Supplier Engagement

Supplier Sustainability Performance Management

Our Supplier Sustainability Performance Management program embeds climate, nature and people dimensions from the supplier and material qualification process through to supplier performance monitoring and evaluation. We leverage ratings such as EcoVadis and CDP to assess supplier performance on company level. At the same time, we scale up our certification efforts and material certifications coverage through labels such as Roundtable for Sustainable Palm Oil (RSPO), BonSucro and Union for Ethical Biotrade (UEBT) chain of custody standards to ensure the highest degree of sustainability and ethics.

We leverage best-in-class sustainability ratings such as EcoVadis to verify our supply chain partners’ performance on environmental management, labor and human rights, ethics, and sustainable procurement. If our minimum expectations are not met, we engage with the relevant supplier to see how we can enable them to improve their score, offering support where feasible. In 2023, we screened 1,210 of our suppliers on environmental and social criteria through EcoVadis. Of these, 1,026 were reassessments and 63% of these reassessments received an improved score compared to last year, highlighting the fact that continuous improvement is also a priority for our suppliers.

As a trustworthy partner to our business stakeholders, we strive to always operate to the highest standards. We only want to engage with others who commit to operate to the same standards, with the objective of achieving an ethical, traceable, and sustainable value chain. These standards for suppliers are captured in the principles set forth in our Supplier Code. All suppliers are expected to follow the dsm-firmenich Supplier Code and all relevant laws and regulations. We will confirm the adherence to the principles of our Supplier Code; a breach of this Code could lead to a discontinuation of dsm-firmenich collaboration and to possible legal sanctions and proceedings.

Due diligence and Sustainability at source

We also drive transformation and positive change through field-based collaborations at source for value chains with increased exposure to sustainability risks or upon request by customers. The latter underlines our belief that driving sustainability needs to be addressed throughout the full value chain and requires resources and expertise from us, our customers, and our suppliers. Collaborations materialize in, for example, Sustainability at source projects, conducting upstream due diligence exercises, supporting our suppliers in obtaining third party verification (on raw material certification level), or implementing traceability tools and processes.

Sustainability at source projects flowing out of these collaborations typically last three years and should contribute to:

• Nutrition, health, safety, and social impact (ensuring living wages are paid, empowerment of women, empowerment of local communities, advocating entrepreneurship, abolishing forced labor and/or preventing child labor)
• Improving climate and the natural environment through sustainable farming practices, regenerative agriculture, biodiversity conservation or improvement, responsible water consumption, and/or greenhouse gas emission reductions
• A combination of both of the above

Due diligence assessments are triggered following below-par EcoVadis assessments, risk alert systems, non-conformities identified during supplier audits, concerns raised by whistle-blowers, or NGO/media investigation, and are aligned with international standards such as the United Nations Guiding Principles (UNGPs) and the Organisation for Economic Co-operation and Development (OECD) Guidelines. Based on the findings of these assessments, preventative or remedial actions are defined in collaboration with the impacted suppliers and are monitored on progress for at least three years. Suppliers are integrated into the project team, which follows a structured approach to addressing negative impact. This ensures that all relevant stakeholder requirements are met and sustainability frameworks respected.

When there is a customer request for increased assurance regarding certification or traceability of a material, our expert team guides our suppliers through the process. Traceability studies will also support us in preparing for new legislation like the EU Deforestation Regulation (EUDR) and EU Carbon Border Adjustment Mechanism (CBAM).

At the end of 2023, the Responsible Sourcing team was working on 73 projects (Sustainability at source and due diligence projects) including field-based collaborations with suppliers to enhance positive impacts for all the stakeholders:

• In Turkey, we raised awareness on the benefits of education for parents active in the rose-plucking industry, and contributed to building a network of daycare facilities, allowing woman to work on the fields while ensuring a safe environment for their children during working hours
• We supported the implementation of labour contracts between farmers and seasonal workers, ensuring fair working conditions and a living wage the seasonal workers, in Bulgaria where we source rose oil
• In Madagascar, we trained our suppliers on conducting human rights due diligence assessments and how to implement corrective actions
• We conducted a living wage assessment and implementation of corrective actions for our jasmine suppliers in India

A further elaboration of actions we took in our mint supply chains is described in our story Mint with Purpose. In 2024, the Responsible Sourcing team will perform the baseline calculations in order to measure the achievements and impacts.

