RESPONSIBLE PROCUREMENT AT DAMCO Issue Date: January 2014
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1 RESPONSIBLE PROCUREMENT AT DAMCO Issue Date: January 2014
2 Responsible Procurement Supplier Booklet Developed by Responsible Procurement Team, Damco Damco All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any other information storage and retrieval system, without prior permission in writing from Damco.
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5 00.00 Contents Introduction Corporate Social Responsibility (CSR) & Responsible Procurement (RP) What is Corporate Social Responsibility (CSR)? Some facts related to CSR What is Responsible Procurement (RP)? What are other companies thinking and doing regarding RP? Implementing Responsible Procurement with Damco What is Responsible Procurement in Damco? Who is Involved? What is Damco Third Party Code of Conduct? How to Engage in Responsible Procurement? Step 1: Setting Priorities: Using Damcoresponsibleprocurement.com Step 2: Taking Action The Responsible Procurement Contract Clause Feedback from Suppliers Violations of Damco Third Party Code of Conduct Whom do I contact for assistance? References 5
6 Introduction As a supplier to Damco, you have been selected for inclusion into our Responsible Procurement Programme. This manual has been designed to introduce you to Responsible Procurement and assist you in implementing the Responsible Procurement process within your organization. We hope that you will find this document useful. If you have any suggestions for improvement, please provide your feedback at Damco Responsible Procurement 6
7 Legend Did you know? This item provides you with additional information about Responsible Procurement. FAQs Download This items provides answers to the frequently asked questions. This icon means that you can download the related document by clicking the link. By clicking on this icon you will be directed to more information about the topic. 7
8 01.00 Corporate Social Responsibility (CSR) & Responsible Procurement (RP) In this part, you will be introduced to: What is Corporate Social Responsibility (CSR)? Some facts related to CSR What is Responsible Procurement (RP)? What are other companies thinking and doing regarding RP? 8
9 CSR What is Corporate Social Responsibility (CSR)? is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large. - World Business Council for Sustainable Development 9
10 People Planet Profit People, planet, and profit are the three pillars of CSR and Sustainability. A company s responsibility lies not only with making a profit and fostering economic benefits, but also ensuring that its operations do not have a negative impact on people or the planet. CSR is also taking care of stakeholders, anyone who is influenced, either directly or indirectly, by the actions of the company: employees, suppliers, external communities. The terms CSR and Sustainability can be used interchangeably. 10
11 Some facts related to CSR million people die annually from occupational accidents and diseases. A further 337 million workers a year are involved in accidents at work. In 2013, 1100 people died in one garment factory collapse in Dhaka, Bangladesh. The factory was a supplier for major international fashion brands. 600, ,000 people are trafficked across international borders annually. According to Anti-Slavery International, the world s oldest human rights organization, there are currently over 20 million people in bondage. Every year, indoor air pollution is responsible for the death of 1.6 million people. It is estimated that the cost of corruption equals more than 5% of global GDP, with more than US$1.5 trillion paid in bribes each year. In a 2009 survey of 729 senior executives from a variety of companies around world, only 36% were very confident in their company s ability to deal with the supply chain corruption risk. 11
12 RP What is Responsible Procurement (RP)? By doing Responsible Procurement, the Procurement Department integrates CSR and Sustainability in a more structured way into the traditional three dimensions of focus: price, quality and time. With Responsible Procurement, a company expands its requirements to include responsible business practices in the areas of labour, environment, human rights and anticorruption. Enterprises are encouraged to engage in or support, where appropriate, private or multi-stakeholder initiatives and social dialogue on responsible supply chain management. - OECD Guidelines for Multinational Enterprises
13 What are other companies thinking & doing regarding RP?* of the surveyed Companies consider Responsible Procurement a critical or important initiative Key motivations to implement Responsible Procurement are Value Creation, Risk management, and Cost Reduction. of companies have a dedicated team for Responsible Procurement. of companies are implementing dedicated tools for assessing their suppliers Sustainability performance. have trained a majority of procurement staff on Sustainability. of companies have increased (56%) or maintained (36%) their budgets related to Responsible Procurement. *According to a survey conducted jointly by PWC and EcoVadis in
14 What are other companies thinking & doing regarding RP? since 2006, have been tracking and reporting transportation- and logisticsrelated GHG emissions. will ask a dozen of its suppliers to file Sustainability Reports beginning in has made commitments over the years towards increasing the percentage of responsibly harvested wood in their supply chain, with Forest Stewardship Council (FSC) certified wood accounting for approximately 25% of their supply, and plans to see that rise to 35% in has decided to work with the Fair Labor Association (FLA) to investigate whether children are working on cocoa farms supplying its factories. It makes Nestlé the first food company to partner with the Fair Labor Association. started serving sustainable fish in Europe in October announced in September 2011 that it is greening its supply chain and will eliminate all harmful chemicals from its products by
