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We have been implementing the Social and Environmental Responsibility (SER) policy and Supplier Code of Conduct (pdf) using a phased approach. In 2003, we introduced the Code to our top 50 suppliers and required them to achieve a new set of SER expectations defined in the Code.
To date, we have introduced the Code to 475 of our high-priority suppliers, addressing a total of 98% of our purchasing expenditure for product materials, components and manufacturing, transport and other services. The following are highlights of the program results for 2005. For detailed results see HP’s Global Citizenship Report. |
Progress summary table – cumulative through 2005 |
| Phase 1: Introduction |
Phase 2: Assessment |
Phase 3: Validation |
Phase 4: Continuous improvement |
| 475 suppliers (721 sites) risk assessed and engaged |
| 363 suppliers signed SER agreements |
| Based on risk level, suppliers may be moved to phase 2 |
(28 suppliers are inactive)
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| 415 suppliers (595 sites) completed self-assessments |
| HP provided 319 suppliers feedback |
| 93 suppliers responded with improvements |
224 suppliers are ISO 14001 certified
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| HP audited 78 suppliers (130 sites) |
| 21 Corrective Action Plans in progress between supplier and HP |
| HP conducted 2-3 rounds of verification to corrective actions |
HP decided not to audit 332 suppliers (547 sites) due to low risk
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Held HP supplier forum in Shenzhen, China with over 330 supplier representatives
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HP held two supplier forums in Mexico City and Guadalajara, Mexico with more than 40 services suppliers
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Held auditor training sessions in China, Mexico, Brazil and India
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Industry and Stakeholder Activities. We are an active member of the Global e-Sustainability Initiative, play a lead role as the Vice Chair of the Electronic Industry Code of Conduct Implementation Group and are also a member of the EICC Steering Committee. HP has shared our knowledge, templates and data with industry groups to support the creation of industry-wide, standardized tools and led the development of a common supplier self-assessment questionnaire that received more than 900 comments from companies, NGOs and socially responsible investment firms. The website www.eicc.info describes many of the activities we are working on based on the common code framework.
Stakeholders help us refine and target our SER program. During 2005, we participated in quarterly stakeholder forums in coordination with the EICC Group and GeSI. These provided opportunities to engage with a range of organizations including the Catholic Agency for Overseas Development (CAFOD), Center for Labor Reflection and Action (CEREAL), Ethical Trading Initiative, F&C Asset Management, International Labor Organization and World Wildlife Fund. In addition, HP has met regularly with stakeholder groups, including Interfaith Center on Corporate Responsibility, Domini, CAFOD, CEREAL, As you Sow, F&C Asset Management, Hong Kong Christian Industrial Committee and Silicon Valley Toxics Coalition to discuss supply chain activities.
Building Supplier Capacity. HP’s program is designed to create sustainable improvements in our suppliers’ practices where they fall short of the Code. To achieve this, we strive to build the capacity of suppliers to manage SER issues effectively. We first make the business case to our suppliers’ management, backed by a commitment to effective monitoring and a willingness to terminate the business relationship if cooperation is not forthcoming. We have learned that lasting change in the factory requires participation at all levels: factory owners, senior management, product line and mid-level factory floor managers, and workers. In 2005, HP held three supplier capacity-building events, one in China and two in Mexico. Through the events (as well as self-assessments and onsite audits), we taught suppliers a systematic process they could use to sustain change on their own. The events promoted understanding of HP’s objectives and expectations and suppliers were encouraged to propose ideas and share best practices. |
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A full understanding of the issues and how to manage them cannot be achieved from a remote corporate office. Therefore, HP has invested in a network of local expert auditing teams in the countries from which we purchase. Our audits focus on management systems to ensure conformance to our Code. HP has decided not to rely solely on certification to external standards such as ISO 14000, OHSAS 18000 and SA 8000, although they can be very effective when correctly implemented. Our audits have shown that standards vary even among certified companies and that some suppliers that are not certified have equally rigorous SER management systems in place.
