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Responsible Sourcing & Compliance Capacity Building Webinar for Suppliers
May 19, 2015
www.aim-progress.com
Participants at the webinar shall not enter into any
discussion or raise questions that may infringe any
applicable competition law. By way of example,
participants shall not discuss, communicate or
exchange any commercially sensitive information, such
as non-public information relating to prices, marketing
and advertising strategy, costs and revenues, trading
terms and conditions. They shall not disclose any
trading relationships in terms of identifying a particular
manufacturer or supplier or other.
ANTI-TRUST NOTICE
Audience Profile
More than 100 participants
registered
57 % Average
24% Advanced
19% Basic
Understanding of Responsible
Sourcing
Mainly US based
suppliers
had a 3rd party social compliance
assessment in the last three years
48%
Interested in hearing
about… • Responsible Sourcing
Principles & Requirements
• Latest Responsible Sourcing
News
• Reporting preferences
• Organisations related to
Responsible Sourcing
Agenda:
1. The Responsible Sourcing Landscape – Petra Tanos – IFF
2. AIM-PROGRESS brief introduction – Pascal Becker - Givaudan
3. Audit process – Brian Kramer – PepsiCo
4. Audit case studies – David Spitzley – Mars
5. Best practice – Ron Jacoby – Colgate Palmolive
6. Q & A
SPEAKERS
• David Spitzley
• Global Responsible
Sourcing Manager
• Mars
• Pascal Becker
• Global Sustainability
Manager
• Givaudan
• Brian Kramer
• Global Sustainability
Director
• PepsiCo
• Petra Tanos
• Global Sustainability
Project Manager
• IFF
• Ronald Jacoby
• Global Responsible
Sourcing Manager
• Colgate Palmolive
1 – The Responsible Sourcing Landscape
Petra Tanos
Global Sustainability Project Manager
IFF
The Responsible Sourcing Landscape
Four Key Areas
1) Standards, Audit Protocols and the Organizations Behind Them
► Define specific criteria against which an audit can be performed to provide third-party assurance of compliance with the criteria or requirements
2) Auditing Companies
► Companies that perform audits against the voluntary standards set by standard-setting organizations
3) Reporting Platforms
► Platforms or frameworks through which organizations can report externally on their goals, progress and achievements in the realm of sustainability
4) Collaborative Groups / Multi-Stakeholder Initiatives
► Organizations that bring together stakeholders in a pre-competitive environment to work together to solve similar problems, share best practices and resources and create credibility with external stakeholders
1) Standards, Audit Protocols and the Organizations Behind Them
► Standards are voluntary, but often required by customers
► Scope of the standards varies: agricultural operations to manufacturing sites
► Focus of the standards varies: specific crops, farming practices in general, EHS, quality, food safety, environmental management, labour practices
► Examples include:
Recommended Resource: The ITC Standards Map provides detailed information on more than 160 standards, codes of conduct and audit protocols. Visit http://www.standardsmap.org/
2) Auditing Companies
► Examples include:
Note: organizations are used for illustrative purposes only and are not endorsed by AIM-PROGRESS
Any many others!
Any many others!
3) Reporting Platforms
► Stakeholders, including customers, consumers and investors want to understand how
companies are performing in terms of sustainability.
► Reporting frameworks seek to standardize KPIs to provide more consistency in how
information is shared and interpreted. They are often, but not always, voluntary.
► Reporting platforms can be broken down roughly into three categories:
Note: organizations are used for illustrative purposes only and are not endorsed by AIM-PROGRESS
a) REPORTING FRAMEWORKS
Frameworks standardize indicators that should be reported and
provide guidance on how to disclose information. They are focused
on organizational management systems and governance structures.
b) DATA SHARING PLATFORMS
Platforms designed to share standardized data with multiple viewers.
Some use built-in, customers questionnaires; others are
clearinghouses for information sharing (such as audit reports).
c) ASSESSMENT PLATFORMS
Similar to data sharing platforms, but with some kind of assessment
component, such as a score or rank, based on information suppliers
to a questionnaire.
4) Collaborative Groups / Multi-Stakeholder Initiatives
► Collaborative groups are pre-competitive – competitors work together to
address the root causes of issues
► Pool resources, reduce duplication of effort and avoid conflicting messages
► Smaller companies with fewer resources can often benefit by participating
► Scope can vary: • Specific industries (food, textiles, mining, electronics, chemicals, cosmetics)
• Specific crops or products (sugar, palm oil, cocoa, coffee)
• Across entire sectors (consumer goods)
► Focus can vary: • Best Practice Sharing – focus on sharing knowledge about approaches and tools that companies
have found to be successful in their individual supply chain sustainability programs
• Standards development – some multi-stakeholder initiatives have developed standards specific
to their industry or sector.
