David on our procurement approach, and how we are working with suppliers to raise industry standards.
Last week, at Business in the Community Ireland’s Responsible Business Forum 2014, I shared our procurement approach and practices with attendees. The event was a great opportunity to talk to industry peers about best practice – and also about lessons learned. As a company, we spend billions of pounds each year sourcing products and services - from boiler parts, insulation materials and metering services for our customers, to heavy equipment and offshore oil and gas management services for our exploration and production operations, on both sides of the Atlantic.
For Centrica, Corporate Responsibility (CR) in the supply chain is not just a procurement initiative, it is a core part of how we do business. And it’s not just about securing reliable supplies or protecting reputation; it is the foundation for successful and sustainable business.
The discussions taking place at the Forum underlined the fact that, now more than ever, it is vital that big organisations such as ours ensure that our values and business principles filter down through the supply chain to the products and services that we provide, to ensure that our suppliers have the same ethos and ethics as our own. This is exactly what my team and I are working hard to achieve.
But business supply chains are becoming more global and fragmented and this shift brings with it opportunities, but also risks. In recent years for example, there have been several high profile supply chain failures in the headlines, such as the supermarket horsemeat scandal which has had serious consequences for the businesses involved and has made customers lose trust in the goods and services they buy.
To guard against risk in our direct supply chain as well as in the supply chain of our suppliers, there are a number of activities we are undertaking. We have embedded standard CR clauses within the vast majority of our supplier contracts to set the standard from the outset of our relationship.
And since 2012, we have been working with independent supply chain sustainability experts, Ecovadis, to assess our suppliers and gain better insight across key areas of risk such as environment, labour practices and human rights, fair business practices (such as bribery and corruption) alongside the sustainability of their supply chain. The results of these assessments are integrated with other supplier data on financial stability and security of supply, to inform our wider business risk registers.
Where CR risks are identified, we work with the supplier to develop and implement corrective plans of action. Currently, we are working with several suppliers to improve standards and these suppliers will be re-evaluated next year to ensure they meet our expectations.
In total, we will have assessed over 200 higher risk* and strategic suppliers by the end of 2014 and in 2015, we will continue rolling-out the assessment to new suppliers throughout our businesses.
By building strong relationships with our suppliers in this way, and sharing best practice as well as our vision, challenges and expectations, together we can improve industry standards.
* Determined by an industry and country of operation segmentations