Question

Improving supplier engagement

The Challenge
Bayer, with core competencies in areas of health care, agriculture, and high-tech polymer materials, has a significant influence on society and the environment in many regions around the world through its global procurement volume.

In 2014, the company procured goods and services from 112,000 suppliers in 147 countries for approximately €20.3 billion. Procurement volume in Germany, the United States, and Japan accounted for nearly 66 percent of the expenditures in OECD countries and about 52 percent of the Bayer’s total procurement spend. Brazil, India, and China together accounted for about 70 percent of the expenditures in non-OECD countries and about 14 percent of the total spend.

With its vast procurement volume and many different suppliers around the world, Bayer had to ensure that global goods and services are manufactured and delivered in accordance with the company’s ethical, environmental, and social standards. To achieve this objective, Bayer needed to streamline its processes and tools to assess whether its suppliers were meeting the company’s social and environmental standards and expectations. Bayer also needed to enhance understanding by both procurement staffs and suppliers of these processes and tools, and to implement the resulting procedural changes throughout the company.

Our Strategy
Bayer views adherence to sustainability standards within its supply chain as an important strategic lever to safeguard global competitiveness and the supply of materials and services. Bayer’s Supplier Code of Conduct builds the basis of its supplier engagement, which describes the company’s sustainability principles and requirements in transactions with suppliers.

The Bayer Sustainability Program was established in 2009, and Bayer started to systematically assess the supply chain in order to identify potential high-risk suppliers. These assessments resulted in a crucial base for the Group’s category and sourcing strategies. To further streamline the process, Bayer in 2012 established a partnership with EcoVadis, a leading supplier of collaboration platforms with which companies can assess the sustainability performance of their suppliers. By using EcoVadis’ web-supported modular questionnaire platform, the supplier sustainability data could reach Bayer’s procurement teams more reliably and efficiently, supporting them to make better sourcing decisions.

Bayer concurrently rolled out sustainability training programs for its procurement employees and its suppliers. Key business units organized training courses and workshops for selected procurement employees on sustainability audits. Bayer HealthCare also conducted sustainability roadshows that focused on specific procurement categories for local procurement organizations across the company. In 2014, the Bayer Group invited its strategic key suppliers to the company-wide Bayer Supplier Day in Leverkusen, Germany, to foster open dialogue and take partnerships to the next level.

To minimize risks and create long-term business relationships with its partners, Bayer also engaged in several new collaborative efforts. In 2011, Bayer co-founded Together for Sustainability (TfS) to lead in the development and introduction of new sustainability standards for suppliers. Also in 2011, Bayer joined the Pharmaceutical Supply Chain Initiative (PSCI).

Our Impact
By partnering with EcoVadis and improving employee and supplier engagement on sustainability, Bayer has evolved its sustainable procurement program from a pilot initiative to what is now an integral aspect of the company’s overall sourcing program. Collaborating with EcoVadis specifically helped Bayer HealthCare improve its data collection and assessment of suppliers’ sustainability performance, nearly doubling its supplier questionnaire response rate to 81 percent in 2014 from 45 percent in 2013. Bayer also continued to expand sustainability trainings on its new supplier assessment process involving EcoVadis. Since the initial rollout in 2012, Bayer has trained more than 800 buyers across the Bayer organization.

Engagement with key suppliers on sustainability also has improved, thanks to the success of Bayer’s Supplier Day in 2014, which was attended by more than 300 participants, including representatives from 90 strategic key suppliers. During this event, Bayer awarded its high-performing suppliers for the successful partnership in areas such as sustainability and contractor safety, and subsequently inspired the creation of numerous other local Supplier Days at Bayer subgroups and country units around the world, including places such as Turkey, China, and India.

By engaging in collaborative initiatives such as PSCI and TfS Bayer addresses the diverse sustainability challenges of a complex global supply chain. In addition, Bayer assumes leadership by helping to create principles and standards that would benefit the entire industry. The PSCI’s Pharmaceutical Industry Principles for Responsible Supply Chain Management is one example. Within the TfS initiative, a total of 2,605 suppliers were assessed (using EcoVadis) and 93 audits were conducted in 2014 throughout China, India, and Brazil. In 2014, Bayer was not prompted to end a supplier relationship due solely to sustainability performance.

1. Discuss the role of the corporate strategy role on achieving successful Sustainability Procurement Program for Bayer.
2. Explain the benefits that Bayer can obtain from such Program?

Answer 1

1. Role of the Corporate Strategy in successful sustainable procurement:

A corporate strategy identifies targets a company wants to achieve and describes the means to achieve them. Specifically, a corporate strategy defines a company's nature of operations and how a company's business processes reflect the company's goals. In doing so, strategic management limits an organization's approved strategies selected by members based on the company's capital and the external environment it competes in.

A strategic strategy's success relies on its being an effective means of allocating a company's resources, establishing industry expectations, and improving an organization's competitive position, as well as growing shareholder value to something beyond its physical assets.

As a coordinating agency, a Corporate Strategy Team works to develop and implement strategies that achieve departmental objectives and meet strategic objectives.

Allocates resources to businesses: A corporate strategy is a method that a business uses to direct its resource allocation to the best investment opportunities available. A company tests each unit's progress through strategic planning and budgeting. Based on its results, the company acquires and divests funds, adjusting capital allocations. Leaders delegate client capital focused on the desirability of each business unit's market opportunities, which determines strategic priorities. A plan of this size would not have worked without allocating key resources such as preparing its massive staff, large money invested in carrying out this initiative, meeting / reviewing vendors, rewarding stakeholders, etc.