► AIM-PROGRESS is one example of a collaborative group.
We focus on best practice sharing and mutual recognition, NOT on creating standards
development
Other examples:
2 - Overview of AIM-PROGRESS
and Responsible Sourcing
Pascal Becker
Global Sustainability Manager
Givaudan
1. What is AIM-PROGRESS? Global forum of fast moving consumer goods companies and suppliers assembled to enable & promote Responsible Sourcing practices
Sponsored by the Grocery Manufacturers Association (GMA) and the European Brands Association (AIM)
42 Companies, representing > USD$ 950 billion annual revenue
www.aim-progress.com
2. What do we AIM for?
Responsible Sourcing is the
process of purchasing goods and
services without causing harm to, or
exploiting, humans or the natural
environment.
We AIM to PROGRESS !
3. Why?
0% 2% 4% 6% 8% 10% 12% 14% 16% 18%
FIRE SAFETY
HEALTH & SAFETY MANAGEMENT
ENVIRONMENT
MANAGEMENT SYSTEMS
LEVEL OF OVERTIMES HOURS WORKED
WORKER HEALTH/FIRST AID/ACCIDENTS
CHEMICALS
MACHINERY
BUILDING/SITE MAINTENANCE
HEALTH AND SAFETY TRAINING
WEEKLY REST DAY(S)
Most common supplier audit non-compliances - US
…in North America
Source: Sedex data from AIM-PROGRESS member companies
4. AIM-PROGRESS Activities
Maximize synergies
NOT: Create a new set of codes or create new audit standards
• Benchmark company assessment protocols
• Sharing best practice
Mutual Recognition
• Common assessment methods
• Maximize synergies
Data Exchange
• Promoting supplier awareness
• Helping suppliers build capabilities, go beyond compliance
Engaging others
Step 4:
Corrective Action
Plan
Commit to
continuous
improvement
5. How suppliers can demonstrate compliance
Step 1:
Suppliers Engaged
by Aim-Progress
Members
AIM to
PROGRESS
Step 2:
Supplier Self
Assessment
(if applicable)
Tool to help to
assess overall
capabilities
Step 3:
3rd Party Assessment
Tool to
demonstrate
good practices
6. Value Proposition
1. Meets multiple customer requirements
2. Builds & protects reputation
3. Increases employee morale and productivity
3 - Audit Process
Brian Kramer,
Global Sustainability Director,
PepsiCo
Audit Provides Verification Against Common Elements
of Supplier Code of Conduct
● Legal Compliance/Management Systems
● Voluntary Employment/No Forced Labor
● Compensation & Benefits
● Working Hours
● Freedom of Association
● No Underage/Child Labor
● Fair & Equal Treatment/Discrimination
● No Abuse/Harassment of Labor
● Health and Safety
● Environment
● Bribery & Corruption
Common supplier
training events
Responsible Sourcing Cycle –
Commonalities on the Supplier Assessment Journey
Companies agree to recognise audits done on
behalf of other customers. Audits can also be
shared using online platforms.
Common formats
include Sedex and
EcoVadis SAQs
Determined by
individual companies
Sharing of
methodologies for
corrective action
plans.
Synergies toward
common methods &
data
Initial Risk Assessment
Supplier Assessment
Further Risk Assessment
Audit
Corrective Action Plan
Building Supplier
Capability
The Audit Process – Benefits of an On-Site Audit
• Provides independent assessment of operations
• Identifies strengths and key areas of opportunity at your site
• Health & Safety
• Environment
• Labor Practices
• Business Integrity & Controls
• Encourages transparency with management, workers, and client
brands
• Further strengthens your own brand – customer accessibility
Types of On-Site Audits
● Full On-Site Audit – usually a 2 person-day audit which covers all areas
of the audit process.
● Follow Up Audit / Re-Audit – used to verify that corrective actions have
been developed and implemented to close out any prior non-
conformities. Usually done in 1 person-day, depending on severity of
findings.
Typical Third-Party Audit Process
• Assessment duration varies depending on size of facility and scope of production. In general, two auditors spend one day in a facility, but can take up to 4 person days
How long does the audit take?