The core aim of our SER program is to achieve long-term sustainable change by encouraging suppliers to create their own management systems. We have learned from industry sectors with more than a decade of experience in supply chain auditing and concluded that sustainable change will occur only when suppliers make the connection between employment standards and business profitability. Monitoring, although essential, will not alone deliver long-lasting change. We are aware of the trend in the apparel sector to publish the names and addresses of suppliers. HP has decided not to follow this practice. In making this decision, we have balanced our commitment to transparency with protecting HP’s commercial interests. In the electronics sector, suppliers are of strategic importance and a closely guarded source of competitive advantage. This differs from the apparel sector where supplier relationships are frequently transient in nature. |
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In 2005, HP audited 54 suppliers at 85 sites in Mexico, China, Thailand, Malaysia, the Philippines, Indonesia, Korea, Czech Republic, Poland and Hungary. The charts (below) illustrate aggregated audit results of nonconformances to HP’s Supplier Code of Conduct, showing findings by code element and differences between geographic regions. As expected, the audits we performed in 2005 identified a higher rate of Code nonconformances than the audits of our largest suppliers in 2004. This reflects our policy of auditing suppliers based on their high risk profile. The 2005 data summarized in the tables and charts is not, and is not intended to be, representative of HP’s supply base as a whole or the bulk of our product materials expenditures. |
HP Social and Environmental Responsibility audit conformance summary table, 2005 [% of nonconformance among sites audited] |
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| HP takes every nonconformance seriously and treats it as an opportunity to work with suppliers to improve performance. Several case studies illustrate how we are working with suppliers to address specific issues identified in their facilities. |
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Goals for 2005 |
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Training
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- Train HP supplier relationship managers responsible for the 450 suppliers engaged by the program in supply chain SER management processes.
Progress: Met. Training in Supply Chain SER Management processes was provided to the Supplier Relationship Managers responsible for the 450 suppliers.
- Develop a supplier training program.
Progress: ongoing. Benchmarked existing supplier SER training programs with universities and NGOs in China. HP’s SER team developed and held an HP supplier forum in Shenzhen, China with over 350 supplier representatives. HP held two supplier forums in Mexico City and Guadalajara, Mexico with over 40 services suppliers. HP is working with other companies and NGOs to develop an industry supplier forum.
- Conduct second phase of the internal auditor training program.
Progress: Met. Held auditor training sessions in China, Mexico, Brazil, and India.
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- Add Supplier Code of Conduct to all product materials supplier contracts.
Progress: Met. The Supplier Code of Conduct/EICC has been added to all product materials supplier contracts.
- Audit a minimum of 75 supplier sites.
Progress: Met. Fifty-four suppliers (85 sites) audited in FY05. Cumulative total since audit program inception FY04/FY05 = 78 suppliers (130 sites).
- Complete self-assessments with an additional 100 suppliers.
Progress: Ongoing. One hundred suppliers risk assessed and engaged in program at appropriate level. Fifty-six suppliers (60 sites) completed self-assessments. Eleven low priority suppliers; required to complete SER agreement only.
- Extend SER program to logistics and service suppliers.
Progress: Ongoing. The program is being extended to logistics and service suppliers. The EICC IG group is working to modify the tools to be applicable to all suppliers. Held two training sessions with service suppliers in Mexico.
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- Work with industry partners and competitors on standardized assessment, auditing and training tools.
Progress: Met. Involved with industry partners and competitors via EICC and GeSI on standardized assessments, auditing and training tools. A new version of the EICC was released in October 2005. A new industry-wide self-assessment questionnaire was released.
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Goals for 2006 |
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Training
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- Design and conduct research on training in Supply Chain SER Expand dialogue cross-industry, government regulators and NGOs on supplier and worker education and training.
- Conduct auditor trainings and supplier forums in India, Mexico, Eastern Europe and China.
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- Conduct initial risk assessments with additional 50 major product materials suppliers and obtain self-assessments and agreements from high priority suppliers.
- Conduct initial risk assessment and extend Supply Chain SER policy and program to relevant, high priority operations, services and logistics suppliers.
- Conduct new and follow-up/verification audits at 90 sites.
- Select 3rd party provider and conduct external verification of HP audits.
- Redesign HP’s internal processes and tools to align with the new common industry templates and e-tool.
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- Design and implement standardized assessment and auditing tools with electronic industry including EICC and GeSI partners.
- Begin work with cross industry partners and 3rd party auditing firms on improving worldwide monitoring standards.
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