Working with suppliers

Ethical trading and respect for human rights are core inherited values at Cadbury Schweppes where we have long sought to treat our suppliers justly. We not only believe that this is the right thing to do, we know it also makes sound business sense. Good practice in our supply chain underpins the integrity, sustainability, quality and safety of our products.

The quality and consumer appeal of our products and their long-term sustainability depends among other important considerations, on the productive and mutually beneficial partnerships we forge with our supply chain partners around the world.

Our ethical sourcing strategy focuses on working with our suppliers to continue to improve workplace conditions and sustainable agriculture. Our supplier assessment and auditing is built on positive engagement and working collaboratively with our supply chain partners. Its aim is to ensure our suppliers meet our Ethical Sourcing Standards.

We are developing specialist auditing support as well as training our procurement teams on ethical sourcing and have begun to secure some audit activity through locally based NGOs. It is through such activity that we will help build auditing and assessment capacity in local markets where we benefit from local understanding.

We are working collaboratively with our suppliers to help make their own systems more effective and to bring about improvements. This includes holding meetings with individual suppliers, and with supplier groups, and working with them to develop our ethical sourcing standards and sustainability. Working with suppliers in this way also helps them create value for themselves and their organisations.

What we and our consumers expect

People love the taste, the quality and the value of our products. They expect our brands to have been produced with integrity, where decent labour standards exist, with straight dealing in business transactions and a fair price for goods, services and labour has been paid. Increasingly, customers expect our products to come from sustainable sources and be produced without significant environmental impact. Increasingly, consumers expect companies to source ethically and in a sustainable manner, and these are firm Cadbury Schweppes commitments.

Our supplier assessment processes

Our supplier assessment processes help us monitor and manage performance. These processes include desk-based risk review, site-based assessment, and verification. Our ethical sourcing team works closely with our procurement and quality teams, and has overall responsibility for these processes.

Desk based review - We conduct a review of site, industry and country risk information in our offices. These reviews help us to decide which sites would benefit from a visit and what aspects of ethical trading to concentrate on. We have recently joined SEDEX (Supplier Ethical Data Exchange) to help us in these reviews and are also encouraging suppliers to join.

Site-based assessment - Following an initial desk review, site-based assessments are carried out by trained Cadbury Schweppes personnel or by external assessors. External assessors range from international audit specialists to local NGOs with in-country understanding, experience, and auditing experience in human rights and ethical trading. In places where this expertise does not yet exist, we are working with NGOs and other businesses to develop it. Where appropriate, when assessments suggest improvements and corrective actions are needed, we work closely with our suppliers to develop these.

Verification - We are continuing to develop our assurance programme and will start our verification process in 2006. This process will look at how effective our supplier assessment procedures are and will provide an external review of our management systems. An independent verifier will review a sample of our assessments to check for completeness, and to make sure that planned improvements have been implemented and are working effectively.

Communicating our policy and standards:
tier 1, 2, and 3 Suppliers

We categorise our suppliers into three levels or tiers according to country risk, as well as the importance of the product or service to our company and our brands. Higher risk suppliers are categorised as Tier 1 suppliers and are given more attention and priority than Tier 2 (who are considered next in terms of risk) and Tier 3. This approach was initiated in 2003, and it is an ongoing process.

We hold discussions with Tier 1 suppliers about our Human Rights & Ethical Trading policy and Ethical Sourcing Standards which underpin our policy. Together with our suppliers, we rank their performance and develop improvement plans if needed. These plans include on-going monitoring and support. From 2003 to the end of February 2006 we had identified around 90 Tier 1 suppliers through desk-based reviews.

We write to our Tier 2 suppliers about our HRET policy and Ethical Sourcing Standards. We ask them to confirm in writing or electronically that they will abide by our policy and standards. From 2003 to the end of February 2006, we had identified a little over 2,100 Tier 2 suppliers that included both active, and some now inactive, suppliers.

Our remaining 38,000 suppliers fall into our Tier 3 category. We advise these suppliers about our HRET policy and Ethical Sourcing Standards through our contractual terms and conditions.

Monitoring performance in supplier Assessment

We monitor our supplier assessment processes and currently use three core Key Performance Indicators to help us do this:

Percentage of identified Tier 1 suppliers with whom we have discussed our policy and standards, gained their confirmation that they will abide by them, risk assessed their performance and identified areas of improvement if any.
Percentage of identified Tier 2 suppliers who have confirmed they have received our communications on our policy and standards and that they will abide by them.
Number of our procurement people trained on our supplier assessment and communication processes.

During the period 2003 to the end of February 2006, we had discussed our policy and standards with 83% of identified Tier 1 suppliers and confirmed our policy with 67% of suppliers we categorised as Tier 2. At the same time, we also trained 148 out of around 270 of our procurement people in the Company. We monitor this data on a group-wide basis. It is reported regularly to our Global Supply Chain Leadership Team and the Human Rights & Ethical Trading Working Group.

We are always seeking to improve our performance. With this in mind we asked the Sustainability Team at Deloitte to assure how we monitor our performance on these core KPIs and to provide feedback to further improve our practices and performance.

Case study: Sustainable Palm Oil

Palm oil is used in a wide range of food and other products and demand for it is growing fast. It is being used increasingly in the Far East, and in food production globally as food producers use palm oil as an alternative to other fats containing trans-fatty acids.

The RSPO, the Roundtable on Sustainable Palm Oil, is a multi-stakeholder group set up to look at ways of ensuring the sustainability of palm oil farming. Its aim is to help address concerns about the loss of rainforest, biodiversity, land rights disputes and labour rights.

Since its inception in 2004, the RSPO has created a set of 'Principles and Criteria', covering economic, environmental and social aspects of sustainability. Some producers of palm oil have started to adopt many practices outlined in these Principles and Criteria.