14.1 Description of the organization's supply chain
Corporate Purchasing (CPU) is responsible for the procurement in all production plants worldwide (except the USA) and manages the procurement organisation through a team of lead buyers who are strategically responsible for various material groups. The Corporate Purchasing department became even more visible and important when the purchasing specialists of the former Sanitec were integrated. Operational purchasing is based locally at the plants.
Geberit’s production processes entail a high degree of skill, i.e. it largely purchases raw materials and semi-finished products with a high share of raw materials. In so doing, material costs represent a relatively low share of Geberit net sales.
The raw materials and semi-finished products primarily come from suppliers in Western Europe (78.6% of procurement value). The share of the procurement volume from Asia and from Eastern Europe amounts to 9.5% each, that from America 1.9% and that from Africa 0.5%. Owing to the “upstream” purchasing in the supply chain and high level of in-house production as well as the very high share of Western European suppliers, the general risk profile of the supply chain is relatively low. The active pursuit of a “dual source strategy” – i.e. the procurement of a resource from two providers – serves additionally to reduce dependencies.
Geberit procured raw materials (28.1%), semi-finished products (43.9%) and finished products (28.0%) with a procurement value of CHF 755.0 million (previous year CHF 646.0 million) from some 2,200 suppliers across the world in 2015.
14.2 Management Approach – supplier assessment using sustainability criteria
Geberit’s business partners and suppliers are obligated to maintain comprehensive standards. The basis for the cooperation is the Code of Conduct for suppliers. This Code is aligned with the principles of the United Nations Global Compact and is binding for every new supplier. Suppliers to the former Sanitec are now also obligated to comply with these standards. The Code comprises specific guidelines on quality and meeting environmental, labour law and social requirements and sets out compliance with human rights. Upon request by Geberit, the supplier must prepare corresponding records in order to demonstrate compliance with the standards of the Code and make these available at any time. Should the supplier fail to comply with the regulations set out in this Code, then corrective measures are taken wherever possible. Failure to comply on the part of the supplier is regarded as a serious obstacle to the continuation of the business relationship. If the supplier does not correct this non-compliance, Geberit can terminate the cooperation.
When evaluating suppliers, Geberit strives to achieve the greatest possible degree of transparency. All new and existing partners are thus assessed by means of standardised processes and according to the same criteria: company as a whole, quality, sustainability, price, procurement chain, delivery reliability, production and technology. As a rule, the selection of suppliers is required to include a quality audit covering clarification on environmental and occupational safety issues. Where an audit reveals inconsistencies in these criteria, an additional, in-depth audit is conducted.
Supplier management has integrated a risk management approach that is based on the division of suppliers into risk classes – depending on the production location (country) and type of production process. Owing to the high share of procurement from Western Europe, the risk in Geberit’s supply chain is relatively low. In the reporting year, 42 companies were identified in the highest risk category. This is equivalent to less than 5% of the entire procurement value. 33 of these 42 suppliers have already been audited. Within this risk class, the focus is placed on independent suppliers such as those which are not part of a larger company with recognised sustainability management. The systematic planning and performance of audits is conducted for these suppliers, generally every three years. To ensure neutrality and the expertise required for the audits, Geberit also works with an external partner. In China, the carrying out of audits by independent experts has proven effective. Performing such audits makes an important contribution to enhancing credibility in supplier management. Any shortcomings exposed by audits give rise to sanctions. As a rule, a deadline is imposed for remedying the situation.
14.3 Percentage of new suppliers that were screened using sustainability criteria
All new suppliers undertake to comply with the Code of Conduct and hence also to international standards governing environmental protection, labour practices and human rights.
14.4 Sustainability-related impacts in the supply chain
As of the end of 2015, a total of 868 suppliers have signed the Code of Conduct for Suppliers (previous year 728). This equates to over 90% of the total procurement value. Among the top 200 suppliers, the consolidated share of companies that have signed has already reached 93.1% (previous year 98.3%), as awareness of the Geberit standards and processes had already been raised among a significant proportion of the top suppliers to the former Sanitec Group.
For audits in China, Geberit cooperated with SGS in 2015 too. The five audits conducted in total concluded that standards governing occupational safety and environmental protection were complied with.
Only in a few justified exceptional cases are there plans to impose complete regulations on the second tier and third tier in the supply chain by getting them to sign a Code of Conduct, as this would result in a disproportionately high level of additional administration with little added benefit. Geberit pursues a pragmatic yet effective approach. When auditing suppliers in the highest risk category, an analysis of the most important suppliers is included in the risk analysis and the audit investigations on site. At the end of the day, Geberit’s goal is modern supplier management, where the relationship with the supplier is actively managed and sustainability risks in the supply chain are jointly analysed.