Novartis engages with an extensive network of suppliers worldwide and their contributions are crucial to our success. With such global reach, ensuring that our goods and services are ethically sourced is paramount.
Responsible Procurement (RP) is the way we seek to achieve that. It encourages companies that we do business with to meet the standards of ethics, business integrity and environmental practice we expect of them. Buying responsibly protects our patients, our people, our business and our reputation. It is built-in, not bolted-on, to the way we work and is fully integrated with our daily procurement activities. The program covers five areas of potential ethical risk: Labor Rights, HSE (Health, Safety and Environment), Animal Welfare, Anti-Bribery, and Data Privacy. We have in-house experts for all five areas and through this network, we engage pro-actively with suppliers in an effort to ensure ethical practices and help suppliers find sustainable solutions to critical issues bringing about real changes.
Responsible Procurement involves more than ticking the compliance box. It's about taking responsibility to safeguard and improve ethical standards among our suppliers, and using our expertise to help them find lasting solutions to complex issues.
Novartis is also a member of the Pharmaceutical Supply Chain Initiative (PSCI) and supports its principles for Responsible Supply Chain Management for ethics, labor, health and safety, environment, and related management systems. These principles are incorporated into the Novartis Supplier Code.
Managing supplier risk
Novartis engages thousands of new suppliers each year, across a supply chain which extends into almost every country in the world. Being able to quickly pinpoint areas of high risk is crucial.
Our RP practice is designed to provide that speed and accuracy and give us a clear view of where potential issues exist or standards may be compromised. It quickly filters out more than 90% of suppliers who present little or no ethical risk, allowing us to concentrate our efforts on the small number of suppliers where a significant risk exists or where we can influence change. Most importantly, it gives us this clear insight before we buy. We call it "buying with our eyes open".
Our responsibility goes beyond monitoring suppliers’ ability to comply with standards, to promoting real changes that benefit workers and the environment in the countries from which we source. If an issue surfaces, we address it by engaging with the supplier. For example, if a supplier is identified as having a potential environmental or labor rights risk (e.g., water waste, freedom of association and bargaining, or forced or compulsory labor), the topic is discussed and an improvement plan is created with the supplier. Our RP program also focuses on applying our expertise to help suppliers find lasting solutions to complex issues, such as bribery, ultimately aiming to improve standards and reduce their overall negative impacts on society.
Third-party risk management
In late 2016, we launched a Third-Party Risk Management (TPRM) program. The program follows an in-depth review of our supplier management systems and processes, and an assessment of the most significant issues in supplier management to help us gain a holistic view of our key risks, such as labor rights and the environment. The assessment identified improvement opportunities, especially in the areas of governance, collaboration across risk areas, capabilities enhancement and action tracking.
The objective of the TPRM program is to implement an integrated approach to third-party risk management through one end-to-end process underpinned by a single technology solution, delivering quality and efficiency improvements. With this new model, we expect to gain depth and breadth, and move toward a comprehensive supplier risk management framework that includes all key risk areas. We believe this new state-of-the-art model will bring consistency and rigor to how we qualify and manage supplier risks, while being simpler, scalable and more transparent. We expect it to be operational globally in 2019, following a phased regional rollout.