151
Reporting basis and governance of non-financial indicators (continued)
Sourcing sustainably
Report of the
Report of the
Financial
Sustainability
Other
Introduction
Executive Board
Supervisory Board
Statements
Review
Information
Heineken N.V. Annual Report 2017
Sustainable agriculture By sourcing raw materials sustainably, we help improve farming practices and enable farmers all overthe world
to adopt better environmental and social standards. Our procedures for sourcing sustainably cultivated crops are
based on the principles of the Sustainable Agriculture Initiative Platform (SAI), an organisation of multinational food
companies working towards a more sustainable food chain. Suppliers allocating sustainably cultivated crops to us are
required to follow our procedures and we encourage them to work with farmers who grow their crops sustainably
We follow the definition of the Sustainable Agriculture Initiative (SAI): The efficient production of safe, high quality
agricultural products, in away that protects and improves the natural environment, the social and economic conditions
of farmers, their employees and local communities, and safeguards the health and welfare of all farmed species.
Our sustainable sourcing reporting is based on the concept of'mass balance'. This tracks what percentage of a
suppliers' materials are produced sustainably and is fully auditable, from farm to brewery
of our main agricultural Contracted sustainable volumes (tonnes)/Total contracted volumes (tonnes).
raw materials from Sustainable volume any agricultural product in scope of the Sustainable Agriculture programme, that has been:
sustainable sources 1. cultivated in accordance with an approved Code of Practice and
2. allocated to HEINEKEN by our supplier in accordance with the mass balance approach
Volumes contracted in 2017 for delivery in 2018 are reported in the 2017 Annual Report
of agricultural raw Quantity (in tons) of agricultural 'extract' producing raw materials (plus hops) that are cultivated in the Africa and
materials locally sourced Middle East region and that are purchased for use in the production of beers, soft drinks, cider, wine and spirits at
in Africa our own production facilities in that region
Estimated number of Calculation based on the total quantity of agricultural raw materials purchased (tons), divided by the average farm
smallholder farms involved size (hectares) and the average yield per crop produced (tons per hectare). This gives the estimated number of
smallholderfarms involved
Number of different local
sourcing initiatives
HEINEKEN Supplier Code
Supplier
Supplier Code
four-step procedure
HEINEKEN operating companies sourcing any agricultural raw material within the AME Region. Each value chain
is counted individually and some involve working with smallholder farmers, while others work with larger scale
commercial farmers.
As a large buyer of crops, we can have a significant economic impact on local agricultural communities. Our local sourcing
PPP projects work with smallholderfarmersand aim to help them raise yields and compete against imported crops. They
empowerfarmers and their communities by helping to alleviate poverty and improve local food security. At the same
time, HEINEKEN benefits by reducing import-related duties and securing a sustainable supply of raw materials.
To achieve more, faster, we support a number of Public-Private Partnerships (PPP) in which HEINEKEN and a
public sector donor (e.g. the Dutch Ministry of Foreign Affairs and the German GIZ development agency) jointly
fund agricultural development projects. Other partners include the European Cooperative for Rural Development
(EUCORD), International Finance Corporation (IFC), International Fertilizer Development Center (IFDC), and Dutch
NGOs ICCO and FairMatch Support
Much of our impact lies indirectly with our suppliers, so we work with them to embed the right practices. Every supplier
is asked to abide by our Supplier Code, which sets out clear guidelines for how we expect them to act in the areas of
Integrity and Business Conduct, Human Rights, and the Environment. The Supplier Code procedure is implemented
among first tier suppliers, and we expect our suppliers to ensure that their suppliers adhere to the same standards
A supplier is an entity:
- that delivers goods and/or services on a regular basis, more than once a calendar year, and
- is registered in the vendor master database as an active supplier, and of which invoices are registered in the
central systems for payment on behalf of Heineken NV. or one of its affiliates, and
- with which there has been spend in the 18 months preceding the assessment of the status of the supplier
The definition excludes: tax authorities, charities, sponsorships, customer refunds and intercompany suppliers
We safeguard compliance through a risk-based step-by-step process:
1. By signing the HEINEKEN Supplier Code, suppliers agree to comply with our principles of integrity, environmental
care and human rights.
2. The intensity with which we monitor compliance against our Supplier Code depends on the risk profile of
a supplier. Our supplier risk analysis (SRA) tool assesses suppliers based on their type of business and level of
supplier-specific risk. All potentially high-risk suppliers are required to go through step three of the programme.
3. We usethe EcoVadis34 sustainability monitoring and scorecard to assess the strength of potentially high-
risk suppliers' management systems for ensuring compliance with our Code. Suppliers complete an online
questionnaire and provide supporting evidence, which EcoVadis analyses alongside a 360° scan which looks at
whether a supplier has been mentioned positively or negatively in the media, by NGOs ortrade unions. They then
create a supplier scorecard. Suppliers that are still considered high-risk go on to Step 4 and undergo a site audit.
4. The final step is a site audit by athird party using our Supplier Code as the basic assessment criteria. We usethe SMETA35
four-pillar protocol. It enables us to contribute to and usethe global database of audits held byAIM-Progress,the
responsible-sourcing platform used by over 40 of the world's leading fast-moving consumer goods companies.
We strive for continuous improvement to ensure ongoing compliance with ourSupplierCode. If acase of non-compliance
is found, we discuss corrective actions with the supplier and allow for commitment to correct the non-compliance within
a given timeline. If commitment and action is not forthcoming, HEINEKEN will cease to do business with the supplier
34 EcoVadis is a sustainability rating and collaborative platform enabling companies to monitor the sustainability performance of their suppliers, across 150 sectors and 110 countries. The evaluation covers 21 Corporate
Social Responsibility (CSR) criteria and is used today by 120 global multinationals. EcoVadis engages approximately 20,000 suppliers a year whereby 70% of suppliers are SMEs (less than 1000 employees).
35 SMETA (Sedex Members Ethical Trade Audit) describes an audit procedure which is a compilation of good practice in ethical audit technique.