Supply Chain.

1.  Introduction

Dexus partners with suppliers to achieve operational efficiencies, enhance customer amenity and positive environmental outcomes. Material issues that relate to Dexus’s supply chain include:

  • 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 human rights legislation such as discrimination 
  • Anti-competitive behaviour: Ensuring that business dealings promote a competitive marketplace and are free of activities such as collusion, bribery, corruption, price-fixing and stand-over 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 support local businesses and communities, 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 solutions 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. Dexus recognises the central role that suppliers play in optimising asset performance, managing risk and delivering customer amenity

The boundary for these issues encompass all direct suppliers across Dexus’s group property portfolio with social impacts felt across Dexus, its suppliers and their employees and upstream suppliers, as well as environment impacts.

2.  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 considered however certain commodities are critical and may present a risk to operational continuity, safety or have material environmental impacts.

Dexus defines a critical supplier as one whose services are required daily for the normal operation of a building. Critical suppliers are retained on a centralised Preferred Supplier List. Dexus applies a high-level assessment of inherent supply chain sustainability risk for each spend category. The risk assessment is based on existing supplier spend 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 and representing potential sustainability impacts and should be prioritised
  • Cost driven: representing lower potential sustainability impacts and high spend
  • Acquisition: representing lower sustainability impact
Main procurement categories
Procurement categories Classification Inherent sustainability risk
Environmental Social Economic
Building operations
Cleaning and waste management Critical
Facility managers Secure  
Energy Critical  
Water Secure    
Security Critical  
Electrical, mechanical, hydraulic Secure  
Lifts Cost driven  
Capital works Critical
Fire protection Secure    
Statutory fees and non-controllable expenses Cost driven    
Landscaping Secure    
Developments
Developers and Builders Critical
Façade materials Critical
Building materials locally sourced Cost driven    
Building materials internationally sourced Critical  
Corporate
IT Critical  
Events and conferences Secure    
Merchandise and promotions Critical

 

3.  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 suppliers where possible by identifying partners that can best meet its needs and optimise their engagement across its portfolio. This leads to fewer suppliers and closer relationships with Dexus with a greater alignment of interest. It also a greater opportunity to embed Dexus Corporate Responsibility & Sustainability (CR&S) commitments with suppliers.

Dexus’s 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
  • Maintain safe workplaces in line with Dexus’s goal for ‘no harm’, safe work environments with zero fatalities
  • 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
  • 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 sustainability-related contract 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 sustainable procurement training 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 philanthropic activities

3.1  Dexus's commitments and targets

Each year Dexus sets, reviews and updates corporate commitments within its responsible investment framework following input from Dexus stakeholders. Commitments are typically defined with respect to each of five Sustainability Approach objectives and are approved by the Board.

Refer to the 2018 Annual Online Reporting Suite for details of FY18 achievements against current commitments and forward-looking FY19 commitments.

Dexus aspires to and dedicates focus towards using its aggregate spend to positively influence its suppliers, contractors, products, services and workers. Dexus takes a long-term view to partner with its suppliers to achieve quality service by:

  • Fostering a ‘no harm’ safe workplace with zero fatalities target, and establishing robust safety compliance systems
  • Monitoring performance through regular engagement, reporting against contract key performance indicators and supported by regular contractor spot checks for service providers at each Dexus managed property
  • Engaging with suppliers through self-assessments to gain a comprehensive insight into their relationship with Dexus through 360-degree feedback, how they manage their own sustainability risks and those for their most significant suppliers

In addition, Dexus seeks to collaborate with suppliers to address human rights and modern slavery risks across its supply chain, through enhanced due diligence, risk profiling and supported by assessments.

4.  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 supply chain approach.

Dexus applies the following governance structure and approach to manage its supply chain:

Supply chain governance
Dexus Board and Board Risk Committee
Property Executive Committee
Dexus Sustainability team Dexus Risk and Compliance team Dexus/CBRE Facilities Management teams
Management approach
Dexus Sustainability approach

Policies

Supplier Code of Conduct | Sustainable Procurement | Tendering | Human Rights | Environment | Work Health Safety & Liability | Anti-bribery | Conflicts of Interest | Development & Construction | Dexus Operating Limits | Embargo

Implementation Documents and systems Tools and actions
Procurement

Business procedures for procurement

  • Category standards, minimum requirements and weightings
  • Risk and opportunity assessment
  • Supplier engagement
  • Pre-qualification process
  • Tendering process
  • Preferred supplier panel
Supplier monitoring

Supplier code of conduct monitoring tools:

  • SASSI contractor management system
  • In-house property risk management system
  • Project Control Group (PCG) meetings and reports
  • Spend analysis
  • Supplier self-assessments
  • Contractor spot checks and corrective action plans
  • Evaluation against contract KPIs and SLAs

 

4.1  Sustainability approach

Dexus's Sustainability Approach incorporates the UNPRI ‘six principles’ relating to responsible investment and active property management. The approach is aligned with Dexus’s corporate strategy through its overarching goal “to create Sustained Value by adopting an approach that embraces connectivity, liveability and resilience, and is integrated across its value chain.”

