2013 Sustainability and Responsibility Report

OUR INITIATIVES: SUPPLY CHAIN

Our Supply Chain

liftOur supply chain is made up of a wide network of suppliers, some of whom provide us with goods that ultimately end up in our restaurants, while others provide us with goods or services that help us in our day-to-day business operations. We work closely with many suppliers that provide the raw ingredients used to make our products, such as wheat, oil and sugar. For a high-level overview of our supply chain, please see the Value Chain section of this Report.

We manage our supply chain by working closely with our suppliers. For example, every two years, we host a Supplier Symposium where best practices are shared amongst our supplier base. We also partner with key suppliers in order to identify and address common industry-wide sustainability challenges. We believe that lasting sustainable supply chain improvements are best achieved by working together.

For the second time in 2013, our food, beverage, packaging and equipment suppliers were evaluated on criteria based on their sustainability practices, goals, and innovation. We look forward to further engaging with our suppliers to share best practices, to encourage innovation and to help minimize the environmental impacts of our products and equipment.

Business Partner and Supplier Code of Conduct

About Our Business Partner and Supplier Code of Conduct

 

We are committed to sustainable supply chain practices across our business. Our Business Partner and Supplier Code of Conduct (BPSCC) is built on the principles of respect, fairness and business ethics, with regulatory compliance being a minimum standard of doing business with us. Our BPSCC is based on internationally accepted labour standards, including the International Labour Organization’s (ILO’s) core conventions and the United Nations’ Universal Declaration of Human Rights. Key areas of focus in the BPSCC include compliance with applicable laws and regulations, conditions of employment, workplace environment, and business ethics.

We believe that the principles of respect and fairness extend to the relationships with our business partners and suppliers. As a result, compliance with our BPSCC is required by all our business partners and suppliers. Failure to comply with our BPSCC is sufficient cause for us to elect to remove a business partner’s or supplier’s approved status. We believe that the standards reflected in our BPSCC should apply throughout our supply chain. Accordingly, we expect that our business partners and suppliers will require their business partners, suppliers and sub-contractors whose work forms part of the Tim Hortons supply chain or business to comply with the standards reflected in our BPSCC.

BPSCC Program

 

Our business partner & supplier code of conduct

We began the wide-scale implementation of our BPSCC in 2010, placing our initial focus on the food, equipment and packaging business partners and suppliers that we felt represented the largest risk to our business. Our implementation plan took a phased and risk-based approach using a cross-functional team of individuals from Sustainability and Responsibility, Strategic Sourcing, Internal Audit and Quality Assurance. We assessed supplier risk across our organization focusing first on those suppliers that provide us with products that ultimately end up in our restaurants (e.g., food, packaging, equipment, etc.).

In 2013, we successfully completed the roll-out of our BPSCC to all our business partners and suppliers who met our risk criteria. In addition, we continued to require all new Tim Hortons business partners and suppliers who meet our risk threshold to sign our BPSCC as part of our formal selection process.

BPSCC Verification Plan(1)

 

An important component of our program is the verification of compliance with our BPSCC. In 2010, our Internal Audit team developed a verification program that was then piloted in 2011 with a small number of our key suppliers. In 2012, we revised our verification program and continued to pilot with suppliers in Canada, the U.S. and internationally. In addition, we extended our pilot program from head office/corporate processes to include full plant-level reviews. Finally, in 2013 we engaged an independent organization to review our verification program, including our risk assessment, review strategy and verification procedures. With our plan now finalized, we are positioned to formally begin conducting risk-based verification reviews starting in 2014.

(1) We consider “suppliers” as organizations that provide Tim Hortons with goods and/or services. Our “business partners” are organizations with whom we have a unique business relationship. This may include entities such as retail businesses, non-governmental organizations and charities that may or may not supply goods and/or services.

Coffee Sourcing and Verification

About the Coffee Supply Chain


We have been sourcing our coffee from the same regions in Central and South America since our company was founded in 1964. The majority of the coffee we purchase comes from “small holder” farms that tend to be family-run with less than five hectares of land. In these regions, the methods used to grow and process coffee are unique and the chain of custody to get the coffee to market is very complex. In some cases, coffee can be traded along its supply chain several times among the producers and processors, resulting in numerous transactions and changes in the custody of the coffee.

The figure below illustrates six key levels in the coffee supply chain that are very important to better understand the verification process: Farmers, Organization, Intermediary, Exporter, Importer, and Roaster.

Farmers and producers can range from individual “small holders” (that can hold less than five hectares of land) to large private estates (50 hectares or more).

Farmers can organize themselves into formal organizations, associations or cooperatives.

