Sustainable purchasing and supply chain management

The way to genuine sustainability
We at Cognis have a deep commitment to sustainability. We see it not just as a way of contributing to social goals, but also as a decisive competitive advantage for ourselves and our customers. We incorporate sustainable values and practices into our purchasing and supply chain procedures with a view to both improving economical results and fulfilling the highest ethical and environmental standards. In turn, we expect all our suppliers and service providers to adopt a similar approach. We are constantly working to make our supply chain even more sustainable, both through our own efforts and in collaboration with our suppliers and service providers.

Purchasing: step by step to greater sustainability
All our activities are based on the principles of sustainable development. Purchasing puts these principles into action by focusing on the procurement of renewable raw materials, and environmentally sound products and services.

• It is continuously looking for greener alternative raw materials and resource-saving equipment.
• It also seeks to buy products whose packaging can be reused or recycled.
• As purchasing of many materials is managed on a global level reducing transport distances from supplier to factory is a focal point of efforts to reduce the environmental impact and cost.

Production: going down the “green” road
Our technological infrastructure is state-of-the-art, and we are continuously improving our production processes. Reducing energy consumption is a key priority here. The “25 by 2012” program has the aim of achieving an improvement of 25 percent in key environmental performance indicators across the Cognis group until 2012 compared to 2002. The measures implemented and envisaged relate to specific energy consumption, emissions, wastewater ,and waste volumes. In Kankakee, USA, for example, improvements to our vitamin E extraction facilities have reduced steam consumption by 18,000 metric tons, and electricity usage by 1,400 MWh annually. This equates to a reduction in CO₂ emissions of 3,700 metric tons a year. Since spring 2008, measures to save and reuse water have seen the volume of waste water produced by the site fall by as much as to 3,000 cubic meters a month.

Making production processes as safe as possible
We have also set our sights high in terms of health and safety. The ultimate goals are zero lost-time accidents and zero workplace-related injuries. Regular drills and training activities, and an ongoing program of safety audits, ensure that employees stay focused on this vital issue. In 2008, the company started systematically analyzing near-misses as well as actual accidents, using a risk matrix coupled with a modified auditing system. The result has been a sustained decrease in the number of industrial accidents at production sites worldwide.

Storage and delivery: responsibility behind and beyond the factory gates
Safety is also a vital issue central in the storage and transportation of goods. Our staff and suppliers receive thorough training in how to drive, secure, load and unload trucks safely. With annual refresher courses, the company exceeds minimum legal requirements on training. Behavior Based Safety (BBS) standards are applied to all loading/unloading and driving activities, and regular checks are carried out to ensure all suppliers are following regulations correctly.

We not only work to reduce the energy consumption of our own warehouses, but also give advice to external logistics centers on how they can save energy with technologies such as low-energy buildings and energy-efficient lighting. We are also trying to reduce CO₂ emissions resulting from transport within our supply chain, for example by using trains instead of trucks, or by switching from diesel to electric forklifts, as Cognis Turkey is currently in the process of doing. We also train staff and suppliers in how to use less fuel, clean trucks with less water and optimize their vehicle fleet, and constantly strive to reduce miscarriages and product damage in transit.

We also seek to improve capacity utilization by shipping only full pallets in completely full trucks, and consolidating shipments by putting in place fixed delivery days. To reduce waste, pallets and packaging are recycled and reused wherever possible. In Spain for example, incoming pallets used to deliver raw material are reutilized. Any remaining pallets are handed over to a certified recycling company. And in Italy, we are testing a new wrap-film to save material in transportation.

Saving paper is another way to reduce waste and cut CO₂ emissions. Enhancing EDI (electronic data interchange) connections with logistics partners and switching to paperless processes, such as e-mail order confirmations, are two ways that paper consumption can be cut. This also helps make logistics operations leaner, by easing and speeding communication. E-invoicing will bring further paper savings.

Products: taking sustainability to the customer
The products we offer meet strict quality and safety standards that often go well beyond legal requirements. Our approach to sustainability helps formulators design end-products that meet the requirements for obtaining the desired environmental labels or certificates, and enable manufacturers and consumers to act in an economically and ecologically sound manner – in the same way that we do ourselves.

Supplier evaluation management (SEM) at Cognis
We aspire to meet the highest standards of sustainability, and expect the same from our suppliers. For this reason, we introduced an evaluation system for assessing our suppliers’ stance on specific sustainability-related issues. After an initial web-based assessment suppliers and service providers are monitored on an ongoing basis. This approach enables us to forge long-term relationships with partners that are committed to sustainability, and to establish appropriate standards. The following factors are particularly important in this regard:

• Management systems
• Social sustainability
• Safety and health
• Environment
• Product (for raw material suppliers)
• Supply chain services (for logistic providers)

Giving suppliers the green light
We are one of the first companies to systematically survey our suppliers about their sustainability in a way that allows global comparability of results, and to use this information in our decision-making process. Based on the supplier’s answers, a score for sustainability is determined, which translates into a rating—green, yellow or red.

• Green-rated suppliers are regarded as sustainable, and are therefore preferred. We increase our cooperation with these suppliers.
• Suppliers that have a yellow rating are regarded as being acceptable, but these suppliers require development, e.g. through workshops, trainings or audits to help them to get up to a green rating.
• Suppliers with red ratings do not meet our strict sustainability criteria—if they do not show  improvement, they risk being delisted in favor of a more sustainable alternative.