Supply chain management

Violations of human rights or sound environmental management among Novo Nordisk’s suppliers could eventually represent a risk to the company if unaddressed. As a responsible company, Novo Nordisk has an obligation to promote social responsibility in its business practices and within its sphere of influence. This includes suppliers and contractors.

A responsible approach

The programme is now reaching out to second-tier suppliers via a new website, which makes the programme and tools available for suppliers and others.

Novo Nordisk is working with suppliers and contractors to support human rights and labour standards as well as sound environmental practices.

The sustainable supply chain management (SSCM) programme was initiated in 2002. It is an enactment of Novo Nordisk’s commitment to the United Nations Universal Declaration of Human Rights, the United Nations Global Compact and the International Chamber of Commerce’s (ICC’s) Business Charter for Sustainable Development.

At the same time, the programme reflects an active risk management approach which seeks to identify and reduce risk to an acceptable level, be it financial or reputational risks.

Evaluation criteria

The programme requires suppliers to complete a self-evaluation questionnaire. For production materials, social and environmental issues account for one third of the total rating of a supplier or licencee, which also includes quality and commercial aspects.

Novo Nordisk’s suppliers are evaluated with respect to environmental management and basic labour rights:

• Preserving the environment
  Identifying, monitoring and managing environmental impacts, including compliance with regulation, and policies and programmes to improve performance 
• Treating people fairly
  This dimension specifically addresses the labour standards: Wages and benefits, working hours, helath and safety, child labour, forced labour, freedom of association and collective bargaining, non-discrimination, disciplinary measures and privacy.

Performance in 2004

Due to the company’s expanding global production, new suppliers have been introduced to the company and its standards. To focus on key impacts, the triviality limit has been raised. During 2004 suppliers accounting for 20% of the total value of Novo Nordisk’s purchases were evaluated. Of these, 72% reported a satisfactory performance. All suppliers with an unsatisfactory rating receive a feedback letter from Novo Nordisk, and when needed an action plan is agreed upon.

As of 2004, the programme includes audits, following similar processes as Novo Nordisk’s regular quality audits. In 2004, nine key suppliers were audited.

In 2004 Novo Nordisk’s sustainable supply chain management programme was extended to include all essential purchase in Production, R&D, Intenational Marketing, Sales, office supplies and engineering.

Analysing the implications of sustainable supply chain management, there are both financial and non-financial benefits to both parties. A model illustrates potential costs and benefits.