Suppliers

Commentary

Context In the majority of instances during 2003, CIS and the bank maintained distinct supply relationships. The bank has reported its assessment and screening of suppliers, on the basis of ethical responsibility record, since 1998. It has reported its assessment and screening of suppliers, on the basis of the ecological impact of products and services, since 1999. CIS has operated a programme to assess the ecological profile of its purchasing and suppliers since 2001; this is being reported here for the first time this year. Since 2001, CIS, the bank and the Co-operative Group have increasingly participated in joint procurement, in order to optimise purchasing power. The bank has applied its ethical and sustainability screening as vigorously here as elsewhere.

Ecological screening In addition to activity relating to paper, energy and recycled waste, the Sustainable Development Team managed the screening of 132 products and/or services during 2003 (contract value £1.4 million). The vast majority related to persistent bioaccumulative chemicals. Details of the screening of bioaccumulative chemicals are described here. In one instance it was considered necessary to contract a service deemed unsatisfactory from an ecological perspective, where it was considered a technical alternative existed. As part of the upgrade of an air conditioning system, a HFC system was installed at one of the bank's London offices, details of which are described here.

Ecological purchasing tool In 2002, the bank developed an ecological product specification guide. This explains the principles and reasoning behind the bank's ecological purchasing policy, alongside recommended suppliers and explanations of the relevant issues. The ecological purchasing tool was made available to key staff involved in the bank's branch refurbishment programme in early 2003. It was utilised in the refurbishment of Manchester branch and the 'construction' of the new Belfast branch.

Ethical screening The total value of contracts screened on the basis of ethics was £18 million, of which contracts with a value of £5.4 million were considered unacceptable. Most notably:

• The bank decided to move away from its existing supplier of branch intruder alarm systems, following the company's acquisition by a global defence equipment manufacturer, which supplied oppressive regimes;
• The bank declined to partner a retailer in a discounted sports goods promotion. This business sold fur-trimmed garments, which placed it in conflict with the bank's position on animal welfare and the fur trade.

Details of how the bank used the Ethical Policy to screen finance in 2003 are described here.

Sustainable procurement - policy development Towards the end of 2003, CFS developed a new Sustainable Procurement and Supplier Policy.i This Policy sets out the criteria for the ethical and sustainability screening of suppliers and products. It brings together, in one document, the key elements of the bank's Ethical Policy and Ecological Mission Statement, and combines them with CIS' Environmental Policy Statement and rigorous new Sound Sourcing criteria that stipulate a variety of minimum labour standards. Where there was a discrepancy between various policy elements, the highest standards have been adopted. The new Policy will place added emphasis on 'materiality'. In practice, this means that CFS will move increasingly beyond policy compliance (i.e. does the supplier comply with the bank's Ethical Policy) and toward the identification of products and services with positive ethical or sustainability features. Implementation of the new Sustainable Procurement and Supplier Policy commenced in early 2004, and progress will be reported in 2005.

Awareness Awareness of ethical and sustainability policies is higher amongst bank suppliers than CIS suppliers. This is related to the existence, for a number of years, of a centralised bank procurement function and to the fact that ethical and sustainability issues form an integral part of the bank's supplier selection process.
Awareness - Bank 81% of suppliers (2002: 82%) are aware of the bank's ethical or sustainability policies. 72% of suppliers are aware of the bank's Ethical Policy (2002: 78%), 76% of the Ecological Mission Statement (2002: 70%), 66% of the Diversity/Equal Opportunities Policy (2002: 59%) and 48% of the Partnership Approach (2002: 52%).
Awareness - CIS 69% of suppliers are aware of CIS' ethical or sustainability policies. 53% are aware of CIS' Environmental Policy, 39% are aware of its Diversity Policy, 33% are aware of CIS' Responsible Shareholding programme and 29% are aware of its commitment to Social Accountability or Social Values.

Knowledge There has been a decline in the percentage of suppliers rating the bank's knowledge of ethical and sustainability issues as good (from 87% to 72%). This is considered to be unsatisfactory and is probably due to business reorganisation activity. Consequently, there has been an increase in the number of respondents who are unable to comment (up from 13% to 28%). Similarly, a substantial number of CIS suppliers (37%) do not feel able to comment. Late in 2003, a CFS Sustainability Steering Committee was established. Follow this link for details of the remit of the CFS Sustainability Steering Committee. This will monitor performance and advise on cost-effective solutions in relation to ethical and sustainability procurement. Staff training associated with the development of the new Sustainable Procurement and Supplier Policy should ensure that 'knowledge' ratings will increase across CFS in the future.

Impact There has been a marked decrease in the proportion of suppliers reporting that the bank's policies have had a positive impact on the way their business operates in terms of being more ecologically sound and socially responsible. 27% of bank suppliers (2002: 46%) state that the bank's policies have had an impact on the way their business operates. In comparison, 30% of CIS suppliers state that policies have had an impact on their business operations. The most frequently mentioned impact for bank suppliers is increased awareness of ecological issues, including those related to printing, recycling and 'green' energy (41%). CIS suppliers cite environmentally sound waste disposal (25%) and change to materials used (22%) as the most frequent impacts.

Sustainability value analysis

• Estimated additional cost of pursuing ethical and sustainability best practice compared with the lower cost option of similar quality, £487,000.

Influence and action

Supplier screening In July 2003, the bank was invited by the EU Multi-stakeholder Forum on Corporate Social Responsibility to outline its approach to ethical and sustainability supplier screening and engagement. Following the bank's presentation, the Forum stated that the European Commission and other public bodies should consider how they might "learn from the experience" of the bank in working with suppliers.

Ethical consumerism The bank's latest Ethical Consumerism Report was published in December 2003. The report brings together the annual Ethical Purchasing Index, which records the sales of ethically marketed goods and services, with a survey of consumer behaviour, which analyses the intent behind consumers' actions. The 2003 report reveals that UK consumers are spending £19.9 billion per annum in line with their ethical values. Recorded sales of ethical goods grew by 13% in 2002, at a time when the UK economy grew by just 1.7%. The report also showed that boycotts by ethically motivated consumers are costing well known brands £2.6 billion a year. For further information visit the website.ii

i www.cfs.co.uk/sustainability2003/spsp
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ii www.co-operativebank.co.uk/epi
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