How Philips Works with Suppliers to Improve Sustainability
The Philips Supplier Sustainability approach is a strategy designed to boost the company’s supply chain and procurement operation and links with its goals of environmental stewardship, social responsibility and ethical business practices.
The approach is integrated into its corporate sustainability strategy, focusing on building a responsible supply chain, reducing environmental impact and promoting human rights and ethical conduct throughout the lifecycle of its products and services.
“Actively helping our suppliers to set and advance sustainability goals is proving to have a real ripple-effect,” says Marnix van Ginneken, Executive Vice President and Chief ESG & Legal Officer at Philips.
Helping suppliers deliver sustainability
The Philips Supplier Sustainability approach focuses on helping suppliers improve in areas like environmental protection, human rights and responsible sourcing of materials.
This approach is part of Philips' wider goal to promote sustainable and fair healthcare by working closely with industry partners, suppliers and customers throughout the supply chain.
After evaluating a supplier's ESG performance and finding areas that need improvement, Philips then collaborates with the supplier to create a clear plan. This includes specific goals for reducing environmental impact and improving social responsibility.
Using AI to identify key action areas
Philips uses an AI-powered tool developed alongside the Eindhoven University of Technology in the Netherlands.
It helps identify the key factors that suppliers should focus on to enhance their performance in both social and environmental areas. By using technology, Philips ensures its suppliers can work more effectively toward sustainability and ethical practices.
Philips is working to reduce its overall environmental impact by focusing not only on emissions from its own operations (Scope 1) and energy sourcing (Scope 2), but also by addressing Scope 3 (upstream and downstream) emissions. In healthcare, it’s estimated that 71% of emissions come from the supply chain, so reducing these emissions is crucial.
By 2025, Philips wants at least 50% of its suppliers (based on spending) to commit to reducing their CO2 emissions using science-based targets. Philips believes reducing Scope 3 emissions will have seven times more impact than simply lowering the company’s own direct emissions.
The Philips Supplier Sustainability Performance Programme
Forming part of Philips' strategy to reduce supply chain emissions is its Supplier Sustainability Performance programme, which helps suppliers become more environmentally friendly.
The strategy was launched in 2016 and has changed how the company works with suppliers.
Instead of just checking if they meet basic standards, Philips now collaborates with suppliers to help them continuously improve their sustainability efforts. It supports suppliers by sharing expertise and using advanced tools, including AI-based data analytics, to help them meet their CO2 reduction targets.
By the end of 2023, 46% of Philips’ suppliers had committed to science-based targets, keeping the company on track to meet its 2025 goal of 50%.
Philips is also part of the CDP Supply Chain programme, which encourages suppliers to share information about their environmental performance. In 2023, 93% of its biggest suppliers participated in the plan and reported a total of 14 million metric tons of CO2 savings from projects aimed at reducing emissions.
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