Introduction

Dexus partners with suppliers to achieve operational efficiencies, tenant and customer comfort and positive environmental outcomes. Material issues that relate to Dexus's sustainable supply chain are:

Building in Sydney CBD
  • Human rights: Sourcing products and services from suppliers that uphold human rights and acceptable labour standards by rejecting child and forced labour and offering acceptable conditions and wages for workers. Dexus is committed to sustainable procurement, indigenous rights, equal opportunity and relevant legislation
  • Anti-competitive behaviour: Ensuring that business dealings promote a competitive marketplace and are free of activities such as collusion, bribery, corruption, price-fixing and standover tactics. An open and transparent tender process underpins Dexus's procurement approach. Employees are trained in conflict of interest and anti-bribery to ensure a competitive process that selects suppliers based on merit rather than personal relationships
  • Local suppliers: Working with local suppliers to build local economies, reduce transport resource use and cost, and provide quality service delivery. Dexus chooses from a mix of local and nationwide suppliers using service delivery as the primary criteria. Dexus seeks to engage with local suppliers to reduce transportation costs, provide reliable service for critical services and to support the communities in which it operates
  • Supplier engagement and capacity building: Creating partnerships that go beyond simple client-supplier relationships to establish deep understanding of each other's business drivers, and create further opportunities for value. Dexus develops long term partnerships that address sustainability impacts and create shared value. The Group recognises the key role that suppliers play in optimising asset performance, managing risk and delivering tenant amenities

Dexus's supply chain composition

Dexus's supply chain encompasses a diverse range of products and services which are grouped into categories. All procurement categories are necessary however certain commodities are critical. Critical commodities present a risk to operational continuity, safety or have material environmental impacts.

Dexus defines a critical supplier as a supplier whose services are required daily for the normal operation of a building. Critical suppliers are retained on a Preferred Supplier List. Dexus uses a high level assessment of inherent supply chain sustainability risk for each spend category. The risk assessment is based on existing spend and supplier data and the British Standard 8903:2010 Principles and Framework for Procuring Sustainably - Guidance.

Dexus classifies its suppliers as follows:

  • Critical - representing areas with a high spend, as well as high potential supply chain sustainability impact
  • Secure - representing areas with a lower comparative spend, however still representing potential sustainability impacts and should also be prioritised
  • Cost driven - representing lower potential sustainability impacts, but still high spend
  • Acquisition - representing lower sustainability impact

The table below shows the main procurement categories, the areas of Dexus operations and whether they are critical suppliers.

Dexus's Main Procurement Categories

Main Procurement Categories Classification Inherent Sustainability Risk
Environmental Social Economic
Building Operations
Cleaning and Waste Management Critical       
Facility Managers Critical    

 

Energy and Water Critical    

 

Security Cost driven    

 

Electrical, mechanical, hydraulic, lifts Secure    

 

Lifts Cost driven        
Capital Works Critical    

 

Fire protection Secure      
Statutory fees and non-controllable expenses Cost driven    

 

Developments
Developers and Builders Critical     

 

Project Managers Secure      
Architectural and Engineering Design Secure    

 

Corporate
IT Critical    

 

Events and conferences Secure      

 

Ongoing data collection and analysis provides a benchmark for site teams that oversee supplier services. This is valuable data on how performance trends vary over time and across sites. This data is used as input into initial reviews of supplier contracts and periodic reviews of Dexus's panel of preferred suppliers.

Management objectives and goals

As a signatory to the United Nations Principles of Responsible Investment, Dexus manages its supply chain to account for human rights, environmental, social and economic factors in its purchasing decisions.

Dexus rationalises its supply chain where possible by identifying companies that can best meet its needs and optimise engagement across its portfolio. This leads to fewer suppliers with a closer relationship with Dexus and a greater alignment of interest. It also facilitates efforts to embed Dexus Corporate Responsibility & Sustainability (CR&S) commitments with its suppliers.

