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Procurement’s Role in
Sustainable Business
Andy Richards
General Manager
Procurement
Air New Zealand25 February 2016
Private & confidential
• Air NZ Overview
• Sustainability at Air New Zealand and Supercharging New Zealand’s success
• Procurement’s role to deliver sustainable business outcomes
• Leveraging the value - From “good to great”
• How we “do” sustainable procurement
• Supplier Code of Conduct, its Application and Progress & Learning
• Where to next? Beyond the Supplier Code of Conduct
• Questions
2
Agenda
Private & confidential 3
Air New Zealand Overview
ATW 2016
Eco-Airline of the Year
11,000
Air New
Zealanders
Flying for
75 Years
$5 billion Operating
Revenue
14m +Passengers
carried in FY15
Over
100Aircraft
$496mFY15 normalised
earnings
Private & confidential
• Embedded in corporate strategy, “Go Beyond”
• Launch of Sustainability Framework in September 2015
• Social
• Environmental
• Economic
• Broad consultation with our Sustainability Panel
& industry bodies
4
Sustainability at Air New Zealand
Private & confidential 5
Private & confidential
• Procurement at Air New Zealand
• >5,000 Suppliers
• All areas of the business - from stationery through to jet engines
• Underpinned by four key value drivers
• Commercial Performance
• Sustainability
• Supplier Enabled Innovation
• Operational Excellence
6
Procurement’s role to deliver sustainable business outcomes
Private & confidential 7
Leveraging the value - From “good to great”
Commercial
Innovation
Sustainability
Operational Excellence
Value
Category Strategy Market EngagementSupplier
Relationship Management
Additional
Value
Creation
Private & confidential
Sustainable Procurement seeks to achieve the appropriate balance between the three
pillars of our Sustainability Framework, i.e. environmental, social and economic.
8
How we “do” sustainable procurement
Sustainable Procurement
Environmental
impact on natural inputs in the manufacture, use and
disposal of goods
Social
community impact, labour conditions in the manufacture
of our goods
Economic
whole of life costs - cost of operations and maintenance
over the life of the goods
enhanced customer experience due to greater
“value”
Private & confidential
• Our goal: to positively influence the supply chain
• Our approach: Identifying opportunities and working with
our suppliers to achieve a common vision
• A way of delivering business objectives by encouraging
innovation and continuous improvement
• Supports a consistent standard across industries, setting
the same level of expectations
9
Supplier Code of Conduct - What
Private & confidential
• Labour and human rights
• Health and safety
• Environmental sustainability
• Ethical business
• Security
• Information security
• Emergency prevention, preparedness, response and business continuity
• Commercial sustainability
10
Supplier Code of Conduct Standards
http://www.airnewzealand.co.nz/sustainable-sourcing
Private & confidential
Supplier Code of Conduct - How
• We were guided by our Sustainability Advisory Panel – internationally renowned
group of external subject matter experts providing advice and guidance on all aspects
of our sustainability journey - chaired by Sir Jonathon Porritt
• Partner of Forum for the Future - international tools, resources and sustainability
expertise
• Collaborate with other organisations and share framework
• Incorporate international and recognised standards (UN Global Compact)
• Pilot internally with direct sourcing (2-year programme)
11
Private & confidential 12
Application
No. of Suppliers
materiality / risk
FY16 80% spend
(~350 suppliers)
FY17-19 20% spend
(~4,650 suppliers)
Private & confidential
Application
1. SCoCcommunicated
2. Engaged –positive
assurance
3. Assessed 4. Documented5. Non-
compliance6. Ongoing
BAU
Light
Moderate
Full
CI
Scorecard
Audit
IF
required
13
Higher
Risk
Lower
Risk
Corrective Action
Private & confidential
• It is a challenge – but rewarding
• Continuous improvement demonstrated
• Suppliers recognise it’s “good business”; reception has been positive
• Alignment is critical
• Business / Corporate strategy
• Standardised approach with industry leaders
• Forum for the Future (best practice)
• Sustainable Business Network (SBN) / Sustainable Business Council (SBC) peers / networks
• Requires focus / resources
• Senior leader / management support and advocacy
• Share the IP; we are on the journey together of industry transformation! Not a competitive
differentiator but a shared necessity
14
Progress & Learning
Private & confidential 15
Where to Next?Beyond the Supplier Code of Conduct
Private & confidential 16
Where to Next?Beyond the Supplier Code of Conduct
• Supplier Relationship Management
• Drive the value: Commercial Performance, Sustainability, Supplier Enabled Innovation,
Operational Excellence
• Partnerships with key suppliers
• Joint Business Plans – shared objectives, including sustainability
• Supercharging New Zealand’s success – some examples
• Villa Maria and Wine consultants (Trade and Enterprise);
• Energy reduction, Renewable energy, ground fleet electrification (Carbon);
• Uniform recycling and working with Altus (Our Communities)
• Taking a leadership role – “be the change you want to see around you”