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16 02.00 Responsible Procurement in Damco In this part, you will learn: What is Responsible Procurement at Damco? What is the Third Party Code of Conduct? How to engage in the Responsible Procurement Programme? What information do I need to provide? What actions do I need to take? Whose responsibility is it to set up and audit? How do I implement an improvement plan? What is the Responsible Procurement Contract Clause? Whom do I contact for assistance regarding RP? 16
17 What is Responsible Procurement in Damco? Our objective with Responsible Procurement is to develop sustainable relationships and pursue continuous improvements in our supply chain in a close dialogue with our suppliers. Thus, it is not about terminating relationships but about collaboration with our suppliers towards sustainable practices. Our Responsible Procurement Programme also demonstrates our commitment to the United Nations Global Compact (UNGC), a policy platform and a practical framework for companies committed to sustainability and responsible business practices. In Damco we want to be a profitable, responsible and sustainable business. Developing a dialogue with our suppliers helps us achieve an important goal: protecting and developing our license to operate in existing and new markets. Damco, Sustainability Report
18 Who is involved? You will be or maybe already have been informed by your contact person in Damco regarding Responsible Procurement. Your contact person will ask you to take some actions which will also be explained in this manual. If you are supplying various units/companies within Damco, these units/companies will make an effort to align internally to ensure that you do not receive multiple invitations for the Responsible Procurement programme. However, your effort within Responsible Procurement should of course reflect all your local and global activities with Damco. 18
19 What is the Third Party Code of Conduct? In order to set consistent standards on human rights, labour, environment and anticorruption and outline what we consider to be responsible business behavior, we have developed a Third Party Code of Conduct. The Code addresses all partners* with whom Damco does business. The Code is divided into a high level description of Damco s Responsible Procurement requirements towards its partners, and a Guidelines & Best Practices Section where examples are given for each of the elements in the Code. *Customers are not included. The Code is based on: Did you know? United Nations Global Compact (UNGC) principles on: human rights Labour Environment anti-corruption Core conventions of the International labour Organisation (ILO) The Group Policies The International labour Organisation is the organization responsible for promoting fair and decent labor standards worldwide. It is the only tripartite United Nations agency that brings together representatives of governments, employers and workers to jointly shape policies and programmes promoting Decent Work for all. This unique arrangement gives the ILO an edge in incorporating real world knowledge about employment and work. For more details, visit 19
20 Why participate in Responsible Procurement? The Code is an opening point for a collaborative dialogue with our suppliers. As a baseline we require our suppliers to acknowledge the Code and this is done when a supplier registers in Damcoresponsibleprocurement.com or upon contract sign off. You may also receive the Code directly from your contact person in Damco. Participating in this initiative will help you to create a more stable, trusted and long-lasting relationship with Damco. By collaborating on Responsible Procurement, you will learn and improve on CSR and be able to use this as a differentiator for your company to other customers as well. Practice has shown that CSR creates new business opportunities in terms of innovation and lower operating costs. Lastly, but not least, your own employees will value this work as you demonstrate care for their well-being, the environment and society at large. Did you know? United Nations Global Compact (UNGC) In 2009, we signed up to the UNGC. In 2010, we were invited to join the LEAD group to achieve higher levels of corporate sustainability. UNGC was launched in 2000 to provide a policy platform and a practical framework for companies that are committed to sustainability and responsible business practices. It is a multi-stakeholder initiative based on ten universally accepted principles in the areas of human rights, labour, environment and anticorruption. The objective is to ensure cooperation between suppliers and buyers, to establish a baseline standard of business conduct and to collaborate to improve the impact of business on society and the environment around the world. For more details, visit Download Third Party Code of Conduct can be downloaded from this link 20
21 How to engage in Responsible Procurement? Setting Priority Taking Action The Responsible Procurement process has been divided into a two-step approach: Setting Priorities and Taking Action. The process will be described below. As mentioned above you will be contacted by Damco with information regarding the Responsible Procurement Programme. This information will include an invitation to register in our Responsible Procurement online tool. 21