This framework incorporates five objectives which describe the goals of Dexus’s stakeholder groups, while the three themes are a frame of reference for initiatives and programs. CRS approach

Key themes:

  • Connectivity - using technology to enable connectivity between people and places and smart operations of Dexus's business and buildings
  • Liveability - creating vibrant, inspiring and flexible work places which enhance productivity and foster the well-being of employees and customers
  • Resilience - increasing resilience so that buildings and spaces are adaptive and customers and Dexus can prosper long term

Together, the three themes and five objectives form the basis from which sustainability commitments and targets are formed and how achievement is measured.

Dexus integrates supply chain sustainability throughout the group’s operations via the Strong Communities objective, which recognises suppliers as an essential part of the Dexus ecosystem.

Dexus believes that by partnering with like-minded suppliers to align sustainability goals, Dexus can foster an open dialogue, most effectively manage supply chain risks and create opportunities for shared value.

5.  Implementing our management approach

5.1  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
  • Tendering Policy
  • Environment Statement
  • Human Rights Policy
  • Work Health, Safety & Liability Policy
  • Anti-bribery Policy
  • Conflicts of Interest
  • Development and Construction Policy
  • Dexus Operating Limits
  • Embargo Policy

Refer to the Dexus website for publicly available Board and Corporate policies.

These policies describe Dexus’s position and expectation of its suppliers and subcontractors.

Embargo Policy

Dexus is committed to working with contractors and service providers who maintain the highest ethical, safety and quality standards. As part of this commitment, Dexus has implemented an Embargo Policy which states Dexus’s approach to managing contractors and service providers that do not meet Dexus’s performance standards.

The Embargo Policy outlines the circumstances in which a contractor or service provider will be placed on an Embargo List. Should Dexus determine to place a supplier on the Embargo list, Dexus will not engage with that contractor or service provider until the issues of concern have been appropriately addressed. The Embargo list is updated on an ongoing basis.

5.2. Human rights and fair work

Dexus respects the principles incorporated in the Universal Declaration of Human Rights. Dexus supports the rights of employees, contractors, customers, investors and suppliers to freedom of expression, sexual belief and sexual orientation and gender identify.

Dexus rejects the use of forced or child labour and strives for fair treatment and equity in the workplace. Dexus’s Human Rights policy outlines commitments to sustainable procurement, indigenous rights, equal opportunity and relevant legislation. Dexus reviews and monitors human rights against the policy internally and with key service providers and business partners.

Modern slavery

The Federal Government has announced plans for Australia to be a world leader in stamping out modern slavery and has committed to passing a Modern Slavery Act (MSA) by the end of 2018. In addition to the Federal legislation, New South Wales State Parliament has passed a Modern Slavery Bill which includes mandatory reporting on modern slavery by companies.

Dexus is obligated under proposed thresholds in New South Wales and Federal Acts. Aside from its own reporting obligations as a procurer of goods and services (i.e. upstream supply chains), Dexus may be requested to provide information to tenants and investors as a supplier to industry and Government (part of downstream supply chains).

Dexus is looking to take a leading approach towards future modern slavery reporting obligations and is taking actions within its business procedures and through industry wide collaboration to ensure readiness for future disclosure.

Dexus is collaborating with other property owners through the Property Council of Australia to adopt an industry-wide approach to modern slavery and the MSA obligations. The need for greater transparency incentivises a collaborative approach to supplier engagement to limit unnecessary duplication of effort, educate and inform extended supply chains. This also improves efficiency and sustainability and leverages the resources and procurement power of the sector as a collective.

5.3. Understanding supply chain sustainability risk exposure

Dexus conducts a periodic group-wide supply chain CR&S risk assessment to identify and categorise the supply chain risks relevant to Dexus’s geographical operations and the types of products and services it procures.

The assessment involves the following staged process to assess the most relevant supply chain issues.

  1. Contextual environment, social and governance (ESG) factors are reviewed against emerging trends and issues. These are mapped against Dexus’s procurement categories to identify the inherent ESG risks that may apply to Dexus 
  2. Supplier categories with significant inherent risk are analysed against Dexus material ESG issues to assess each in terms of their relevant inherent risk
  3. Inherent risk hotspots are evaluated and ranked within a matrix according to their level of inherent risk
Supply chain risk management process

The outcome of the risk assessment is a risk matrix of ESG risk exposures across each of Dexus’s major supply chain categories. The matrix informs procurement processes and CR&S ambitions, including specification of requirements, and questions during tendering and the screening of suppliers.

In addition, the matrix is referenced for setting contract key performance indicators (KPIs) and the adoption of best practice CR&S management and monitoring over the lifecycle of the project.

