Sustainable practices at work
Since 2002, all Novo Nordisk’s key suppliers have been evaluated by a sustainable supply chain management programme covering environmental and social issues. The programme has had tangible results: The sustainable performance among suppliers has been continuously improved and the programme contributes to the profitability of Novo Nordisk’s business in general.
Some of the quick wins of the programme have been a strengthened risk management of the supply chain and an improved corporate coordination between the different procurement functions in the group.
A pragmatic approach
“We have a pragmatic approach to the sustainable supply chain management, which means that we do not evaluate and audit every single supplier, which would be an enormous task with a limited return on investment. In stead we have formulated a list of criteria to identify those suppliers most relevant to evaluate, based on an analysis of purchase value, business impact and risk,” explains Annette Stube, advisor, Corporate Responsibility Management and project manager of the sustainable supply chain management programme at Novo Nordisk.
Novo Nordisk total procurement costs per year amounts to DKK 12.6 billion and today, around 20% of these, including all key suppliers, are covered by the programme.
Annette Stube continues: “Obviously it is an investment to set up such a programme and requires a great deal of resources operating it. However, we are confident that the benefits exceed the additional costs. We have already seen some of the results, and in the longer term, we believe that the improved control with social and environmental impacts and a better cooperation with suppliers will reduce our costs, limit our financial risks and in general reinforce Novo Nordisk’s reputation.”
Improved supplier loyalty
According to Henrik Cruse, lead negotiator, who is working with procurement in Novo Nordisk Servicepartner, the programme has in fact strengthened the relations to suppliers and increased supplier loyalty:
“When I first approached our suppliers with the programme, I think it came as something of a chock to many of them. The evaluation programme does require that they provide answers to a series of questions, which not all of them had readily at hand. But as we got into the process, most of them recognised the relevance of the exercise. In addition, the questions in the evaluation became the basis of a whole new and interesting dialogue between us. Previously, our relations had been founded primarily on hard data such as prices, delivery time, quality assurance etc. Now suddenly, we are also discussing social values, ethical issues and other themes, which I feel has added new value to our relationship and brought us closer together”.
This experience is supported by a survey conducted by Novo Nordisk in 2003 revealing that even though it requires both dedication and resources to respond to the programme, the majority of suppliers find it important to evaluate their performance on social and environmental issues. More than half of them actually believed that the Novo Nordisk evaluation has had a positive effect on their own internal procedures.
Cascading down the value chain
The Novo Nordisk approach to sustainable supply chain management is based on dialogue and recommendations rather than rules and sanctions. The objective is not to make all suppliers apply to a strict ‘Novo Nordisk code of conduct’, but by way of suggestions and recommendations fuel a process towards a sustainable behaviour in accordance with international standards and local regulations. Many of Novo Nordisk’s suppliers already fulfil that requirement, and many others have over the past couple of years implemented new procedures and improvements following the Novo Nordisk evaluation. Some have even become inspired to initiate their own programmes for evaluating their suppliers.
This has supported Novo Nordisk’s decision to promote the system to the second tier level of suppliers and also to expand the programme to cover all suppliers – from R&D to production and to sales affiliates. A new toolbox on the corporate website gives easy access and guidance on how to set up a sustainable supply chain management programme. Novo Nordisk encourages its suppliers to make use of the system with their own suppliers, and the toolbox is available to everyone else that seeks inspiration to get started with similar programmes across their own supply chain.
