AstraZeneca Annual Report and Form 20-F Information 2008

Working with suppliers

We believe that effective risk management extends to managing any potential reputational risks associated with our purchasing activities. We are therefore committed to working only with those suppliers who embrace standards of ethical behaviour consistent with our own. This applies across the full range of our purchasing activities, from promotional items to pharmaceutical ingredients, and includes any specialised work for which we use external contractors to complement our in-house effort. It also applies as much to our expanding business in Emerging Markets as it does to our existing supplier relationships.

We are in the process of revising and strengthening our Corporate Responsibility Principles in Purchasing, which we first launched in 2003 to provide guidance for our purchasing community on integrating CR considerations into their activity. The strengthened guidance will become a new Global Responsible Procurement Standard and will provide the framework for developing and implementing the programmes needed to ensure that we effectively and consistently incorporate our standards of ethical behaviour into our procurement activity worldwide. Launch of the new standard is planned for the first half of 2009 and targeted training will be subsequently provided.

A rolling implementation

Integrating responsible business considerations into all of our supplier relationships around the world will take time. CR considerations are being included in all new contracts and master agreements in the US, the UK and Sweden – our three main business hubs where over 80% of our suppliers are based, and last year we extended the geographic reach to other countries where we have major marketing, manufacturing or research activities. These include Japan, China, India, Canada, Mexico and Puerto Rico, as well as more countries in Europe.

Monitoring performance

Our supplier evaluation procedure requires that comprehensive on-site audits of all our high-risk category suppliers be conducted at least once every four years. Medium risk suppliers are audited at the start of the business relationship and refresher audits are planned if there are any significant changes at the supplier. The auditing process will be further extended to regional and local suppliers in 2009.

In 2008, our audit programme covered 28 manufacturing sites at 27 different global suppliers. These audits included elements of safety, health, environment, corporate responsibility and security of supply. High-risk categories such as active pharmaceutical ingredients, formulation and packaging, and complex chemicals were a particular focus.

Within the scope of the audit programme, a critical deficiency in a known high risk R&D-area (hydrogenation) was identified at a proposed supplier. The supplier acknowledged the audit feedback, de-commissioned the facility and replaced it with a facility of an appropriate standard.

During the year, we updated our supplier evaluation process to include product security, comprising elements such as information security, logistics and waste handling related to packaging operations. We have also strengthened the social elements of the evaluation process in recent years, particularly in relation to human rights and labour standards, given our expanding presence in Emerging Markets.

Audit training continued during the year, with nine more people joining the audit team. We also conducted a focused ‘Ethical Auditing’ auditor-training programme as a part of the implementation of the new supplier evaluation process. Training will continue during 2009.

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