Tullow Oil plc 2011/2012 Corporate Responsibility Report - The Group

Sustainable supply chainADDING VALUE,PROTECTINGTHE BUSINESSThe objectives of Tullow’s supply chain strategy are to add value and protectthe business. Building a sustainable supply chain is integral to this goal and itis also closely aligned with our values and the way we do business in Tullow.STRATEGIC IMPORTANCEThe activities in our supply chain impact every aspectof our business model, including how we create valueas a company and how we run our business in pursuitof prudent risk management, strong governance,entrepreneurial flair and shared prosperity.HIGHLIGHTS FOR THE YEARNEWA new supplier centre was launched to promotetransparency in how to do business with Tullow and whatopportunities are available in our areas of operation.FIVETullow has five key supplier evaluation criteria whichaddress the 10 principles of the UN Global Compactto develop more sustainable supply chain practices.UPDATEDIn 2011, supplier contractual terms were updatedto take account of Tullow’s new Code of BusinessConduct. Supplier workshops have been held inBangladesh and Kenya and for the TEN Project in Ghana.REVISEDMaster contract agreements were revised in 2011to embed EHS standards and mandate local contentrequirements.DETAILED PERFORMANCE INFORMATIONSustainable supply chain and related local contentperformance information against objectives for2011/2012 and key plans for 2012/2013 are set out onpage 54 and 55 of this report.Building a sustainable supply chainOur supply chain is embedded in all our activities. It is thestarting point for an exploration campaign in-country, underpinsthe successful delivery of major development projects and helpsto run our day-to-day business. Many of our areas of operation,but particularly those in East Africa, present some of our biggestchallenges in technical and non-technical risks and sustainablepractices. Distance, remoteness, geography, topography andinfrastructure are often set within a complex operational context.They are frequently environmentally sensitive areas with multipleand overlapping interest groups and pastoral local communitieswith low EHS awareness. Delivering logistics in and bringingwaste out, building camps in the right way and running trucks tothe correct environmental and safety standards, for example, allrequire a long lead time and strong support to optimisesustainable practices all along the supply chain.As a consequence, we evaluate our suppliers against five keycriteria – EHS standards, technical requirements, local contentopportunities, ethics and compliance, and the best technicallyacceptable commercial offer. These five criteria address the 10principles of the UN Global Compact to develop more sustainablesupply chain practices. They also underpin the three keyprinciples at the heart of building a sustainable supply chain forTullow. These are to protect the environment as much aspossible; support the creation of long-term social benefits in hostcountries; and achieve the right balance between environmentaland social considerations, the commercial needs of our businessplans and Tullow’s commitment to creating shared prosperity.Developing robust contract strategiesAlongside the five criteria for supplier evaluation, supply chainworks closely with specialist functions and experts in Tullowto identify all the risks in relation to the provision of goods andservices. We also work with external stakeholders to aid ourdiscussion on the design of contract strategies. This enablesus to identify the custom elements that are needed in a contractto ensure we meet or exceed sustainable supply chain criteriaand address all identified risks. We directly monitor supplierbehaviour and practices on location and mandated supplierreporting gives us added assurance of high standardsof performance.72Tullow Oil plc 2011/2012 Corporate Responsibility Report