AIM-PROGRESS

Responsible Sourcing Forum

Dubai

September 30th, 2013

Agenda

2

Welcome and Introductions 09:00

Leadership Welcome 09:10

AIM-PROGRESS Overview 09:50

Assessment Process: Demonstrating Continuous Improvement 10:15

TEA BREAK 10:45

Assessment overview and Q&A 11:00

Supplier Testimonial 12:30

LUNCH BREAK 12:45

Migrant Labor Overview: Arche Advisors 13:45

Supplier Testimonial 15:15

Questions and Wrap-Up 15:30

Conclusion 16:00

Safety and Logistics

Location of Exits, Evacuation routes & Emergency procedures Location of rest-rooms, food & beverage, etc Person(s) to see if you have any questions throughout the day Other security/ safety polices

www.aim-progress.com

Participants at the forum shall not enter into any discussion or raise questions that may infringe any applicable competition law. By way of example, participants shall not discuss, communicate or exchange any commercially sensitive information, such as non-public information relating to prices, marketing and advertising strategy, costs and revenues, trading terms and conditions. They shall not disclose any trading relationships in terms of identifying a particular manufacturer or supplier or other.

ANTI-TRUST NOTICE

Importance of Responsible Sourcing

Imad Benmoussa, Head of Middle East

Operations, The Coca-Cola Company

Welcome Messages from Leadership

Nabil Sousou, Global Procurement Sr.

Director, MEA Region, PepsiCo

Welcome Messages from Leadership

Rodney Monk, Head of Procurement, Nestlé

Welcome Messages from Leadership

Ferhan Alemdaroglu, Procurement Operations

Director, Central Africa, Unilever

Welcome Messages from Leadership

Brian Kramer

Director Sustainable Supply Chain, Asia-Pacific

Middle East Africa, McDonald's

AIM-PROGRESS Overview

Stuart Kyle Director Workplace Accountability, Vice Chair of AIM-PROGRESS

• Common Understanding of Responsible Sourcing

• Review AIM-PROGRESS Objectives and Activities

• Review Scope of Responsible Sourcing Assessment

• Customer Requirements

• Agree on Next Steps

Seminar Goals

11

Forum Introduction

http://aim-progress.com/

What is AIM-PROGRESS?

Global forum of 36+ consumer goods companies assembled to enable & promote responsible sourcing practices

Sponsored by the Grocery Manufacturers Association (GMA) and the European Brands Association (AIM)

Representing > USD$ 618 billion annual revenue

www.aim-progress.com

AIM-PROGRESS Objectives

To promote responsible sourcing through common, or mutually accepted Supply

Chain Standards:

To increase efficiency by sharing data – “an audit for one is an audit for all”

To seek convergence with other similar initiatives

Environmental

Management Business Integrity

Health & Safety Social/Human

Rights

Value Proposition

Meets multiple customer requirements in a consistent manner

Builds & protects reputation with:

Consumers, Regulators, Wider society, Investors

Increases employee morale and productivity:

Improves retention rates

Lower overtime

Reduces health and safety incidents

Reduces quality incidents

Foundation for sustainable growth

It’s the right thing to do!

Reputations: HARD TO BUILD…. EASY TO LOSE!

Current Performance Levels

50%

29%

14%

7%

Regional Facility Ratings

Moderate Major Minor Compliant

Over 75% of facilities assessed in

the area are initially not compliant

to local law/responsible sourcing

standards

(Source: Aim-Progress member

audit data 2005 – present.

Includes UAE, Saudi Arabia,

Bahrain, Kuwait, Jordan)

Common Issues in the Region

1. Hours of Work: Including excessive working hours/Rest day

violation

2. Health & Safety: Including emergency preparedness (fire drills,

emergency exits blocked/not marked, inadequate fire detection

systems, etc)

3. Wages & Benefits: including improper overtime payments and/or

mandated benefits not provided

4. Forced Labor: Passport retention

5. Discrimination: including treatment of migrant workers

Workstreams to maximize synergies

NOT: to create a new set of codes (respect individual. companies codes of conduct)

to create new audit standards

19

• Benchmark company assessment protocols

• Sharing best practice

• Audit data exchange

Mutual Recognition

• Promoting supplier awareness

• Building capacity

• Engaging industry groups

• Going beyond compliance

Supplier Capability Building

AIM-PROGRESS Workstreams

Mutual Recognition

Purpose:

● Reduce Audit Fatigue through

mutual recognition of assessments

● Reduce duplicative costs throughout supply chain

● Align standards and share best practices

Results to date:

• 86% of AIM-PROGRESS members

have signed up to MR

• Companies have met up to 40% of

audit needs through MR

• Audit avoidance resulting in an

estimated savings of over

$750,000 for suppliers MUTUAL RECOGNITION COMMUNICATION

Supplier Capability Building

AIM-PROGRESS and our members have held 17 events around the world,

reaching over 1,700 supplier companies. These events build

understanding of responsible sourcing and customer expectations.

Supplier Comments

“Companies must take steps to manage

their impact on the natural

environment... External validation of

our activities in this area is key to

maintaining our credibility.”

“Earn the trust of our customers, licensing

partners, suppliers, and consumers by

manufacturing and purchasing quality

products using ethical standards”

MWV

Tate & Lyle Sugars

“Over 20 customers have asked for SEDEX

information – All we have to do is go into

SEDEX and give access to those companies

to view the questionnaire and audit we already

completed.”

