Partners Group is an investor in Action Nederland BV (“Action”) on behalf of its clients.

Action is a Netherlandsbased discount retailer offering a range of stationary, household goods, cosmetics, food stuffs, toys, textiles, glass, chinaware and pottery, decoration accessories and do-ityourself products. The company aims to offer around 150 new articles in its stores on a weekly basis, sourcing from dozens of countries.

In early 2014, Partners Group and Action management recognised the growing investment and reputational risk from not staying ahead of rising ethical standards in Action’s supply chain. Key risk factors included potential damage to brand and reputation, staff morale, and exposure to legal risks. Action subsequently commissioned an ethical sourcing “health check,” to benchmark Action’s performance relative to peers and industry best practice, pinpoint the areas of greatest risk, and prioritise intervention areas in its responsible sourcing strategy. The process included interviews with the company’s CEO, procurement managers and communications department, which provided insights on how the company established its procurement strategy, how it monitored its suppliers and how it communicated to them and its customers. The “health check” raised the need for Action to establish a stronger ethical sourcing culture: the policies, vision and strategy from senior management that could signal the importance of the topic.

Following the health check, Action established an ethical sourcing policy and supplier code of conduct that outlined expectations to suppliers which were clearer than the brief, high-level language previously included in the standard terms and conditions. For example, the new guidance articulated expectations around preventing child labour and paying fair wages and made membership to the Business Social Compliance Initiative (BSCI) compulsory.

Action followed this step by asking its domestic suppliers to complete an ethical sourcing self-assessment through an online portal, designed to generate a low, medium, or highrisk rating, subject to data validation from an independent third party. Action then sent each supplier a tailored set of recommendations based on each individual risk rating, with deeper engagement planned for higher-risk suppliers.

With this foundation in place, Action has now set its sights on the next phase of its ethical sourcing initiative. Priority next steps include developing a formal escalation process and a set interval for how often to reassess suppliers to monitor progress. It will also look to take full control of the ethical, safety and social conditions of the factories its domestic import partners use to manufacture and supply its Private Labels from.

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    Managing ESG risk in the supply chains of private companies and assets

    November 2017