Upholding standards

Given the importance to us of an ethical supply chain, we have developed a Socially Responsible Supplier (SRS) programme encompassing all Reed Elsevier businesses, supported by a working group comprised of colleagues with operations, distribution, and procurement expertise, and a dedicated SRS Director from the Global Procurement team. As part of the SRS programme, we maintain a database with comprehensive information including code versioning/signing, initiative tracking, audit dates, remediation plans, and compliance.

In 2011, the SRS tracking list included 457 key suppliers, 193 of which we deem to be high risk according to criteria encompassing the Corporate Executive Board’s Global Country Analysis Support Tool, human trafficking data from the US State Department, and the Environmental Performance Index produced by Yale University and Columbia University. Review the SRS risk rankings.

The tracking list changes year-on-year based on the number of suppliers we do business with who meet the required key criteria. In 2011, 74% of spend was with critical, strategic, and preferred suppliers identified by Global Procurement, representing a 23% increase over 2010. Also, through enhanced spend analytics we refined data for more than 45 business unit/country combinations to improve identification of duplicate suppliers, group supplier relationships, and mergers and acquisitions across the supply base. We started 2011 with 37% of key suppliers on the SRS tracking list as signatories to the Supplier Code and reached 64% by year end. This represented good progress although less than our 75% target for 2011. The number of non key suppliers who are signatories to the Supplier Code increased from 1,421 to 1,701 between 2010 and 2011.

Over the past three years there have been 190 core suppliers that have consistently appeared on the tracking list with 49 deemed high risk based on our SRS Risk Rankings. For 2011, these core suppliers represent 72% of total spending associated with the tracking list – 86% of which have signed the code. We aim to reach 75% of SRS suppliers as Supplier Code signatories in 2012 by including compliance provisions in procurement contracts, and involving key colleagues who manage supplier business relationships. Over the last four years, all new suppliers participating in our e-sourcing process run by Global Procurement are requested to sign our Supplier Code as a condition of doing business with us.

In addition to internal audits, the SRS programme terms of reference stipulates that external audits be performed on a regular basis (suppliers with repeat code violations are subject to annual external audits). In 2011, we conducted 41 independent external audits of high risk suppliers through specialist auditors Intertek (51% on core suppliers), and four were deferred and completed by the close of January 2012. Audit locations included Brazil, China, Guatemala, India, Lithuania, Malaysia, the Philippines, Singapore, South Korea, and the United Arab Emirates.

Intertek examines how well a supplier is meeting all aspects of the Supplier Code and issues a Corrective Action Plan Acknowledgement Report (CAPAR) as necessary, summarising audit findings and detailing corrective action plans – agreed by the auditor and the supplier to ensure compliance with the Supplier Code and local laws. Remediation target dates are agreed and the CAPAR is signed and dated by both parties. Follow-up audits ensure identified issues are resolved. See the SRS audit workflow and process.

Exemplary of collaborative improvements resulting from supplier remediation, in 2011 we pursued safer working conditions for employees at a pre-press supplier in India ensuring drinking water was tested and the height of the power generator stack met environmental requirements. We also worked with a pre-press supplier in the Philippines to establish an HIV /AIDS education programme. Review sample 2011 Remediation Reports.

Our Supplier Code states that “Failure to comply with any Reed Elsevier term, condition, requirement, policy or procedure… may result in the cancellation of all existing orders and termination of the business relationship between Reed Elsevier and Supplier.”