Givaudan

Demonstrating Compliance

Brian Kramer Director Sustainable Supply Chain,

McDonald's Asia-Pacific Middle East Africa

RESPONSIBLE SOURCING PROCESS

Step 1:

Suppliers Engaged

by Aim Progress

Company

Step 2:

Supplier Self

Assessment (if

applicable)

Step 3:

3rd Party Assessment

Step 4:

Corrective Action

Plan

Take steps to address gaps in your responsible business practices

Demonstrate continuous improvement to your customers

Independent Activity

Independent Activity

Common Activity

Common Activity

Suppliers Engaged

Step 1:

Suppliers

Engaged

● Your customers may have differing ways to

reach out to you: via e-mail, via supplier

forums, via phone

● Contact could be made by the customer,

audit firms or other third parties such as

Sedex

● ENGAGE and PARTICIPATE

Supplier Self-Assessment

● Tool to help suppliers and buyers assess

overall capabilities and ensure

management processes are in place

● Only a requirement for some companies

● If applicable, an example is the Sedex self-

assessment which covers the following:

Site Profile

Labor Policy & Standards

Health & Safety, Hygienic Assessment

Business Integrity (anti-corruption)

Environmental Stewardship

Step 2:

Supplier Self

Assessment

Common Method

among SEDEX

members; McDonald's

requires SAQ; not

required by all

3rd Party Assessments

• Auditors are independent and impartial professionals

• Trained to evaluate compliance to laws and standards.

WHAT IS THE ROLE OF THE AUDITOR?

• Suppliers pay for the audit

• This allows you to own the data and share the reports with multiple customers through AIM-PROGRESS

WHO PAYS FOR AND OWNS THE AUDIT?

• Processes ensure no personally identified information leaves the facility

• Goal of assessment is to protect employees not infringe on privacy

PROTECTION OF PRIVACY

• Check with your customer if you are unsure

ARE OTHER STANDARDS ACCEPTABLE?

Step 3:

3rd Party

Assessment

Common Method

3rd Party Assessments

• Varies depending on size of facility and scope of production. In general, two auditors spend one day in a facility (2 person-day audit), but can take up to 4 person days

How long does the audit take?

Assessment Process Key Staff

Opening Meeting Site Manager, HR

Environment, Health and Safety

Manager

Site Inspection Site & Environment, Health and

Safety Manager

Document Review HR Manager

Payroll Clerk

Environment, Health and Safety

Manager

Interviews with production employees Floor Staff only

Secondary Site Inspection/Misc None

Preparation of Onsite Report None

Presentation of Onsite Report to Management Site, HR, Environment, Health

and Safety Manager

Step 3:

3rd Party

Assessment

Common Method

On Site Assessment

Legal Compliance

Forced Labor

Wages and Benefits

Hours of Work

Freedom of Association

Child Labor

Discrimination

Abuse of Labor

Health and Safety

Environment

Bribery and Corruption

Common Assessment Topics

Not Fault finding but solution finding

Audits for sustainable development

Collaborative effort

Focus on Continuous Improvement

Assessment Philosophy

Assessment Reporting

SEDEX Members

► Online tool that enables global

suppliers to share assessments and

audits on ethical and responsible

practices with their customers and

avoid duplication

► Common tools to enable companies

to analyse and assess risks: – SAQ – self assessment questionnaire

– SMETA – Sedex Members Ethical Trade

Audit

Non-SEDEX Members

► Company Protocols

► Benchmarked against each other

and SMETA – For Instance, The Coca-Cola Company and

McDonald’s are not members of SEDEX

– Reports can be translated and uploaded to

respective systems.

Most SEDEX and AIM Progress members do not… • set policy

• pass, fail, certify, or score suppliers

• conduct social audits

• issue certificates

• promote suppliers

www.sedexglobal.com

CORRECTIVE ACTION PLAN

Non-compliances identified must be addressed through

Corrective Action Plans

Supplier is responsible for close out of non-

compliances

Timeframe and follow-up methods depend on the type

of issue and the severity

● Customers may have different time requirements after

audit in terms of closure of NCs

Opportunity to demonstrate commitment and show

continuous improvement

Step 4:

Corrective

Action Plan

NEXT STEPS…

Review your customer specific requirements

Complete any pre-assessment works required by your customer;

register on the required online platform such as Sedex and conduct

self-assessment to identify areas for improvement

Schedule assessment and share results with AIM-PROGRESS

companies and beyond

Focus on continuous improvement by:

addressing non-compliances in requested timeframes,

leveraging results and remediation across business,

engaging your suppliers in similar work and requirements

www.aim-progress.com

Example: McDonald’s Supplier Workplace Accountability Process

1 2 3 4 5 6

External Audit

Self Assessment

Summary

Facility Completes

Self Assessment

Facility Completes

Online Training

Facility Confirms

Code of Conduct

Supplier Identifies Facilities on Facility Identification Form

User goes through online training at their own pace to understand McDonald’s Supplier Workplace Accountability process

Facility understands the Code of Conduct and acknowledges online

Online Self Assessment helps supplier & facility understand their level of compliance and helps the auditor to prepare for the audit.

After Self Assessment completed, a summary sent to the facility to help them understand opportunities for improvement and prepare for the audit

In the first year of engagement, all facilities are subject to a baseline on-site audit by one of McDonald’s approved monitoring firms. Next audit year cycle determined after results come in.

Supplier identifies facilities to be used for production

Annual Requirements Required

w/in 3 months

Responsible Sourcing is a growing movement

and is critical to maintaining a positive

reputation and meeting customers demands.

This as an opportunity to grow our business

together with our suppliers in a sustainable and

responsible manner.

www.aim-progress.com

QUESTIONS ?