Sets expectations: an organization expresses its corporate strategy to individual business units to improve production and sets out internal and ex goals. Corporate goals are based on key areas such as market position, competitiveness and performance for which tangible goals are set, such as achieving specific market share or returning on investment. Via expectations, stakeholders coordinate their behaviors with strategic goals and perform specific roles to ensure the successful execution of a corporate strategy. Although originally just 45% of the questionnaire was filled out in 2013, in 2014, 81% of the questionnaire was filled out. It means that manufacturers were properly informed about the value of this plan and the actual result of this system. The awarding providers show explicitly what their strategic partners need from the business.

Enhanced productivity: The corporate strategy is about development and market outcomes. Therefore, the plan defines the markets a corporation is active in and how business units coordinate and perform their activities to improve a company's competitive position. A minor error is often ignored, but one does not understand the significance of this mistake unless it accumulates to make up a large amount. Therefore, working on a particular strategy and following short-term goals allows companies to reduce errors and increase profitability.

Encouraged shareholders to engage: Depending on corporate strategy, business units should lift investor interest to something beyond their physical and intellectual properties. Through making rational strategic investment decisions a corporation plans to pursue, distribute its capital, exploit organizational skills and competitive advantages for the business unit, the probability improves that business unit activities are successful in increasing a company's value. Encouraging participants to invest in such a system by giving them added value-adding much to the program's performance.

2. Benefits that Bayer can obtain from such Program

Sustainable development in the last two decades has become more than a fad or a buzz word. Research indicates that resilience has real business advantages when applied sensitively to business activities.

Enhanced brand image and strategic advantage: The Natural Marketing Center noticed that 58% of customers are more willing to purchase goods and services from firms implementing sustainable practices, taking account of the impact on the environment of a company. This provides a good customer base for companies with successful government, social and environmental backgrounds for 68 million Americans. The Cause Marketing Group states that customers like firms who help their communities actively: firms are doing well.

Sustainability critics say sustainable business practices are cutting into corporate profit: Developing sustainable business practices enables productive activity to streamline operation and conserve energy, increase employees ' productivity, and reduce costs. Cost reduction often calls for energy-saving steps that can be just as simple as shutting unwanted lamps off and insulating walls into complex projects involving construction and cooling of geothermal systems. Such broader-based programs will possibly be more expensive to execute but the commitment would have long-term effects.

Enhance company ability to comply with regulations: With all the climate change debate, diminishing energy resources, and environmental impact, it's no wonder state and federal government agencies pass environmental protection regulations. Incorporating sustainability into your business would position it in a timely manner to meet changing regulations.

This draws employees and investors: We don't want to be involved in environmental disasters and social welfare scandals. Show the business to be environmentally friendly and respectful of its workers, attracting the caliber of people you want to recruit and the funds the company needs to expand.

Reduced waste: Probably the simplest and fastest way to get involved in sustainable practices. Beginning with offices collecting empty cans for recycling in the 1990s, campaigns have evolved to include waste reduction in paper (conserving trees and forest habitats), product value engineering (reworking or developing new methods using less raw materials, using less material in the manufacture of goods) and swapping incandescent lights for LED lights (greater efficiency combined with great efficiency).

Bringing shareholders satisfaction: Prosperity can not only be used to cut costs, but it can also lead to higher profits. In their 2014 report entitled "Profits with Purpose: How to Organize for Sustainability Can Benefit the Bottom Line," McKinsey surveyed 40 businesses to define sustainability problems and adopt concrete advice "to capture sustainability value." They observed that a Deutsche Bank study revealed that companies with high economic, social and governance scores outperform each other. McKinsey reported similar results for Carbon Disclosure Project research. They also noted that a Deutsche Bank report has revealed the dominance of companies with a high level of cultural, social and governance. For the Carbon Disclosure Project study, McKinsey reported similar findings. Sustainability is almost always expressed in New Markets:' Investing $1 at the beginning of 1993 on a high-sustainability value portfolio would have risen by the end of 2010, to $22,60, compared to $10,40 on the low-sustainability portfolio.' Dow-Jones Sustainability Report Have you heard? How about mutual funds for sustainable enterprises? Investing Socially Responsible? These investors study sustainability reports and discuss your writing.

Would you like to draw brilliant young people? Want to be cutting-edge? If you want to "make it as we've done for the last ten years," you're living in denial, luck.

You need a plan or some process if you really want to play with the best clients, the best companies or the best suppliers or if you want public finance. Aren't we all a dream client? A dreamwork? Modest but profitable? Sustainability will make you realize this vision.

Sustainable companies encourage better-quality investment: Today's finance world is not interested in dinosaurs. When you label a sustainability Plan, forward-thinking businesses always have significantly lower investment risk, insurance risk, and liability risk.

You attract customers, the financial community, insurers, etc. A star treatment can be expected, with improved capital access, lower underwriting costs, etc. This is an area where a variety of cost savings and financial incentives can be seen.

Building a relationship with state agencies: So no-brainer it's not funny. Run your surveyors, regulatory agencies as well as any environmental issues in a clean, lean, green procedure. You will receive fewer tickets, fewer fines, fewer hassles, fewer neighbor complaints.

We saw that regulatory bodies use safe and eco-friendly facilities as models to evaluate other facilities. Indirect advertising will also improve your reputation as a market leader and leader, through the recognition of officials and businesses.

Answer 2

Good, I benefited a lot from the course