At PPG, we believe that achieving sustainability within our company is only part of the equation. We also must work to ensure our suppliers around the world are equally committed to sustainability as a core value.
In 2019, we spent approximately $9 billion with more than 30,000 suppliers globally for raw materials, indirect products and services, and the transport of finished 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.
Historically, we assessed the sustainability of our top 100 suppliers globally who represent approximately 25% of our annual procurement spend. We have 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.
In 2019, 86 of our 100 high-risk suppliers responded to our survey. Areas evaluated included:
- Policies, including sustainability, code of conduct, anti-corruption and bribery, human rights, conflict minerals, proprietary technology, health and safety and environmental sustainability;
- Criminal violations involving corruption, bribery or antitrust;
- Spills, chemical releases and environmental contamination;
- Significant health and safety incidents and notices of violations;
- Citations or fines related to a breach of labor law;
- Process to educate, train and audit employees regarding company policies; and
- Sustainability review processes to monitor corporate and supply chain performance.
Of the respondents, 61 effectively exhibited strong sustainability controls. The surveys for the remaining respondents required further review and clarification, which we undertook in early 2020. For the 14 high-risk suppliers that did not respond to our survey, we continued to engage with them in early 2020 to obtain their information.
In 2020, we plan to double the number of high-risk suppliers we evaluate to further target and address potential sustainability risks in the supply chain.
Our Europe, Middle East and Africa region evaluates the performance of approximately 180 of its critical raw materials and packaging suppliers each year. The evaluation covers many areas that pertain to sustainability, such as environmental performance, human rights and anti-corruption, as well as performance indicators relating to on-time delivery and quality.
For the surveys distributed in the fourth quarter of 2019, we received responses from 77 suppliers (43%). Of these, 47 suppliers demonstrated good performance and provided supporting documentation. The remaining 30 supplier surveys will require additional clarification.
In Asia Pacific, we conducted six onsite audits with existing suppliers and six onsite visits for potential new suppliers during 2019. 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 actions. The six suppliers we audited in 2019 scored above 64.
Prior to a company becoming a PPG supplier in any region of the world, we perform an assessment that evaluates ethical and regulatory performance in addition to financial solvency, business stability and operational capability.
We strive to continuously improve our supplier sustainability programs through benchmarking, expanding the program parameters, improving our reporting and program visibility, providing organization training and creating a long-term plan with third party organizations on joint sustainable initiatives.
Sustainability requirements will become more engrained in our processes beginning in 2020 with the implementation of an electronic system that will require new and current suppliers to agree to our policies and codes. This builds upon our existing requirement for suppliers within the United States and Canada that accept our terms and conditions to acknowledge all aspects of our Global Code of Ethics.
The new system will enable a more proactive third-party due-diligence screening for supply chain risks on a continuous basis. We are also in the initial stages of compiling a database for product manufacturing sites to help us identify potential disruption in the event of global crisis situations.
PPG participates in the Responsible Mica Initiative (RMI) and has taken a number of steps to assure for the responsible sourcing of Indian mica. For example, we have taken several actions to ensure that our major mica pigment suppliers are active members of RMI. RMI is working collaboratively with various stakeholders including several government agencies, civil society organizations, local mica businesses and sector experts. In particular, its discussions with Indian state representatives may lead to the development of a legal framework within which mines, processors and other intermediaries would be required to operate (e.g., setting minimum health and safety standards and prohibiting their use of any form of modern slavery, including child labor). The framework would also protect the rights of workers.
Throughout the world, 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 General Data Protection Regulation (GDPR); Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH); and Modern Slavery Act of 2015.
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.
The PPG Supplier Sustainability Award, which is presented on a periodic basis, recognizes suppliers that help us meet our sustainability goals and demonstrate industry-leading sustainability and safety cultures that can be adapted within PPG.
We presented the award to two suppliers in 2019 – Asahi Kasei Corporation, an isocyanates supplier headquartered in Japan, and Resinas y Materiales, a Mexico-based supplier of reactants and plasticizers. Both suppliers helped us meet sustainability goals for various coatings products.
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. We actively seek suppliers that are council certified, as well as small businesses and businesses owned by veterans, minorities, members of the lesbian, gay, bisexual, transgender and queer (LGBTQ) community, people with disabilities, and women who provide quality products and services at competitive prices.
Our Supplier Diversity Program is aligned with the One PPG philosophy and built on four pillars:
- Infrastructure refresh, which encompasses new technologies, system rationalization and solution upgrades;
- Resources to drive results and behaviors;
- Operationalization of key supplier diversity elements; and
- Effective outreach.
Key achievements in 2019 included ongoing metrics management, the embedding of diverse suppliers into our strategic sourcing process and engagement with various diversity councils through board seats and corporate memberships.
We also received the 2019 Excellent Supplier Diversity Award from Toyota North America. The award recognizes suppliers that put forth outstanding efforts on diverse supplier business development initiatives and are helping Toyota meet its diversity procurement targets.
We recognize outstanding performance from our diverse suppliers through the PPG Diverse Supplier Award. Today's Business Solutions, which is a minority- and woman-owned supplier of office products, received the award in 2019.