Sourcing responsibly, can it be done?

A quarterly series of blog posts about responsible supply chain management from the PSCI Chair, Vicki Stone-Bjarup. 

Transparency calling  

Our supply chains are getting more complex, and recent disruptions show how fragile they can also be. On top of that, the lack of transparency increasingly causes human rights violations and contributes to climate change. This has an effect on the legislative landscape that aims at tackling these issues. The EU Deforestation Directive, EU Human Rights and Environment Due Diligence Directive, German Supply Chain Act, and US Uyghur Forced Labor Prevention Act, just to name a few, will in the coming years influence where we buy and how we buy, by demanding more transparency from the supply chains of global brands. With the new trends emerging, there is a need for new organisational functions to support the work ahead. This is a particularly complicated issue for the pharmaceutical and healthcare sector, which has large, complex, and truly global supply chains that span geographies, countries, and legislative frameworks. 

Responsible procurement – an emerging trend and profession 

Responsible Procurement is a term rapidly spreading into the corporate floors, tackling the sustainability agenda from operational side rather than the high level strategic. It offers a more hands-on approach, anchored in the procurement or sourcing teams. Not always comfortable to procurement professionals, as this is yet another hat that they are required to wear, Responsible Procurement asks not only for where or what to source (e.g., certified products) but most of all, how to source (e.g. by having awareness of local communities, transparency down the chain, etc.). Overall, we can define responsible procurement as the practice of evaluating the ethical , environmental, and social impacts of a given product or supplier alongside the more standard considerations of price and quality within the procurement process. The goal of responsible procurement is to improve the ethical, environmental, and social performance of suppliers and ultimately mitigate any negative impacts found within the supply chain.  

Sourcing of many raw materials presents various social and environmental risks that must be tackled as early as possible. Therefore, the context in which procurement professionals operate changes significantly and requires much more collaborative efforts to reach the goals. Nevertheless, thinking these risks into the buying process essentially leads to better procurement decisions overall and benefits for companies in terms of the ESG performance and suppliers and the communities in which they operate. Assistance often comes through Responsible Procurement professionals that can unite the emerging sustainability trends and demands with the supply chain complexity and knowledge. 

But Responsible Procurement is not only about buying certified raw materials or having adequate due diligence in place. More often we see examples of responsible sourcing taking the form of stakeholder engagement or collaborative activities, where the aim is to bring common standards to life and take the administrative burden off the suppliers to allow them to focus their efforts on improving sustainability standards. 

Better together  

In the Pharmaceutical Supply Chain Initiative (PSCI), we work towards making common standards for all pharmaceutical suppliers and engaging stakeholders in the important discussion on how to move the needle. We do this through the PSCI Principles for Responsible Supply Chain Management and  by creating tools, organizing webinars, and facilitating knowledge sharing for both procurement professionals and suppliers.   

One particular area of focus for us in on raw materials sourcing, as this is a typical hotspot for pharmaceutical companies. We have initially looked at sourcing risk through the human rights lens, and engage key stakeholders across the PSCI membership to include views and insights. To help our members and create change across the industry and down the supply chain, we created a High-Risk Materials Sourcing Process & Evidence Evaluation Tool that enables procurement professionals to understand the human rights risks associated with key raw materials and evaluate how suppliers are addressing these risks. 

There is a common appreciation that often, pharma companies do not have significant leverage when sourcing raw materials as the volumes cannot compare to the ones from e.g., food industry. Therefore, collective, and pre-competitive action is essential to address the lack of supply chain transparency as well as to limit the duplication of supplier engagement efforts. The projects are focused on a collective approach, often closing the knowledge and transparency gap, allowing single member companies to gain the necessary influence by approaching suppliers with a common voice of the industry. For the future, we hope to be able to succeed in creating even more positive impact for all stakeholders in our supply chains and unlocking the full potential of the initiative.