We believe in maintaining strict controls in our supply chain to minimize negative impacts on the environment and people, and ensure human rights are upheld in our value chain. We strive to work with suppliers who share our values and commitment to operating responsibly and ethically. All suppliers are expected to comply with our Responsibility Standards for Suppliers (the Standards), available in 13 languages. Our standard Purchase Order (PO) Terms & Conditions (T&Cs) in North America reflects the Standards, and we are in the process of making similar changes to PO T&Cs worldwide in the applicable local languages. All new and current Global Procurement employees must complete a mandatory training on the Standards. The training is also available to relevant employees in other functions.
We verify and monitor supplier compliance on a regular basis through a formal assessment and audit programs. Initial risk assessments are largely administered through a globally recognized third-party program called EcoVadis. These assessments are conducted for suppliers participating in our Sustainable Procurement Program or through our Environment, Health & Safety (EHS) risk assessment program. EcoVadis assessments provide an initial screening of supplier performance, and the results (a score) play an important role in determining which suppliers may require an on-site audit.
We have had a well-established EHS audit program in place since 2006. In recent years, in part because of our engagement with different working groups and organizations on human rights and social aspects of supply chains, we further standardized our framework for ensuring supplier compliance with our human rights standards by launching a dedicated social audit program. Refer to the list of our policies and statements included in the Respect for Human Rights section.
The majority of our supplier EHS audits are conducted by our Environmental Health, Safety & Sustainability organization, leveraging our internal EHS expertise and on-the-ground presence in various geographic regions. In some cases, EHS audits are conducted by third-party firms on behalf of Johnson & Johnson.
We systematically screen suppliers to be audited for EHS compliance based on EcoVadis scores, type of goods and services provided, and geographical location. In 2018, 870 suppliers were in scope for our EHS risk assessment.
We particularly focus on the following types of suppliers for audits:
- External manufacturers
- Active pharmaceutical ingredients (API) suppliers
- Biologics/vaccine suppliers
- R&D suppliers
- Chemicals suppliers
New external manufacturers and APIs or biologics or vaccines suppliers located in a high-risk country34 are automatically subjected to an on-site audit.
All EHS site audits are conducted using the audit protocol and checklist developed by the Pharmaceutical Supply Chain Initiative (PSCI). We identify supplier non-compliances in the areas of environment, health and safety, and management systems. While we maintain a separate social audit program, a small number of these audits also focus on compliance with labor and business ethics provisions of the Standards.
Social audits are conducted according to SMETA 4 guidelines by an accredited external audit firm on behalf of Johnson & Johnson. Supplier selection and prioritization criteria include results of EcoVadis scores on Labor and Business Ethics, location in a country considered high risk for violation of human rights, and the supplier category. In 2018, we rolled out our social audit program, with 11 audits completed by year end. We plan to expand the program in the coming years to cover more geographic regions and procurement categories.
We categorize supplier non-compliances for both EHS and social audits as critical,35 major and minor, and communicate the findings to each supplier. We communicate our expectation that suppliers must implement time-bound corrective actions and demonstrate improvement. When critical findings are identified during audit, we expect immediate mitigation of the risk.
We aim to maintain long-term relationships with suppliers, and prefer to work with them to resolve audit findings. For our EHS audit program, we provide the following forms of support for post-audit supplier improvement:
- Follow-up technical visits36 that include expert training and best practice sharing;
- Business reviews with direct coaching and guidance;
- Information provided in Sustainability Toolkit for Suppliers;
- Supplier relationship management engagement; and
- Supplier capability-building conferences, webinars and other resources.
If significant non-conformance with the Standards cannot be sufficiently resolved in a timely manner, we withdraw existing business or decline to start business with a new supplier.
While we work hard to positively impact the suppliers within our immediate sphere of influence, achieving complete visibility into multi-tier supply chains requires concerted efforts from industry and other stakeholders. This is one of the reasons we actively participate in global healthcare industry forums that aim to raise the bar on supply chain responsibility and transparency by addressing systemic issues that no one company can solve alone. We continue to participate in such forums in the following roles:
- Founding member of the Pharmaceutical Supply Chain Initiative (PSCI), which brings together pharmaceutical and healthcare companies to champion responsible supply chain practices. Johnson & Johnson endorses the Principles established by the PSCI, and we have updated our own Responsibility Standards for Suppliers in line with PSCI principles and guidance.
- Member of the Consumer Goods Forum (CGF) through which we participate in working groups that aim to standardize and advance environmental and social sustainability practices across the consumer goods supply chains.
- Member of the Business for Social Responsibility (BSR) Human Rights Working Group established in 2012.
Supplier EcoVadis Assessments
|EcoVadis assessments completed||542||685||496|
|Supplier risk ranking based on EcoVadis assessments|
Supplier EHS Audits
|EHS audits and technical visits completed, total||185||189||156|
|EHS audits||101||not reported||not reported|
|Technical visits||84||not reported||not reported|
|Audits and technical visits, by region|
|Europe, Middle East & Africa||18||21||24|
|Number of suppliers identified as high risk for non-conformance to Johnson & Johnson Responsibility Standards for Suppliers||23||23||31|
|Number of critical EHS findings identified as a result of EHS audits||27||25||not reported|
Supplier Social Audits
|Supplier social audits completed, total||11|
|Completed using SMETA 4-pillar protocol||9|
|Completed using PSCI protocol||2|
|Supplier social audits completed, by region|
|Europe, Middle East & Africa||1|
|Number of critical findings identified as a result of supplier social audits||—|