Thursday, November 23, 2017

Supply Chain and Sustainability Management at a Few Chemical Companies

Fourteen large, mostly European chemical companies (with annual revenues ranging from $61 billion to $4.9 billion) belong to a non-profit organization, called Together for Sustainability (TfS), that assists each company in its supplier evaluations and audits.  Chemical companies of the size of the ones belonging to TfS often have thousands of suppliers paying billions of dollars, e.g., BASF, a TfS member, reports in its 2016 annual report it has 70,000 suppliers paying $36 billion to those suppliers and Clariant, another member, in its 2016 annual report, states it has 5,250 suppliers paying $2.1 billion to them.

These large amounts paid to so many suppliers represent a significant business concern for the companies and an important response to this concern is effective evaluations and audits of the suppliers.   Belonging to the TfS allows these companies to share supplier evaluations and audits, done by TfS directly or by TfS subcontractors, reducing the need for each company to do its own evaluations and audits for many, but not all, suppliers.

The emphasis on the evaluations and audits done by (or on behalf of) TfS is to support member sustainability management.  This management is intended to ensure the long-term sustainability of the company, a sustainability which depends to a large extent on suppliers.  Click here to go to the TfS website and read more about what TfS does.

The amount of data and analysis found in the annual and sustainability reports of the TfS chemical companies indicate the extent that these companies are embracing sustainability as an important strategic management goal.  The data and analysis demonstrate how value and supply chain considerations interact with sustainability considerations.  Reviewing several TfS-membered companies’ annual and sustainability reports found the following:

  • ·         Solvay seeks to detect sustainability risks and opportunities along the entire value chain (cradle to grave for products)
  • ·         AkzoNobel has a company-wide approach to continuous improvement of its integrated supply chain function, looking for breakthroughs in process, packaging, and digitalization
  • ·         Arkema is implementing improved information technology for supply chain optimization
  • ·         BASF sustainability is an integral part of its supply chain strategy
  • ·         Bayer has had more than 700 sustainability assessments of suppliers made by TfS and in 2016 conducted more than 70 external audits and more than 160 internal audits related to its suppliers
  • ·         Clariant has initiated an integrated planning landscape to improve supply chain management
  • ·         Covestro regards adherence to sustainability within the supply chain as crucial to value creating; social, ethical, environmental, and governance factors, in addition to economic ones, are used in supplier selections
  • ·         DSM has had 96% of their approximately 1,000 critical suppliers go through the evaluation and audit process
  • ·         Evonik, with approximately $8 billion spent on raw materials, supplies, services, and energy, emphasizes automation and optimization in its procurement process.

 A 2013 survey of more than 500 supply chain executives, conducted by PWC, focused on what these executives are doing to enhance their supply chain management.  Click here to read the report on this survey (PDF file).

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