Dexus's key supply chain goals are to:

  • Maintain an efficient procurement process operating under sound governance that achieves the best value for money, meets business requirements and delivers financial and CR&S outcomes based on a whole of life costing
  • Mandate that suppliers abide by all minimum standards and laws in the countries in which they operate
  • Treat suppliers and contractors fairly with respect and dignity demonstrating probity, equity and transparency
  • Continue to develop and manage relationships with suppliers and contractors to encourage them to promote a best practice approach to employment practices, social outcomes and the environment
  • Identify key risks and opportunities particularly in high value, high impact contracts and improve the overall impacts of the products and services Dexus procures
  • Challenge suppliers to deliver tangible, innovative and sustainable solutions that deliver mutually beneficial outcomes for Dexus and the supplier
  • Continue to assess each contract's merits against a set of sustainability principles and ensure environmental and social impacts are assessed in line with Dexus policies and objectives, emerging best practice and industry standards
  • Ensure prospective and new suppliers understand contract sustainability criteria and requirements
  • Mandate that all suppliers acknowledge and abide by the Dexus Supplier Code of Conduct
  • Maintain sustainable procurement capability by engaging and upskilling employees and implementing a sustainable procurement training program for procurement and contract managers
  • Collaborate with suppliers and seek feedback as part of contract management
  • Where appropriate, increase the purchase of products that support community base charities, are carbon neutral or have a lower carbon footprint, are more efficient or meet internationally recognised sustainability performance standards
  • Where appropriate, partner or encourage supplier participation in community engagement and with Dexus in its philanthropic activities

Management approach

Dexus adopts a long term approach to managing and maintaining supplier relationships through a robust set of business procedures which guide supplier screening, selection and engagement. A suite of policies, principles and performance standards underpin the ethical and supply chain approach.

Dexus uses a staged procurement and contract management process to identify and mitigate supply chain risks. The key aspects of this process include:

  • Performing due diligence on potential suppliers to identify those that can service an organisation of Dexus's size
  • Procuring services via a formal tender process which involves financial analysis due diligence to establish that a company is viable and can perform the tasks required
  • Reviewing proposed services to confirm fair value upfront and avoid later uplift
  • Assessing a company's capability to perform by reviewing its track record, and seeking feedback from references
  • Confirming commitment to Dexus's Sustainable Procurement Policy
  • Using a balanced scorecard to comprehensively rank each supplier
  • Undertaking contracts that include embedded KPIs tailored for the supplier and commodity

Supply chain approach

 Management Approach

Sustainable Procurement Framework

Dexus applies a Sustainable Procurement Framework to minimise any potential impacts from its upstream supply chain. Sustainable procurement is built into all supplier engagements through supplier adherence to the following Dexus Policies:

  • Supplier Code of Conduct
  • Sustainable Procurement Policy
  • Environment Statement
  • Human Rights Policy
  • Work Health, Safety & Liability Policy

 All these policies are available at http://www.dexus.com

Managing supply chain across the lifecycle of a project

The performance management process aims to optimise performance and supplier service levels, manage risk, maintain healthy supplier relationships and realise shared value.

All tender documentation and service agreements integrate CR&S policies and Key Performance Indicators (KPIs) and Dexus prioritises its engagements based on the commodity/service involved, the size of the contract, supplier values and its criticality to business continuity.

A supplier assessment process takes into account labour practices, social, environmental and human rights impacts. Suppliers are encouraged to work with Dexus to reduce carbon emissions, adopt sound environmental principles, manage their people ethically, drive positive supplier relationships and consider the impacts of their activities on the communities in which they operate.

