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Corporate Responsibility & Risk in the Supply Chain Responsible Sourcing: Too expensive …….. Or can you afford to be without it? Supply Chain 2014, 17th June 2014 Brian O’Kennedy Clearstream Solutions

Agenda • Latest trends in Corporate Responsibility • Why Corporate Responsibility in Supply Chains?

• Why Not? - The Challenges. • What is a Responsible Supply Chain – Responsible Sourcing

• 7 steps to developing a Responsible Supply Chain • Measures, Standards and Tools to help – And Jokes.

7 ‘Megatrends’………What has changed? 1. Environmental focus now integrated with Social e.g. Innocent ad ‘Chain of good’ 2. Moving from static measures to Engagement 3. Legislation – Dodd Frank and EU non-financial reporting 4. Multiple Tiers – Visibility past Tier 1 5. Globalisation V Locally sourced 6. Social Media – speed of communications 7. Standards: ISO14001 – supply chain procedures, Verego SRS

Responsible Supply Chain...... Why not? • • • • • • •

Challenges you may face……. Cost – 50% believe it increases cost Expose a hidden issue - Brand damage Lack of visibility with multiple tiers Multitude of cross business issues; environmental, social, security, commercial Ownership - Management not bought in Competitive pressures Product availability

Responsible Supply Chain...... Why?  Cost – fuel, emissions, materials and waste Walmart  Investors - ‘Sustainability goes mainstream’ PwC  Regulations  Competition – Tenders  Innovation  Stakeholder engagement – employees and customers  Brand Protection

 Risk reduction – Was it worth it? – – – – – –

Electronics industry suicides Child Labour Cocoa Pig and Horse meat contamination Toy manufacturers – lead paint Conflict materials diamonds and metals Counterfeit materials Pharmaceutical industry – Textile building collapse in Bangladesh – Prawn fishing and slavery in Thailand

What you need to do - 7 steps 1. 2. 3. 4. 5. 6. 7.

Clear and Consistent policy –– Code of Conduct , ‘knee-jerk’ costs more Measurement – KPI measures agreed and reported on a regular basis Transparency – part of regular supplier reviews & tenders – Scorecards & dashboards visible across whole business Integrated plan – Covering Ethics, Governance, Health & Safety, Environmental, Social etc. End-to-end Visibility – The ‘Trickle Down’ effect – supplier engagement not just linear Incentives and rewards – Suppliers and employees demonstrating sustainability practice are rewarded Supplier Engagement – Facilitate supplier education, awareness, via forums, communities and deploying tools

Measures and Standards “Financial measures tell me what a company did in the past.................... Sustainability measures tell me what a company is going to do in the future.” - Investor    

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CDP Supply Chain .......$71 trillion in investment funds. GRI G4 FTSE4Good & Dow Jones Sustainability Indexes Supplier Scorecards - Walmart and P&G ISO14001 and 20121 (Sustainability and the Olympics) Greenpeace (Ken & Barbie, Green Electronics) Industry Codes of Conduct : EICC, Apparel Coalition, Green Building, Green Freight Sedex, EcoVadis, Sustainable Purchasing Leadership Council, Ceres, SAM. Green Public Procurement – EU and Irish Government. Green Awards

Help from Platforms and Tools 1. Networks – Ecovadis, Sedex, EcoDesk (for first pass top level data) 2. Reporting frameworks – CDP, GRI, UN Global Compact. 3. Engage industry programs e.g. Gresb, EICC, Sustainable Apparel, Origin Green. 4. Enterprise tools – PE, Enablon, SAP, Enviance, IHS. 5. Measuring to a standard – ISO14001/26000, SA8000, AA1000, Verego SRS. 6. Help in Ireland – EI, SEAI, EPA, Green Business, Chambers, BITCI…….. And Clearstream !

Walmart Sustainability: 15 Questions for Suppliers Energy and Climate: Reducing Energy Costs and Greenhouse Gas Emissions • Have you measured your corporate greenhouse gas emissions? • Have you opted to report your greenhouse gas emissions to the Carbon Disclosure Project (CDP)? • What is your total annual greenhouse gas emissions reported in the most recent year measured? • Have you set publicly available greenhouse gas reduction targets? If yes, what are those targets?

Material Efficiency: Reducing Waste and Enhancing Quality • If measured, please report the total amount of solid waste generated from the facilities that produce your product(s) for Walmart for the most recent year measured. • Have you set publicly available solid waste reduction targets? If yes, what are those targets? • If measured, report total water use from facilities that produce your product(s) for Walmart for the most recent year measured. • Have you set publicly available water use reduction targets? If yes, what are those targets? Natural Resources: Producing High Quality, Responsibly Sourced Raw Materials • Have you established publicly available sustainability purchasing guidelines for your direct suppliers that address issues such as environmental compliance, employment practices and product/ingredient safety? • Have you obtained 3rd party certifications for any of the products that you sell to Walmart? People and Community: Ensuring Responsible and Ethical Production • Do you know the location of 100 percent of the facilities that produce your product(s)? • Before beginning a business relationship with a manufacturing site, do you evaluate the quality of, and capacity for, production? • Do you have a process for managing social compliance at the manufacturing level? • Do you work with your supply base to resolve issues found during social compliance evaluations and also document specific corrections and improvements? • Do you invest in community development activities in the markets you source from and/or operate within?

Most terrifying words spoken in procurement  1. So I told the supplier, we’re much more interested in service and quality than cost… 2. Oh, you don’t need a PO. Here’s the invoice, just pay it. 3. We thought we would save time so we skipped doing a formal contract, but these guys are great. 4. Hi, my name is Susan and I am from Corporate and here to help you! 5. Sure! We definitely have an NDA in place with them, I think? 6. The CEO wants you to talk to someone senior at BA. His apple strudel was cold on the flight back from Vienna last night. 7. The regulations are only for guidance, anyway! 8. So, I heard that you told Finance how much to take out of my budget next year. 9. Send me a customer satisfaction survey—I dare you. 10. Were you the one responsible for this ERP eProcurement solution that I’m supposed to use? 11. Do verbal contracts count? 12. (Insert your Sole-source supplier's name here] …. just had their only facility burn to the ground with all of their inventory. What’s the contingency plan? 13. Can you accelerate the ‘strategic sourcing’ process you have? I need to get this supplier onboarded tomorrow. 14. What procurement policy? ….. We have a procurement policy?! 15. I DID buy from our approved supplies vendor! I have my Rewards credit card receipt for the laptop on my expense report as proof! 16. I met this supplier at an exhibition…… 17. So I told the supplier I’d have a new budget next month of £5 million for this project, so I wanted him to come in and see us soon. 18. Thanks, but I already have an IT procurement process that I run—it’s very nice.”—(said with a French accent per Monty Python castle scene) 19. Oh, they decided not to work today,” after arranging for a next-day, Saturday shipment from the East Coast to California for a production “line-down” situation. 20. The CEO wants to talk to you about this friend of his who runs a consulting/training/marketing/IT business… 21. I think I’ve ordered 1,000 units instead of 100—but it was from a framework contract so can I cancel it?

Thank you! Clearstream Solutions 31 Sandyford Office Park Sandyford Industrial Estate Dublin 18 Phone: +353 1 297 3390 Web: email:

12.00 Brian O'Kennedy, Clearstream