Case study: How SGS promotes sustainability among its suppliers
SGS is the world’s leading testing, inspection and certification company, recognised as the global benchmark for quality and integrity. Across the more than 125 countries in which it operates, SGS sources goods and services sustainably, from suppliers that meet its high standards Tweet This!, promoting its sustainability principles beyond its own business.
This case study is based on the 2020 Corporate Sustainability Report by SGS, 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.
Abstract
Recognising that it is in a position to influence up to 70,000 suppliers to follow its principles and values, SGS is committed to doing business with other companies that share its values and beliefs. In order to promote sustainability among its suppliers SGS took action to:
- implement a Supplier Code of Conduct
- assess suppliers
- embed sustainability criteria into new supplier selection
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With this case study you will see:
- Which are the most important impacts (material issues) SGS has identified;
- How SGS proceeded with stakeholder engagement, and
- What actions were taken by SGS to promote sustainability among its suppliers
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What are the material issues the company has identified?
In its 2020 Corporate Sustainability Report SGS identified a range of material issues, such as cybersecurity, data privacy and protection, health & safety, ethical behaviour, talent attraction and retention. Among these, promoting sustainability among its suppliers stands out as a key material issue for SGS.
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:
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 SGS engages with:
| Stakeholder Group | Method of engagement |
| Employees
| · Global employee engagement programme, CATALYST · SGS intranet portal · SGS Inside newsletter · Add Value with Lëss – internal initiative aimed at increasing efficiency · Training programmes, videos and eLearning modules · SHINE Onboarding · Employee Representation Councils (e.g. European Works Council – Euro Forum) |
| Customers
| · One-to-one meetings · SGS hosted conferences, seminars and webinars · Customer surveys, e.g. Voice of the Customer · White papers · Customer portal |
| Governments and industries
| · SGS hosted conferences, seminars and webinars · Membership meetings and events · White papers |
| Investors
| · Annual General Meeting · SGS Investor Days · Meetings with investors and analysts · Responses to analyst questionnaires |
| Communities and the planet
| · Annual community survey to measure the impact of community investment · White papers · One-to-one meetings with NGOs and responses to questionnaires |
| Consumers | · Certification and product labelling · Direct marketing and communication with certain B2C products |
| Suppliers | · Supplier self-assessment · Supplier Code of Conduct · Supplier audits |
How stakeholder engagement was made to identify material issues
To identify and prioritise material topics SGS carried out an in-depth stakeholder engagement exercise, consulting with more than 4,000 stakeholders in 112 countries (including customers, employees, suppliers, investors, non-government organisations and sustainability professionals).
What actions were taken by SGS to promote sustainability among its suppliers?
In its 2020 Corporate Sustainability Report SGS reports that it took the following actions for promoting sustainability among its suppliers:
- Implementing a Supplier Code of Conduct
- By participating to its tenders, suppliers must accept SGS’s Supplier Code of Conduct, which:
- Defines SGS’s non-negotiable minimum standards and specifications for its supply chain and responsible sourcing
- Applies to all new, critical and high-risk suppliers, who are required to adhere to it
- Invites suppliers to work with SGS to identify and develop continuous improvements
- Meets the requirements of the International Bill of Human Rights and the International Labour Organization Declaration on Fundamental Principles and Rights at Work
- Covers the areas aligned to SGS’s sustainability pillars: Professional Excellence, People, Environment and Community
- Is supported by a confidential helpline for raising concerns about issues related to the Code
- In addition, SGS’s suppliers automatically sign up to its Code of Conduct when following the SGS procurement process. In high and medium risk countries, for example in Africa and Asia, SGS has proactively requested 1,300 suppliers to sign its Code of Conduct.
- Assessing suppliers
- SGS asks strategic suppliers to complete a questionnaire requesting financial and procurement information and more in-depth sustainability information. SGS also asks them to provide third-party validation and to detail the actions they are taking to improve their sustainability performance. Based on this assessment, SGS prioritises groups or certain suppliers for partnership sustainability initiatives. Over the past three years, SGS assessed around 4,000 suppliers globally, which represents approximately one third of its yearly spend. This required enormous effort, with suppliers spread over 30 countries and speaking multiple languages.
- Embedding sustainability criteria into new supplier selection
- Engaging with new suppliers gives SGS the opportunity to establish sustainability as a pre-condition of its relationship with them. SGS’s Group-wide Procurement Policy requires sustainability criteria to be evaluated as part of its supplier selection, sourcing and contracting processes. In its standard supplier contract template, SGS states its expectation that its suppliers act in accordance with environmental, health, safety and employment policies, comply with relevant standards and legislation, continuously improve processes and encourage their contractors and subcontractors to follow the same practices. SGS’s Code of Conduct is directly embedded in its terms and conditions, so it is automatically accepted by each new supplier, regardless of country, market, technology, product or service. These criteria for doing business with SGS are continuously being developed further so that suppliers can be better compared based on their compliance with its sustainability standards.
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 308-2 Negative environmental impacts in the supply chain and actions taken
3) Disclosure 414-1 New suppliers that were screened using social criteria
4) Disclosure 414-2 Negative social impacts in the supply chain and actions taken
Disclosure 308-1 New suppliers that were screened using environmental criteria does not correspond to any SDG.
Disclosure 308-2 Negative environmental impacts in the supply chain and actions taken does not correspond to any SDG.
Disclosure 414-1 New suppliers that were screened using social criteria corresponds to:
- Sustainable Development Goal (SDG) 5: Gender Equality
- Targets: 5.2
- Sustainable Development Goal (SDG) 8: Decent Work and Economic Growth
- Targets: 8.8
- Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
- Targets: 16.1
Disclosure 414-2 Negative social impacts in the supply chain and actions taken corresponds to:
- Sustainable Development Goal (SDG) 5: Gender Equality
- Targets: 5.2
- Sustainable Development Goal (SDG) 8: Decent Work and Economic Growth
- Targets: 8.8
- Sustainable Development Goal (SDG) 16: Peace, Justice and Strong Institutions
- Targets: 16.1
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References:
This case study is based on published information by SGS, 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:
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