RESPONSIBLE SOURCING
A company’s supply chain is a highly important resource – collaboration between companies at every step in the chain can open up powerful opportunities to minimize the overall environmental impact and maximize the overall positive social impact. At Henkel, our global supply chain includes business partners from 120 countries. Together, we want to drive progress toward 100 percent responsible sourcing.
Our responsible sourcing approach focuses on sustainability aspects along our supply chains for the benefit of people and our planet with the aim of driving transformational change together with our partners. For this reason, we maintain intensive dialog and collaboration with our suppliers to promote sustainable practices and respect for human rights. Our mission is to go beyond compliance, to drive impact and change across our entire value chain, and to create sustainable value for our customers.
We aim to take responsible sourcing decisions globally, across all regions, business units, and material groups, based on our responsible sourcing strategy. We are convinced that we can only establish sustainable procurement practices if every single decision-maker in the global supply chains acts in the spirit of sustainability. This requires a fundamental recognition of this responsibility, as well as adopting the right attitude and building skills and knowledge.
Within our purchasing department, we are strongly committed to contribute to Henkel‘s Purposeful Growth agenda and its ambitions with our 100% Responsible Sourcing Strategy.
Bertrand Conquéret, Chief Procurement Officer (CPO) at Henkel and President of the TfS initiative
Our Foundation: Risk Management & Compliance
Our strategy is based on our comprehensive risk management and compliance approach. The aim here is to gather and provide transparent key figures on the sustainability performance and risks of our suppliers as a basis for fact-based decision-making in sourcing processes and the awarding of contracts. The transparency gained in this area also benefits dialog and cooperation with our suppliers.
Henkel currently has business partners from over 120 countries and places the same exacting demands on all business partners worldwide. We expect their business conduct to be consistent with our sustainability requirements. In selecting and working with our business partners, we also consider their performance with regard to safety, health, environment, social standards and fair business practices. This is based on our corporate Safety, Health and Environment Standards. Our corporate purchasing standards continue to apply. The Chief Procurement Officer (CPO) is responsible for all procurement activities and for ensuring responsible supply chain management. He reports directly to the Chief Financial Officer (CFO).
Compliance with the cross-sector Code of Conduct of the German Association of Materials Management, Purchasing, and Logistics (BME) is mandatory for all of Henkel’s suppliers worldwide. The BME Code of Conduct is based on the ten principles of the UN Global Compact. This Code of Conduct makes international application possible and, in addition to the Responsible Sourcing Policy also serves as the basis for contractual relationships with our strategic suppliers. The Responsible Sourcing Policy that is integrated into the purchasing-supplier cycle was revised in 2023 to add specific aspects of supply chain due diligence.
Our strategic approach
Our 100% Responsible Sourcing Strategy puts Henkel’s dimensions of the 2030+ sustainability ambition framework – regenerative planet, thriving communities and trusted partner – at the core of its sourcing agenda. To this end, we focus on the following areas:
- Together we enable a climate-neutral future by driving reduction of supply chain greenhouse gas emissions, implementing circular sourcing solutions and protecting nature and biodiversity.
- Together we commit to drive sustainable practices by supporting equity, education and wellbeing of people in our supply chains while respecting human rights in all our activities.
- Together we secure a high-performing, transparent and sustainable supply chain and collaborate with our suppliers and partners to drive transformation and create sustainable business value.
In the areas of strategic sustainability in sourcing mentioned above, a large number of indicators are collected and made available to measure the value contribution as a basis for strategic sourcing decisions.
Key enablers for implementation
In order to implement our 100% Responsible Sourcing Strategy, the following factors are key enablers – collaboration, transformation, innovation, and empowerment. We accelerate our efforts by intensifying our internal and external collaboration with business partners and key stakeholders. Our global purchasing structure allows us to drive transformation by fully integrating the respective sustainability strategies of the business units and functions in our responsible sourcing agenda. Furthermore, we will focus on sustainable innovations, boosting innovation of digital solutions and on driving the change to a 100 percent responsible sourcing mindset by empowering internal and external stakeholders through capability building opportunities.
Cooperation with strategic suppliers and partners
Our current cooperation with our suppliers centers on the definition and implementation of a common plan for Henkel’s sustainability targets for 2025 and beyond. We use different platforms and forums to develop pioneering innovations in the field of sustainable products and technologies together with our suppliers.
