Goals & Performance

Goals & key performance indicators

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.

2016 2017 2018 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% 98% 98% 100% 2020
Number of suppliers that completed the Roche Supplier Code of Conduct online training 12,200 15,100 19,400 20,000 2020
Supplier contracts and bidding processes include clause1 95% 95% 97% 100% 2020
Procurement spend with preferred suppliers2 85% 85% 88% 90% 2020
Cost savings due to reduction programs for Scope 3 emissions3 1 m CHF 1.5 m CHF 3 m CHF 2 m CHF 2020
Supplier Diversity - Small Business Spend in the U.S.4 $917 m $861 m $808 m $850 m 2020

1 Roche Supplier Code of Conduct (or equivalent) clause included in 100% of all contracts with Business Critical Suppliers.
2 Preferred Suppliers include critical, strategic and leverage suppliers, plus suppliers that are in scope of Supplier Diversity programs. 2015 figures: direct spend only.
3 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.
4 Small Business: As defined by the U. S. Small Business Administration.

Spend analysis

In 2018, our total spend with suppliers and service providers was approximately CHF 17.7 billion: CHF 11.1 billion by the Pharmaceuticals Division and CHF 6.6 billion by Diagnostics Division. The spend with the top 1,000 suppliers accounted for 78% of Roche’s total spend. Approximately 5% of the total spend was with suppliers in non-OECD countries.

2018 Spend by region (in billion CHF):
North America  6.0
Europe, Middle East and Africa  10.0
APAC  1.2
LATAM  0.5

2018 Spend by category (in billion CHF):
Research & Development  2.4
Supply Chain  5.5
Engineering and Facilities  3.1
General & Administration  3.8
Marketing & Sales  1.6
Information Technologies  1.3

Supplier Audits

In 2018, we conducted 721 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 126 supplier sustainability assurance visits and SHE audits worldwide. 63 visits were made in the direct spend area (goods that go directly into production) and 63 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. Based on the audits, we terminated the business relationship with 2 suppliers that were unwilling to collaborate on closing critical findings.

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 2018, 105 supplier audit reports and self-assessment questionnaires were shared under this protocol, up from 68 in 2017.

Global Supplier Audits
Total 2016 Total 2017 Total 2018 Target 2018
Total number of global supplier audits worldwide 1011 917 721 n.a.**
Supplier quality audits 878 761 595 n.a.**
Supplier sustainability assurance visits 133 156 126 120
Visits of suppliers in the direct supply chain 43 61 63 60
Visits of service providers and general manufacturers 90 95 63 60
Sustainability assurance visits by internal auditors 32 36 27 30
Sustainability assurance visits by external auditors 101 120 99 90
Number of Suppliers discontinued based on audit results 8 8 2 5
Number of Suppliers audited through PSCI* 51 68 105 80

* PSCI audit reports or filled-in PSCI questionnaires to which we have access.
** n.a. = not applicable

Findings from Supplier Sustainability Assurance Visits
Total 2016 Total 2017 Total 2018
Number of findings in sustainability assurance visits** 763 988 854
Ethics 61 119 77
Labor/Human Rights 61 114 100
Health & Safety 281 304 331
Environment 127 125 109
Management Systems 233 326 237
Major findings from assurance visits that were closed 90% 95% 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. With the support of our critical tier 1 suppliers we identified 1,000 critical tier 2 suppliers, thereof 300 high-risk suppliers. Mitigation plans were in place for the identified high risks.

Risk assessment of critical non-tier 1 suppliers
Total 2016 Total 2017 Total 2018
Number of critical non-Tier 1 Suppliers identified* 250 1000 1000
Number of critical non-Tier 1 Suppliers with high risk identified* 20 300 300
Percentage of high risk critical non-Tier 1 Suppliers with mitigation in place 100% 100% 100%

* Suppliers that are critical to our own business critical suppliers.

Environmental Footprint Reduction with Suppliers

In 2018 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 95% on average and generated savings of 3 million Swiss francs since start of the project.

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. In 2018, we broadened our collaboration with suppliers and our reporting on Scope 3 emissions reduction by engaging in a collaboration with Ecodesk. This gave us visibility of the ecological footprint data of more than 100 of our suppliers.