22 Registering yourself in the tool, however, is only part of the process. We will also ask you for information on how you work with Sustainability and Responsible Procurement and review your performance. You may also be asked to fill out a Self-Assessment Questionnaire or grant us permission to conduct an audit of your practices. Please note that Responsible Procurement is a long-term process. Thus, we do not expect all our suppliers to meet the requirements in our Third Party Code of Conduct immediately. We understand that some issues may require time and resources. However, we do expect our suppliers to commit to conduct business in an ethical, legal and socially responsible manner and implement the standards in our Third Party Code of Conduct. 22
23 Step 1: Setting Priorities: Using damcoresponsibleprocurement.com 1 2 Action Setting Taking Priority You will receive an invitation for the Responsible Procurement Programme via . In the there is a link for you to register in Damco Responsible Procurement online tool. F.A.Qs Q: Who should I contact if I have problems with registering? A: You can contact the system support by sending an to Please remember to mention the name of the buyer who sent you the invitation 23
24 Register in RP Site 3 4 Enter Info F.A.Qs Q: How can I determine whether Damco is critical to my business? A: Damco is critical to a supplier s business if: The current and proposed business volume with Damco exceeds 30% of the revenues. The loss of business will potentially disrupt your operations. The loss of business will have severe cost consequences for you. Is your business model built on Damco Technology or know-how? Q: My colleague also wants to have access as a user to Damcoresponsibleprocurement.com. How can he get a profile? A: Once you are registered through the link in the invitation, click Admin > My Company > Create User. Here you can invite your colleagues to use the system. Once registered, you will automatically be directed to the main Dashboard where you have to provide or confirm information under the Required Actions Tab as follows: Personal details Company details Supplier Registration Questionnaire: Is the product or service to be provided to Damco customised or branded? Do you consider Damco critical to your business? In which country/countries are products or services for Damco produced? Read and acknowledge the Third Party Code of Conduct 24
25 Entering Information in the System Step 4 will be about your registration. Completing this step correctly is very important for all the subsequent steps. Please make sure you enter all correct and updated information for the following areas: Personal details Company details Supplier Registration Questionnaire: Please fill in the Third Party Code of Conduct Scorecard according to the instructions in the document and upload all mentioned and relevant CSR documentation to support the Scorecard. If not uploaded correctly, this may delay the completion of the process. Policies and documents you will need to upload are for example: health and safety Policy and management system environmental Policy and procedures policies on employment, compensation, workplace conditions anticorruption Policy and procedures certificates (i.e. ISO 14001, OSHAS 18001) 25
26 No Action 5 Verify & 6 Supplier Approve Prioritization Clarify We will verify the accuracy of the information provided. Based on the information provided by both you and us, the tool will assign a priority. The three possible Priorities are: No Action, Clarify, And Action. Please refer to page 27 for more information on the different priorities. Action F.A.Qs Q: In the contact details, do I need to provide the details of the Head Office or the individual locations servicing/manufacturing for Damco? A: In the company details tab you need to provide the details of the Head Office if you have more than one manufacturing location, but also mention contact details of the specific location. 26
27 Step 2: Taking Action Setting Priority No Action Clarify Action Taking Action When you have been assigned the priority of either No Action, Clarify or Action, we will follow up with you and take the necessary actions. The steps to be taken for each priority will be explained in detail on the following page. 27
28 No Action: No action is required for the moment. However, as a supplier to Damco and as stated in our Third Party Code of Conduct we expect you to keep improving within the areas covered by our Code. As conditions may change, Damco may ask you to go through an assessment again at a later stage. No Action Clarify: For suppliers categorised as Clarify we need to ask you for further information and documentation on your CSR activities and business practices. Action: Business practices of the suppliers categorised as Action will have the most impact on our business and may pose a business risk to our activities. Therefore further actions are required and we need to ask you further information and documentation on your CSR activities and practices. Clarify Action Did you know? The initial follow up actions for suppliers with priorities Action and Clarify priority categories are the same: we will initiate a dialogue about your current CSR practices. However, the subsequent steps are different. This will be explained on page
