In our procurement process, CH2M influences suppliers to advance sustainable performance measures, including efforts to reduce environmental impacts by increasing reliance on sustainable goods, delivery methods and business practices.
We expect our suppliers to endorse CH2M’s commitment to corporate social responsibility, including fair labor and operating practices, environmental protection, diversity and supplier development. Our Supply Chain Ethics & Business Conduct Principles are accepted by every supplier during the registration and qualification process and incorporated into every contract.
Our centralized supplier qualification and performance management system enables us to consider sustainability attributes in sourcing decisions, contract formation and supply chain performance management. For example, we collect information on key performance indicators associated with planning, production, products and services delivered, energy consumption, carbon and transportation impacts. We use such metrics, as well as stakeholder surveys and supplier scorecards, to evaluate suppliers on their actual sustainability performance.
We use the United Nations Standard Products and Services Code to analyze where we spend our money, identify cost-effective vendors and make use of electronic commerce capabilities. The major categories of our supply chain and the percentage of our total spending are shown below.
Our procurement organization distinguishes between procurement for client projects (direct procurement) and procurement for internal operations (indirect procurement).
We assist engineers and construction designers in selecting more sustainable construction materials, equipment and services on our client projects, in collaboration with clients and consideration of budget constraints. We also implement sustainability screening on long-term, high-value agreements for internal operations such as technology, services, paper, office supplies and furnishings.
Procurement for client projects
Suppliers and subcontractors provide materials, engineered equipment, fabricated products, professional and technical services and construction services on our projects. Decided at the project level, sources may include local, domestic or global suppliers; large or small and disadvantaged business enterprises; and manufacturers, fabricators, distributors and brokers.
We have suppliers in all regions where we operate, and we have not had any significant changes in our supply chain in the last several years as a result of organizational changes or acquisitions.
We use a methodology and toolset to identify and select suppliers and subcontractors with robust sustainability programs: suppliers whose products achieve project sustainability targets and subcontractors that will implement acceptable sustainability solutions on our construction sites.
The majority of CH2M’s spending (86 percent) supports client projects.
Procurement for internal operations
We actively manage our internal supply chain for environmental, social and economic sustainability issues. Our EMS focuses on internal operations because we have more control over these company-wide, global agreements than specific client contracts.
In a global supply chain consisting of thousands of suppliers, we focus on suppliers that want to work with us to establish meaningful, effective and industry-relevant sustainability metrics. We segment these suppliers into four tiers:
- Tier 1 – Strategic: Long-term, high-volume agreements
- Tier 2 – Preferred: Long-term, but lower-volume agreements
- Tier 3 – Value Add: Shorter-term, lower-volume agreements with infrequently used suppliers
- Tier 4 – Tactical: Typically a one-time procurement with no ongoing relationships or expenditures
We focus on Tier 1 and 2 agreements because they afford the greatest opportunities. In 2016, we spent $181.2 million with Tier 1 and 2 suppliers that have sustainability criteria in their agreements, a decrease of $7 million compared to the previous year. This decrease reflects less spending overall in 2016.
Business partnerships: local and diverse spending
We have a long-standing commitment to fostering relationships with small and diverse businesses. We partner with local, small and diverse firms and provide business opportunities, training and mentoring to help them develop and grow.
CH2M pursues subcontracting opportunities with small, disadvantaged, LGBT, minority, veteran-owned and woman-owned enterprises for our commercial, industrial, U.S. federal and municipal contracts. We make inquiries with local chambers of commerce and professional organizations to increase diversity in our supplier database and foster local partnerships where we have active projects.
Supporting the local economy is always a high priority, but with so many projects around the world, it is difficult to identify the proportion of spending on local suppliers. Numbers and percentages fluctuate each year because of our acquisition of other companies, the nature and amount of work that can be subcontracted and the fact that some businesses expand and no longer qualify as small businesses according to the U.S. Small Business Administration (SBA).
Our Supplier Diversity and Small Business Program succeeds because of our employees’ commitment to providing subcontracting opportunities to small and diverse businesses. We recognize these individuals, projects and subcontractors for their dedication in supporting the firm’s deliverable requirements and our clients’ socioeconomic initiatives.
We participate in the SBA’s Small Business Subcontractor of the Year program to recognize our best small business subcontractors. Since 1996, we have nominated 46 subcontractors for this award. CH2M's Supplier Diversity and Small Business Program has maintained the government's highest rating possible – "Outstanding/Exceptional" for 19 consecutive years.
We also maintain strong mentor-protégé relationships with minority- and woman-owned businesses under the U.S. Department of the Defense, Department of Energy, Environmental Protection Agency, Agency for International Development and SBA programs.