We use target agreements as a tool to steer sustainable sourcing solutions with our strategic suppliers. As part of our risk management approach, we are working to continuously improve the transparency of our upstream supply chains with regard to sustainability risks. We therefore also require selected suppliers, e.g. in the raw materials and packaging sectors to be transparent about the emissions levels of the product portfolio supplied to Henkel. The suppliers selected for participation in this Climate Commitment Program collectively account for more than 50 percent of our Scope 3.1 footprint. In 2023, we were able to validate more than 2,500 product carbon footprint data points on raw materials collected from suppliers and make this information available internally as a primary data source. In 2024 we increased this further to more than 6,000 product carbon footprint data points.
2024 also marked the launch of “Henkel Climate Connect” – a key global procurement initiative to expand our climate-related supplier engagement and emissions data collection beyond top emitters and direct materials. Through this initiative we expect to systematically map, validate and reduce our suppliers’ emissions, and for our suppliers to make an active contribution to reducing emissions along their supply chains in line with our net-zero target. Through our existing partnership with Together for Sustainability (“TfS”) and the newly-launched “Henkel Climate Connect”, we provide support and training resources to raise suppliers’ climate transition capabilities on a global scale catering to different supplier maturity levels.
As another milestone on the path to greater sustainability in the value chain, in 2022 Henkel joined forces with Deutsche Bank to link the sustainability performance of suppliers with an existing supplier financing program in Europe. Based on their EcoVadis rating, European suppliers that are already participating in supply chain financing with Deutsche Bank can benefit from better financing terms. Financing rates are gradually lowered as the ESG rating of suppliers continues to improve. This means that all five regional supplier finance programs are now linked to sustainability criteria. Other countries will be gradually integrated into these programs as necessary to further increase the coverage of the Henkel supply chain.
Responsible Sourcing Process as an integral component of our procurement activities
Our six-stage “Responsible Sourcing Process” is a central element of our strategic risk management and compliance approach, which focuses on risk identification and defining appropriate measures to minimize risk. Based on the assessment of our suppliers’ sustainability performance, we use the resulting transparency to support our buyers in working with suppliers to make lasting improvements in the value chain. These continuous improvement processes are based primarily on knowledge transfer and competence building with respect to process optimization, resource efficiency, and environmental and social standards. This process is an integral part of all our purchasing activities. Using this six-step process, we cover about 97 percent of our purchasing volume in the areas of packaging, raw materials and contract manufacturing.
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Step 2: Onboarding
The results of the pre-check and the risk assessment then flow into our supplier onboarding process. We expect our suppliers to acknowledge our Supplier Code of Conduct as well as our Responsible Sourcing Policy. Our onboarding process is anchored in a globally uniform registration system and provides a standardized summary of our sustainability requirements.
Step 3: Initial assessment or audit
At the start of a new business relationship, new suppliers are asked to either disclose existing sustainability performance results, or to undergo a sustainability self-assessment that provides transparency about their sustainability performance. Our assessment approach uses questionnaires drawn up by EcoVadis, an independent sustainability assessment specialist. These questionnaires cover expectations in the areas of safety, health, environment, quality, human rights, employee standards and anti-corruption.
In 2021, we introduced the software-as-a-service solution IntegrityNext for suppliers with a lower purchasing volumes. This software solution is based on a compact self-assessment questionnaire on sustainability performance and risks.
Selected suppliers undergo initial audits as an alternative to the self-assessment questionnaires. In this process, Henkel works with independent audit companies to check compliance with the defined standards in audits. Our audits consist of on-site inspections (e.g., at production sites) and include both factory inspections and discussions with employees at all levels of the hierarchy.
Step 4: Analysis of the performance assessment
External sustainability experts, as well as the supplier owners in our Purchasing team, analyze the results of the audits or the results of the EcoVadis assessment to identify sustainability deficits and improvement areas. At the same time, the suppliers are assigned to different sustainability risk classes. A standardized process ensures that our suppliers implement the corrective actions that have been specified. Repeated serious non-compliance is handled via a defined escalation process and leads to termination of the supplier relationship.
