Supplier Sustainability Performance Program in Healthcare Supply Chain

Technical Case Study

From: from Philips, a member of DITTA

Approach

Philips developed the Supplier Sustainability Performance (SSP) Program to improve the environmental and social standards across its global supply chain. By setting clear guidelines and actively collaborating with suppliers, Philips aims to reduce supply chain emissions, improve resource efficiency, and promote sustainable business practices.

Comprehensive Supplier Assessment: The SSP Program includes a rigorous assessment framework focusing on environmental performance, health and safety, business ethics, and human rights to establish a baseline for each supplier’s sustainability performance.
Collaborative Improvement Plans: Suppliers are provided with tailored improvement plans, including training sessions, goal-setting, continuous improvement, and sub-tier supplier management to meet Philips’ sustainability standards, to meet Philips’ sustainability standards.
Continuous Monitoring and Reporting: Philips uses regular audits and a data-driven reporting process to track supplier progress on sustainability goals, ensuring alignment with Philips’ overall climate commitments and code of conduct.

Figure 1: Supplier Sustainability Program (SSP) Concept

Why take action?

The supply chain represents a significant portion of Philips’ environmental impact, accounting for up to 71% of the company’s total emissions. Recognizing the urgent need for sustainable supply chains, Philips launched the SSP Program to ensure suppliers meet rigorous environmental and social standards. This intervention aligns with global climate resilience and low-carbon sustainability goals, making Philips’ supply chain a model for responsible business practices.

The SSP Program is structured around comprehensive assessments, improvement plans, and ongoing monitoring to drive continuous progress across Philips’ supplier network. By enhancing supplier sustainability, Philips contributes to the reduction of global greenhouse gas emissions, while encouraging social and environmentally friendly practices..

Key Benefits:

Reduced Emissions and Environmental Impact: By setting environmental performance targets for suppliers, the SSP Program helps reduce supply chain emissions, contributing to Philips’ goal of achieving net-zero by 2040.
Improved Supplier Standards and Compliance: The SSP Program raises supplier standards in areas like human rights, business ethics, and environmental practices, promoting sustainability across the entire supply chain.
Resource and Cost Efficiency: Suppliers adopting the SSP Program’s recommendations often achieve better resource management and cost savings, demonstrating that sustainability can align with economic benefits.

Co-Benefits:

Enhanced Transparency and Accountability: The SSP Program’s reporting structure allows Philips and its stakeholders to monitor supplier compliance closely, fostering a culture of accountability
Long-Term Supplier Relationships: Through collaborative improvement plans, Philips builds long-term relationships with suppliers, ensuring they are partners in sustainability goals and fostering mutual growth.
Industry-Wide Impact: By implementing high sustainability standards, Philips encourages other companies in the healthcare sector to adopt similar practices, contributing to broader industry decarbonization.

Outcomes

Reduced GHG Emissions across the Supply Chain: The SSP Program has led to measurable reductions in emissions from suppliers who implemented recommended sustainability practices.
Higher Compliance Rates: Participating suppliers have shown an increased rate of compliance with Philips’ environmental and social standards, helping Philips achieve its sustainability targets.
Resource Efficiency Improvements: Suppliers have reported reductions in material waste and energy consumption, demonstrating tangible benefits of the SSP Program’s guidelines.

Key messages

Collaborative supplier engagement is key to decarbonization: Working closely with suppliers enables companies to drive decarbonization across the entire supply chain, achieving more impactful climate goals.
Sustainability standards benefit both environment and business: By aligning sustainability with operational efficiency, the SSP Program shows that environmental goals can support financial stability.
Accountability and transparency foster trust: Clear monitoring and reporting processes build trust between Philips, suppliers, and stakeholders, setting a standard for responsible supply chain management.

How to get started

Figure 3: Structured process of the Supplier Sustainability Performance Program

Philips developed the SSP Program in response to the high environmental and social impact of its global supply chain, aiming to improve sustainability practices among suppliers. Initial assessments identified significant areas of improvement, leading Philips to create a structured, collaborative approach to supplier sustainability.

Key learning: Baseline assessments enable targeted interventions

Approach: Conducting supplier assessments provided Philips with insights into the specific environmental and social challenges within its supply chain, forming a strong foundation for targeted improvements. As the program is maturity based, additional support is given to suppliers who have met all elementary requirements. During deep dive assessments, suppliers are supported on site to improve business and manufacturing processes which have high carbon emissions.

Impact: Baseline assessments allowed for tailored improvement plans, making the intervention more effective and measurable.

Key learning: Collaborative plans drive better compliance

Approach: By developing improvement plans with suppliers, Philips fostered shared responsibility for achieving sustainability targets, ensuring suppliers are partners in the progress.

Impact: Collaboration strengthened supplier relationships and compliance with standards, fostering long-term partnerships.

Key learning: Ongoing monitoring ensures accountability

Approach: Regular assessments and progress reports kept suppliers accountable to the SSP Program’s standards, reinforcing the importance of continuous improvement.

Impact: This data-driven approach enabled Philips to track supplier progress effectively, allowing for timely adjustments as needed.

Funding and Investment:

Philips funded the SSP Program through its corporate responsibility budget, with an initial investment in assessments, training, and compliance monitoring tools.

Tracking progress

To evaluate the SSP Program’s impact, Philips employs a multi-level tracking and reporting system consisting of:

Supplier Scorecards:
Suppliers are graded on environmental, health and safety, business ethics, and human rights standards, with scores used to benchmark progress and identify areas for improvement.

Regular Assessments and On-Site Inspections:
Philips conducts assessments to ensure suppliers meet SSP standards, using mainly internal subject matter experts, to maintain and build strong relationships based on trust to increase transparency.

Annual Sustainability Reports:
Progress and results from the SSP Program are included in Philips’ annual sustainability reports, providing insights into the program’s overall impact on supply chain emissions and compliance.

By integrating supplier scorecards, assessments, and sustainability reports, Philips ensures a comprehensive and transparent evaluation of the SSP Program.

Figure 4: Supplier maturity level classification

In practice

The SSP Program has been integrated into Philips’ procurement and supplier management practices, ensuring ongoing commitment to sustainability across its supply chain.

Supplier Training and Engagement:
Philips provides regular training for suppliers on SSP standards, including best practices in environmental management and social business conduct, making sustainability a shared responsibility.

Sustainable Procurement Policies:
SSP Program standards are embedded into procurement policies, requiring suppliers to adhere to Philips’ sustainability guidelines as a condition for partnership.

Scalability Across Markets:
The SSP Program’s success has enabled Philips to expand these sustainability practices to suppliers in other regions, creating a global model for sustainable supply chain management.

This structured integration has made sustainable practices a standard across Philips’ supply chain, encouraging other healthcare companies to adopt similar approaches.

Key resources

Philips Supplier Sustainability Performance (SSP) Program Brochure: provides an overview of Philips’ SSP Program, including guidelines for environmental and social standards.
Philips Annual Report 2023: integrates the company’s sustainability results, highlighting key initiatives such as the Supplier Sustainability Performance (SSP) Program. This report details Philips’ progress toward its environmental, social, and governance (ESG) goals
European Commission’s Environmental Footprint Guidelines: framework used by Philips to measure supplier environmental impact, providing a standardized approach to lifecycle assessments.
Health Care Without Harm - Health Care Climate Footprint Report: provides context on the healthcare sector’s environmental impact and emphasizes the need for sustainable supply chain practices.