HP Global Citizenship Report
Supply chain responsibility
The Focused Improvement Supplier Initiative (FISI) employed organizations experienced in conducting training in China to provide monthly social and environmental management training sessions for 30 of our suppliers. The training organizations, ENSR, Environmental Resources Management, GED, Verité and WSP Group, delivered a total of 40 days of training to approximately 70 participants in Shenzhen and Kunshan. Participants included factory managers as well as managers in quality, human resources and environment, and health and safety. After the training, suppliers forward HP monthly progress reports to measure its impact.
Benefits of training
FISI connects suppliers with resources, skills and a network of experts to facilitate systematic improvement in SER management. The FISI training sessions covered a wide range of issues, such as productivity, working hours, wages and benefits, worker communications, management systems, root cause analysis, Chinese laws and regulations, the environment, health and safety, and the European Union’s Restriction of Hazardous Substances and Waste Electrical and Electronic Equipment directives. The training also introduced new subjects such as supplier scorecards and NGO campaigns.
FISI demonstrates HP’s commitment to raising awareness of SER management and strengthening our suppliers’ capabilities. Last year, the program tested curriculum design methods and training resources while promoting dialogue among buyers and suppliers. Participants were encouraged to share best practices and take part in training exercises modeled on real situations. For example, in a production line simulation, participants assumed the roles of workers, buyers and managers and adjusted key production factors, such as inventory, overtime, delivery time and materials, and then tracked progress and analyzed the reasons for higher and lower productivity levels.
Opportunities for improvement in future FISI training
Participants in 2007 agreed that future FISI training would be improved by increasing the focus on SER metrics and providing additional opportunities for buyer-supplier interactions. Although it was originally assumed that trainees would feel more comfortable if buyers were not present, FISI was found to be an ideal platform for buyers and suppliers to talk to each other.
In 2007, the NGO Students and Scholars Against Corporate Misbehavior (SACOM) reported that certain HP suppliers had failed to achieve labor and environmental standards.
Because of our extensive engagement with suppliers and NGOs, we were able to bring the parties together. As a result, SACOM is working on improvements with specific suppliers in their factories. In addition, they are participating in the Foreign Investment Advisory Service (FIAS) pilot program to conduct worker rights training in the factory. SACOM is visiting factories and interviewing workers, and the findings will form the basis for participating suppliers and SACOM to establish a remediation plan. Improvements made by the suppliers will be judged by the third-party NGO. The level of openness and cooperation between the suppliers and SACOM is rare and encouraging and provides an excellent model for improved collaboration and dialogue across our China supply base.
HP is participating in a multi-stakeholder capability-building initiative to raise standards in the electronic sector in southern China. The initiative is led by FIAS, a part of the World Bank that advises the governments of developing countries about improving their investment climate for domestic and foreign investors.
This initiative engaged government, civil society, supplier industry associations and companies. The participants included FIAS, Business for Social Responsibility, Shenzhen Electronics Industries Association, Electronic Industry Citizenship Coalition Group and Global e-Sustainability Initiative (GeSI). A broader group of stakeholders, including suppliers, NGOs and leading companies in other sectors, also provided input.
The group published a final report based on the research gathered from all stakeholders in the project’s first phase. Recommendations included piloting worker hotlines in supplier factories, providing worker rights training, and establishing environmental, health and safety committees. Two HP suppliers are participating in these pilots.
The Partnership for Sustainable Competitiveness is funded by the European Commission's program for Mainstreaming Corporate Social Responsibility among SMEs (small and medium-size enterprises—those with 250 or fewer employees). Five major HP suppliers nominated 15 of their suppliers from the Czech Republic, Hungary and Poland to participate.
HP worked with a group of first- and second-tier suppliers over 18 months ending in January 2008 to help small suppliers develop social and environmental responsibility expertise and understand the connection between improved standards and business efficiency. The project also helped our first-tier suppliers learn how to manage and build capabilities in their next-tier suppliers. The project achieved its main goals of auditing participating suppliers and then training them based on the audit results. A final report was published with guidelines for multinational companies on how to promote social and environmental responsibility among their suppliers, focusing on small and medium businesses. By following these guidelines, multinationals will be able to better equip their suppliers to effectively compete in the global market while maintaining and improving their social and environmental standards. The report also highlights the crucial role that multinationals’ first-tier suppliers can play in promoting corporate responsibility to SMEs further along the supply chain.