Est. Time Assessment Process Key Staff
45 Min Opening Meeting
Explanation of the audit scope, deliverables and process
Review of your self-assessment information off SEDEX
Review of the document request list
Identification of documentation to be prepared for review
Site Manager, HR
and EHS Manager
1 hour Site Inspection: Understanding site areas Site & EHS Manager
2 hours Document Review
Review of management documentation
Review of employee personnel files
Review of wages and payroll related information
HR Manager
Payroll Clerk
EHS Manager
3 hours Interviews with production employees Floor Staff only
30 min Secondary Site Inspection/Misc None
30 min Preparation of Onsite Report None
30 min Presentation of Onsite Report to Management Site, HR, EHS
Manager
Step 3:
3rd Party
Assessment
Common Method
Corrective Action Plans (CAP)
Non-compliances identified must be addressed through Corrective Action Plans
Timeframe and follow-up methods depend on the type of issue and the severity
Critical, Major, Minor categorization of issues
Desk based verification vs. follow-up visit
Individual buying companies determine the CAP template and follow-up
Key CAP Elements include:
Immediate Correction
Root Cause Analysis
LT Preventative Action
Individual Responsible
Closure Date
Frequently Asked Questions About the Audit Process
• Audits are conducted by independent, accredited professionals (examples include Intertek, UL, SGS, BV, Level Works)
Who conducts the audits?
• Auditors are independent and impartial professionals trained to evaluate compliance to laws and responsible sourcing standards.
What is the role of the auditor?
• Suppliers pay for the audits as this allows them to own the data and share the reports with multiple customers through AIM-PROGRESS
Who pays for and owns the audit?
• Process and protocols are in place to ensure no personally identified information leaves the facility.
• Goal of assessment is to protect employees not infringe on privacy
Does an audit adhere to Privacy Protection laws?
• Standards that are relevant to an individual pillar e.g. OHSAS 18001, would be taken into account during the audit process
• Other audit protocols e.g. SA8000, may be acceptable if conducted by an independent 3rd party auditor and within a reasonable timeframe.
• Check with your customer for specifics
Are other standards acceptable (ISO, SQF, SA8000, etc)?
4 – North American and Global
Audit Experiences
David Spitzley,
Global Responsible Sourcing
Manager, Mars
Introduction
• Audits verify compliance versus a Code of Conduct
• Identifing and addressing issues benfits workers, suppliers
and brands
Topics:
• What are audits like in North America?
• What global trends exist in audit findings?
Case Studies: Typical North American Audit
Experience
● Site with more than 900 employees in the United States
►Three day audit
►42 workers interviewed as part of the audit
►Non-Compliances found: • Directional exit signs missing
• Employees work more than 60 hours per week
● Site with less than 70 employees in the United States
►1.5 day audit
►10 workers interviewed as part of the audit
►Non-Compliances found: • Employees work more than 60 hours per week
• Incorrect or incomplete I-9 forms
Case Study: Promotional Item Audits
Two factories supplying Promotional Items (Premiums) attempt to bribe
external social compliance auditors in order to influence the outcome of
the audit.
Reaction:
• Orders from the two factories were not approved
• Agents are no longer allowed to source from these factories
• Agents attend an anti-corruption training with a lawyer
Result: Alternative factories were found by the agents
Brand Agent
Factory
Factory
Factory
Top 5 global non-compliances in RS Audits
1. Lack of emergency preparedness (including lighting, trainings, exits etc.)
2. Unsafe working conditions (including lack of PPE, unsafe machinery
operation, inadequate permits, improper chemical storage, etc.)
3. Excessive working hours (including excessive overtime, exceeds waiver,
inadequate rest days, and inadequate record keeping)
4. Failure to pay expected benefits of overtime (including inaccurate piece
rate calculations)
5. Management system documentation concerns
Lack of emergency preparedness
Russia – Liver & offal
No evacuation plan
(Dec 2012)
Brazil – Cane
Blocked aisles
(Oct 2012)
UAE – Pack materials
No evacuation drills
(Oct 2012)
USA – Pack materials
Obstructed exit
(Feb 2014)
Italy – Tomato
No evacuation drills
(Apr 2014)
These are non-compliances taken from Sedex audit reports
Unsafe working conditions
China – Chemicals
No medical examinations
(Feb 2014)
Egypt – Paper
No safety guards
(Mar 2014)
Chile – Tomato
Hazardous chemicals
stored incorrectly
(Feb 2014)
Viet Nam – Pack materials
Protective masks not worn
(Sep 2013)
USA – Sugar
Pallets stacked unsafely
(Nov 2013)
Excessive working hours
Kenya – Pack materials
108.5 hours overtime
in May (Jun 2013) India – Palm oil
220 hours overtime
in a quarter (Jul 2013)
South Africa - Sugar
Inadequate rest days
(Sep 2013)
China - Premia
40-56 hours overtime
most months (Nov 2013)
USA – Peanut
72 hours in a week
(Dec 2013)
Summary
• Audits are intended to benefit workers, suppliers,
and brands
• Opportunites for improvement are present globally
• Transparency and collaboration drive
improvement and strong business relationships
5 - Best Practices
Emergency Planning & Fire Safety
Ronald Jacoby,
Global Procurement Strategy &
Training Manager,
Colgate-Palmolive
0% 5% 10% 15% 20% 25% 30% 35%
FIRE SAFETY
LEVEL OF OVERTIME HOURS WORKED
MANAGEMENT SYSTEMS
WEEKLY REST DAY(S)
HEALTH & SAFETY MANAGEMENT
OVERTIMES HOURS VOLUNTARY
WORKER HEALTH/FIRST AID/ACCIDENTS
MACHINERY
HOUSEKEEPING
BUILDING/SITE MAINTENANCE
Audit Non-compliances in the US AIM-PROGRESS suppliers
Understand Your Emergency Risks
● Operational Disasters
► Fires, chemical releases, explosions, major
equipment malfunction
● Natural Disasters
► Floods, earthquakes, hurricanes, tornados
Understand your Hazards
● Physical hazards
► Fire hazards
► Explosion hazards
► Combustible Dust
● Electrical systems
● Chemical processes
Why Plan for Emergencies?
