Managing Supplier Performance

Approximately 50,000 suppliers in more than 100 countries provide the goods, services and raw materials required for Baxter's operations worldwide. In 2008, Baxter’s total supplier spending was approximately $4.4 billion. About 34 percent of this was on “direct” supplies – raw materials and components used in Baxter products. Baxter buys most of its direct supplies from local, regional and global companies located near its operations. All other supplies are considered “indirect” – goods and services that support other aspects of the company’s operations. The company enters into global supply agreements for travel, corporate credit cards, computer purchases and other goods and services.

Ensuring Ethical Supplier Conduct

Baxter's Supplier Quality Standard and Ethics and Compliance Standards for Baxter Suppliers provide a framework for consistent supplier-evaluation and selection, and define policies and expectations for ethical behavior when doing business with Baxter. Baxter evaluates and approves all suppliers before purchasing any materials, components, products or services. Baxter expects all suppliers to meet both sets of standards in the goods and services they supply.

The Supplier Quality Standard specifically addresses sustainability issues, including indentured and child labor, employment standards, waste and energy reduction, and ethics. Baxter's Ethics and Compliance Standards for Baxter Suppliers, available in six languages, also cover child labor, as well as the management of confidential information, intellectual property, gifts and entertainment, anti-corruption, conflicts of interest, trade compliance, fair employment opportunities, and environment, health and safety (EHS). Baxter expects suppliers to comply with both sets of standards as well as all laws governing purchasing, and may terminate agreements with suppliers that do not. Baxter also asks key suppliers to provide emergency response plans describing how they will continue to provide vital supplies in the event of a catastrophe or business interruption.

ETHICS AND COMPLIANCE STANDARDS FOR BAXTER SUPPLIERS
English (pdf 102k) French (pdf 1.1M) Japanese (pdf 115k)
Chinese (pdf 1.7M) German (pdf 1.1M) Spanish (pdf 1.1M)

Ethics training is mandatory for employees in Baxter's Purchasing and Supplier Management (PSM) organization. All PSM employees that interface with suppliers are required to take an online ethics and compliance course as well as a live session conducted by Baxter’s Ethics and Compliance organization. Suppliers also have access to EthicsKit, a best practices guide available on Baxter’s website to help suppliers create and implement business ethics programs.

Baxter has adopted the Institute for Supply Management Principles and Standards of Ethical Supply Management Conduct. These standards promote excellence in supply chain management, professional research, promotional activities and education.

Supplier Sustainability Survey

In 2008, Baxter surveyed approximately 100 of its major U.S. suppliers on their sustainability activities, particularly regarding supplier diversity and EHS. These suppliers accounted for $2.2 billion, or 50 percent, of Baxter’s total supplier spend during the year. Forty-eight percent of the suppliers responded. Key results include the following:

Overall, Baxter’s suppliers have strong health and safety programs, but showed weaker results on environmental issues such as climate change, biodiversity, water, packaging and product stewardship.

Sustainability Language Added to RFPs and Supplier Agreements

In 2008, Baxter worked to change the culture within the company’s Purchasing and Supplier Management group to look beyond price, quality, service and other traditional performance measures and also consider sustainability programs and performance in supplier selection and contracting. To this end, in 2008 Baxter added sustainability language to its requests for proposal (RFP) and its standard supplier agreement used in the United States and Canada. The company plans to incorporate that language into similar documents globally in 2009.

Baxter RFPs now ask suppliers to provide their sustainability policy and mission statement, describe sustainability initiatives and outcomes, list sustainability-related awards received, and disclose environmental violations and fines for the past three years. Baxter also asks suppliers to provide details on their activities with diverse suppliers, particularly related to products and services in the RFP, as well as information about other initiatives that would support Baxter’s sustainability goals.

Language added to the company’s standard supplier agreement requires suppliers to certify compliance with federal and state equal opportunity laws, demonstrate efforts to employ people of diverse backgrounds, and make good-faith efforts to engage small, minority-owned, women-owned, veteran-owned and other types of diverse suppliers when procuring secondary suppliers. The agreement also requires suppliers to support Baxter’s sustainability initiatives by using and/or identifying for Baxter’s use products and/or services with reduced environmental impact. Suppliers also are asked to provide a quarterly report to Baxter on all sustainability activities, particularly in the areas of EHS, diversity and inclusion, and community involvement.

Baxter also has initiatives to manage supplier environmental performance specifically. See Greening the Supply Chain for more detail.