Supply Chain Sustainability
Achieve sustainability balance, together, by aligning our supply chain with our 2030 sustainability vision and goals.
At O-I, sustainability is about achieving a balance in our operations and the products we make with the current and future needs of our communities, the planet, and our collective prosperity. We are committed to achieving balance together by transforming what we do. Developing sustainable procurement is about acknowledging the broader impact that our purchasing decisions have on our people, the environment, and our overall sustainability performance. We are transforming today by inviting our suppliers to join our sustainability journey.
O-I’s Global Procurement Policy defines Procurement’s authority, engagement, methods, transactions, and documentation requirements for procuring goods and services on behalf of O-I. Our procurement aim is to gain supplier alignment with our sustainability goals and to obtain goods and services that meet performance, quality, and service level expectations from approved suppliers at the best overall value and total cost.
Our Procurement Team’s Guiding Principles include:
- Procure goods and services at the best total cost.
- Understand and respond to our customers’ business needs and challenges.
- Seek, establish, and maintain supplier relationships that deliver O-I’s objectives.
- Improve our business processes to facilitate our effectiveness and efficiency. Remain open, competitive, and fair in our business practices.
- Retain the integrity and confidentiality of information.
- Develop and foster a dynamic, proactive, and committed relationship with stakeholders, incorporating stakeholders in the Strategic Sourcing Process.
- Ethics, professionalism, commitment, and quality are the four pillars underpinning Procurement’s commitment to excellence.
Our fundamental values guide our behavior. We are committed to the core values of integrity, respect, trust, and the pursuit of excellence in all of our relationships throughout the supply chain.
O-I seeks to foster relationships with suppliers who share similar values. At O-I, we expect our suppliers to conduct their business in compliance with laws and in accordance with our high ethical standards. With production locations around the globe, we place great importance on the relationships we maintain with all our suppliers. O-I’s global supply chain includes a variety of local, regional, and global suppliers who provide a wide range of products and services.
Supplier Guiding Principles
O-I applies the Principles to all suppliers with whom O-I, our affiliates, and business units worldwide have a contractual/business relationship, including contractors, and suppliers of products and services. The Principles lay out supplier legal, compliance, and expected standards on many topics including:
- Minimum age for employment
- Forced labor
- Child labor
- Human trafficking/modern slavery
- Abuse and harassment
- Freedom of association
- Work hours, work week, and payment of wages
The Principles also establish expectations around workplace health and safety, environmental practices, sustainability, anti-corruption and bribery, conflicts of interest, gifts, antitrust and competition law, protecting confidential information, trade compliance, business records, and communications.
Suppliers are asked to certify their compliance with the Principles at O-I’s request, and to authorize O-I and its designated agents (including any third parties) to engage in monitoring activities, including on-site inspections based upon reasonable notice.
Upholding O-I’s value of integrity, O-I provides suppliers an outlet to report illegal or otherwise improper conduct by contacting the relevant O-I manager, the Ethics & Compliance Office, or use O-I’s Ethics and Compliance Helpline.
We ask our suppliers to adhere to and conduct their business in accordance with the Supplier Guiding Principles. We encourage a continuous improvement approach by our suppliers to achieve compliance with the Principles including ongoing risk assessments performed by suppliers and the implementation of appropriate actions to mitigate identified risks. See Supplier Screening below for more information on Compliance.
When O-I becomes aware of any actions or conditions not in compliance with the Supplier Guiding Principles, such actions or conditions will be reviewed and appropriate corrective measures will be implemented. Additionally, we expect a supplier to promptly report any non-compliance that could have a significant effect on our business.
In situations involving non-compliance, O-I and our suppliers will develop ways to correct the non-compliance including a commitment from the supplier to correct the non-compliance within an appropriate timeframe. If there is no commitment from the supplier or a lack of corrective measures, O-I will consider taking appropriate action, which may include ceasing to do business with the supplier.
Other Due Diligence
The Code of Conduct stipulates that O-I deals fairly and honestly with our suppliers. This means that O-I’s relationships with suppliers are based on the Supplier and Procurement Guiding Principles, price, quality, service, and reputation, among other factors. Employees dealing with suppliers must maintain their objectivity and independent judgment. Specifically, employees are prohibited from accepting or soliciting any personal benefit from a supplier or potential supplier that might compromise an objective assessment of the supplier’s products and prices.
In the past, O-I has used a sustainability questionnaire, verifying particular suppliers’ compliance to meet regional requirements and laws. We have additionally worked with a business intelligence service provider that has compiled a database that can be used to screen suppliers against sanctions lists published by various governmental jurisdictions.
In 2020, we enhanced our supplier screening process by launching an initiative to monitor, verify, and improve suppliers’ sustainability performance. O-I uses a third-party, EcoVadis, to guide supplier assessment against four sustainability criteria: environment, labor and human rights, ethics, and sustainable procurement. Targeting continuous improvement, suppliers are required to develop action plans for growth opportunities. Our suppliers will have access to a confidential questionnaire, their scorecard, and tools for benchmarking their sustainability performance and improving their practices. EcoVadis will also aid us in monitoring our supply chain, facilitating O-I’s ability to take action in case of supplier sustainability-related issues. This will help us to quickly identify and address any eventual, current, or future criticality.