29 7 Have a dialogue with Damco At this stage, you have registered in Damcoresponsibleprocurement.com, acknowledged Damco Third Party Code of Conduct and been assigned a priority. Next step is to have a dialogue with Damco about the priority and the actions to be taken. F.A.Qs Q: What does Action / Clarify mean? A: Action / Clarify is the priority assigned to you as a supplier based on the information provided by both you and Damco. It means that we need to ask you for further information on your CSR activities and responsible business practices in order to evaluate what actions we need to take to obtain continuous improvements in our supply chain. Q: I know that we have a better reputation than some other suppliers you use. Why do you not start Responsible Procurement with them? A: In the RP programme we prioritise suppliers based on strategy and activities. As you are one of our important suppliers, we have selected you for inclusion in the programme. We will, of course, also work with other suppliers. Q: Will you terminate the relationship with us if we do not meet the requirements of Third Party Code of Conduct? A: The objective of RP is development, not punishment. However, in cases of repeated violation of the Code and/or you refuse to collaborate with Damco in implementing or developing improvement plans Damco can impose a business recess or even terminate the relationship. 29
30 Do you have policies and documentation and are you willing to share information? Yes 8 Share your CSR report / programme with Damco upon registration No If Clarify If Action 9 10 CSR documentation should have been duly uploaded during registration in Step 4, together with the Third Party Code of Conduct Scorecard. During this step, you may want to share or be requested by your contact person additional information and documentation on your CSR practices. The documents could include Policies, Procedures, a CSR report, a Sustainability report, your Code of Conduct or audit reports showing your responsible business practices. If you not have any documentation, skip Step 8 and go to next step instead. 30
31 F.A.Qs Q: I have been prioritized as Action / Clarify. What should I do? A: Please make sure you send documentation regarding CSR practices, if available. We will need these documents in order to evaluate if you are aligned with our Third Party Code of Conduct. Q: What do you mean by documentation? A: Documents containing information on your practices and how they link to our Third Party Code of Conduct. It could for instance be documentation on how you manage anticorruption, your human resources policies guaranteeing good labor conditions for your employees, certifications (i.e. ISO for environment) or documents showing that you are following an international social standard like BSCI, ETI, SEDEX, ETI. You can also share recent audit reports in the areas of health and safety, CSR, or environment. Q: We need some time to collect all the documents. What is the deadline for this? A: The invitation and registration needs to be completed in three weeks. 31
32 Does the information show that your company is aligned with the Code? No Yes Verified Supplier If YES: If the documents show that you are aligned with the Third Party Code of Conduct, we will inform you accordingly, and no further action is required. If NO: If the documents are not sufficient to evaluate whether you are aligned with Damco Third Party Code of Conduct, the following steps will apply: Did you know? Suppliers with priority Clarify will be asked to fill out a Self- Assessment Questionnaire. Suppliers with priority Action usually may not fill in the Self-Assessment Questionnaire. Instead, an onsite audit is the preferred way of obtaining more information about your practices. 32
33 9 Answer the self-assessment questionnaire within 3 weeks Self-Assessment Questionnaire The Self-Assessment Questionnaire has been designed to gain a better understanding of your business practices. It may also assist both you and us in identifying potential areas for improvement. The questionnaire addresses labour rights, health and safety issues, business ethics and environment. Please return the questionnaire and supporting documents within 3 weeks. Upon receipt, Damco will review the answers through an external service provider. 33
34 9 Do we need more information and/or clarifications? Yes No Verified Supplier If YES: If the review of the questionnaire indicates that we need to take additional actions, we will continue with step 10: Arrange for an audit or establish an improvement plan. If NO: If the answers in the questionnaire do not require any clarifications or indicate any issues, no further action is required and we will inform you accordingly. 34
35 10.1 Arrange for Audit / Follow-up on Improvement Plans We have assessed that your business practices have a significant impact on our business and may pose a risk, therefore an onsite audit is required. We will contact you to agree on when the audit should take place. The audit will be performed by an external audit company approved by Damco. The audit company will contact you in due time to agree on the details and provide you with information on what documents they will need to verify during the audit. F.A.Qs Q: Who will be paying for the SAQ or the audit? A: An audit initiated by Damco will also be paid by Damco, unless agreed otherwise. If you want to proceed with your own audit, you must obtain approval by Damco, share all the audit findings and also bear the cost of the audit. Q: What areas will the auditors look into? A: The audit will be conducted according to our Social Commitment Checklist that covers the same areas as our Third Party Code of Conduct. 35
36 Does the audit highlight any findings that need corrections / improvements? Yes No Verified Supplier A Typical Audit Schedule: Did you know? Opening Meeting Management Interview Walkthrough An audit is a process where the conditions and practices at a company s facility are examined onsite in order to evaluate performance against the local legislation as well as our Third Party Code of Conduct. The audit is performed by professional auditors from internationally recognized independent audit companies. Closing Meeting Document Review Private Employee Interviews During the audit the auditors will engage with both managers and employees in the facility. However, the auditors will try to avoid disturbing the routines and the production at the facility. At the end of the audit the auditors will summarize the findings and obtain the management s signature on a Finding Summary together with suggested corrective actions and deadlines for correcting findings if applicable. 36
