Life sciences company Novo is to assess its suppliers using a new evaluation system that puts their social and environmental performance on a par with quality and price considerations.
The Danish firm, whose main product is insulin, has initially moved firms supplying raw materials onto the system, but aims to have included all of its 7000 suppliers by 2005.
‘Social and environmental factors now account for one-third of the total rating of our suppliers, with the other two-thirds on quality and cost,’ said Vernon Jennings, Novo’s vice president of sustainable development.
‘By the end of 2005 all of our purchasing activities will be subject to social and environmental evaluation, including relationships with research and development partners and universities.’
The company evaluates suppliers using a detailed self-assessment questionnaire that has taken two years to devise and is issued to suppliers by Novo purchasing managers.
The company’s buyers receive three days’ training on how to explain to suppliers the background to the questionnaire, which is based on core labour standards developed by the International Labour Organization.
Any problems arising from the assessment are filtered back to a head office committee, which works with the purchaser and supplier to find a remedy.
A review in January will assess how well the system is working with the raw materials suppliers, but Jennings said the only complaints so far related to the length of time needed to gather information for the questionnaires.
‘Hopefully this becomes easier after the first time it’s done, because it is then just a question of an annual update’, he said.
‘One or two US companies have also told us they felt the process was intrusive, which seems to be a cultural difference we will have to address.
‘The review in the first quarter of 2003 will tell us whether we need to refine our way of doing things and whether we should change some of the questions.’
Novo (previously known as Novo Nordisk) hopes to run the system without any independent monitoring.
‘The intention is not to spend huge amounts of money on third-party external auditing, but to make this part of our normal monitoring of suppliers,’ said Jennings.
Although it has suppliers in 68 countries, most of them are based in Europe. ‘We’re not under the same pressure as some companies’, he added.
Novo claims to be the first company in the world to have included social and environmental performance information in its quarterly results issued to analysts.
‘We decided to include the information in our most recent set of results, even though the analysts have not asked for it and are not interested,’ said Jennings.
‘They tend to take a short term view of things, but we believe there is a connection between our social and environmental performance and our financial results, and that is why we are doing it. The hope is that they will come to agree with us.’