Supply Chain Engagement
We work closely with our suppliers and industry peers to advance Supply Chain Social and Environmental Responsibility (SER). With suppliers, we communicate our standards, examine their programs and performance, and engage with them to educate, collaborate and drive improvement. As a member of the Electronic Industry Citizenship Coalition (EICC), we work with our peers to improve industry-wide SER practices. EMC co-chairs the EICC Environmental Sustainability Working Group, and participates in other EICC working groups, including Extractives (Conflict Minerals), Learning & Capabilities Building, and Tools Management.
Setting Standards, Monitoring Performance, and Holding Suppliers Accountable
We set standards, monitor performance, and hold suppliers accountable through a multi-step process. Suppliers are expected to 1) acknowledge our Supplier Code of Conduct, 2) complete Self-Assessment Questionnaires (SAQs), 3) complete audits, when required, and 4) correct any issues identified through the SAQs or audits. We follow EICC standard protocols for this process in an effort to enforce industry best practices while also minimizing survey and audit fatigue.
In 2009, we began evaluating SAQ data to better understand the SER status and risk in our supply chain. We have increased the number of audits conducted each year as the program has matured.
Supplier Code of Conduct
EMC asks suppliers to acknowledge our Supplier Code of Conduct, which sets the baseline social and environmental responsibility requirements for companies doing business with EMC. (Tier 1 direct suppliers, defined as suppliers that sell to EMC materials used directly in our products, and managed Tier 2 direct suppliers.) Our Supplier Code of Conduct includes the industry-standard EICC Code of Conduct and supplemental guidance from EMC.
The EICC Code establishes standards to ensure that working conditions in the electronics industry supply chain are safe, that workers are treated with respect and dignity, and that business operations are environmentally responsible. The Code describes standards in the following five areas:
- Health & Safety
- Management Systems
EMC supplemented the EICC Code with additional guidance in the following key areas:
- Industry Standards
- Compliance with Applicable Laws and Regulations
- Sub-Tier Management
- Combating Trafficking in Persons
- Gift Giving
In 2011, 99 percent of suppliers acknowledged our Supplier Code of Conduct. We will refresh these acknowledgements in 2012, following the release of the updated EICC Code.
Self-Assessment Questionnaires and Audits
The SAQ reviews policies and procedures – both at corporate and individual facility levels – to determine how well a supplier is implementing and adhering to the standards in the EICC Code. EMC uses the SAQ results to gain visibility into the supply chain and to identify areas of potential risk. We require SAQs from more than 80 percent of our direct suppliers by spend.
The audit is an on-site assessment of practices and conditions. We use third-party auditors to identify areas of concern. Each audited site must create an approved Corrective Action Plan to address any findings. EMC monitors suppliers’ progress on these corrective actions until they are complete.
Our audit list prioritizes high-risk suppliers and is informed each year by geographic risk analysis combined with spend data, SAQ results, and on-the-ground EMC staff knowledge. Geographic risk is determined using multiple global indicators of risk in areas that include human rights, ethics, and environmental perceptions and performance. Our goal in 2012 is to audit 20 percent of our high-risk supplier facilities.
Analysis of our audit results over the last two years (2010-2011) shows results similar to those found throughout the industry. Labor, Labor & Ethics Management Systems, and Health & Safety continue to be the biggest problem areas across geographies, with working hours accounting for the largest percentage of overall findings. Follow-up audits show considerably fewer findings, suggesting that improvements are being made. We are working to identify areas where additional training or stronger incentives could address the root causes of the findings.
2010-2011 Audit Findings by Type
EMC believes that more positive impact will result from continuing to do business with, rather than disengaging from, suppliers who have challenges as long as they are committed to improve. Working with our suppliers to remedy issues raised helps the workers in their factories and the communities in which they operate. We have seen multiple instances where our continued engagement has ultimately resulted in significant improvements being made.
Incorporating SER into Supply Chain Operations and Strategy
Integrating SER into EMC’s business processes is critical. 100 percent of targeted EMC Global Supply Chain Management employees have been trained on our Supplier Code of Conduct. SER indicators are also included in our supplier performance scorecard, which guides our purchasing decisions. In 2011, we began incorporating SER requirements and performance results into quarterly business reviews with suppliers in order to raise awareness and promote accountability. In 2012, we will continue and add to these efforts.
We are excited to be joining the Stanford Initiative for the Study of Supply Chain Responsibility which seeks to illuminate methods for taking supply chain SER management to the next level, and to quantitatively analyze the correlation between business results and responsible supply chains. We will use this information, along with other analyses, to better understand, communicate, and translate into action the most strategic and impactful actions that will help EMC achieve environmental, social and business success.
EMC is committed to the ethical sourcing of minerals used in our products. See our Statement on Conflict Minerals.
Tracing minerals that are “conflict-free” is a complex process. In 2011, we launched a pilot survey of our suppliers to determine the source of the minerals used in our products. We intend to roll out this survey to all of our suppliers in 2012.
We are also working diligently with other stakeholders to improve and systematically address this critical issue in the global supply chain. We are members of the EICC-GeSI Extractives workgroup, which is developing common reporting protocols for the supply chain and driving programs for the responsible sourcing of minerals such as Conflict-Free Smelter Validation. Through the EICC, we also support the U.S. State Department’s Public-Private Alliance for Responsible Minerals Trade. This joint initiative between industry, governmental agencies, and civil society was formed to support the development of solutions to source responsibly-mined, conflict-free minerals from the Democratic Republic of Congo and the region.
A key challenge in advancing Social and Environmental Responsibility is transparency and influence throughout the supply chain. EMC suppliers are at varying stages of maturity in their SER reporting, and the data and information we receive is not always complete or consistent with industry standards. We also work with companies operating in different cultures with different incentives, needs, priorities, resources, and constraints. As we develop our SER program, we continually seek to better understand what we can do to effectively drive change, and to prioritize accordingly.
In 2012, we will continue to mature our monitoring and reporting expectations while also building knowledge in our supply base and emphasizing the importance of good practices through the integration of SER into business decisions. We will also encourage all of our suppliers to publish sustainability reports that align with Global Reporting Index (GRI) standards.
As our program continues to mature and the quality of our data improves, we can undertake more rigorous analyses to inform and transform our strategies.