During assessments performed by HP auditors and observers from TCC (now the Danish Centre for CSR in the Danish Commerce and Companies Agency) and HP's first-tier suppliers, the main nonconformances that were identified related to emergency preparedness, physically demanding work, machine safeguarding, the handling and control of hazardous substances (although the amount of chemicals used is relatively small), and a lack of management systems for both labor and environment, health and safety (EHS).
A supplier survey at the end of the training found the program highly beneficial. The survey identified three major issues:
Joska Andorka Gal, director, Wolters Hungaria KFT, said at the closing meeting:
Following our initial social and environmental responsibility (SER) audits in 2006, which identified significant shortcomings in Central Europe, we have been encouraged by the proactive approach adopted by key suppliers in the Czech Republic. Below are three examples of their progress identified during our 2007 audits.
In the first case, our audit in early 2006 revealed that a supplier’s purchasing organization lacked awareness of the Electronic Industry Code of Conduct (EICC). As a result, the company did not have a management process to enforce the requirements of the code with its suppliers. HP requested corrective actions.
In the second case, our initial audit found another supplier had poor awareness of EICC requirements. In part, this may have been because the company had established its site shortly before the audit and was still developing SER management systems.
Our follow-up audit in 2007 found that the supplier had developed policies and management systems and processes to meet EICC requirements. Representatives from the company’s other sites in the Netherlands and Ireland were present during the follow-up audit, and the supplier is now proactively implementing the EICC consistently at all its factories. It has also branded its program internally, making a clear companywide commitment to labor and environmental standards.
The third example from the Czech Republic also involved noncompliance with EICC requirements. When we first audited this supplier’s assembly site in early 2006, we discovered that the company did not fully understand some of the code’s provisions and had inadequate management systems addressing labor and health and safety standards.
In our follow-up audit at the supplier’s new site last year, we confirmed that all but one of our initial findings had been addressed. Importantly, the company had deployed SER management systems to sustain the improvements it had made.
In a groundbreaking collaboration in 2006, National Chamber of the Electronics, Telecommunications and Informatics Industry (CANIETI) members and a Mexican NGO, Centro de Reflexión y Acción Laboral (CEREAL) in Guadalajara, agreed to work together to improve labor conditions in the electronics sector through worker communications and education. CEREAL serves as a liaison and grievance management organization for workers to raise concerns to several factory management teams.
A representative from HP Mexico, who is the facilitator and spokesperson for CANIETI, facilitated the collaboration by establishing communication channels between CEREAL and the electronics companies. Every two months CANIETI meets with CEREAL to resolve issues and define worker response strategies. Communications are working so well that in most cases, CEREAL raises issues directly with the electronics companies and without the need for CANIETI to mediate. Instead, the CANIETI team acts mainly as an escalation body to which issues the parties cannot resolve directly can be referred for resolution.
In 2007, HP Mexico also participated in the Electronic Industry Citizenship Coalition-CEREAL meeting to encourage a constructive response to the CEREAL report on working conditions in the Mexican electronics industry ( See "Electronics multinationals and labor rights in Mexico").
Following HP’s assessments, audits and training, Pegatron Mexico has designed and implemented its own SERASUS Management System, based on the international standards ISO 14001, OHSAS 18001 and the EICC. The management system aims to meet customers’ requirements on environmental protection, labor, and health and safety.
Notable features of the SERASUS Management System include zero tolerance of sexual harassment, an open door policy for all employees, a dedicated area for social workers and education for employees about the environment.
Pegatron believes that focusing on social and environmental responsibility issues has helped reduce employee turnover and improve product quality. The improved labor system has reduced the number of accidents and injuries and lowered insurance costs. A systematic approach to managing environmental issues has helped to ensure environmental compliance.