Managing our supply chain responsibly

We are committed to working with third parties who operate in a manner that is consistent with our values and ethical principles. While interactions with third parties at Novartis are broadly defined by our Third-Party Code, we identify, assess, monitor and mitigate risk associated with suppliers through our Third-Party Risk Management (TPRM) framework.

Implemented globally across Novartis in 2019, our TPRM process promotes ethical behavior and fosters sustainability across our supply chain by addressing risk areas such as anti-bribery; animal welfare; health, safety and environment (HSE); labor rights; information security; and data privacy. We conduct risk assessments for all new eligible suppliers and new products, services or sites from existing suppliers. Not all suppliers trigger a detailed risk assessment.

12 064

Suppliers assessed

through our Third-Party Risk Management framework

In 2021, we assessed 12 064 suppliers through our TPRM process, up from 8 448 in 2020. We agreed on remediation actions with 912 suppliers, and we stopped engagements with 37 suppliers due to the risk assessment results. We audited 85 suppliers, a significant increase from the previous year as the impact of the COVID-19 pandemic eased in several countries.

We took steps to increase the efficiency of our TPRM process and align it more closely to our overall view of risk at Novartis

In 2021, we took steps to increase the efficiency of our TPRM process and align it more closely to our overall view of risk at Novartis, while maintaining a high level of assurance.

For example, we started to prioritize all third parties in scope by risk severity. As part of this process, we de-scoped two risk areas – financial due diligence and business continuity – since the former is already embedded in other process steps while the latter is covered by default within other risk areas.

We also completed the integration of human rights into four relevant risk areas (labor rights, HSE, data privacy, and anti-bribery and corruption) in our TPRM process. (For more on human rights at Novartis, please see the section “Build trust with society.”) In addition, we moved responsibility for screening new vendors for Good Manufacturing Practice under the scope of Quality teams in NTO, which have specialized expertise in this area.

We also evaluated ways to automate our processes. For example, current manual risk assessments for distributors and wholesalers will be gradually incorporated into an automated TPRM process, ensuring a standardized and auditable practice around the world.

Supply chain performance indicators

 

2021

2020

2019

Suppliers risk-assessed by Third-Party Risk Management (TPRM)1, 2, 3

 

 

 

Number of suppliers risk-assessed by TPRM

12 064

8 448

2 839

Suppliers assessed by risk area4

 

 

 

Anti-bribery

2 303

2 014

479

Animal welfare

9

10

3

Health, safety and environment

477

315

226

Information security and data privacy

5 668

3 174

1 142

Labor rights

6 755

4 635

1 423

Quality GmP

848

561

162

Actions taken

 

 

 

Suppliers audited2, 5

85

35

135

Suppliers with remediation action agreed

912

521

122

Supplier engagements stopped due to risk assessment outcomes

37

120

15

1

Assessment is done on new suppliers and new products, services or sites from existing suppliers. Not all suppliers trigger risk assessments.

2

Figures do not include GxP audits (see “Ensuring patient health and safety” for more details).

3

Data from 2019 reflect April-December 2019, managed under the TPRM umbrella, based on the TPRM program geographical rollout.

4

Reflects risk assessments conducted on the suppliers. One supplier can trigger more than one assessment depending on the risk areas involved.

5

Anti-bribery audits included from 2021 onward

Sustainability in our supply chain

To reach our emissions reduction targets, we are working with our suppliers to help them apply, where possible, the same high standards of environmental sustainability as we do. By 2025, we aim to include environmental sustainability criteria as part of all supplier contracts.

We are working with key suppliers to set baselines and targets for CO2 emissions, water consumption and waste management

In our manufacturing operations, we are working with key suppliers to set baselines and targets for CO2 emissions, water consumption and waste management, as well as confirm the API content of manufacturing effluents. We are jointly developing sustainability roadmaps by focusing on product-specific technology action plans. Suppliers are also expected to report annually on progress and implement remediation plans where needed.

We are also engaging our commercial suppliers, with a focus on those with the largest contribution to our carbon footprint. In 2021, we published the Novartis Green Expectations from Suppliers engagement framework. Our top 100 suppliers are expected to commit to emissions reduction targets approved by the Science Based Targets initiative (SBTi) and regularly report on their environmental impact management and achievements through CDP. Meanwhile, we organized a Green Supplier Summit to discuss environmental sustainability challenges and potential solutions with our commercial suppliers.

Also in 2021, we worked with Schneider Electric and nine major pharmaceutical companies through an initiative called Energize to accelerate the adoption of renewable electricity in our shared supply chains in the US and Europe. We also provide guidance and tools to our manufacturing suppliers on water quality topics, including a tailored mass balance calculator to identify and quantify APIs in wastewater.

For more on this topic, please see the section “Build trust with society” and our TCFD disclosure.