In addition to prioritizing sustainability within our company, we also work to ensure our suppliers around the world are equally committed to sustainability as a core value.
In 2020, we spent approximately $9.8 billion with more than 30,000 suppliers globally for raw materials, indirect products and services, and the transport of goods. We expect these suppliers and their subcontractors to fully comply with all applicable laws and to adhere to internationally recognized environmental, social and governance standards. Our Global Code of Ethics, Supplier Sustainability Policy and Global Supplier Code of Conduct clearly state our expectations for every supplier.
With the phased launch of our global eProcurement (ePro) platform, our suppliers now will use this supplier portal to do business with PPG. This includes completing an electronic acknowledgement of our Global Supplier Code of Conduct and Supplier Sustainability Policy. Suppliers also must indicate compliance with data privacy laws as they pertain to any relationship with PPG.
Given the challenges resulting from the COVID-19 pandemic, we have increased our evaluation of ethical and regulatory performance in addition to financial solvency, business stability and operational capability. In 2020, the implementation of our global spend visibility database has resulted in increased visibility into our supply chain and more systematic identification of suppliers, which helped us better target at-risk suppliers.
Our approach to assessing the sustainability of our supply base also changed and improved significantly in 2020. Historically, we assessed our top 100 suppliers globally that represented approximately 25% of our annual procurement spend. More recently, we shifted our focus to evaluating and monitoring 100 high-risk suppliers based on geographic location and industry to better gauge ongoing or potential risk with existing suppliers.
We also engaged EcoVadis®, which is a leading global corporate social responsibility and sustainability ratings company, to leverage assessment processes, tools, resources and insights to drive sustainability standards and practices throughout our global supply base. We expanded the scope from 100 suppliers per year to 1,000 suppliers based on a preliminary risk assessment around activities such as mining, geographic position and other category risk factors. We are conducting the program in quarterly waves of approximately 200 suppliers through 2021, with the initial wave launched in the fourth quarter of 2020.
We are evaluating four key segments of sustainability:
- Environment: Energy consumption, product use, customer health and safety, and biodiversity;
- Labor and human rights: Employee health and safety, working conditions, child labor, forced labor, human trafficking, diversity, discrimination and harassment;
- Ethics: Corruption and anticompetitive practices; and
- Sustainable procurement: Supplier environmental and social practices.
The EcoVadis scorecard allows assessed companies to benchmark against industry peers, and it provides an overall corporate social responsibility (CSR) performance rating on a scale from increasing risk to best in class. The majority of our initial respondents received a score that demonstrated a confirmed level of engagement.
Our plan is to achieve a 100% response rate in 2021 and use that information to improve practices within the supply base. Procurement plays a fundamental role in our commitment to sustainability, and it is critical to drive those responsibilities into our global supply base as an extension of our values and expectations of the way do business.
In Asia Pacific, we conducted onsite audits with five raw material suppliers – three new and two existing – during 2020. We select existing suppliers for onsite audits based on an established schedule or when a new product will be produced in a supplier facility. New suppliers are selected for onsite visits based on their impact to our business, formulations or supply chain.
Evaluation criteria for both groups of suppliers include:
- Product review;
- Production process: Incoming raw materials, quality control, packaging and shipping;
- Quality system: Key controls, inspection/testing, abnormality reporting, continuous improvement and training;
- Environment, health and safety performance; and
- Corporate social responsibility: Human rights and regulatory performance.
For the onsite audits, we will stop business or development with suppliers that achieve a score of less than 50 on a 100-point scale. A score between 50 to 64 results in suspension until the supplier meets our requirements by implementing corrective action plans that we closely monitor. A final evaluation of 65 or higher enables the supplier to be moved to or maintained in the approved supplier pool. The approved suppliers are subject to ongoing audits to ensure their performance level is sustained or improved.
In the Europe, Middle East and Africa (EMEA) region, we conducted eight on-site audits in 2020 for suppliers identified as critical based on an assessment that considers product category, quality risk and supply risk. This activity spanned both new and existing suppliers that represented seven raw material vendors and one service provider. The number of assessments was scaled back from previous years due to impacts from the pandemic.
The evaluation criteria included quality systems, product and process review, and contamination prevention. It also included a questionnaire requesting supplier certifications, sustainability processes and contingency plans. Three of the suppliers had minor non-conformities related to quality and delivery requirements that will require corrective actions for improvement.
In the event suppliers have major non-conformities, we put them under surveillance status until the corrective action is closed. If corrective actions are not implemented, we may elect to end our relationship with those suppliers.
Our Aerospace business in the U.S. and Canada region maintains a similar approach for supplier development and quality as the EMEA region to ensure alignment with the AS9100D aerospace standard. The standard provides guidelines for implementing a quality management system within the aerospace industry.
We evaluate suppliers to our Aerospace business based on their ability to meet technical requirements, financial stability, quality management systems and sustainability practices via audit/assessment worksheets. In 2020, 69 qualified suppliers underwent either an on-site assessment or a remote/desktop audit to ensure standards were met. If the standards are not met, we will not do business with that supplier.
