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Suppliers

Our supply chain is complex, which means that assuring the EHS performance of our suppliers is challenging. We currently provide oversight and audit of EHS issues centrally for approximately 250 critical suppliers and contract manufacturers of materials that are used exclusively by GSK. They are based primarily in Europe, North America and Asia Pacific.

When selecting, negotiating with and managing key suppliers of materials and products to our manufacturing supply chain, we take EHS and loss-prevention issues into account. This includes providing them with information on the EHS risks associated with the GSK materials they are producing or handling.

We carry out EHS audits before signing contracts with significant new key suppliers, and contracts contain requirements based on our Global EHS Standards.

Subsequent EHS involvement is based on an assessment of EHS risks, focussing on:

• threats to continuity of supply
• hazards associated with manufacturing processes and materials
• environmental impacts
• regulatory requirements
• relevance to the supply of essential medicines

The key suppliers that present the greatest risk to GSK on these issues receive the greatest scrutiny.

Sites are scored based on their performance against GSK’s EHS Standards for key suppliers and against a supplementary, quantitative risk assessment scheme. We make recommendations following the audit and monitor progress, with a particular focus on poorly-performing suppliers.

Until they make significant improvements, we curtail or end procurement from sites that do not meet a minimal performance score against the EHS Standards, or that score an “unacceptable” rating on the quantitative risk assessment. For contract manufacturers, the minimum score was 30% until 2006, when we increased this requirement to 50%.

(Supplier audits also cover basic questions on human rights. See human rights and suppliers.)

In 2004 we joined the USEPA Green Suppliers Network (GSN). The Green Suppliers Network is a programme to help small and medium-sized suppliers to reduce their environmental impact. GSK supports this programme through initiatives undertaken under an Operational Excellence theme with specific suppliers.

Supplier performance
In 2005, we carried out 41 site-based EHS audits, approximately half of which were potentially new suppliers. Of the 41 sites audited, 32 were producers of ingredients and raw materials for our manufacturing supply chain. We found a wide variation in performance, with scores ranging from 28% to 81%. Five suppliers were determined to be unacceptable against GSK's audit assessment standards so we decided not to proceed with these suppliers until significant improvements were made.

The remaining 9 audits were of sites supplying pharmaceutical and consumer healthcare products and materials to Research & Development. Their performance against our EHS standards ranged from 40% to 95%.

In general, suppliers based in North America and Europe performed well. But performance in Asia Pacific was variable, and in some cases there were significant gaps against our EHS standards.

We found no apparent instances of non-compliance with the UN Universal Declaration of Human Rights or the core labour standards set out by the International Labour Orgainsation (ILO).

Reporting EHS performance
EHS information is collected where possible from selected suppliers. This data is not currently included in EHS performance charts, contained in this report, and has not been subject to verification by ERM.

In 2005 we requested information from 39 suppliers, 20 of which provided data. Some of these had not provided data in 2004 so we do not have comparative figures. These 20 suppliers produced a total of 83m Kg of material, resulting in the following:

• energy use: 24m gigajoules
• water consumption: 2m cubic metres
• hazardous waste disposed: 51m Kg
• non-hazardous waste disposed: 5m Kg

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