An intermediary is a trader or “middleman” operating at origin that provides farmers services and assistance in getting their coffee to market. Intermediaries range from professional organizations to independent traders.

Exporters are organizations operating at origin that process and commercialize coffee from farm gate level to meet the needs/specification of international buyers.

Importers are global merchants who bring goods and commodities from the origin country to the place of sale and exchange. Coffee is imported prior to roasting – as “green coffee.”

The roasting process tends to take place close to where the coffee will be consumed. This reduces the time that roasted coffee spends in distribution, helping to maximize its shelf life. The vast majority of coffee around the worldis roasted commercially on a large scale. Tim Hortons has two roasting plants, one in Hamilton, Ontario, and another in Rochester, New York. We also use other third party companies who roast on our behalf.

Our BPSCC Applied to Coffee Suppliers

 

Our coffee suppliers are considered key suppliers and are included within the scope of our BPSCC, and verification of compliance with our BPSCC is of particular importance in the coffee supply chain.

Since 2011, in conjunction with Control Union Certifications (Control Union), a third party certification company, we have been piloting our BPSCC verification program specific to coffee sourcing. Our verification tool facilitates a detailed review of 14 key areas of focus.

These areas include:

  • Remuneration;
  • Working hours;
  • Child labour;
  • Forced labour;
  • Discrimination and human rights;
  • Business ethics (including bribery and corruption, conflicts of interest, and internal codes of conduct);
  • Working conditions;
  • Health and occupational safety;
  • Discipline;
  • Association;
  • Product quality;
  • Traceability;
  • Environmental practices; and
  • Verifications/certifications.

 

Control Union performed inspections and reviews down to the dry mill level at eight of our export suppliers in Brazil, Colombia and Guatemala and was given open access to the facilities and relevant documentation. Interviews with employees at every level in the organization were also conducted.

Download verfification statement PDFOverall, the pilot verification exercise revealed strong compliance with our BPSCC. The most common audit findings identified by the verifiers included documentation/program issues related to a supplier’s lack of formal internal code of conduct, a general lack of good environmental management practices, and programming.

All identified issues have been accepted by the organizations and remediation plans put into place. Control Union has provided us with a letter of verification for our 2013 verification audits.

In 2013, we met with all export suppliers that participated in our pilot exercise. Control Union facilitated workshops to receive feedback on the verification program, identify common challenges and opportunities, and to gain a better understanding of best practices to improve the verification process. We plan on updating our verification program for 2014 based on the recommendations and best practices from these workshops.

Animal Welfare at Tim Hortons

eggsAnimal welfare is an important issue to Tim Hortons and all of our stakeholders, including our Restaurant Owners, suppliers, and guests. We consider animal welfare to apply to all aspects of animal care of the farm animals within our supply chain. While some of our food products are derived from farm animals, we are not directly involved in the raising, handling, transportation or processing of these animals. We depend on various direct and indirect suppliers – from processors right down to producers, many of which are family-run farms.

Our Animal Welfare Policy is aligned with our company values and Sustainability and Responsibility Guiding Principles, and sets internal standards in key areas such as regulatory compliance, quality assurance and auditing, continuous improvement and reporting.

download animal welfare summit agenda PDFThroughout 2013, we engaged with our suppliers, government and industry groups to further understand the latest animal welfare science-based research and best practices. We toured farms, in both Canada and the U.S., participated in industry meetings and roundtable discussions, and hosted our first North America–wide restaurant industry summit with the University of Guelph which focused on animal welfare issues, academic research and best practices for the restaurant industry.

Our partnership with the University of Guelph, through the establishment of the Tim Hortons Sustainable Food Management Fund (established in 2012), continued in 2013.

University of Guelph researchers are investigating opportunities that produce sustainable outcomes in the best interest of animals and farmers. The focus of the research aims to understand the costs of making transitions to alternative hen and sow housing systems, and the viability and timeline of implementation. Traceability of these alternative value chains has already emerged as a major challenge to the industry.

The researchers are also conducting consumer research on perceptions of animal welfare and sustainability attributes in a hospitality setting. Research will continue throughout 2014.

In 2013, we also made good progress towards meeting our goals for pork and egg sourcing.

ChickenBy 2022, we intend to source pork from suppliers who have made a transition to alternative open housing systems. We are on track to meet this goal and continue to work with the pork industry and governments to advance standardized approaches and codes resulting in more humane and sustainable open housing systems.

In 2013, we sourced 10% of our eggs from producers utilizing alternative hen housing systems. Three new alternative hen housing barns came on-line for Tim Hortons supply in 2013, and we are aiming to source 12% by the end of 2014.

For more information on our Animal Welfare Program, please visit our website.