Chiesi is a privately owned Italian pharmaceutical company, founded in Parma Italy in 1935, where the HQ is currently based. The Chiesi Group has approximately 6’400 employees, 30 Affiliates and product sales in approximately 90 countries. Committed to pushing the boundaries Chiesi invested 22% of its revenues into R&D in 2020.
Starting from 2017 Chiesi launched group impacting actions in sustainability across the business and in 2018 subsequently changed its status to become a Benefit Corporation adopting a new legal form under the Italian and US Law. In 2019 Chiesi’s commitments paid off as they became the largest global pharmaceutical group to be awarded B Corp Certification, a recognition of high social and environmental standards. Following this the “We ACT – We Actively Care for Tomorrow” program was launched as an expression of Chiesi’s desire to take care of society and the environment in an effective way for the benefit of both stakeholders and the company. Chiesi takes its role as a key corporate citizen seriously and has set itself the challenge of becoming carbon neutral (Scope 3 included) by 2035 as one of many targets.
Chiesi’s procurement function is a key catalyst in driving the continued social and sustainability efforts of the business. Guido D’Agostino as Head of Global Procurement discusses the journey so far, outlines the ambitions, and highlights the importance of supplier collaboration.
To read the full content in a digital brochure format please click on the below and select full screen.
Hi Guido, you were appointed as head of global procurement in May 2020 having been with the business since 2007. During this time, your role has evolved. Can you provide an insight into your journey with the business?
I joined Chiesi in 2007 starting as an industrial buyer within Chiesi Global Manufacturing Division following a four-year period with Pfizer. Initially I oversaw the procurement operations within the pharmaceutical primary packaging and devices environment, where I learned a lot and created an extensive network which I still use today as a base of my daily work. In 2015 I took the responsibility of the direct procurement team, managing strategic relationships for all production materials of the group and for all manufacturing sites. Late 2017 I was appointed Head of Procurement with a remit to rearrange the function which proved to be successful and remains the base for today’s procurement operations. From May 2020 the responsibility of procurement became global, we have created a procurement network consisting of a team that represents all Chiesi Affiliates (overall about 70 people) and have begun to centralise strategic partnerships and negotiations.
The Chiesi Group managed approximately 16.000 suppliers and a spend of €1.4 billion in 2020.
Why did the role become global? How is the function structured? Having affiliates spread across 30 countries must create many unique challenges. What are the primary daily challenges you face? Whilst the global nature of your operations can cause challenges, your structure has been implemented to maximise the opportunities. What benefits does the global structure offer the business?
Well, the role became global to generate as much value as possible, and I think this is the key role of all global procurement functions across industries, and also to spread a unique and global approach to our suppliers for sustainability challenges we have and for those we want our suppliers to take. Managing a global procurement function into a multinational company doesn’t necessarily mean to centralise the statutory purchase in one place serving all the group, we are not there and actually very far from this concept.
We believe in investing in local partnerships as much as possible, to generate value close to where each affiliate is placed. Being global for our procurement means of course attempting to negotiate big deals involving all our global functions that will positively impact the company. We want to put together the overall Chiesi contractual power to always obtain the best conditions, to create an internal network as a main centre of excellence for negotiation activities, that can also be implemented at a local level. There are many daily challenges. Of approximately 16’000 suppliers at global level, 370 represent 50% of our total spend, while about 40 represent the 80% of the total. Within our network we have colleagues from all over the world, we have cultural peculiarities and different ways in approaching suppliers and partners.
Focusing on strategic suppliers with a unique and global approach is challenging and asking them to follow us on the most critical issues of sustainability can be extremely challenging.
In 2019 Chiesi achieved B-Corp status and in doing so became the largest pharmaceutical company to date to achieve the certification. The desire to become B-Corp certified was driven by the founding Chiesi family and achieved in prompt time. What role did the procurement function play during this process?
Many differences from our Procurement processes pre B Corp, we definitely changed our way of working in all areas. Economics, quality, and level of service remained key, but we started to innovate also introducing sustainability at the same level. For example, we reshaped the vendor qualification interview for our strategic suppliers, introducing deep sustainability questions and attributing real value to these responses. Separately our annual vendor evaluation exercise now takes into consideration sustainability parameters, we introduced category plans for the whole group for 35 spend categories, introducing fixed and predefined weight for sustainability in tenders and partner selections.
