Ingersoll Rand has a combined annual spend of $7.5 billion for direct commodities. Our global procurement team sources these commodities from a large, multi-tiered supply base. Utilizing our Preferred Supplier Program and Supplier Council, we promote business with those strategic suppliers that best align with our expectations on quality, service, value and risk.
We strive to ensure that our suppliers demonstrate a commitment to environmental responsibility, business ethics, employee health and safety, as well as social responsibility. We pay strict attention to supplier compliance with human rights principles and labor laws, in line with the Ingersoll Rand Business Partner Code of Conduct, which our suppliers are required to follow.
Understanding how our suppliers are performing, both environmentally and socially, enables us to manage risk and collaborate with those that are best in class.
Material Traceability and Sourcing
The ability to establish mutually beneficial supplier relationships is a key success factor in our business. We aim to engage local suppliers globally as much as possible, provided they meet our cost and quality expectations. We have systematic processes in place to govern these relationships, ensuring our suppliers share our values and adhere to our standards of business ethics, health and safety, environmental and social responsibility.
As part of our enterprise risk management processes, we periodically assess the sustainability and business continuity risks associated with our supply chain. The Ingersoll Rand Business Partner Code of Conduct, which includes our Global Human Rights Policy, is now integral to our standard purchase agreement and communicates the social, environmental, quality and compliance-related expectations that we have of our supply chain partners.
Our Business Partner Code of Conduct requires that suppliers not violate basic human rights of life, liberty and security. No harsh or inhumane treatment, including any sexual harassment, sexual abuse, corporal punishment, mental or physical coercion or verbal abuse of workers. Suppliers must have an effective environmental policy and conduct their operations in a way that protects the environment. Suppliers must also obtain and keep current all required environmental permits and meet all applicable environmental rules, regulations and laws in the countries where they do business. Our Business Partner Code of Conduct can be found here and here.
In implementing our supplier selection process, we use a Quality Supplier Onsite Assessment to screen 100 percent of our new direct material suppliers based on environmental criteria. For example, the assessment asks if suppliers have a program for tracking and managing water use, if they have a program for tracking and managing hazardous waste, if they are located in high risk water areas. The assessment also screens for human rights and labor practices criteria by asking, for example, if the supplier hires and pays all employees at or above local law requirements, and if they refrain from using prison or forced labor, among other questions.
Ingersoll Rand employs more than 2,500 contract security guards worldwide, who are under the management of our Global Security function. All security personnel are contract employees and are required to comply with our Business Partner Code of Conduct, which includes the Global Human Rights Policy.
For more information about our supplier relationships, please refer to our Form 10-K
Our objective is to ensure a diverse and innovative supply base. Supplier diversity is integral to our global supply chain strategy not only because it is consistent with our values, but because it enhances competitiveness and capacity building, drives market connectivity, and creates jobs and economic growth in the marketplace. To support this objective, we are extending our supplier diversity program globally in a phased approach to leverage the flexibility, innovation and diversity of thought in our supply chain.
The diversity program, launched in 2012, embraces suppliers whose ownership is primarily minority, woman or veteran. The goal of the program is to maximize marketplace connectivity and corporate sustainability by focusing on three pillars: 1) increased utilization of diverse suppliers; 2) supplier development and mentoring; and 3) strategic outreach that drives increased brand awareness. We purchased more than $337 million (USD) of goods and services from diverse-owned businesses in 2015, a 10 percent increase from 2014.
In 2014 we launched our Market Connectivity Ambassador Program (MCAP), which focuses on engaging our Employee Resource Groups (ERGs) in our supplier diversity initiatives. Each of our seven ERGs companywide is a grassroots initiative led by local employees and managers with the support of our Diversity and Inclusion Team. As champions for diversity within the enterprise, ERG members are ideally positioned to help with outreach to supplier firms led by minorities, women and veterans.
In 2015 we introduced a seven-step strategic sourcing process including a Supplier Decision Matrix, which enables us to avoid using price as the primary driver for supplier selection. Instead, we consider a range of factors as agreed upon by a cross-functional team, such as supplier diversity, quality and risk.
Early in 2016 we hosted 200 representatives from our 100 top direct material and indirect suppliers for our first global supplier conference. These suppliers represent 25 percent of our annual commodity spend. We discussed our Preferred Supplier Program and set expectations for 2016 and beyond. We also recognized five supplier partners for their exemplary efforts in 2015 by presenting them with the first Ingersoll Rand global supplier awards, including Sustainability, Innovation and Value Creation, Most Improved, Go the Extra Mile and Supplier Quality.
The global supplier conference featured five targeted breakout sessions with ample time for discussion and questions: Supplier Roundtable, Sustainability, Conflict Minerals and Supplier Code of Conduct, Supplier Quality Manual, Procure to Pay Value Stream and Supplier Portal Strategy. The conference reinforced that Ingersoll Rand is seeking like-minded suppliers who invest in innovation and support ongoing improvement efforts for sustainability.
The Ingersoll Rand Preferred Supplier Program is a key initiative to identify and engage world class suppliers capable of enabling profitable growth for our Strategic Business Units. The program highlights those suppliers that best align with our high expectations on customer and business standards for quality, service, value and risk. Preferred Suppliers will be the first choice for early engagement on new product development and strategic sourcing programs and will have priority opportunity to extend their product and service offerings to all Ingersoll Rand locations.
Leading up to 2020, we have set the following targets for Ingersoll Rand:
- Ensure alignment of business partners to a common set of ethical beliefs and expectations
- Leverage supplier innovation to deliver advanced solutions
- Maximize marketplace connectivity by fostering supplier diversity
- Partner with suppliers to minimize the environmental impact of our supply chain
- Minimize impacts on our customers by ensuring a viable supply chain
By the year 2020:
- 100 percent of suppliers have agreed to our Business Partner Code of Conduct
- We will extend supplier diversity program to spend with diverse companies globally
- We will reduce emissions due to freight by 5 percent
- We will designate 80 percent of spend assessed on a quarterly basis for risk
Conflict Minerals Statement
Ingersoll-Rand plc has conducted a reasonable country of origin inquiry (“RCOI”) regarding the minerals specified by Rule 13p-1 of the Securities Exchange Act of 1934, as amended (the “conflict minerals”) necessary to the functionality or production of products manufactured by the Company for the fiscal year ended December 31, 2015. The Company exercised due diligence on the source and chain of custody of its conflict minerals using the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (the “OECD Framework”).
For more information about our approach to conflict minerals, please click here.