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The largest categories of direct material purchases in our supply chain are castings, forgings, electronics, and machined parts.
Baker Hughes’ supply chain is large and diverse as we source materials from more than 180 countries. Our spend is divided into direct and indirect materials. Direct materials are the components that are incorporated into the products and services that we sell. The largest categories of direct material purchases are castings, forgings, electronics, and machined parts.
We also buy products and services to support our business operations, which are used to develop or create, but are not incorporated into, our products or services. These are referred to as indirect purchases. They range from tools and supplies to telecommunications and professional services.
Understanding impact
Supplier Integrity Guide
Suppliers are critical partners in our value chain, and maintaining an ethical supply chain is essential. Our Supplier Integrity Guide governs all aspects of our relationships with suppliers, contractors, consortium partners, and consultants. It includes specific requirements for fair employment practices; health, safety, and environment; and human rights. Our suppliers are required to hold their own suppliers to equivalent standards.
Qualifying our suppliers
In 2019, we renamed the Baker Hughes Supplier Responsibility Guidelines (SRG) Program to the Baker Hughes Supplier Social Responsibility Program (SSRP) to better reflect Baker Hughes’ commitment to social responsibility and ethical practices across our supply chain. We continued integrating all relevant legacy Baker Hughes suppliers into our common SSRP onboarding process.
As part of the SSRP onboarding process, 100% of our suppliers are assessed for social risks.
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Assessment
We take a risk-mitigation based approach to our supply chain monitoring program to identify suppliers based on country risks, the supplier's past performance, and other factors. We look to continuously improve our risk profiling by further identifying additional risk factors, such as process risks, to include in our reviews. Additionally, pre-engagements and on-site periodic assessments follow an "Eyes Always Open" policy for our teams to be alert to potential violations during any supplier visit.
Verification
Suppliers identified as high risk are subject to audit by our trained auditors. These auditors conduct on-site audits on a one- to three-year basis, using a global questionnaire and risk-weighting metrics. Spot checks are also carried out.
Requirements
Our Supplier Integrity Guide specifically prohibits activities associated with human trafficking, such as withholding passports, charging recruitment fees, and misleading recruitment. Our guide also imposes certain affirmative obligations on suppliers, such as a requirement to reimburse workers for transportation costs, and to provide workers with written contracts in a language they understand. The guide encourages open and direct reporting.
Accountability
All assessment findings from on-site inspections are recorded in our automated assessment tracking tool. This tool monitors each assessment finding until it is closed, which occurs only after the supplier provides evidence that all noted findings have been corrected. Our target is to close 90% of audit findings within 90 days. New suppliers will not be issued purchase orders, and existing suppliers’ purchase orders will be suspended, if findings remain open beyond this timeframe. Business relationships can be suspended immediately in the case of serious labor-related findings, such as evidence of child labor or forced labor.
Training
We have 145 trained SSRP auditors with the opportunity of all employees to take SSRP Awareness training and Eyes Always Open training. Each one of our trained employees is empowered to raise concerns they may have on supplier expectations, human rights issues and on-site due diligence requirements.
Since 2005, employees trained in the SSRP program from legacy Baker Hughes companies have conducted more than 30,000 supplier assessments across 100 countries. We drive better outcomes through our collaboration and partnership with suppliers and other stakeholders. Working together with suppliers, customers, governments, industry partners, academic institutions, and non-governmental organizations, we can achieve holistic progress in human rights more than any one sector can accomplish alone.