Dexus conducts an annual supplier spend analysis to prioritise a list of suppliers based on the category-level assessment. Together, the supplier spend analysis and supplier category risk assessment direct ongoing engagement with suppliers through due diligence and verification activities (monitoring and engagement).

5.4     Managing supply chain across the lifecycle of a project

Dexus’s staged procurement and contract management process optimises performance and supplier service levels, manages risk, maintains symbiotic supplier relationships and realise shared value. The overall risk rating for the procurement category and spend details the extent to which due diligence and supplier monitoring is undertaken. The key aspects of this process include:

The lifecycle of a standard project  

Project stage Due diligence action Assessment actions

0.  Supply chain CR&S risk assessment and spend analysis

 
  • Periodic risk assessment conducted in accordance with Dexus’s Risk Management Framework to evaluate Dexus procurement categories against external contextual factors
  • Procurement categories are ranked by inherent risks material to Dexus to inform procurement and supply chain monitoring activities

1. Project is proposed

  • Project owners follow procurement procedures to develop and present a project business case to decision makers 
  • Project assigned risk level in accordance with Tendering and Operating Limits Policies
  • Articulate CR&S project goals
  • Internal audit of Operating Limits Policy
2. 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
  • Internal audit of Operating Limits Policy
3. 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
  • CR&S prequalification criteria specified
 
4. 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, using a balanced scorecard
  • Dexus conducts financial due diligence to establish that a company is viable and can perform the tasks required 
  • Assessing a company's capability to perform by reviewing its track record, and seeking feedback from references
               
5. Service provided is appointed
  • Dexus reviews proposed services to confirm fair value upfront and avoid later uplift
  • Service providers contractually agree to Dexus’s Sustainable Procurement Policy and Supplier Code of Conduct
               
6. Service is undertaken  
  • Contractor management systems track on-site contractor activity and ensure contractors maintain licences and insurances
  • Project Control Groups (PCGs) hold regular meetings between Dexus and suppliers and receive progress reports
7. Service is monitored
  • Dexus procurement team monitors supplier performance through site feedback, regular performance meetings and tracking against project KPIs
  • Dexus conducts site-level contractor spot checks to evaluate performance and develops corrective action plans where required
  • Evaluation against contract KPIs and SLAs
  • Suppliers periodically complete a self-assessment to provide Dexus insights into their business-related sustainability issues and gather feedback on its performance as a partner
8. Project completes
  • Dexus evaluates the effectiveness and value for money as part of retaining service providers 
  • Dexus conducts period spend analysis to maintain a current view of critical suppliers and commodities
  • Suppliers periodically complete a self-assessment to provide Dexus insights into their business-related sustainability issues and gather feedback on its performance as a partner

Tender documentation and service agreements integrate CR&S policies and key performance indicators. Dexus prioritises supplier 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 issues. 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.

Ongoing data collection and performance 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.

6.  Supply chain governance

6.1  Procurement procedures

Dexus’s procurement procedures outline the buying process for the Dexus Office & Industrial, Retail and Corporate divisions, 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

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

6.2  Tender process

Dexus’s tender process ensures that service providers are chosen based on merit and capacity to deliver works and services. The number of organisations invited to tender varies due to a project’s size, complexity and procurement guidelines. 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 for high value projects. The PCG includes 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.

6.3  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.

6.4 Contractor health and safety

Dexus recognises its duty of care to manage any work health and safety risks across its managed property portfolio. Dexus’s Workplace 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 workplace health and safety (WH&S) management systems and manage compliance of contractors regarding insurance, WH&S and inductions.

6.5 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.

Grievance mechanism

Feedback from or about a contractor that becomes a formal grievance is addressed through Dexus’s Complaints Policy. Further details are available in the Governance Disclosure on Management Approach.

7. Evaluation and process improvement

Dexus’s procurement process is subject to ongoing, risk-based auditing and monitoring via the Risk and Compliance team. Potential breaches of procedures are investigated and may result in disciplinary action if substantiated.

Dexus’s operational 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). Dexus measures its success in effective supply chain management in the following ways:

Material issue Objective KPI
Sustainable procurement Maintain value aligned partnerships
  • Number of critical suppliers
  • Supplier relationship satisfaction score (0 to 10)
  • Supplier net promoter score
  • Value for money
Effective service delivery
  • Tenant satisfaction survey
  • Feedback from customers and/or facility managers
  • Supplier conformance and legal compliance (fines, penalties and breach notices)
  • Achievement of contract KPIs and SLAs
Human rights Readiness for Modern Slavery legislation
  • Supplier Code of Conduct in contracts
  • Spot checks
  • Contractor KPIs related to human rights due diligence
  • Number of grievances 
  • Incidents of non-conformance
Fair working conditions
  • Incidents of non-conformance
  • Corrective action plans
Work Health and Safety Maintain a safety culture
  • Contractor compliance with on-site WH&S systems 
  • WH&S metrics (e.g. lost time injury frequency rate, medical treatment injury frequency rate, fatalities)
  • Incidents of non-conformance