37 F.A.Qs Q: Do you accept audit reports from other customers, to avoid redundant audits? A: Audit reports from other customers with similar standards as Damco can certainly be used, and should be provided at Step 4. Q: Is the audit going to take up much of my time? A: The audit normally takes around two days, depending on the size of the facility, but the auditors will not need your assistance all the time and they will do their best not to disturb the activities. Also, you can share the information from this audit with your other customers afterwards saving you future time. Q: What will happen during the audit? A: On page 36, you find an overview of the audit process. The audit will consist of management interviews, employee interviews, a facility tour and documentation reviews and will cover the areas in our Third Party Code of Conduct. Please note that during the audit the auditors should be given full access to the facility and documentation as well as be allowed to interview employees. Q: Do we receive an audit report? A: Yes, you will receive a report with all the findings and suggestions for improvement shortly after the audit. At the closing meeting, you will also receive a preliminary summary of the findings. Q: What should we do after the audit? A: A mutually agreed improvement plan should be put in place. This will contain strict progress measurement and follow-up activities to ensure effective implementation of corrective actions. 37
38 10.2 Establish improvement plan with milestones & deadlines & obtain buyer s approval within three weeks after audit If the audit highlights that improvements must be made, you need to create an improvement plan with milestones and deadlines. Please send the improvement plan to Damco for review and approval. Once the plan is approved you need to implement it within the agreed time frame. We will monitor and track progress on these Improvements together. You are expected to send us your improvement plan within 3 weeks after the audit has been finalized. 38
39 Monitor progress on improvement plan (3-9 months depending on issues) Arrange for follow-up audit Arrange for document review Yes Yes Do Improvements need to be verified through onsite audit? No Do Improvements need to be verified through document review? No 10.6 Verify Improvements Verified Supplier Yes Have improvements been successfully implemented and integrated? No
40 Following up on Improvement Plans Once the improvements have been completed, we will verify the implementation of these either by asking you to provide documentary evidence or by conducting an onsite follow-up audit at the facility. This will be decided on a case-by-case basis and communicated to you by your contact person. If the improvements have been successfully implemented no further actions will be required at this stage although we expect you to keep meeting the standards of our Third Party Code of Conduct. If gaps still exist you must develop another Improvement Plan that needs to be implemented and the process above will be repeated. 40
41 The Responsible Procurement Contract Clause The Responsible Procurement Contract Clause has been created to ensure that our suppliers are legally aligned with our Third Party Code of Conduct and adhere to our standards for responsible business practices. The clause will be included in all new contracts with our suppliers. Existing contracts can be modified by including the RP clause after mutual agreement with the supplier or during revisions. The RP Contract Clause: Commits the supplier to comply with applicable laws and regulations and to implement the Third Party Code of Conduct Reserves the right for Damco to audit the supplier, also on an unannounced basis Requests the supplier to present an improvement plan and correct any issues that may be discovered Reserves the right for Damco to terminate the contract in case of severe or repeated violations of the Code 41
42 Feedback from Suppliers Through the whole process of Responsible Procurement, it is important that you provide your feedback to us. You may face challenges when improving your business practices. It is important that you are able to communicate these challenges to us and feel confident doing so. Once we understand what the challenges are, we can work towards improvements. We send a feedback survey every year to our suppliers; when you receive it we will appreciate if you take the time to complete it and send us your view on the Responsible Procurement program. 42
43 Violations of the Third Party Code of Conduct As stated both in the Third Party Code of Conduct and the RP Contract Clause, Damco reserves the right to terminate the contract in case of critical or repeated violations of the Code and if the supplier refuses to collaborate with Damco in implementing improvement plans. However, this must be used as the ultimate and last mean of remediation since the essence of the Responsible Procurement programme is to strive for continuous improvements within our supply chain through collaboration with our suppliers. 43
44 Who do I contact for assistance? You can contact the RP support desk in case of any issues pertaining to Damcoresponsibleprocurement.com by sending an to: For other questions, please direct your enquiry to your contact person in Damco who will assist you. 44
45 References 01. ILO, 30 November 2010, Improving safety and health at work through a Decent Work agenda: Project outline, WHO UNGC. June Fighting Corruption in the Supply Chain: A Guide for Customers and Suppliers, p Koll 2009/2010 Global Fraud Report, p
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