Sustainable supply chain management

Our supply chain

Early in 2010, we began a programme to rationalise our supply chain and procurement processes to improve efficiency and support the strong growth we expect in Canada and in the Middle East and North Africa (MENA) over the next three to five years, together with the substantial growth we are targeting in UK support services from 2012 onwards.

A key aspect of this programme is the introduction of category management so that we can procure goods or services by category, both globally and locally, rather than on a project by project basis. Our supply chain team develops sourcing plans for 80% of our external spend, which enables us to build closer and stronger supplier relationships and achieve greater efficiency.

This supports our objective of working only with high-quality suppliers who deliver right-first-time goods and services, which reduces waste and improves delivery, safety and sustainability performance, thereby helping us to drive innovation and improve value for money for our customers.

Carillion’s supply chain principles are:

• Safety – we only work with safe suppliers to help us meet our Target Zero objective and we ensure that suppliers of high-risk services are suitably accredited.
• Customers first – all supply chain activity must be focused on satisfying customers and meeting their procurement requirements.
• Sustainable procurement – all suppliers are required to comply with our Sustainable Supplier Charter (204 Kb) and sustainable procurement principles.
• Cost effective – we aim to minimise costs by collaborating with suppliers to develop innovative ways of working.
• Quality – we purchase goods and services of appropriate quality. Suppliers must demonstrate their ability to meet their quality management systems.
• Performance – we create a direct link between the performance of suppliers and their selection for future work, through the application of consistent supplier performance indicators.
• Category management – we procure goods and services by category so that we can understand the end-to-end supply chain contribution.
• Our people – we ensure our people are well trained and diverse, and support individuals’ professional development, including qualification with the Chartered Institute of Purchasing and Supply and other internationally recognised standards.
• Our Values – we are guided in our relationships with suppliers and customers by the Carillion Values.

Supplier management

In 2010, we upgraded our supplier management systems in the UK and implemented MyRegister, a new database for requesting and approving suppliers’ participation in our accreditation process. Within the accreditation process, we have extended our expectations of suppliers in the areas of responsible procurement, ethical working, resource use and atmospheric impacts.

Having the MyRegister database also improves supplier performance management, as it allows us to appraise them more easily against consistent criteria such as health and safety, professional delivery, cost management, design and sustainability.

In MENA, we have introduced a supply chain audit programme, which includes a number of requirements relating to sustainability. The first phase of audits was completed in 2010 and follow-up reviews are planned for 2011 to measure performance improvement. We are rolling out the MyRegister system to our MENA operations during 2011.

In the Middle East, the top 50 suppliers and subcontractors are subject to an annual audit programme, which includes a number of criteria relating to sustainability. Carillion Canada is implementing a consistent supplier evaluation process which includes a section on sustainability. Through applying this process, we aim to have 30% of our suppliers and sub-contractors accredited by the end of 2011.

Aimed at furthering the skills and expertise of our supply chain professionals, Carillion launched a supply chain academy to develop and deliver training programmes. Specific training was held at our Aspire Defence Capital Works project to embed the sustainable procurement strategy in 2010.

In Canada, we require all our supply chain staff to attend one industry conference per year. The conferences they attended in 2010 focused on the internationally recognised Leadership in Energy and Environmental Design building standards.

Sustainable procurement

We continue to implement the Flexible Framework programme of the Government’s Sustainable Procurement Task Force. This provides a roadmap towards sustainable procurement excellence, comprising five levels of performance.

Following our business restructuring in 2010 and our creation of a global category management function, we aim both to embed Level Two within the Group and achieve Level Three in 2011. We are also assessing the risks associated with the social and environmental impacts of the services and materials we procure.

To strengthen our sustainable procurement programme, we created a new Sustainable Supplier Charter (204 Kb) in 2010. This builds on our former Sustainable Procurement Policy and Supplier Charter, but places greater emphasis on supplier compliance with the International Labour Organization’s Core Conventions and the United Nations Universal Declaration on Human Rights.

E-invoicing

In 2010, we created systems to allow the electronic submission and checking of supplier invoices in the UK. E-invoicing will reduce processing time and errors, as well as offering significant environmental benefits.

For suppliers, accuracy and purchase order validity are automatically checked in the e-invoice, thus avoiding late payments. We are working closely with suppliers to ensure a smooth transition to the new system.

Environmental savings resulting from our switch to e-invoicing (per annum once fully integrated):	Financial savings for our suppliers
Carbon emissions from paper: 17,204 kg CO2e Carbon emissions from delivery: 13,702 kg CO2e Ink cartridges: 335 kg	Paper: £5,740 Postage: £13,702

Audit and accreditation

Our product sourcing business in China, Carillion Direct Sourcing, tests and sources products directly from manufacturers rather than through a third party. This reduces waste and costs generated in the supply chain. Furthermore, having direct relationships with the manufacturers enables us to audit their compliance to compulsory labour standards.

In 2010, Carillion Planned Maintenance and Carillion Facilities Management achieved re-certification to the Chartered Institute of Purchasing and Supply – a global standard for excellence in supply chain policies, procedures and strategies. We were judged to be in the top 10% of all organisations certified to date, both in the UK and internationally.

Supply chain engagement

We recognise that there are great opportunities to share best practice by building close relationships with our suppliers.

Here are a few examples of supplier engagement.

• Carillion is working with cleaning contractor, LCC, to improve environmental performance. Our best practice cleaning model includes the use of microfibre cleaning products, which can eliminate up to 99% of bacteria without chemicals. Where we still use cleaning chemicals, we choose concentrated products to minimise our indirect environmental impacts from transport and packaging.
• Biffa, a preferred waste supplier to our services business, uses a method called ‘dry mixed recycling’. This enables our customers to put all dry, recyclable matter into one bin – meaning fewer bins and collections, with recyclable matter then being separated off-site.
• In MENA, we are appointing a waste management contractor to increase the volume of waste we recycle and reduce the volume taken to landfill.
• Also in MENA, one of our suppliers provided training to our procurement team on Forest Stewardship Council accreditation for timber products.