These relationships are often long-lasting due to the complexity of our products and their long lifecycles, so it is critical that our suppliers share our values. To ensure we work with suppliers who share our approach to responsible business, we monitor and manage them throughout the business relationship.
Governance of supply chain
Our ambition in procurement is to be responsible and sustainable across the life of the contracts we have in place. We cannot achieve this alone, therefore it is important that we collaborate and partner with suppliers to make a positive business difference over the long term.
Our supply chain management starts with our Global Procurement Policy which defines the requirements to be implemented by each of our businesses for the establishment of procurement control and the management of supplier-related risk.
Our Global Procurement Policy requires our businesses to communicate our ‘Supplier Principles – Guidance for Responsible Business’ to our suppliers. The Supplier Principles are based on our Code of Conduct and Group policies. They set out what we expect from our suppliers and their supply chains and outline best practice guidance for suppliers, in relation to matters such as anti-corruption, how employees are to be treated, international trade compliance, environment, counterfeit components and the BAE Systems Code of Conduct.
Our Supplier Principles and our standard terms and conditions require suppliers to comply with all applicable laws and regulations, including those related to human rights, anti-slavery and the environment.
We periodically update our Supplier Principles and our standard terms and conditions to reflect changes in laws and regulations and to incorporate and progress issues that are important to the Group. For example, we will be updating our Supplier Principles in 2022 to expand our expectations of suppliers in relation to human rights and sustainability and we will be including anti-human trafficking (US) clauses and modern slavery (UK and Australia) clauses within our updated standard terms and conditions.
As part of continuous improvement and to support the Group’s sustainability agenda, during 2021 we worked with our suppliers to understand where they are on their own net zero journey, while seeking to identify opportunities relating to sustainable procurement. In the UK and Australia, we established working groups to review how modern slavery and human trafficking risk is identified, assessed and managed across our business as part of our overall compliance programme.
During 2022 we will develop a strategy and roadmap, which will outline our approach to integrating ESG principles across how we work with suppliers.
Supplier due diligence
Risk-based due diligence is undertaken for all third parties with whom we engage, whether supplier, adviser, potential joint venture partner, acquisition opportunity or other third party. Where required, this may include establishing the identity of the third party in terms of beneficial ownership and gathering of sufficient information to assess relevant bribery and corruption risks. At the contracting stage we stipulate our expectation that suppliers embrace our standards on ethical behaviour, including those set out in our Supplier Principles.
Once a supplier has been approved and a contract has been signed, we continue to actively manage and monitor that supplier throughout the life of their contract. This includes managing any significant changes in our relationship with the supplier as well as undertaking ongoing risk-based due diligence.
During 2021, we undertook supply chain assurance activity to assess compliance with our Supplier Principles. This activity supports us in identifying and mitigating risks across our supply chain. Our assessments covered 25% of global spend. This activity will continue in 2022.