The lifecycle of a standard project 

Project stage Sustainability and risk management activities
Project is proposed
  • Project owners follow procurement procedures to develop and present a project business case to decision makers
Project is approved
  • Project owners: a) procure services directly within agreed limits and preferred panel, or b) work with Dexus procurement team to procure major services via formal tender
Quotes obtained or formal tender is issued
  • Business units work with the Dexus procurement team to issue project brief to service providers
  • Service providers may be pre-qualified and selected on Dexus's preferred supplier panel
Service provider is selected
  • Sustainability track record, as well as risks and opportunities are evaluated during a rigorous and structured screening and ranking of suppliers
Service provided is appointed
  • Service providers contractually agree to Dexus's Sustainable Procurement Policy and Supplier Code of Conduct
Service is undertaken
  • SASSI is used to track on-site contractor activity and ensure contractors maintain licences and insurances
Service is monitored
  • Dexus procurement team monitors supplier performance through site feedback, regular performance meetings and tracking against project KPIs
Project completes
  • Dexus evaluates the effectiveness and value for money as part of retaining service providers

 

Supply chain governance

Procurement Procedures

The Procurement Procedures outline the buying process for personnel in the Dexus Office & Industrial, Retail and Corporate sectors, and by authorised third party property managers. The procedures accompany the Dexus Operating Limits, Conflicts of Interest and Tendering policies.

The procedures ensure that:

  • Service providers are engaged based on merit
  • Conflicts of interests are appropriately identified and managed
  • Dexus interests are legally protected (including the avoidance of fraudulent transactions) and
  • Dexus insurances are not compromised

A key step in this process is engaging with suppliers to evaluate the effectiveness of Dexus's sustainable procurement policies and supplier relationship management practices.

Tender process

The tender process ensures that service providers are chosen based on merit and capacity to deliver works and services, rather than relationships with Dexus personnel. The number of organisations invited to tender depends on the project's size and complexity. Dexus is committed to a transparent and competitive tendering process. The process is subject to detailed monitoring and oversight.

 

A Project Control Group (PCG) is established where projects are expected to exceed five million dollars. The PCG must include appropriately qualified representatives from Dexus, co-owners and senior representatives of the core service providers and contractors or consultants, for example builders, architect, project manager or leasing agents.

The role of the PCG is to:

  • Recommend whether to proceed with the proposed Project
  • Refer the Project to the Investment Committee and/or Board/client for funding approval in line with Dexus's operating limits

Employee responsibilities and training

Dexus employees receive periodic training on procurement best practices as well as building-related products, services and requirements. This provides them with the required skills and industry knowledge to appropriately select and appoint service providers.

 

All employees with responsibility for selecting, appointing and monitoring service providers must ensure performance and compliance with contractual agreements via standard contract templates.

Contractor health and safety

Dexus recognises its duty of care to investors, tenants, employees, agents and the community to manage any work health and safety risks in its property portfolio.

Dexus's Work Health, Safety and Liability (WHS&L) statement outlines how Dexus manages property risks. It states the Group's commitment to maintaining safe properties, working with stakeholders to manage hazards, risks and continuous monitoring.

Dexus implements a safety management system that is certified against OHSAS 18001 to address WHS&L risks across the portfolio.

Dexus uses a third party tool across all Dexus managed properties to monitor contractor WH&S management systems and manage compliance of contractors regarding insurance, WH&S and inductions.

Supplier monitoring and relationship management

Dexus monitors the performance of major contracts through:

  • Regular performance review meetings with site teams that assess performance against KPIs
  • High level performance reviews that occur at least half yearly and incorporate formal feedback from internal stakeholders
  • Site and corporate team feedback, which is discussed with suppliers to directly manage exceptions against performance expectations

Service agreements set out the level and frequency of monitoring. Suppliers must perform an appropriate level of monitoring, which may include a combination of physical monitoring of activities and performance reports.

Evaluation and process improvement

The procurement process is subject to ongoing, targeted auditing and monitoring via the Compliance, Risk & Governance team. Potential breaches of procedures are investigated and result in disciplinary action if substantiated.

Dexus's Asset Solutions and Sustainability teams monitor procurement activity to evaluate the value that is being delivered to Dexus, as well as identify and address environmental, social and governance risks within tier 1 suppliers (i.e. Dexus's direct suppliers).