Responsible sourcing

Facing an increasingly globalised supply chain, Novo Nordisk procures more from countries in which enforcement of international law may be weak. This emphasises the need to understand the risk to our business from the social, ethical and environmental performance of our suppliers.

At Novo Nordisk, we have adopted a risk based approach to manage environmental, ethical and social risks in the supply chain. This means that we have built a methodology for assessing our supplier base that consist of a common set of screening principles and a risk model to map and manage social and environmental risks that is tailored to specific sourcing areas. In addition, we also consider the potential for partnerships and capability building among key suppliers.

For more information on our responsible sourcing standards, click here.

We have engaged with the suppliers on the identified findings to ensure improvements. Procedures for follow-up have been agreed upon by the auditor and the supplier, including time frames for the corrective action plan.

For information on how we handle findings at suppliers, click here.

High-risk suppliers
In product-related spend, which includes spend directly related to the manufacturing of products, 8% of suppliers (27 of 336) have been identified as high risk. Action plans for all high risk suppliers have been established including a focus on responsible sourcing contract coverage as well as responsible sourcing audits. Findings from audits direct the concrete activities to be implemented by the supplier.

Within our engineering sourcing supply chain, which covers sourcing of goods, works and services indirectly related to production and mainly within larger investment projects, 1% (9 out of 775) were identified as high risk suppliers.

The majority of our suppliers relate to non-product related, or indirect, spend. This supplier base not only comprises the biggest number of suppliers worldwide (approx. 40,000) but also covers the highest spend Of these suppliers, within current responsible sourcing scope, 0.2% (87 suppliers) is considered highest-risk suppliers.

Internal alignment and supplier engagement
Besides having a risk based approach, there is also a need for internal knowledge building. Some of the activities carried out in 2011 relate directly to this and include:

• Development and implementation of an e-learning programme specifically tailored for our procurement staff, focusing on creating awareness through dilemmas related to responsible sourcing. This supports knowledge building as well as the change management initiative within both the sourcing and logistics organisation.
   
• A face to face training programme was implemented for key sourcing professionals focussing on concrete issues in the supply chain related to responsible sourcing. Also included was the Novo Nordisk sourcing practices and the potential impact these can have within the supply chain.
   
• A working group was set up to identify root causes and how we can work with suppliers in relation to excessive working hours in high risk countries.

Strengthening our responsible sourcing approach
After implementation of full risk assessment of all product-related suppliers and with a risk assessment of our non-product-related suppliers also implemented during 2011 Novo Nordisk’s responsible sourcing approach is being reviewed internally. This work will be finalised in 2012. Some of the elements for review include strengthening the focus on the continuous improvement element of our current responsible sourcing approach going forward, e.g. via supplier capability building.

For more information about our responsible sourcing efforts, see our UN Global Compact Communication on Progress.

• For a number of years we have been a part of Business for Social Responsibility's (BSR) Beyond Monitoring initiative, where a number of companies are working together to develop more sustainable supply chains.
   
• Novo Nordisk is also an active member of the Pharmaceutical Supply Chain Initiative (PSCI), a group of major pharmaceutical companies who share a vision for better social, economic and environmental conditions for all those involved in the pharmaceutical supply chain. This includes improved conditions for workers, economic development and a cleaner environment for local communities.
   
• Novo Nordisk is also member of the Danish Ethical Trading Initiative (DIEH), which is the first Danish multi-stakeholder initiative that brings together trade unions, business associations, non-governmental organisations and companies to promote ethical trade and responsible supply chain management in Danish companies.