We classify aerospace supplier risk based on complexity and the level of impact on product performance. Based on this supplier classification, we regularly monitor the number and frequency of approved suppliers via on-site or remote audits, process control oversight, and report and system evaluations to ensure policy and program compliance. We work closely with these suppliers to improve key performance indicators, drive continuous improvement initiatives and establish opportunities for supplier development.
We participate in the Responsible Mica Initiative (RMI) and have taken a number of steps to assure the responsible sourcing of Indian mica. For example, RMI has taken several actions to ensure that our major mica pigment suppliers are active members of RMI. Currently, 98% of our spend volume in this category is covered by suppliers that are RMI members, and we are working to close the gap on the balance.
RMI is working collaboratively with various stakeholders including several government agencies, civil society organizations, local mica businesses and sector experts. Some of our customers are now represented in RMI, demonstrating that this is a growing and critical sustainability program throughout the supply chain.
Globally, we work to comply with evolving regulations that impact the sustainability of our operations, and we expect the same of our suppliers. These regulations include the Modern Slavery Act of 2015; General Data Protection Regulation (GDPR); Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH); and other third-party due diligence screenings for compliance purposes.
In addition to helping suppliers evaluate and improve their sustainability performance, we seek their help in improving our own. Examples include asking suppliers to provide more environmentally friendly products, recycle packaging used to ship materials to our facilities and offer more fuel-efficient transportation services.
A recent example is a collaborative effort between our employees and raw material suppliers that was recognized internally with a 2020 PPG Sustainability Award for environmental impact. The initiative transitioned materials purchased in drums to totes or bulk tankers at locations in Canada and the U.S. We avoided around 340 metric tons of carbon dioxide emissions through the elimination of more than 10,000 drums. Given the success, we will be expanding this effort globally during 2021 and beyond.
In Latin America, we executed against our sourcing strategy to improve costs and use renewable sources of energy where possible, all while delivering short- and long-term value to the business. Through a contract implemented in 2020, the energy supplied to seven of our locations in Mexico over a three-year period will be 100% renewable.
Within our e-catalogs, suppliers can flag green and safer choice products. These include environmentally preferable products that are widely recognized as having lower environmental impacts than comparable items. Safer choice items advance the mission of the U.S. Environmental Protection Agency to protect human health and the environment by helping users choose the safest functional ingredients possible. Such designations will give us increased visibility into a product’s impact and also help employees make more sustainable-conscious decisions.
The PPG Excellent Supplier Award for Sustainability, which we present on an annual basis, recognizes suppliers that help us meet our sustainability goals and demonstrate industry-leading sustainability and safety cultures that can be adapted within PPG.
In 2020, we presented the award to a metal packaging container company in the Asia Pacific region for its efforts in on-time delivery, quality service at a reasonable cost and driving sustainable energy and environmental practices.
We strive to continuously improve our supplier sustainability programs. Actions include benchmarking, expanding program parameters, improving our reporting and program visibility, providing organization training and creating a long-term plan on joint sustainable initiatives with third-party organizations.
For more details about our supplier sustainability initiatives and policies, visit our Supplier Sustainability page.
We believe that our company and communities benefit when we provide equal opportunities for diverse suppliers to compete for our business. By including qualified diverse suppliers in our purchasing process for products and services that meet our requirements, we will strengthen our business position and that of our suppliers and customers.
We actively seek suppliers that are recognized by certifying entities and government agencies. These suppliers include small businesses and businesses that are owned by veterans, minorities, members of the lesbian, gay, bisexual, transgender and queer (LGBTQ) community, people with disabilities and women.
Our Supplier Diversity Program is aligned with the One PPG philosophy and built on four focus areas:
- Data and technology;
- Operational program;
- Resources to drive results; and
- Effective outreach.
From a data and technology perspective, we are executing the phased implementation of ePro. Used in conjunction with our global spend visibility database, ePro will enable us to identify new suppliers, maintain accurate records and use that information for enhanced reporting. Examples include:
- Potential suppliers can self-register for business opportunities with PPG;
- Existing suppliers can self-identify as diverse suppliers by including certification evidence;
- Tier 1 program reporting is improved for internal and external purposes; and
- E-catalogs allow suppliers to flag goods at the Tier 2 level for increased end-user visibility when purchasing to assist in growth.
Operationally, we look to embed qualified diverse suppliers into our sourcing projects and channel more spend volume to existing and new suppliers using market information, references, tools and other reports to expand the program.
Program success hinges on leadership support and cross-functional and business awareness, collaboration and execution. Our procurement team is strengthening its internal relationships through alignment on requirements, target achievement and value-add impact.
Effective outreach encompasses myriad ways in which we can expand the Supplier Diversity Program’s footprint. Within our business and corporate functions, select employees maintain memberships and associations with key diverse supplier organizations, participate in matchmaker events and perform benchmarking activities.
Overall, we look to play a part in the business growth and success of diverse suppliers, drive economic and social benefits with targeted businesses and local communities, and enhance community relations based on our commitment. We recognize the strategic value of supplier diversity initiatives and strive to have a sustainable program.