Sustainable Procurement Training
O-I seeks to foster relationships with suppliers who share similar values to ours. We are in the early stages of launching a sustainable procurement training program for our buyers. We are on track to cover 100% of our procurement staff by the end of 2021.
The sustainable procurement training introduces five key areas in sustainability: respect for human rights, labor standards, health and safety, environmental impact, and business ethics. It presents sustainability as an ethical and risk imperative, specifically stressing action to address climate risk.
The training delineates a five-step Sustainability Improvement Process to: identify risks, assess the risks, prioritize suppliers, evaluate suppliers, and make improvements. In the first two stages, the process involves assessing risk based on the product category and the supplier’s business criticality, not on specific supplier risks. In the risk assessment step, we use two categories: product category risk and business criticality. Product category risk includes country risk, environmental risk, and health and safety risk. Business criticality includes business impact and spend. The purpose of assessing business criticality is to focus improvement on suppliers that are a combination between the riskiest suppliers and those suppliers that are most critical to the business.
O-I’s supply chain activities are conducted by the Global Procurement Team led by the Procurement Leadership Team (PLT). The PLT is headed by the Chief Procurement Officer. Processes and capabilities are managed by the Procurement Center of Excellence Leader and supported by Global Sourcing Leaders (Corporate Services, R&D, Energy, Batch Material, Capital Expenditure, and Molds) and the Regional Category Leaders (Europe, Latin America, and North America). The Regional Category Leaders have direct responsibility for Regional Sourcing Managers in the areas of Raw Materials, Cullet, Energy, Packaging, and Logistics. Regional Category Leaders also have functional responsibility over the country group Procurement Leaders.
O-I has organized Procurement and assigned sourcing responsibilities based on market structure (local, regional, or global) and the nature of the need (common or specific). Nearly 90% of our total suppliers are local. We define local markets as country-based. Most glass customers and suppliers are within 300 miles (500km) of production plants.
For each selected market, we assess the business criticality and market difficulty, incorporating varying expectations of value drivers into our portfolio analysis.For each selected market, we also assess the perception of our business by each of our current and prospective suppliers (supplier’s view) in terms of the relative value and attractiveness of our business. By combining the portfolio analysis and the supplier’s view, we map and manage our supplier relationships according to an increasing level of collaboration.
Elevating sustainability throughout the company, we are enhancing our procurement process to make it more robust, collaborative, and embed it in risk management and value creation with full deployment by 2025.
Strategic Sourcing Process
We cover all markets in all geographies through a Strategic Sourcing Process (SSP) over a three-year rolling plan that we call the Strategic Sourcing Roadmap. The SSP is a robust five-step approach consisting of scoping, category analysis, strategy definition, execution and results validation, and impact monitoring. Each project has a Sourcing Leader with a cross-functional core team. Each phase ends with a gate review with relevant procurement leaders and stakeholders. Engagement from stakeholders is required within each gate, however, stakeholder and management validation is incorporated into scoping and strategy definition.
As part of the category analysis step, we develop external (markets, suppliers, regulations, cost drivers) and internal (needs definition, sourcing history) analysis, generating options to maximize value and reduce risks for strategy definition. Incorporated into the category analysis step, we have launched sustainable supplier scrutiny with focus on markets with the highest business criticality such as materials (including cullet) and energy. Our objective is to cover all of our spend by 2025.
Forming for Our Future
Sustainable procurement is a significant part of O-I’s goals and aspirations. We are aware of the importance of sustainable procurement and focused on making all purchases with the least possible impact on the environment while leveraging local communities. Although we have received no refusals from suppliers to follow the O-I Supplier Guiding Principles, we are launching initiatives that increasingly will drive sustainability deeper into our supply chain.
During the course of 2021, sustainable procurement training will be rolled out fully. We will start embedding sustainable procurement concepts, tools, and practices into the SSP by assessing sustainability performance of suppliers as part of our external data gathering and analysis. Our direct suppliers, making up nearly 60% of our spend, will be the priority for the rollout of our sustainable procurement approach. These suppliers provide Raw Materials, Energy, Packaging, Transport & Logistics, and Moulds. As an outcome of the three-year Strategic Sourcing Roadmap, we plan to include sustainable procurement clauses in most of our supply contracts by 2024. Suppliers’ sustainability performance will become part of our supplier selection criteria and supplier development program, with full deployment by 2025.
To support this effort, we have partnered with a specialized sustainability ratings organization, EcoVadis, which will provide us with expertise and online tools. EcoVadis will equip us to better monitor our supplier’s environmental and social performance and facilitate our supplier assessment. We will screen our suppliers against the EcoVadis monitoring database, covering over 70,000 suppliers. This will help us determine our supply chain sustainability performance baseline. Together we will be able to identify the highest risk suppliers and implement appropriate corrective actions even before we start the cooperation. Based on this risk analysis (high risk and business impact), we will invite additional selected suppliers of energy, raw materials, refractories, moulds, and packaging to go through assessment using the EcoVadis web platform. Our objective to assess 60% of our critical spend in 2021 and 80% by 2023.
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