Sustainable Procurement: Meeting Corporate Social Responsibility Objectives through Your Supply Chain

1. #AribaLIVE Sustainable Procurement: Meeting Corporate Social Responsibility Objectives through Your Supply Chain Achim Voermanek, Head of Solution and Product Management Office @voermanek Dieter Haesslein, Vice President, Natural Resources Industries and EHS & Sustainability Products and Solutions, SAP AG Geoff Elliott , Procurement Lead, Property & Corporate Services Deloitte LLP 04/2014 © 2014 Ariba – an SAP company. All rights reserved. @ariba

2. “Safe Harbor” Statement • This information reflects the status of Ariba Inc., an SAP company, solution planning as of March 2014. All such solution planning information is the Confidential Information of Ariba (per the contract between our companies – or an authorized distributor), and must not be further disclosed, as stated in the confidentiality clause of that contract. This presentation contains only intended guidance and is not binding upon Ariba (or its affiliates) to take any particular course of business, product strategy, and/or development. Its content is subject to change without notice. Ariba assumes no responsibility for errors or omissions in this document. Ariba shall have no liability for damages of any kind including without limitation direct, special, indirect, or consequential damages that may result from the use of these materials. 2 © 2014 Ariba – an SAP company. All rights reserved.

5. SAP’s carbon footprint along the value chain

6. 6 Design Source & Procure Produce & Comply Store & Ship Sell & Use EOL Information Technology is key to holistically manage economic, social, and environmental risks and opportunities Products, Recipes, Regulations, Specs, BoM‟s Assets, Parts, Equipment, Regulations Customers, Distributors, Channels Raw Material/ Component Suppliers Take-back, Reuse, recycle, dispose

7. Sustainable Supply Chains Competitive advantage through Sustainability Source: An Avnet Case Study, September, 12, 2012 Definition of Sustainable Supply Chain Integrating environment, economic and social aspects into supply chain management.

8. Sustainable Sourcing and Procurement Business Impact Trends – Brand value at risk – Increasing regulation – Changing customer requirements – Resource scarcity and price volatility Investment – Build new sourcing and procurement capabilities (varies by industry and region) “McDonalds„ to Recall 12 Million „Shrek‟ Glasses Citing Cadmium Health Risk” (NY Times) “Underage Workers Found in Apple Supply Audit” (BBC News) “Mattel Issues New Massive China Toy Recall” (NBC News) “Oil Spill Panel Urges Major Reforms” (BBC)

9. Sustainable Sourcing and Procurement Introduction Sourcing Procurement practices aimed at finding, evaluating, and engaging suppliers of goods and services Sustainable sourcing Source products and services in line with the principles of social, economic, and ecological sustainability, beyond the traditional aspects of cost, quality, and consistent supply – Less resource intensive – Less polluting – Less harmful to human heath and the environment Sources: Wikipedia + Worldwatch Institute Design Source ProduceStore & Ship Sell & Use Recycle Raw material, fertilizer, energy, water, cleaners, dyes, waste, packaging, chemicals, etc.

10. Sustainable Sourcing and Procurement Overview: How Industries Change Supplier Risk and performance More Sustainable Products Compliance (legal and customer requirements) Active management (suppliers and products) Supply Chain Optimization (link sourcing and design) Sophistication

11. Sustainability Requires Supply Chain Collaboration © 2014 Ariba – an SAP company. All rights reserved.11 Company Product Category Product Raw Materials 1000‟s of Suppliers EH&S, Legal, Sustainability Sourcing & Procurement R&D, Engineering Sustainability performance of.. Certifications, Compliance declarations / sustainability data exchange Producer/Manufacturer

12. New Tasks in Sourcing & Procurement Suppl.Perf.Mgmt.ProcurementSourcingDiscovery • Qualify material • Meet Form-Fit- Function • Compliant • Sustainable • … • Qualify supplier • Financial • Sustainable • … • Negotiate T&C • Decide (“design-in”) Direct materials souring / procurement process • Ask supplier rep’s • Ask disti rep’s • Search catalogues • Issue RFI on supplier hubs • Visit tradeshows • … • Establish Master Purch. Agreement • Issue PO (MRP or “spot”) • Volume, date • Verify compliance • … • Analyze performance • Quality • Compliance (tests) • Delivery volume, schedule • Improvement program • Sustainability Indirect Materials (MRO) Services Annual spend in manufacturing industries Direct Materials Red = new tasks

13. Problem: Collecting Compliance Data is Hard E.g. Access to EU market requires RoHS/REACH/.. compliance Disk drive Manufacturer: “It takes 18 months to collect 1 round of substance data ..” Connector Supplier: “We receive over 1300 inquiries per month ..” Component manufacturer: “My biggest spend is retyping declaration data ..” What’s in my materials? Images and logos for illustrative purpose only 13 © 2014 Ariba – an SAP company. All rights reserved.

14. Solution: SAP Product Stewardship Network E.g. Access to EU market requires RoHS/REACH/.. compliance SAP Product Stewardship Network • Easily connect supply chain • Share material data • Automate change management • Share insight • Faster time to market • Reduce compliance risk • Save cost Note: company names/logo’s for illustration only 14 © 2014 Ariba – an SAP company. All rights reserved.

15. PSN Supports 3 Scenarios • Product Environmental Compliance (substances) • Conflict Minerals Declaration (smelters) • Product Category Sustainability Assessments (footprint, based on KPI’s from The Sustainability Consortium) • … © 2014 Ariba – an SAP company. All rights reserved.15

18. Conflict Mineral Declarations

19. Conflict Mineral Declaration

20. Conflict Mineral Reporting

21. Reported smelter list

22. Product Sustainability Assessment Leverage TSC® Product Sustainability Toolkits

23. Supplier Responds to a Survey Use TSC® Toolkit questionnaire to perform assessment

24. Supplier Can See their Relative Score Impression of product category average

25. Retailer Has Detailed Analytics Progress, category improvement potential, supplier rankings

26. SAP’s procurement products Enable sustainable choices for requester

27. Enterprise Resource Planning

Sustainable Procurement: Meeting Corporate Social Responsibility Objectives through Your Supply Chain

SAP Ariba

Sustainable Procurement: Meeting Corporate Social Responsibility Objectives through Your Supply Chain