Excellence, performance, ESG: engaging our suppliers in the fight
The global health crisis and the ongoing conflict in Eastern Europe underline the crucial role that our suppliers play in reaching our business objectives but also in meeting our environmental, social and governance (ESG) commitments. In fact, ESG was one of the central themes of the third Thales Suppliers' Conference at the end of March, as Thales Chief Procurement officer Roque Carmona explains.
Can you remind us how much we spend on procurement?
Last year, Thales spent 8.2 billion euros – 15% more than in 2020 and the equivalent of nearly half of our revenues – with a total of about 17,000 suppliers. So our supply chain is clearly crucial to our future growth and business success, because at the end of the day, we can only perform as well as our suppliers!
Operational excellence was one of the main topics at this third Suppliers' Conference. Can you tell us more?
Operational excellence is one of our top priorities, and it means delivering products and services on time and with the required level of quality. Our targets today are to achieve 95% on-time delivery and quality performance of less than 500 parts per million (ppm). Last year we were at 90% and 600 ppm, and we would probably have done better if the public health crisis hadn't disrupted our supply chain. Just for the record, a few years ago we were at 75% and more than 15,000 ppm, so the action plans we have drawn up with our suppliers are definitely taking us in the right direction. But we still need to do a little better.
What are your other priorities?
Competitiveness is also a clear priority. If we want to win new business with our customers, and if our suppliers want to win new business with us, we need to be more competitive than everyone else. The situation today is very tight, with demand outstripping supply and huge pressure on raw materials, logistics and energy. This year we are going to launch a competitiveness action plan, but more than anything, we expect our suppliers to anticipate problems ahead of time and to come to us with suggestions about how we can improve our competitive performance. Our suppliers are the experts in their respective fields, so we expect them to challenge us, even on the specifications in our requests for proposals.
This third Suppliers' Conference also had a strong focus on ESG. How do ESG criteria affect Thales's suppliers?
Meeting our environmental, social and governance commitments is a strategic priority for Thales because the Group has a particular role to play in overcoming the major challenges that the world faces today. Our technologies can help our customers to make the world safer, greener and more inclusive. But for this vision to become a reality, we need to embed ESG in all of our business processes, and make sure all of our stakeholders, and our suppliers in particular, are engaged in the fight.
How are we going to do that?
Obviously the first thing we need to do is to meet our own commitments, but we also need our suppliers to apply a number of principles and practices.
As you know, Thales has been engaged with these issues for a very long time. We are not just jumping on the bandwagon. The Group has been a signatory to the United Nations Global Compact for 20 years and has qualified for Advanced Level status every year for the last decade.
A strict policy on corruption prevention has also been in place for a number of years at Thales. This policy complies with the most stringent laws and regulations, and last year we became one of the few companies in the sector to achieve ISO 37000 certification for our anti-bribery management system.
And what are Thales's commitments to its suppliers?
First and foremost, we apply a policy of responsible procurement. We want our relationships with suppliers to be based on mutual loyalty and cooperation, and that means we have a commitment to transparency and fair treatment of suppliers in our tendering procedures, and a commitment to balanced supplier relations driven by trust and respect.
Based on this responsible procurement policy, Thales is one of the relatively small number of companies to have received Responsible Supplier Relations and Procurement certification, which rewards companies and public entities for maintaining balanced and sustainable relationships with their suppliers. This certification is fully aligned with ISO 20400, the international sustainable procurement standard, which integrates social responsibility into the procurement function.
You mentioned the demands that Thales makes on its suppliers. Can you tell us more?
Our first demands are for suppliers to work ethically and responsibly. That doesn't only mean complying with laws are regulations – it means applying our Integrity and Corporate Responsibility Charter, which includes putting measures in place to prevent corruption and influence peddling, and conducting due diligence. This due diligence (or "duty of care") requirement makes it mandatory for a major company like Thales to identify, prevent and mitigate the negative impact on human rights and the environment caused by its own activities but also by the activities of its entire supply chain.
Another of our demands is related to the fight against climate change. We want our suppliers to share our objective of reducing our direct operational CO2 emissions by 50%, and we expect them to take tangible steps to help us achieve it. In particular, we are working with the 100 or so suppliers in the procurement categories that generate the highest levels of greenhouse gas emissions to help them reduce their carbon footprint.
More broadly, a growing number of ESG criteria like emissions reduction and eco-design are going to be taken into account more explicitly in our supplier selection process.
To help to overcome the challenges that the world faces, companies like Thales need to propose comprehensive, coherent solutions that involve all of their stakeholders, and their suppliers in particular. Only by working together to achieve our targets will we be able to play our part in building a future we can all trust.