Goals & Performance
Our supplier objectives are aligned with the Roche Group strategy and include key performance indicators and targets as shown in the table below. These targets are bonus-relevant for our procurement staff in Roche Pharmaceuticals.
|2015||2016||2017||Target value||Target year|
|Business critical suppliers risk-assessed each year||100%||100%||100%||100%||year-on-year|
|Procurement managers trained in sustainability & compliance and Roche Supplier Code of Conduct||100%||100%||100%||100%||year-on-year|
|Business critical suppliers committed to sustainability principles in Roche Supplier Code of Conduct||100%||100%||100%||100%||year-on-year|
|Procurement managers trained in anti-corruption||100%||100%||100%||100%||year-on-year|
|Newly selected business critical suppliers and service providers fulfill minimum criteria||95%||95%||98%||100%||2020|
|Business critical suppliers audited1||55%||65%||70%||80%||2018|
|Number of suppliers that completed the Roche Supplier Code of Conduct online training||7,300||12,200||15,100||20,000||2020|
|Supplier contracts and bidding processes include clause2||90%||95%||95%||100%||2020|
|Procurement spend with preferred suppliers3||84%||85%||85%||90%||2020|
|Cost savings due to reduction programs for Scope 3 emissions4||500 k CHF||1’000 k CHF||1’500 k CHF||2,000 k CHF||2020|
|Innovation events and success stories with suppliers per year||9||10||10||15||2020|
|Supplier Diversity - Small Business Spend in the U.S.5||$883 m||$917 m||$861 m||$1’000 m||2020|
1 Audit Target: This refers to approximately 1.000 Business Critical Suppliers, where we have the highest risk exposure. The audits include sustainability assurance visits & assessments using the PSCI (Pharmaceutical Supply Chain Initiative) protocol, SHE audits by internal experts and for our Diagnostics division also quality audits.
2 Roche Supplier Code of Conduct (or equivalent) clause included in 100% of all contracts with Business Critical Suppliers.
3 Preferred Suppliers include critical, strategic and leverage suppliers, plus suppliers that are in scope of Supplier Diversity programs. 2015 figures: direct spend only.
4 Cumulated number since 2015. We aim to reduce Scope 3 greenhouse gas emissions with the involved suppliers and reduce Total Costs of Ownership to generate savings and benefits for all parties involved. Examples include supply chain projects where we changed the transportation mode from air to sea shipment for medicines and diagnostics.
5 Small Business: As defined by the U. S. Small Business Administration.
In 2017 our total spend with suppliers and service providers was approximately CHF 17.2 billion: CHF 11.0 billion by the Pharmaceuticals Division and CHF 6.2 billion by Diagnostics Division. The spend with the top 1,000 suppliers accounted for 75% of Roche’s total spend. Approximately 5% of the total spend was with suppliers in non-OECD countries. Spend by region and by category is shown below.
In 2017, we conducted 917 audits of global suppliers and service providers and many further ones at local suppliers. Based on a prior assessment of the potential risk associated with the suppliers we performed audits in all spend categories and across all countries and industries we source from. Priority was given to high-risk industries and countries. We audited global as well as local suppliers and service providers.
We transformed our supplier sustainability audits into assurance visits with the aim of fostering the relationship and creating mutual benefit. We conducted 156 supplier sustainability assurance visits and SHE audits worldwide. 61 visits were made in the direct spend area (goods that go directly into production) and 95 at service providers. Regionally the majority of these assurance visits were conducted in non-OECD countries, with emphasis on Asia, Latin America and Eastern Europe. The main findings related to health & safety, management systems and quality.
The suppliers and service providers followed up on the findings from audits via agreed-upon corrective action plans, and we helped them with this if needed. The degree of implementation of these actions was verified via follow-up audits. We found 8 suppliers and service providers with critical issues and terminated the agreements with three of them on the grounds of unethical behavior.
Roche collaborates on supplier audits with other pharmaceutical companies under the umbrella of the Pharmaceutical Supply Chain Initiative (PSCI), using a unified joint audit protocol. In 2017, 68 supplier audit reports and self-assessment questionnaires were shared under this protocol, up from 51 in 2016.
|Total 2015||Total 2016||Total 2017||Target 2018|
|Total number of global supplier audits worldwide||954||1011||917||n.a.**|
|Supplier quality audits||772||878||761||n.a.**|
|Supplier sustainability assurance visits||182||133||156||120|
|Visits of suppliers in the direct supply chain||31||43||61||60|
|Visits of service providers and general manufacturers||151||90||95||60|
|Sustainability assurance visits by internal auditors||20||32||36||30|
|Sustainability assurance visits by external auditors||162||101||120||90|
Number of Suppliers with critical issue or discontinued
|Number of Suppliers audited through PSCI*||32||51||68||80|
* PSCI audit reports or filled-in PSCI questionnaires to which we have access.
** n.a. = not applicable
|Total 2015||Total 2016||Total 2017|
|Number of findings in sustainability assurance visits**||1349||763||988|
|Health & Safety||431||281||304|
|Major findings from assurance visits that were closed||80%||90%||95%|
** The figures refer to visits that were conducted with support of 3rd party audit firms. Roche helps its suppliers follow up on these findings.
Transparency of Critical non-Tier 1 Suppliers
In our supply chain, uninterrupted supply to patient is a key objective. We manage and mitigate risks related to our business critical suppliers and service providers ("tier 1"). In 2016 we started to systematically assess risks related to our suppliers' own critical suppliers which are "tier 2" or even "tier 3" for us. We call them "critical non-tier 1" suppliers. They are either single source suppliers for our own business critical suppliers or they could potentially pose a high reputation risk for us. We have established a program to risk-assess these critical non-tier 1 suppliers in collaboration with our business critical suppliers. Our target is to ensure we have identified all critical non-tier 1 supplier related high risks and ensure that mitigation plans are in place. This includes single supplier related business interruption risks as well as human rights risks like child and slave labour and unsatisfactory health, safety and environmental protection standards which could potentially pose a high risk for Roche. We have started to systematically include language into our contracts with our business critical suppliers to ensure they provide transparency of the risks related to their own critical suppliers and work with them to mitigate identified high risks. This will help to make supply to patient more robust. In 2016, with the support of our critical tier 1 suppliers we identified 250 critical tier 2 suppliers, thereof 20 high-risk suppliers. This number increased in 2017 because we included more suppliers in the program. Mitigation plans were in place for the identified high risks. In 2018 we will further expand this program.
|Total 2016||Total 2017|
|Number of critical non-Tier 1 Suppliers identified*||250||1000|
|Number of critical non-Tier 1 Suppliers with high risk identified*||20||300|
|Percentage of high risk critical non-Tier 1 Suppliers with mitigation in place||100%||100%|
* Suppliers that are critical to our own business critical suppliers.
In 2017 we focused on reducing the environmental footprint of our supply chain (Scope 3 emissions) by moving more shipments from air freight to sea freight in collaboration with our logistics service providers (4PLs) and their carriers. We reduced CO2 emissions in the air to sea projects by 90% on average and generated savings of approximately 500 k Swiss francs.
The projects were also part of our annual submission to the Carbon Disclosure Project (CDP), which award Roche a position on the Climate A List. We continue to broaden our collaboration with suppliers and our reporting on Scope 3 emissions reduction.