The case for CSR/ Sustainability Reporting Done Responsibly


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Case study: How Lonza promotes responsible procurement

Founded in Switzerland in 1897, Lonza is one of the world’s leading and most trusted suppliers to the pharma, biotech and specialty ingredients markets. By engaging with its stakeholders, Lonza has been able to identify gaps, future trends and requirements regarding sustainable sourcing and supplier risk assessment.

This case study is based on the 2020 Sustainability Report by Lonza, prepared in accordance with the GRI Standards, that can be found at this link. Through all case studies we aim to demonstrate what CSR/ ESG/ sustainability reporting done responsibly means. Essentially, it means: a) identifying a company’s most important impacts on the environment, economy and society, and b) measuring, managing and changing.

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Lonza’s procurement teams focus on procurement excellence  Tweet This!, developing and implementing category strategies, managing the selection of suppliers and negotiation of terms, and reducing exposure to supply risks. In order to promote responsible procurement Lonza took action to:

  • promote responsible practices
  • establish a comprehensive and integrated supplier risk-management process
  • promote due diligence

What are the material issues the company has identified?

In its 2020 Sustainability Report Lonza identified a range of material issues, such as economic performance, customer satisfaction, environmental compliance, anti-corruption, occupational health and safety. Among these, promoting responsible procurement stands out as a key material issue for Lonza.

Stakeholder engagement in accordance with the GRI Standards

The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:

“The reporting organization shall identify its stakeholders, and explain how it has responded to their reasonable expectations and interests.”

Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.

Key stakeholder groups Lonza engages with:

Stakeholder Group
Suppliers
Customers
Group Management and Board of Directors
Employee Associations
Employees
Associations and Competitors
Consumers and Patients
Lenders
Shareholders and Investors
Rating agencies and Analysts
Proxy Advisors
Regulators
Government / Authorities
Future Talent
Local Communities
Scientific Community
NGOs
Media / General Public

How stakeholder engagement was made to identify material issues

To identify and prioritise material topics Lonza engaged with its stakeholders through a materiality survey, to capture their input on topics to be reported upon, actively managed or simply monitored. They included employees, customers, the scientific community, financial analysts, future talent, media and Lonza’s management and Board.

What actions were taken by Lonza to promote responsible procurement?

In its 2020 Sustainability Report Lonza reports that it took the following actions for promoting responsible procurement:

  • Promoting responsible practices
  • Lonza is a member of the Pharmaceutical Supply Chain Initiative (PSCI). PSCI is an association of pharmaceutical, biotech and medical device industries. Its aim is to establish and promote responsible practices to improve ethics, labour, health, safety and environmentally sustainable outcomes, as well as to improve supplier capability for the members’ supply chains. This active membership enhances the firm’s capabilities and processes in sustainable supply chain management. As a PSCI member, Lonza performs audits of key suppliers and is in turn audited with a similar scope by its customers.
  • Establishing a comprehensive and integrated supplier risk-management process
  • Lonza’s Procurement has established a comprehensive and integrated supplier risk-management process to support sustainable business growth by capturing opportunities, anticipating and mitigating supply risk. The following key principles define the risk management framework using Enterprise Resource Planning (ERP) automation:
    • Key supplier risk assessment and management by global procurement experts;
    • Integrating risk assessments into business processes to enable and support business continuity;
    • Using criteria and a risk register for scalable assessments of materials and suppliers;
    • Monitoring and ranking supply risks, including risk mitigation and implementation;
    • Embedding in the risk assessment process the supplier’s on-time/in-full delivery and quality performance ratings. 
  • Promoting due diligence
  • As part of its commitment to sustainable development, Lonza’s Supplier Code of Conduct sets high standards for suppliers and provides a framework to evaluate their practices. Lonza carefully selects and evaluates suppliers for security of supply and specifications of materials and services and also audits some of its critical suppliers to assure and improve performance and relationships, in line with the Pharmaceutical Supply Chain Initiative (PSCI) principles. Lonza operates an automated anti-bribery and anti-corruption due diligence process, monitoring for high-risk suppliers. This is run by the Ethics & Compliance Group and integrated into the procurement and supplier management process through Lonza’s enterprise resource planning (ERP) system (SAP). Third parties in qualification are blocked in SAP until the due diligence process is completed. The process includes real-time corruption, trade sanctions, and adverse media screening for all third-party suppliers with increased due diligence for higher-risk third parties. For the latter, the process includes mandatory completion of a due diligence questionnaire and a custom made anti-bribery and anti-corruption training, as well as competition law. Third parties with higher risk profiles are then further reviewed and assessed by members of the Ethics & Compliance Group. Lonza’s suppliers are continuously monitored and, where relevant, full due diligence is completed on a two-year automated cycle.

Which GRI Standards and corresponding Sustainable Development Goals (SDGs) have been addressed?

The GRI Standards addressed in this case are:

1) Disclosure 308-1 New suppliers that were screened using environmental criteria

2) Disclosure 414-1 New suppliers that were screened using social criteria

 

Disclosure 308-1 New suppliers that were screened using environmental criteria does not correspond to any SDG.

Disclosure 414-1 New suppliers that were screened using social criteria corresponds to:

 

80% of the world’s 250 largest companies report in accordance with the GRI Standards

SustainCase was primarily created to demonstrate, through case studies, the importance of dealing with a company’s most important impacts in a structured way, with use of the GRI Standards. To show how today’s best-run companies are achieving economic, social and environmental success – and how you can too.

Research by well-recognised institutions is clearly proving that responsible companies can look to the future with optimism.



FBRH GRI Standards Certified & IEMA recognised Sustainability Course | Venue: London LSE

By registering for the next 2-day FBRH GRI Standards Certified & IEMA recognised course you will be taking the first step in gaining the many benefits of sustainability reporting.

Most importantly, you will gain the knowledge to use the GRI Standards, project manage your own first-class sustainability report and:

  • Identify your most important impacts on the Environment, Economy and Society
  • Begin taking solid, focused, all-round sustainability action ASAP

 

References:

This case study is based on published information by Lonza, located at the link below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original please revert to the following link:

https://annualreport.lonza.com/2020/documents/Lonza_Sustainability_Report_2020.pdf

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