Supplier Engagement Program ‘Joining Forces’

The global challenges of the next decade are such that dsm-firmenich cannot succeed alone: we must engage our suppliers on our journey. We seek to inspire our suppliers with a collaborative approach that reinforces the resilience of our supply chain and contributes to the Group’s strategic objectives. We want to offer our supply chain partners assurance that they are not on their own, and that they can connect with us, their industry peers and their customers to jointly drive continuous improvement.

In June, we gathered over 100 industry partners from our most important global suppliers, leveraging the existing setup of our Leadership Event. With the theme ‘joining forces to bring progress to life’, the purpose of this supplier event was to strategize, exchange ideas, and jointly devise innovative solutions to benefit our valued customers and enhance our sustainability journey.

During the event, we showcased our newly established organization, shared our purpose and ambitions, presented our inspiring vision of innovation, outlined our four Business Units, and importantly, emphasized the significance of robust partnerships.

Hosted by our Chief Procurement Officer (CPO) and Deputy CPO, and kicked off by our CEO Dimitri de Vreeze, the event revolved around the three main pillars of our Procurement organization: Value delivery (the essential), Innovation (the desirable) and Responsible sourcing (the sustainable).

We further connected with suppliers throughout the year by means of events, knowledge-sharing sessions, and capacity-building workshops. For example, in July, we organized a workshop where our scientists, process improvement managers and commercial leads got together with the manufacturing experts of one of our key suppliers to jointly identify and plan opportunities to reduce the carbon footprint of benzoic acid, a feed additive supporting digestive capabilities and the absorption of nutrients.

Going forward, we aim to further raise the bar by launching our Supplier Engagement Program ‘Joining Forces: dsm-firmenich and Suppliers in Sustainable Action’ with focal points on climate change, nature, and human rights, to support our partners in their sustainability journey by aligning commitments and actions. Our program will be launched in April 2024, where we invite more than 500 of our key suppliers to connect with us and our customers, jointly kicking off a journey toward science-based target setting and improving human rights within our value chains. Our objective is to see the investments return through long, sustainable business relations and stimulate continuous improvement throughout the industry, not only providing benefits to dsm-firmenich but also to our suppliers’ other customers through materials with a low (carbon) impact.

Tackling climate change with our value chain

Beyond our own operations, we invite key suppliers to develop detailed plans to reduce their environmental impact, and we join forces with our supply chain partners to tackle climate change. We continue to develop emission reduction roadmaps for our raw materials together with key suppliers as part of our reduction ambitions and have also continued to engage with suppliers to set their own targets. We will continue with this approach going forward. More information on our achievements and our targets can be found in Scope 3.

Additionally, dsm-firmenich received a top ranking on the CDP Supplier Engagement Leaderboard in 2023 based on our disclosures in 2022. This recognition highlights our excellence in working with our suppliers to reduce environmental impacts and risks across our value chain. We will continue to engage with our suppliers and work toward our SBTi in our direct operations and beyond.

Moving toward deforestation-free supply chains

To achieve deforestation-free supply chains by 2030 (one of our Food System Commitments) we ask our suppliers to certify their crop-based raw material through third-party, independent certification schemes. In 2023, 71% of our relevant sourced volume was assessed as deforestation-free. This relates to our Tier 1 supply chain for the crops we source that are prone to deforestation risks: palm oil and derived products, sugarcane, and direct soy and corn products. We assess ‘deforestation-free’ through certification schemes issued by NGOs such as RSPO, BonSucro and Proterra. We also leverage RSPO MB certificates for our Palm Oil and derivatives as a way of mitigating risk in our supply chains. However, as the Segregation model is considered the best approach to demonstrate deforestation-free, we do not include these in the calculated percentage.

Obtaining a (supply chain) certificate enables our suppliers to highlight their dedication to deforestation, biodiversity preservation, and tackling human rights issues, and will be an integral part of dsm-firmenich suppliers’ performance criteria. We carefully monitor the developments of the EUDR, securing our supply chains for the future. More information on how we contribute to protecting nature can be found in Nature.