Improving CSR risk management during the sourcing process
Compliance with the Responsible Sourcing Charter
Since April 2017, the CSR clause included in all contract templates of the Sourcing Division in France sent to suppliers invited to tender includes a reference to the Responsible Sourcing Charter. This charter is a joint initiative by French companies of the "Banking & Insurance" sector1 who want to associate their suppliers in the implementation of due diligence measures in their Corporate Social Responsibility initiatives (CSR).
The mutual commitments provided in the Responsible Sourcing Charter are based on the fundamental principles of the UN Global Compact, in the field of human rights, working conditions, the environment and the fight against corruption.
The KYS (Know Your Supplier) plan
Since May 2020, the KYS checks implemented as early as 2016 by the Sourcing Division with suppliers in their supplier relationship management program, have been strengthened and extended to all the suppliers of the Group who represent significant spending or provide critical services. Suppliers are evaluated against international standards and those of the Societe Generale group relating to:
- Regulatory risks due to non-compliance with international regulations (relating to money laundering and terrorist financing, sanctions and embargos; fight against corruption and influence peddling; the duty of care Law of 27 March 2017 and the UK Modern Slavery Act of 2015, etc.)
- Reputation risks on environmental & sociale issues, particularly those related to respect for Human Rights and governance.
The operational risk is also evaluated through the assessment of suppliers' financial situation and default risk.
In addition, for the most critical suppliers2, an assessment of performance in the areas of the environment, social practices, business ethics and subcontacting by an independent third party is also required.
Introduction of mandatory environmental and social criteria in Requests for Proposals (RFPs)
In 2006, the Group designed the first map of environmental and social risks (E&S) to assess the intrinsic CSR risks of every sourcing category. A global revision of this map of E&S risks was carried out between 2017 and 2018 in consortium with 3 other French banks and the support of a specialized consulting firm. This map covers more than 150 sourcing sub-categories. Four levels of risk have been defined: low, moderate, high and very high. To mitigate and control the risks when purchasing products or services pertaining to risky categories, the Group includes environmental and social requirements in the requests for proposals when it is appropriate and according to the risks identified in the map. The minimum weighting of E&S criteria used to select suppliers can vary from 5% to 15% for very-high risk categories such as Waste management and building Works.
Audits and/or corrective action plans in the event of underperformance
The Sourcing Division requires its most risky suppliers to engage in continuous progress and provides support in the implementation of corrective action plans. Since 2015, on-site CSR audits can also be triggered for some suppliers. These audits are performed by specialising external providers and are the starting point for the implementation of closely monitored corrective action plans.
For example, in 2020, the Groupe initiated 7 supplier audits:
- Three suppliers were audited in the final phase of a competitive process. The results of these audits were taken into account when awarding the deal.
- Societe Generale also initiated CSR audits jointly with its peers of the banking sector. This sectoral approach was undertaken to meet the requirements of the duty of care regulation in the matter. Four CSR audits were then initiated with key suppliers for France retail banking activities in 2020.
Improving payment of supplier invoices with the "30-day payment term"
In 2014, the Group started a project to accelerate the payment of supplier invoices to 30 days. At the end of 2018, the Group deployed a digital platform to receive invoices which has simplified invoice processing and shortened the payment term. The digital efforts were increased in 2020, particularly through mass affiliation actions which took place during the lockdowns. Ainsi, the proportion of paper invoices is now very small and the reported weighted (by the amount) average term of invoice payment has improved (31 days in 2020, vs. 33 in 2019 and 40 in 2018).
Inclusion of a CSR clause in agreements
A CSR clause is included in all the contract templates of the Sourcing Division in France and gradually deployed internationally. Through the clause, the supplier agrees to comply with the requirements laid out in the Code of Conduct and the Responsible Sourcing Charter, and to produce a non-financial evaluation (targeted suppliers only). The CSR clause also specifies that Societe Generale reserves the right to conduct supplier CSR audits.
Raising the buyers' awareness on CSR issues
A specific "Responsible Sourcing" course is included in the internal training programme for newly employed Sourcing Function buyers.
In addition, all the buyers of the Sourcing Division have CSR targets in their annual roadmap.
[1] On April 1st, 2017, signatories are: ALLIANZ, CNP ASSURANCES, CREDIT AGRICOLE S.A., NATIXIS, and SOCIETE GENERALE. the updated list of signatories of the Charter, as well as the Charter itself, are available on the website of every signatory.
[2] Suppliers having a high reputational risk with Societe Generale, either due to their preferred business relations, or to the use of the Societe Generale brand in the products and/or services they offer.