Robust governance for responsible procurement through our SCC

With our supply chain activities happening all over the world, we’ve made a commitment to keep a close eye on how we conduct business with our suppliers. Sub-contractors are on our radar, too! A sound governance portfolio helps us to remain transparent in the way we conduct ourselves while providing procedures and training to mitigate corruption and bribery activities.

The journey starts with the sourcing of raw materials, which can be challenging for our global operations because business practices and regulations differ among countries and regions. Additionally, our sustainability efforts can be stalled by local development realities. When suppliers and sub-contractors are beyond tier one, a procurement term describing how many links away they are in the supply chain, it can be tough to maintain complete transparency and accountability. 

Solidifying a responsible supply chain

The governance of procurement processes was further tightened in 2018 with a number of new initiatives. We implemented a new administration system to capture all suppliers in the Responsible Sourcing Programme scope, to ensure they receive and answer our requirements for responsible sourcing.

We also extended our responsible sourcing principles to suppliers of indirect products and services for our Denmark-based operations. So far, 95 percent* of suppliers within this category have signed our Supplier Code of Conduct (or its validated equivalent). Previously, only suppliers of direct products were in scope. In 2020, we aim to have all suppliers in both categories sign the Code or have their own validated.

An anti-corruption and bribery e-learning programme facilitated by the United Nations Office for Drugs and Crime (UNODC) was delivered to targeted employees around the globe. These selected employees are typically in a sales or procurement roles and are more likely to be exposed to corruption, bribery and cartel risks.

These initiatives help to bolster our existing Responsible Sourcing Programme, which is managed by our headquarters in Denmark, sourcing around 98 percent of all our raw materials.

Due diligence on target

Suppliers in scope of the Responsible Sourcing Programme are within the top 85 percent of our supplier spend on direct materials, such as raw materials and packaging. We aim to assess at least 85 percent of the in-scope suppliers each year. 2018 saw an increase the percentage of suppliers assessed from the previous year, remaining above our target.

The Responsible Sourcing Programme is made up of a few different elements including:

  • A Corporate Social Responsibility (CSR) supplier information sheet, which helps us to understand a supplier’s social, environmental and ethical conduct
  • Regular audits conducted by Procurement adherence to our Supplier Code of Conduct or its equivalent
  • Quarterly sustainability evaluations as part of the overall Quality Management System evaluation

Setting high supplier standards

Palgaard’s sets out expectations for our suppliers for the protection of local communities and our stakeholders, including the suppliers themselves. The ten United Nations Global Compact (UNGC) principles thoroughly address human rights, labour, environment and anti-corruption.

The UNGC principles are adopted in our Supplier Code of Conduct, which is signed by suppliers falling within the scope of our Responsible Sourcing Programme. Where a supplier wants to use their own Code of Conduct, they can have this validated by Palsgaard to ensure it aligns with ours. Theirs can be used in lieu of our Code as long as it passes validation.

The Code requests that suppliers maintain accurate documentation of their business practices to show compliance with the principles outlined. If non-compliance is identified through an audit, we engage in an open dialogue with them to curate a plan outlining steps to meet compliance. Terminating a supplier contract is ideally the last resort, but it is a possibility.

In Malaysia, we introduced a Code of Conduct for sub-contractors with principles similar to our Supplier Code of Conduct. As mentioned, one of the challenges with global-scale supply chain management is the variation of business practices and regulations among countries and regions. This policy adds an additional layer of assurance for our procurement activities in Malaysia.

The fight against corruption

Our Anti-Corruption Guidelines clearly state our position on unethical business behaviour: We have zero tolerance for corruption and bribery. The guidelines describe what constitutes corruption and bribery, going into detail using examples like gifts, charitable donations and facilitation payments. Whilst not exhaustive, it provides a good overview of our approach and clearly sets out expectations for conduct. The UNGC principles are also referenced. 

*Data current as at December 2018