Procurement management

Sustainable procurement management

Bayer actively upholds its commitment to environmental protection, human rights, fair working conditions and the fight against corruption worldwide in its purchasing activities too. Through the establishment of a sustainable procurement management system, Bayer aims to exert influence as a purchaser responsibly and to avert sustainability risks.

Dr. Udo Murek, spokesman for Group-wide procurement at Bayer AG

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Dr. Udo Murek, spokesman for Group-wide procurement at Bayer AG

“Sustainable supplier management guarantees not just our high quality standards, but also active risk management.”

Last year the Bayer Group procured goods and services with a total value of approximately €15 billion from more than 40,000 suppliers. These numbers make clear that the company’s procurement volume represents a significant development factor in many regions. “We want to be a reliable partner and exert our influence in a socially responsible manner,” says Dr. Udo Murek, spokesman for Group-wide procurement at Bayer, explaining the company’s position. “In order to achieve this goal, transparency in all business processes is essential because it is the only way to ensure sustainable procurement management and active risk management.” In 2003 Bayer created the basis for systematically integrating ecological and social goals into its procurement system by establishing the “Supplier Relationship Management Concept” (supreme).

Steering of purchasing
Purchasing responsibility in the Bayer Group lies with the operating subgroups and service companies. Two Group-level bodies – the Coordination Board Procurement (CBP), headed by the member of the Board of Management responsible for Procurement, Klaus Kühn, and the Community Council Procurement (CCP) – ensure close cooperation. They also hold responsibility for the global steering and further development of purchasing at Bayer. The Coordination Board Procurement and the Community Council Procurement closely coordinate their actions with the Group-wide Sustainable Development Planning Group in all sustainability issues. In this way, it should be ensured that procurement activities are always in line with the company’s sustainable development strategy.

Clear guidelines for all

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Bayer employee Guan Lian Jun and Huang Wei from the Vopak company (from left) check the supply documents at the Shanghai Chemical Industry Park.

“We are convinced that responsible actions in purchasing must not be based solely on short-term economic goals, but also on long-term sustainability principles,” Murek says. That’s why the Bayer Procurement Policy clearly supports the principles of the U.N. Global Compact, the Group’s Values and Leadership Principles and the Bayer Human Rights Position. This commitment is also integrated into the “Requirements for our suppliers” brochure, which can be called up at any time on the Internet and has been directly sent to the strategic top 200 suppliers.

Empowering purchasers
To specifically sensitize the currently around 1,000 procurement employees to the theme of sustainability, Bayer launched a special information campaign for purchasers in 2007. This involved sending a personalized letter to the managerial staff working in procurement, in which the heads of purchasing underscored the importance of sustainability aspects in daily operations. Sustainability is also a regular subject of the quarterly Procurement Newsletter sent to the entire procurement community. Since 2008, the Bayer Group has also made the topic of sustainability in procurement a regular element of its global purchasing seminar concept.

The meeting in October 2007 between the purchasing heads from Bayer’s 11 core countries – representing more than 80 percent of the global purchasing volume – focused on the importance and growing requirements of sustainability in procurement. It was due to this workshop that the theme of sustainability played a key role at the Bayer Group’s Chinese purchasing day in February 2008 in Shanghai, where, in front of an audience of approximately 100 purchasing employees, top management representatives explained the principles of the U.N. Global Compact and their relevance for purchasing procedures.

Sensitizing suppliers

Bayer maintains close dialogue with its suppliers in order to establish reliable partnerships. Last year the Bayer Group selected sustainability as the core theme of its international Supplier Day to give suppliers a better understanding of what is required of them, as well as to get a clearer picture of the suppliers’ situation. In front of an audience including more than 150 of the company’s most important suppliers worldwide, 75 purchasers and their supervisors, Bayer Management Board member Klaus Kühn explained the company’s view of sustainability and appealed to the suppliers to actively help its implementation. The feedback analysis shows that the participants consider sustainability to be highly important and are very interested in delving into this theme in more depth in the future. Bayer Procurement is thus planning further dialogue events with its suppliers and expanding the “Sustainability in Procurement” section on its website.

Supplier development

For Bayer, cooperation and a joint learning process are important factors for successful sustainable supplier management. That’s why, in the event of violations of sustainability criteria, the company first examines how it can help the supplier to better implement these criteria.

In 2007, Bayer carried out a pilot study in the form of a written survey, the purpose of which was to document in detail the sustainability performance of the company’s suppliers from non-OECD countries. The heterogeneous result of this study confirms the existing strategy of individually working with suppliers to further develop their sustainability management.

One example of how supplier auditing can be effectively conducted in non-OECDstates using the main criteria of the U.N. Global Compact is the “Supplier Sustainability Program” of Bayer CropScience in India.

The program against child labor in cotton seed production that Bayer CropScience has maintained in India for a number of years with increasing success also shows how sustainability can be achieved hand in hand with suppliers and child labor resolutely fought. After all, Bayer does not tolerate child and forced labor

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In the Asia-Pacific region, Bayer MaterialScience is demonstrating how central safety standards can also be guaranteed in non-OECDcountries: To monitor transport and distribution safety, a team has been set up that audits all transport and warehouse service suppliers in China, Indonesia, Malaysia, Taiwan, Thailand and Singapore every two to three years. Prior to the first major shipment, the team also carries out a safety inspection of the customers’ facilities and holds a training workshop for their employees. Furthermore, Bayer CropScience last year supplemented its extensive HSEQ qualification program for suppliers in China with safety training measures and has initiated its expansion to India.

Procurement Roadmap

In 2008, Bayer is planning to further expand the procurement management methods of the operating subgroups and service companies through a detailed analysis of individual purchasing processes. This includes the further development of evaluation, control and penalty measures for its supplier community. After all, the Bayer Group’s expectations of its purchasers are clear: to contribute to value creation in the company through intelligent and effective procurement management.

Professor Lutz Kaufmann, WHU-Otto Beisheim School of Management

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Professor Lutz Kaufmann, WHU-Otto Beisheim School of Management

Heightened purchasing awareness on the part of customers is creating entirely new markets. No company today can afford to ignore sustainability – and certainly not with regard to the supply chain. The first order of business in sustainable procurement management is to formulate a clear code of conduct for all partners and apply it uncompromisingly in the selection and ongoing evaluation of suppliers. However, this must not automatically mean that those who do not observe it 100 percent are automatically excluded. In keeping with the “supplier development” principle, companies should work together with suppliers. Our international studies repeatedly show that the most successful companies in this regard are those that truly take the initiative and organize on-site workshops even in distant countries. This is particularly important as regards procurement from growth markets, as many suppliers simply do not yet have the social, technological and organizational means to implement sustainability criteria.

I think Bayer is already making very good progress, for example through the establishment of rigorous minimum standards in purchasing. On this basis, there should now be an ever sharper focus on active further development of suppliers.