● Protect employee health & safety
● Protect the environment
● Minimizing property damage
● Manage business continuity
● Manage reputational & business risk
● Meet legal requirements
What Regulatory Requirements, Codes &
Standards Apply?
● OSHA
● EPA
● NFPA
● OHSAS 18001
● ICC - International Building Codes
Components of Fire Safety
● Fire Prevention
● Fire Response
► Fire fighting equipment
● Emergency & Evacuation Plans
● Training
● Practicing (Drilling)
● Documentation
Fire Response - Roles & Responsibilities
● Dedicated employee(s):
► responsible for fire safety activities, emergency planning, and
communication of such plans to all workers at each workplace
● Roles and Responsibilities:
► defined and communicated to all employees
● All employees should know your emergency response team
● All employees in all shifts should participate in Drills
Fire Response - Equipment
● Fire Extinguishers:
► Appropriate number, maintained, & easily
identified
● Emergency Lighting & Signage:
► Adequate & maintained
● Audible and visual fire alarms:
► can be activated at many locations throughout the
site and heard in all areas of the site
● Automatic fire suppression systems
► Maintained & tested
● Emergency Response Plan
► Appropriate for each emergency event
► External emergency responder contacts
► Identified roles - emergency coordinators, fire
brigade, emergency responders & evacuation
marshals
► Debriefs of all events, including drills
● Evacuation Plan
► Drills every 3 months including all employees
► Posted maps with routes and exits
► Assembly areas with headcounts
Emergency & Evacuation Plans
Evacuation Plan
Routes and Exits
● Identified via posted maps
● Appropriate number and location
► Be aware of changing environments &
workplaces
● Clear of obstructions and unlocked – at all times
● Exit doors & aisles
► swing in the direction of flow
► Equipped with panic hardware
► Clearly marked with maintained illuminated exit
signs
► Wide enough for intended volume
► Lead to safe exterior location
Training & Drills
● Emergency response plan & evacuation plan
► Roles and responsibilities
● General Fire & Emergency awareness
● Emergency response
► Extinguisher training, First aid, CPR / AED
● Special training for those who maintain fire fighting
equipment or emergency response equipment
● Drills for all potential emergencies
Documentation
● Drill records & debriefs
● Hazard assessments
● Lists of fire fighting and emergency equipment
● Training records for all worker roles and responsibilities
● Lists of emergency response workers
● Certification records for emergency responders
● Maintenance records for fire fighting and emergency response equipment
● Records of health & safety incidents including near misses and
investigation reports
Common Audit Non-compliances
● Exit signs missing / not operating
● Blocked exit aisles
● Locked exit doors
● Missed equipment inspections
● Evacuation Drills not practices / frequency
● Inadequate Emergency Route mapping
Key Take Aways
● Know and comply with all Federal, State, and Local regulatory
requirements
● Ensure fire hazards are identified & controlled
● Ensure employees know how to respond to a fire
● Ensure emergency exits are identified, available and maintained
● Ensure evacuation plans are implemented, communicated and drilled
for all employees
● Ensure workers tasked with responding to fires are properly equipped
and trained
Questions?
Additional Resources
● Webinar recording will be available
on the website
● More information: www.aim-
progress.com
● Other valuable content
Follow-up with your contacts
For more information, contact:
Final words
Responsible Sourcing is key for:
● Business reputation
● Good relationships with stakeholders
● Creating sustainable foundation for growth
And of course, it’s the right thing to do!
● Compliance is the first step
● Think about continuous improvement
Thank you for participating!
www.aim-progress.com