Step 5: Corrective actions and continuous improvement process
Independently of the results of an audit or assessment, we ask our assessed suppliers to draw up a Corrective Action Plan and to work on the defined improvement areas. We monitor the progress made in implementing the Corrective Action Plan together with our suppliers in the course of the period until the re-assessment or re-audit takes place.
Step 6: Re-Assessment / Re-Audit
We use recurring re-assessments or re-audits to monitor the performance progress of our suppliers and ensure a continuous improvement cycle consisting of evaluation, analysis and corrective measures. The resulting transparency about the development of our suppliers’ sustainability performance is made accessible in real time via digital platforms.
Step 1
Step 1: Pre-check and risk assessment
This approach to assessing sustainability risks in the supply chain is part of the Group-wide risk management system. We assess risk potential at the regional and country level, as well as at the level of the value chain, including industry-specific risks. In doing so, we concentrate on countries identified by international institutions as being associated with heightened levels of sustainability risks. The assessment includes criteria related to human rights, environment and corruption.
Step 2
Step 2: Onboarding
The results of the pre-check and the risk assessment then flow into our supplier onboarding process. We expect our suppliers to acknowledge our Supplier Code of Conduct as well as our Responsible Sourcing Policy. Our onboarding process is anchored in a globally uniform registration system and provides a standardized summary of our sustainability requirements.
Step 3
Step 3: Initial assessment or audit
At the start of a new business relationship, new suppliers are asked to either disclose existing sustainability performance results, or to undergo a sustainability self-assessment that provides transparency about their sustainability performance. Our assessment approach uses questionnaires drawn up by EcoVadis, an independent sustainability assessment specialist. These questionnaires cover expectations in the areas of safety, health, environment, quality, human rights, employee standards and anti-corruption.
In 2021, we introduced the software-as-a-service solution IntegrityNext for suppliers with a lower purchasing volumes. This software solution is based on a compact self-assessment questionnaire on sustainability performance and risks.
Selected suppliers undergo initial audits as an alternative to the self-assessment questionnaires. In this process, Henkel works with independent audit companies to check compliance with the defined standards in audits. Our audits consist of on-site inspections (e.g., at production sites) and include both factory inspections and discussions with employees at all levels of the hierarchy.
Step 4
Step 4: Analysis of the performance assessment
External sustainability experts, as well as the supplier owners in our Purchasing team, analyze the results of the audits or the results of the EcoVadis assessment to identify sustainability deficits and improvement areas. At the same time, the suppliers are assigned to different sustainability risk classes. A standardized process ensures that our suppliers implement the corrective actions that have been specified. Repeated serious non-compliance is handled via a defined escalation process and leads to termination of the supplier relationship.
Step 5
Step 5: Corrective actions and continuous improvement process
Independently of the results of an audit or assessment, we ask our assessed suppliers to draw up a Corrective Action Plan and to work on the defined improvement areas. We monitor the progress made in implementing the Corrective Action Plan together with our suppliers in the course of the period until the re-assessment or re-audit takes place.
Step 6
Step 6: Re-Assessment / Re-Audit
We use recurring re-assessments or re-audits to monitor the performance progress of our suppliers and ensure a continuous improvement cycle consisting of evaluation, analysis and corrective measures. The resulting transparency about the development of our suppliers’ sustainability performance is made accessible in real time via digital platforms.
Development or termination of the supplier relationship
We work intensively with our suppliers to improve their sustainability performance. The focus is on initiating positive change throughout the value chain, for instance, through training programs and joint projects. During 2024, we did not receive any notifications of an infringement by any of our strategic business partners that would have given cause for terminating our relationship with that supplier.
Together for a sustainable supply chain
In 2011, Henkel and five other companies in the chemical industry co-founded the initiative “Together for Sustainability – Chemical Supply Chains for a Better World” (TfS). It is based on the principles of the United Nations Global Compact and the Responsible Care Initiative of the International Council of Chemical Associations (ICCA). TfS aims to harmonize increasingly complex supply chain management processes with regard to sustainability and to optimize dialog among worldwide business partners. Above all, synergies are to be created so that resources can be used more efficiently and with a minimum of administrative effort, not only among the member companies but also with all of our shared suppliers.
