In 2013, Merck KGaA, Darmstadt, Germany, revised its procurement strategy to take into account corporate responsibility (CR) aspects. The aim was to further improve adherence to internationally recognized compliance, environmental, and social standards along supply chains, as well as to prevent violations of those standards.
Throughout the world, Merck KGaA, Darmstadt, Germany, procures raw materials, products and services from several thousand business associates, who in turn have their own suppliers and sub-suppliers. It is therefore an enormous undertaking to ensure that supply chains comply with CR standards. Our activities focus on our direct business partners.
Through our Group Procurement Policy, updated in 2013, we are ensuring that our procurement processes adhere to CR standards, which includes the selection, assessment and management of suppliers. This procurement policy reflects numerous internal and external guidelines, such as our Code of Conduct, our Social Charter, our EHS policy, and ISO standard 14001. Standard operating procedures for Group Procurement have been revised to reflect this policy.
To complement our procurement policy, we drafted our Responsible Sourcing Principles and integrated them Group-wide into our general terms and conditions in 2013. These principles define what we require of our suppliers with regard to responsible conduct, highlighting the responsibility of our suppliers to apply our corporate responsibility standards to their upstream value chain.
A key element of our optimized supplier management is reviewing and monitoring the CR standards applied by our suppliers. In addition to requiring supplier self-disclosures from both new and existing suppliers, Merck KGaA, Darmstadt, Germany, conducts annual sustainability audits based on the potential risk posed by a supplier. In 2013, we conducted 22 audits. We found four suppliers with critical flaws, and 20 suppliers with major defects. We demanded that these suppliers provide us with a corrective action plan (CAPA), which describes the course of action needed to address the issues. Auditors will be reviewing their progress. Particularly when it comes to critical flaws, we consider the option of terminating business relations if the problems are not sufficiently corrected.