Since the end of the 1990s all our suppliers for product related material are contractually bound to comply with environmental legislation. Since 2001 we have group-wide International Purchasing Conditions supplemented by human rights legislation. In 2009 we updated our International Purchasing Conditions with the latest sustainability requirements and the additional focus on n-tier suppliers. To further improve supplier sustainability at the BMW Group, we have implemented various instruments to actively minimize supply chain sustainability risks.
BMW Group Supplier Monitoring. To minimize potential sustainability risks in our supply chain, internal quality teams regularly conduct on-site visits and we ensure on-going sustainability risk-specific monitoring through our own sustainability risk filter. All direct (product related material) and indirect suppliers (non-product related materials and services) are rated by the filter.
The risk filter clusters suppliers by their potential sustainability risk depending on country and commodity risk. In total 70 countries are being rated by ESG-factors (based on data from Maplecroft, Worldbank, OECD, etc), the top 10 high risk sourcing countries for the BMW Group in 2011 are featured in the table. (Please note that this is an excerpt: WIthin the supplier assessment the risk level of all countries is taken into account.)
The second factor assessing the supplier risk is the BMW Group commodity specific critical sustainability rating.
In supply chains where infringements of sustainability due to the locations of n-tier suppliers are likely, these n-tier suppliers will also be assessed using the sustainability risk filter.
This provides the procurement department with a concrete risk score for every supplier and thereby with increased transparency over potential sustainability risks in the supplier base.
Supplier sustainability self-assessment questionnaire. To gain a deeper understanding of the supplier’s sustainability level, a self-assessment questionnaire is sent out to every product related (direct) supplier and to high risk non-product related (indirect) suppliers, which we identify through our sustainability risk filter. From 2009 to 2011, 2,214 of our current direct suppliers, which covers approximately 60 percent of our direct suppliers, have completed the self-assessment process.
For all new product lines such as BMW i, passing the self-assessment questionnaire process – which ensures compliance with the BMW Group’s Supplier Sustainability Standards – is the basic prerequisite for the supplier selection (100% coverage for direct suppliers) since 2009. The procurement staff is thereby required to ensure the sustainability of all new selected suppliers.
Supplier Sustainability Development. The BMW Group believes that sustainability in the supply chain and in the n-tier base can only be achieved in cooperation with the suppliers. Therefore, supplier sustainability development is a key priority for the BMW Group’s procurement department. Should an mid or low level of sustainability be identified as a result of the self-assessment process, the buyer and the supplier cooperatively develop a corrective action plan to improve the supplier’s sustainability performance. Should the supplier not be cooperative or violate an essential sustainability clause of the BMW Group, the termination of business can be a consequence.
We believe that close collaboration and interaction with the supplier is the key for a successful sustainability risk mitigation process. Therefore, the BMW Group will further roll out the described process. A systematic three step process consisting of a refined sustainability risk filter, a risk adjusted self-assessment questionnaire and sustainability audits will be implemented in 2012.