At the heart of the audits and online assessments of the TfS initiative is the core idea: “An audit for one is an audit for all!”. Suppliers then only have to undergo one assessment or one audit. The audits are carried out by a number of selected, independent audit companies. For the online assessments, TfS works with EcoVadis, a sustainability performance assessment specialist. Performance is assessed in the areas of management, environment, health and safety, labor and human rights, and issues of ethical corporate governance. In 2024, TfS had a pool of around 20,600 active TfS assessments and audits. In the same year, around 3,200 Henkel suppliers underwent a TfS assessment or audit. As a number of TfS members are also direct suppliers of Henkel, and these suppliers also assess and audit their suppliers, we achieve a more in-depth approach (tier n) to sustainability practices along the value chain.
One significant milestone in the history of the TfS initiative was the release of the Scope 3 Product Carbon Footprint (PCF) Guideline for the Chemical Industry in 2022. TfS members have worked with global NGOs, corporate sustainability experts, chemical industry experts, and organizations such as the World Economic Forum (WEF) and the World Business Council for Sustainable Development (WBCSD) to ensure compatibility of the TfS PCF Guidelines with global best practices for emissions accounting. Henkel was represented by experts in the PCF working groups. The recently updated guideline consolidates existing PCF calculation approaches with regard to the specifics of the chemical industry and enables business and industrial customers as well as consumers to establish direct comparability and an assessment of the climate impact of chemical products in the future. In 2024, the TfS initiative officially launched the PCF Exchange – a standardized data platform enabling suppliers and companies to generate and securely exchange carbon data from across their supply chains.
Another core element of the TfS initiative is the TfS Academy – a tailored learning and skill-building platform that is designed to provide member companies and their suppliers with continuing education on key sustainability topics in the supply chain. The courses cover topics including health and safety, the environment, sustainable procurement, labor and human rights, management and governance, as well as information about TfS itself. The learning content is all linked to corrective actions resulting from TfS audits and assessments. This provides suppliers who have been evaluated with a range of concrete learning opportunities that are directly related to the results of the audit, and which support them in their continuous improvement efforts. By the end of 2024, more than 280 learners at Henkel were enrolled in 790 courses at the TfS Academy.
Training and development of suppliers and buyers
During 2024, Henkel continued to focus on building competence and expanding the knowledge of its buyers and suppliers. Henkel experts trained purchasing experts and suppliers in focus areas like palm (kernel) oil, greenhouse gas emissions, contract manufacturing and trade products. Experts at TfS trained more than 2,500 participants in various webinars in five languages in 2024.
As in previous years, internal Henkel stakeholders and new employees in the Purchasing department were also trained on the contents of our responsible sourcing strategy, with a special focus on the requirements of the Supply Chain Due Diligence Act. More than 320 employees in the Purchasing department underwent extensive human rights due diligence training in 2024, focusing on human rights due diligence in supply chains.
More diversity in the supply chain: Supplier Diversity Program
To drive progress in the areas of diversity, equity and inclusion, our procurement function is helping to strengthen diversity among our suppliers. As part of this effort, we launched our Supplier Diversity Program in North America to provide certified suppliers interested in doing business with Henkel with more opportunities for collaboration. The program targets women-owned businesses and businesses run by members of minority groups such as the disabled or veterans, among others. A registration form developed by our Supplier Diversity team on our North American website provides a way to connect potential diversity suppliers directly with our purchasing organization. In addition to a number of corporate memberships, including the National Minority Supplier Development Council (NMSDC) and Women-owned or Minority-owned Business Enterprise (WMBE), the Supplier Diversity team is involved in numerous supplier diversity matchmaker events. In this way, we aim to link high-quality procurement solutions with an inclusive and dynamic supplier base. We intend to take advantage of the experience gained from this program in the important North American market to expand our global activities.
Close collaboration with partners
In addition to our work in the TfS initiative, Henkel is a member of AIM-Progress, a forum of companies from the consumer goods industry. The objective here is also to encourage member companies to share experiences in the area of sustainable sourcing and to utilize synergies. The forum also focuses on holding regional supplier events to improve sustainability performance within the value chain. We are also a founding member of the Action for Sustainable Derivatives (ASD) initiative. It brings together organizations from along the palm oil derivative supply chain to support efforts to increase transparency and promote compliance with NDPE (No Deforestation, No Peat, No Exploitation) principles to positively transform the palm oil industry.