As already said, we created a brand new “UN SDGs based” Code of Conduct for our suppliers that we called Code of Interdependence. We launched in mid-2020 an internal audit procedure to start auditing strategic suppliers that accepted our Code of Interdependence, checking their adherence to it. We have set long term targets for increasing the overall sustainability level of the Chiesi Ecosystem (meaning Chiesi + its strategic suppliers). We have changed the traditional term of supply chain to value chain, considering all related improvement targets: one general target is to facilitate the Carbon Neutrality target of Chiesi in 2035 (Scope 3 included).
Becoming a B- Corp certified business is an evolving process and there is no opportunity to rest on your laurels. The program demands that its partners strive for more. To be successful it is imperative that your supply chain can meet the sustainability requirements and quality you require. How important have strategic supplier relations been during your evolution? How have you engaged your suppliers on this subject? What plans to do you have to develop strategic engagements throughout the top tier of suppliers?
That’s correct, B Corp certification must be reobtained every three years, and each time your performance must be better than previous certification. The B Corp certification interview evolves becoming more challenging itself, Chiesi has been certified in 2019 based on revision 5, but since then B Corp have issued version 6 and this will be the version we will use for our re submission in 2022 where a number of new and challenging topics on suppliers have been inserted. We are at the very beginning of our journey with suppliers, we have firstly engaged our key strategic partners in 2019 with a direct involvement on drafting our Code of Interdependence, where they contributed directly as we collaboratively developed key topics.
The Code is challenging, it contains mandatory requirements and improvement actions. All mandatory requirements must be respected by our suppliers (and Chiesi of course), the improvement actions can give more value to our judgement. The code is dynamic, we wrote that into its design principles, meaning that we plan to update the code every single time we want to increase the sustainability bar internally and with our suppliers. Now we are launching a project review for the code that will deliver a new version by the end of 2021. So, our strategic partners were really key for such a project, participating with us directly in developing the code clauses. Starting from mid-2021 we will launch what we call ‘engagement plans’, specifically for some impacting categories of spend and for our high spending partners. These plans will be highly customised to our partners and directly related to the Chiesi Code of Interdependence clauses and SDGs. We will ask suppliers to increase activities in areas where they are performing lower than expected, focusing on CO2 emissions mapping, gradually reducing and potentially deleting or offsetting.
We are now designing the engagement plans but we expect most of our suppliers will follow us at best, otherwise where possible we will have to find alternatives to facilitate our long-term sustainability targets.
During the process of becoming B-Corp certified what did you learn most about your procurement function?
I mostly learned that the procurement function, differently from all other company functions, has a sensible external responsibility in changing things, in making a better world, in helping the environment and the people to improve. Procurement professionals can spread exponentially the sustainability “call to action” to all suppliers but also to the suppliers of our suppliers (Tier 2 Supplier), and so on. This is massively impacting especially on local and small companies. In the long run only responsible and sustainable companies will survive, this will have to be the common approach, sooner is better. In becoming a B Corp I mostly learned that procurement must be organized to give high evidence to sustainable requirements to its suppliers, the target must be clear even if gradual. A responsible company must have only suppliers with high performances in sustainability.
The business is continuing to push the boundaries and seeking more. What specific targets does the procurement function have and what would your foresee as the primary challenges to meeting these?
There is a race to zero in many industries, and this is absolutely good for all, for the business but of course for the people and for the planet. The issue is that in reality only a few companies are ready to start now, even with progressive targets, but unfortunately the majority remain linked to the traditional and old-style ways of business. I personally believe for the business there is no other way than becoming zero impacting or carbon neutral, sooner is better, but this can only be a concrete target if it is a shareholders’ target, otherwise it risks being unfeasible. The companies who will reach such targets first will benefit from a business and image standpoint. For those who are not focused on such direction, this is actually an obvious management oversight.
The primary challenge for procurement departments is, or will be, asking their strategic suppliers to invest in being neutral or zero impacting as soon as possible.
For many the last 12 months have been extremely challenging. During this dreadful time of the covid pandemic what have you learnt about your business/function?
During 2020 I learned procurement can really be a strategic function for the whole organization. Many companies are elevating the function from an organizational standpoint and this is becoming key every day. Since the start of the pandemic up until Q3 2020, we were able to implement daily assessment with suppliers, both on direct and indirect procurement activities, individuating in advance any areas of risk. We did not stop internal production for even one day. We adapted our internal processes and procedures to quickly find solutions moving to continue the constant delivery of drugs to our patients all over the world.
This Chiesi content has been proudly supported by the following suppliers:
MAIN SPONSOR – Koura