Global Sustainable Supply Chain

Baxter educates and empowers its global Purchasing Supplier Management (PSM) personnel and the company's broader employee population to influence purchasing decisions and implement supplier initiatives that enhance sustainability performance. These efforts support and strengthen Baxter's commitment to reduce its environmental impact while maintaining continuity of supply and managing costs.

Global Supplier Sustainability Program

Through Baxter’s Global Supplier Sustainability Program, the company integrates sustainable practices into its procurement policies and procedures. Approximately 70% of the initiatives comprising the Global Supplier Sustainability Program were implemented at the regional or country level by the end of 2010. The program focuses on:

• Green supply chain - Procuring products and services that have reduced environmental impact (see below);
• Material compliance - Working with suppliers to meet the growing number of regulations worldwide related to product materials (see below);
• Supplier environmental, health and safety audits - Ensuring that suppliers meet Baxter standards in their manufacturing operations (see Managing Supplier Performance); and
• C-TPAT (Customs-Trade Partnership Against Terrorism) Program - Collaborating with governments and other businesses to strengthen international supply chains and U.S. border security (see below).

Green Procurement

One of Baxter's 2015 sustainability goals is to incorporate green principles into its purchasing program with 100 select suppliers. Baxter and its suppliers both benefit from these efforts.

Since 2009, Baxter has integrated 20 green criteria into its purchasing procedures to provide its procurement organization a framework to evaluate suppliers’ sustainability initiatives. These criteria fall into four categories that align with Baxter’s own sustainability efforts. In 2010, Baxter added a fifth category to evaluate suppliers’ protection of human rights since Baxter considers this an important aspect of suppliers’ sustainability commitments. Baxter conducts an annual survey of 100 select suppliers to evaluate their performance against these green criteria.

RFPs and Supplier Agreements

Baxter considers cost, quality, environmental criteria and other factors when selecting and evaluating its suppliers to reduce the company's environmental impact while maintaining continuity of supply and managing costs. Since 2008, Baxter has included sustainability language in its request for proposal (RFP) documents and its standard supplier agreements used in the United States and Canada, to complement price, quality, service and other traditional selection factors. Starting in 2010, Baxter now includes sustainability language in RFPs and supplier contract templates in Australia, Brazil, Colombia, Mexico and New Zealand, and plans to extend this to additional countries in 2011.

Baxter's updated RFPs ask suppliers to provide:

• Their sustainability policy and mission statement;
• A description of company sustainability initiatives and outcomes;
• A list of sustainability-related awards received;
• Disclosure of environmental violations and fines for the past three years;
• Details on purchasing from diverse suppliers, particularly related to products and services in the RFP (as applicable); and
• Information about other initiatives that would support Baxter's sustainability goals.

Baxter's standard supplier agreement requires U.S.-based suppliers to certify compliance with federal and state equal opportunity laws. Suppliers also commit to make good-faith efforts to consider small, minority-owned, women-owned, veteran-owned and other diverse suppliers when engaging their own suppliers.

The agreement also encourages suppliers to support Baxter's sustainability initiatives by identifying for Baxter's use products and/or services with reduced environmental impact. Baxter asks its suppliers to provide updates on their sustainability activities.

Tracking Global Progress

Baxter monitors global PSM progress in implementing the company's green supply chain programs as well as supplier progress in applying Baxter's green criteria. The company also tracks suppliers' progress in their own sustainability programs, and incorporates results into supplier business reviews.

Understanding the risks and opportunities related to reducing GHG emissions within its supply chain is a related area of focus. To this end, the company participated in the Carbon Disclosure Project (CDP) Supply Chain Program in 2009 and 2010. This program encourages transparent disclosure of GHG emissions data by providing a standard methodology to calculate supply chain emissions using supplier data. This is a key step in understanding and managing a company's broader carbon footprint. The CDP distributed a questionnaire on Baxter's behalf to 10 of the company's top suppliers. Six of these suppliers responded to the survey in 2009 and six of 10 suppliers responded in 2010.

Product Material Regulatory Compliance

Effectively tracking the materials and chemical substances used in products and manufacturing is complex since a product may contain many components from numerous suppliers worldwide. To better meet this challenge, Baxter contracted with a specialized service provider to manage environmental and other information related to new and existing products. This includes information about product materials content, which will help Baxter evaluate compliance to the European Union Restriction of Hazardous Substances (RoHS) and Registration, Evaluation and Authorisation of Chemicals (REACH) Directives as well as similar emerging regulations in other parts of the world.

Baxter began contacting suppliers in September 2010 as part of the company’s Material Compliance Project. This initiative ensures that materials used in Baxter’s products comply with a wide range of environmental regulations in Europe, individual U.S. states, and other countries worldwide (e.g., Australia, Canada, China, Korea and Japan) while maintaining high-quality standards and satisfying customer requirements.

Baxter will store data collected from suppliers in a database that interfaces with other company and supplier information systems, to allow Baxter to better understand, manage and optimize product environmental performance and meet customer needs while facilitating regulatory compliance. The company began phasing in this system in 2009. See Materials Use for more information about Baxter's programs in related areas.

U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) Program

In March 2011, Baxter was recognized as a Tier III Partner in the U.S. Customs-Trade Partnership Against Terrorism (C-TPAT) program. C-TPAT is a joint U.S. government-business initiative that builds cooperative relationships to enhance U.S. border security, with a focus on strengthening security throughout the supply chain. As a C-TPAT participant since August 2009, Baxter has committed to maintaining Tier III security criteria as well as ongoing enhancements to the security of its global supply chain.

Tier III is the highest level an importer can achieve in the C-TPAT program. Currently, only approximately 3% of the more than 10,000 program participants have achieved this status. Baxter’s internal C-TPAT steering committee remains committed to monitoring and enhancing its supply chain practices and implementing process improvements as needed.