With more than 70 per cent of our manufacturing costs in our external supply chain, suppliers make a vital contribution to our performance. We encourage them to work openly and collaboratively with us as we continually improve our operations.
This means looking for better ways of working together across a broad set of activities, from research and development, through product design, and into manufacturing and after sales. At every stage we work closely with our suppliers to ensure the quality and competitiveness of our products.
We carefully consider the balance between economic, social and environmental aspects in our global sourcing decisions. Suppliers are expected to fully comply with all our policies including the Rolls-Royce Supplier Code of Conduct . This sets out the standard expected of our suppliers at all times. We expect them to be ethical, responsible and to comply fully with local laws and regulations. Specifically, the code outlines our expectations in relation to:
- ethical dealings
- health, safety and environment
- employee involvement
- diversity and equality
- pay and benefits
- working hours
- forced or involuntary labour
- child labour
- proprietary information
- employee communications
- monitoring and record keeping
- sub-tier supplier selection
We constantly develop methodologies for assessing the impact of our procurement decisions, including working with customers. For example, we're a member of the UK Ministry of Defence Industry Working Group on Sustainable Procurement. This group aims to raise the focus of sustainable procurement throughout supply chains and promote best practice. Building on this, every year we receive at least 100 questionnaires from customers and stakeholders requesting information on how we engage with suppliers on sustainability issues. To better address the risks, we assess our suppliers by asking focused questions on sustainability.
We manage the risks associated with supply continuity, both in the short and long term, by using requirements set out in our Supplier Advanced Business Relationship (SABRe) quality system. An online questionnaire, coordinated by an independent organisation, allows suppliers to share their business continuity plans with us. Business continuity risks are associated with geographic location, facilities and people. They relate to:
- Susceptibility to natural phenomena
- Product, facility and individual skills
- Critical manufacturing processes
- Sub-tier supplier-related issues.
- deliver mutual business benefit;
- minimise the environmental impact of business operations;
- encourage the highest standards of ethical behaviour; and
- promote sustainability and transparency.
Supplier approvals are carried out in full accordance with the relevant regulatory authorities.We operate a global sourcing process which assesses a supplier's overall capability. This includes considering economic, environmental and social factors.
As part of maintaining our on-going relationships, we work very closely with our suppliers to help them develop the right capabilities in areas such as quality management, HS&E and manufacturing. Here are a few examples of where we're having an impact:
- Sharing best practice: We regularly introduce dedicated professionals into the supply chain to help our suppliers improve their overall business performance.
- ISO14001: Over the past ten years our policy has been to encourage suppliers to gain third party certification against the international environmental standard ISO14001.
- Electronic business: We've recently transformed the way business is done with suppliers by introducing electronic transactions.
- Supplier Finance Programme: This enables suppliers to benefit from the company's superior credit rating and access funds at lower interest rates than they would ordinarily have access to.
- Supplier Diversity: Our Supplier Diversity Programme was set up to support our small suppliers and help them become part of our supply base. To date, more than 165 small companies are registered with the programme.
- Metals recycling: In 2012 over 500 tonnes of metal was collected and we doubled the number of manufacturing suppliers involved.
International Aerospace Environmental Group
Our suppliers also make state-of-the-art products that need them to make use of certain hazardous chemicals and to manage their risks too. This is why Rolls-Royce is at the forefront of the International Aerospace Environment Group (IAEG). This forum, which already represents around half of the aviation industry by value, is being used to help develop consistent processes and standards across the industry and its supply chain with an initial focus on chemicals management and communication throughout the value chain.
REACH (Registration, Evaluation, Authorisation of Chemicals)
We look for a balanced approach in our use of chemicals through managing product safety as well as risks to the workplace and environment.
Our industry is dependent on a range of substances of high concern, in particular some chromium compounds. We work with industry partners to identify and qualify alternatives for use in new production and aftermarket applications. In the meantime, we're also actively seeking authorisations to ensure product integrity and supply continuity.
Our policies for the materials we use are managed through our Materials Stewardship Board and we continue to enjoy a strong relationship with a number of trade associations and regulators. This helps us ensure there is an effective and practical regulatory framework.
Link to UK government web site on REACH. www.hse.gov.uk/reachConflict minerals (Dodd-Frank Act)
Minerals such as tin, tungsten, tantalum and gold are important in many of our products. Rolls-Royce recognises that we must play our part in minimising the risk of armed conflict and human rights abuse relating to some mining activities in the Great Lakes region of Africa.
So we're developing a global programme team that will make sure our supply chain is free of minerals sourced from areas of conflict. The Organisation for Economic and Cooperative Development (OECD) provides the framework used for our programme.
Early work within our raw material supply chains, where we are close to smelters and refiners, has not identified any issues.