Sustainability columnChoose your friends carefullyEvery year companies spend billions of euros on goods and services. Butdo they really know what they‟re getting?They know about the price, of course. They know when to expect delivery,and they know where the goods are coming from. But what about theenvironmental or social impact? Do they know, for example, if theirsuppliers use child labor to make their products? Or are involved in humanrights abuses? Or are polluting the environment?If you don‟t choose your suppliers carefully, the consequences can beserious indeed. And there are plenty of examples of companies that, in thepast, have got it wrong.Give us a breakTwo years ago, Nestlé became the target of a campaign byenvironmentalists at Greenpeace. Why? The food and drinks giant, saidGreenpeace, had been buying unsustainable palm oil from an Indonesiansupplier called Sinar Mas. Nestlé‟s actions were contributing to thedestruction of the rainforest there and robbing the country‟s orang-utans ofone their few remaining natural habitats.Cleverly, Greenpeace used an advertising slogan for Kit Kat – one ofNestlé‟s biggest-selling chocolate bars – as the centrepiece of itscampaign. „Have a break. Have a Kit Kat‟ became „Nestlé – give therainforests a break‟.Of course, it‟s not just about choosing suppliers carefully and settingminimum standards. It‟s also about enforcing them. Often, that‟s easier saidthan done. Remember Mattel, the US toy company that makes Barbie dollsand Hot Wheels cars? A few years ago, Mattel was forced to recall millionsof toys because of safety concerns over supplies from China.
Companies like Nestlé and Mattel have long and complex supply chains –as a result, they run more risks and have a more difficult task managingthose risks.For AEGON, the risks are different. We source most of our products andservices locally. We don‟t buy politically sensitive commodities like crude oilor cocoa beans. And we‟re not in an industry which is constantly looking forcheap labor.But that doesn‟t mean we don‟t face risks. We spend just under EUR 1.5billion a year on goods and services. That‟s a considerable sum. And a lotof it – not surprisingly – goes on computers and other IT equipment.Increasingly, IT companies are coming under the spotlight, too. Last year, aNew York-based human rights group, China Labor Watch, criticized threeof the world‟s leading IT suppliers – Apple, HP and Dell – for creating anetwork of “electronic sweatshops” in China. And the risks aren‟t confinedto IT: if we want to avoid nasty surprises, we should look at other suppliers,too. What about our contractors? What about the firms that supply ourpaper and other raw materials?Managing your supply chain matters – whether you are Nestlé or AEGON.It‟s about financial risk. It‟s about controlling costs. It‟s about being efficient– and not storing up problems for the future. Most of all, it‟s aboutprotecting your good name and brand. It takes ten years to build areputation – and ten minutes to break it again. It‟s old adage, but still agood one.The views and opinions expressed in this document are solely those of the author and do notnecessarily represent those of AEGON N.V. This document is for information purposes only andany reliance you place on such information is strictly at your own risk. AEGON N.V., its affiliatesand the author cannot be held responsible for the accuracy or reliability of the contents of thisdocument.