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In the telecommunications supply chain, we occupy a position between our customers – the general public, businesses and governments – and the vast, complex network of suppliers that design, produce, distribute, build and maintain the network equipment, the devices we sell, and the services that support our operations.

It is in our interests for our supply chain partners to maintain excellent quality and value for money, but also for them to operate responsibly. Strikes, protests, negative publicity or poorly managed environmental costs or impact, will affect our reputation and profitability, and so responsible sourcing is a necessary commercial, as well as moral, activity.

During 2015, we have been continuing to develop our approach to ethical procurement across our HQ and BU procurement activity. As part of this process, we have finalized and published our Supplier Code of Conduct (‘SCoC’). The SCoC is based on best practice guidance and standards born out of extensive consultation with many relevant parties, through work carried out by the ICT sector. 

 The SCoC covers our expectations of supplier performance across a range of issues including labor standards, child and forced labor, health and safety practices, environmental performance etc. and includes expectations that our suppliers will also be responsible for the assessment of their own supply chain. We invited over 40 of our top global vendors, and prospective vendors, to a supplier day in Amsterdam where the SCoC was shared with all participants and covered in presentations. 

To assess our suppliers against the SCoC, we are rolling out an approach based on the E-TASC tool developed by GeSI and the EICC. The tool follows existing best practice and codes, and reflects consultation with GeSI/EICC members and a broad group of stakeholders. E-TASC, which is managed on behalf of GeSI by EcoVadis (gesi.ecovadis.fr), is a web-based CR performance monitoring platform and is based on a comprehensive set of ethics, labor rights, health and safety, and environmental criteria which closely align with our SCoC. Approximately 1,800 ICT sector suppliers are currently evaluated through E-TASC.

Starting in late 2014, we initially tested E-TASC with our global strategic suppliers who represent approximately 56% of our total technology spending in 2015, and tend to have the most complex supply chains. We are therefore already focused on a substantial proportion of our ethical procurement risk.

We summarize our engagement with these global strategic suppliers1 (‘GSS’) in table 13. 

Engagement with GSS




Number of GSS% of GSS

Assessments completed

2693%

Assessments not yet started

27%

The assessment measures performance in four categories: environmental performance; labor practice performance; fair business practice performance; and supply chain management performance. The results of the assessments completed and analyzed at the end of 2015 indicated that no GSS fell below the overall risk threshold for performance in their overall scores, or their scores on the four individual categories of performance.

Following the successful pilot exercise with GSS, we have been rolling out the assessment process with high-risk suppliers where procurement is managed at BU level. Risk is determined by the size of annual business with the BU, together with an analysis of the potential for labor, health and safety, or environmental risk factors to be present – largely based on the supplier’s type of business. 

Our GSS have been monitored by other businesses in our sector for some time and, though there is always room for improvement, they generally have good systems in place. We expected the roll out at BU level would be more difficult as most local vendors in our markets have not previously been assessed on these issues by any customers. We therefore anticipated a much lower engagement rate, and lower performance category scores. In 2015, we launched phased engagement campaigns in Italy, Russia, Bangladesh and Pakistan. Markets in our Eurasia region started their campaign towards the end of the year and this is reflected in the overall results in table 14. 

Engagement with local higher-risk suppliers




Number of GSS% of GSS

Assessments completed

5425%

Assessments in analysis

21%

Assessments in progress

5425%

Assessments not yet started

11050%

Total higher risk local suppliers approached in first campaign

220100%

This response rate is typical of first campaigns in these types of markets and we recognize that implementation of this engagement and assessment approach will be challenging. As expected, the scoring of the completed assessments also indicates the long-term nature of the program. 

We request suppliers who score below our designated risk threshold score on any component, or on overall score, work with us to develop corrective action plans. We are unlikely to terminate supplier relationships immediately on the basis of the E-TASC score alone, unless we identify other additional red flags, such as bribery and corruption issues. With any suppliers falling below a threshold, we are discussing how to prioritize areas for improvement.

1 Global strategic suppliers are defined as those having both high supply risk and high profit impact (key to successful business delivery).

Assessment Results




% of Local Suppliers

Suppliers scoring lower than overall risk threshold

22%

Suppliers scoring lower than environment risk threshold

28%

Suppliers scoring lower than labor risk threshold

28%

Suppliers scoring lower than fair business practice risk threshold

37%

Suppliers scoring lower than supplier management risk threshold

48%

 

Conflict Minerals

Responsible sourcing of minerals is covered by our SCoC, and encourages suppliers to “exercise specific due diligence on the source and chain of custody of these minerals and make their due diligence measures available on request”. Through our membership of GeSI we support a number of programs relating to where the production of the metals used in ICT components may fuel conflict or have associated social, environmental and humanitarian issues. GeSI takes a three-pronged approach to improve the transparency and traceability of mineral sourcing, focusing on key stages in the supply chain: 

  • Tracing minerals from the mine to the smelter by supporting a ‘bag and tag’ in-region sourcing program.
  • Identifying and validating conflict-free smelters for suppliers to source metals from through a Conflict-Free Smelter Program developed through a multi-stakeholder process.
  • Supporting relevant stakeholder efforts such as the Public-Private Alliance for Responsible Minerals Trade, a joint initiative between governments, companies, and civil society to support supply chain solutions to conflict minerals challenges in the Democratic Republic of Congo and the Great Lakes Region of Central Africa.
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