Responsibility in the Supply Chain
As a manufacturer of high-quality life science products, Eppendorf sources raw materials, goods and services from all over the world. Our supply chain encompasses procurement, production, distribution and logistics. As a result, the activities along our supply chain entail a wide variety of risks that can impact the stability of our production capability. Identifying and evaluating these risks as early as possible is crucial to our ability to supply our customers with products featuring the high level of quality they require while successfully running our business. Establishing transparent and digitalized processes along the supply chain can minimize disruptions and risks in this regard.
To this end, we take process-related, economic and technical criteria, as well as social and environmental factors, into account in our procurement process. Environmental sustainability as well as respect for human rights and fairer working conditions are an integral part of our corporate culture. In addition, we continuously address growing external demands with regard to our supply chain management, including new statutory requirements on the traceability of specific materials, and we exercise our due diligence obligations under human rights law. Moreover, we pay very close attention to our customers’ requirements and take them into account in our tenders. Our aim is to ensure stability in the value chain while encouraging our suppliers to act more sustainably where required and helping them to implement our requirements.
Our supplier management
A Group-wide corporate standard defines the framework for Eppendorf’s supplier management. It sets out precise specifications on how to identify and select suppliers and ensure that they are qualified. When developing new supplier relationships and screening new suppliers, the purchasing departments overseen by the Chief Technology Officer (CTO) ask candidates to provide them with information pertaining to their social and environmental credentials. For example, each supplier must confirm our Code of Conduct for Business Partners and provide voluntary disclosures on the topic of sustainability. The screening of suppliers that reject or refuse to sign the Code of Conduct for Business Partners or fail to provide adequate answers in the voluntary disclosure will be terminated with immediate effect. Alongside the initial screening of potential suppliers, we perform audits of our existing suppliers using defined corporate standards that apply at all of our production sites. These standards include sustainability requirements from the screening questionnaire relating to human rights, the environment and ethics, to enable us to verify compliance with these requirements on site.
In addition to regularly qualifying and auditing our suppliers, we conducted a quantitative risk assessment of direct and indirect suppliers for the first time at the end of 2022, on the basis of audited data from the financial statements for the fiscal year 2021. Using country- and sector-specific external risk indicators, we explored the likelihood of a human rights violation for each human rights and environmental risk identified in the German Supply Chain Act (LkSG). Based on an input-output model of the value chain, both country- and sector-specific risks and the statistical total number of potentially affected employees along all levels of our supply chain were determined and evaluated. This way, we identified examples of which countries and sectors are affected by which human rights risks and to what extent.
We identified the following key risk areas: The areas of prohibition on ignoring freedom of association, prohibition on force by security forces, prohibition on discrimination, prohibition of child labor, workplace safety and wages constitute an increased or moderate risk. The risks extend especially to Asian and South American countries as well as countries in the Middle East.
Based on this initial assessment, we have developed a strategy to comply with our due diligence duties related to human rights and the environment. As a result, we established various responsibilities and processes to further analyze the risks in our supply chains and to take appropriate preventive measures. More details on this strategy can be found in the Declaration of Principles on the Respect of Human Rights of the Eppendorf Gruppe.
The Global Procurement Instruments (GPI) unit performs all sustainability-related supplier screening activities and is assigned to the CTO role. In this context, the unit also focuses on the German Supply Chain Act (Lieferkettensorgfaltspflichtengesetz, LkSG), which has been in force since January 1, 2023. It is supported and monitored by the newly created position of Human Rights Officer within the global sustainability team of the Eppendorf Group. In addition, GPI is responsible for creating consistent processes within the CTO organization. This ensures that all Technology Centers (TC) assess their suppliers according to the same specifications, for example with regard to their sustainability efforts, and develop them accordingly if necessary. The results can also be viewed centrally so that the experiences of other TCs can be included in the assessment and comparability is ensured.
In addition to the existing organization for the sustainability-related assessment of product-relevant suppliers, we plan to establish a network of LkSG ambassadors in 2023. The aim of this network is to implement the diligence duties related to human rights and the environment also with regard to suppliers for non-production-related material at all global sites.
Standards & guidelines
In our operating activities, we are committed to complying with generally accepted labor, social and environmental standards and respecting human rights. We also meet the requirements for responsible corporate governance as set out in our Code of Conduct. Furthermore, we are firmly committed to the Ten Principles of the United Nations Global Compact (UNGC), which we have been supporting since becoming a participant on January 31, 2022. The principles focus on human rights, labor standards, the environment and preventing corruption. Our Declaration of Principles on the Respect of Human Rights also explains in detail that we are committed to respecting human rights as defined by various international frameworks.
We expect all of our suppliers to comply with internationally accepted environmental and social standards. These are set out in our Code of Conduct for Business Partners, which is based in particular on the core labor standards of the International Labour Organization (ILO), the UNGC and the UN Universal Declaration of Human Rights. Our suppliers are also expected to ensure that their own suppliers comply with these standards.
Moreover, Eppendorf expects its suppliers to comply with applicable environmental laws, regulations and standards. Accordingly, we expect suppliers to set up and operate an environmental management system based on accepted standards in order to minimize environmental impacts and hazards and improve environmental protection in their day-to-day business operations. At Eppendorf, we expect our Business Partners to be able to declare that to the best of their knowledge they have no reason to assume that the products delivered to us contain conflict minerals from the DR Congo or other countries mentioned in the Dodd-Frank Act. If a Business Partner cannot be able to do so, the Business Partner is obliged to inform Eppendorf about this in writing without undue delay.
In addition, we require that suppliers comply with fundamental workers’ rights as stipulated by applicable national laws. Such laws include regulations prohibiting child labor, forced labor and discrimination, as well as those protecting freedom of association, fair pay, lawful working hours and occupational health and safety.
Eppendorf expects suppliers to not tolerate corruption of any kind. They are obliged to ensure that their companies comply with the conventions of the UN and the Organization for Economic Cooperation and Development (OECD) on combating corruption, as well as relevant anti-corruption laws. Any conflicts of interest with personal and business interests or other activities, including those of relatives or individuals and entities otherwise closely associated with the company, are avoided from the very outset.
Voluntary disclosure as initial indicator
In January 2021, we added a sustainability questionnaire featuring exclusion criteria to our screening process for new suppliers. This additional voluntary disclosure will allow us to examine all potential suppliers in terms of their social and environmental credentials. As with a rejection of the Code of Conduct for Business Partners, a negative answer to the elimination questions will now result in the immediate termination of the screening process.
The questions cover, among other things, an outright ban on child and forced labor, the existence of policies and operating agreements to prevent human rights violations, and the prevention of accidents in the workplace. Over the course of the business relationship, we carry out supplier audits and on-site visits to verify that the information we have received is correct. Based on this information, we also complete annual assessments of our strategic suppliers.
Assessment of strategic suppliers
Once a year, the Global Procurement Instruments unit and the Eppendorf Group’s other Technology Centers assess Eppendorf’s strategic suppliers. We define as strategic all suppliers that exceed a certain revenue threshold (depending on the Technology Center supplied), pose a procurement risk for Eppendorf or have an impact on product quality or the Material Group Strategy.
The assessment includes conventional economic factors such as reliable delivery, product quality, capability and customer focus. Since 2021, we have also included information on sustainability, particularly with regard to human rights, child and forced labor and environmental issues. Based on the outcome, we determine action plans for suppliers’ ongoing development. In the event of serious violations, the business relationship may also be terminated with immediate effect.
In addition, we successfully completed 18 audits in the year under review. In this context, we also systematically checked the information from the sustainability questionnaire. No irregularities were determined.