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HP Global Citizenship Report  >  Supply chain responsibility

Assessing conformance

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FY07 Global Citizenship Report

» Introduction
» Global citizenship at HP
» Ethics and compliance
» Supply chain responsibility
» Performance
» Audit results
» About HP’s supply chain
» Approach
» Standards
» Assessing conformance
» Collaboration
» Third-party audits
» Case studies
» Goals
» Perspective
» Supplier diversity
» Climate and energy
» Product reuse and recycling
» Product innovation
» Operations
» Privacy
» Employees
» Social investment
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HP's supply chain SER management system

Our social and environmental responsibility (SER) program follows four phases that promote continual improvement in supplier companies (see table). HP has developed a network of local internal auditing teams backed by independent verification in the regions where we purchase. We do not rely solely on supplier certification to external standards such as ISO 14000, OHSAS 18000 and SA 8000 because we have observed that standards can vary among certified companies and that suppliers without certification can have equally rigorous SER management systems. In 2007, we increased our work to achieve continual improvement, focusing on training programs and partnerships (see Collaboration).

Supply chain SER management system
Performance measurement Continuous improvement
Stakeholders: brands; supplier owners, managers and workers; auditors; NGOs; governments; consumers
Phase 1:
Introduction
Phase 2:
Assessment
Phase 3:
Validation
Phase 4:
Continual improvement
HP conducts preliminary risk assessment of suppliers.

For risk factors see: Risk-based program.

Suppliers identified as potential SER risks are prioritized for introduction to HP's SER requirements.
SER requirements are confirmed in the HP Supplier contract.

Supplier completes an SER agreement and a self-assessment for each factory manufacturing for HP. HP reviews the assessment and provides feedback, which often leads to ongoing dialogue.

HP determines if the supplier is a priority for an onsite audit.
HP conducts on-site audits of selected sites. When audits reveal nonconformance with code provisions, we work with the supplier to establish a corrective action plan.

After implementation, we re-audit (several times if needed) and verify that the nonconformance and its causes have been addressed.

We work with several organizations to identify key education areas, and we help suppliers build capability by acquiring the necessary skills, tools and expertise to continually improve.

HP collaborates with NGOs throughout the world (China, Thailand, India, Eastern EU and Mexico) to work directly with workers and management on root causes of nonconformance.
Progress 2007
611 suppliers (911 sites) were risk assessed and engaged. 460 suppliers (697 sites) completed self-assessments.

HP conducted more than 150 initial and follow-up site audits of 106 suppliers in 2007.

HP audited 160 suppliers (including sub-tier) at 252 sites.

242 corrective action plans are in progress between supplier and HP.
In China and Central Europe, HP completed training courses for more than 50 first- and second-tier suppliers.

HP held supplier forums in China, India, Mexico and Thailand with more than 150 supplier representatives.

 

How we assess potential new suppliers

HP integrates new suppliers into the supply chain by following the Procurement Management Process. This requires suppliers to complete the SER agreement and the self-assessments. Suppliers then pass into our supply chain SER program for further assessment and continual improvement.

How we assess conformance

In assessing conformance with our Supplier Code of Conduct, we seek long-lasting change. A supplier monitored for specific areas of nonconformance may correct those particular issues but allow a new problem to occur. As a result, we believe in combining monitoring for specific areas of nonconformance with the development of management systems.

How we respond to nonconformance

As part of our supplier SER program, HP employees conduct supplier audits. An external organization verifies a sample of these audits. Nonconformances to our Supplier Code of Conduct are categorized as "major," "minor" and "observation." HP ranks noncomformances using the standard ISO guidelines:

  • Major nonconformance: A significant failure in the management system that affects the ability of the system to ensure that conditions conform to the HP Supplier Code of Conduct or General Specification for Environment.

    Major nonconformances include any "zero tolerance" items identified, such as underage child workers (below the legal age for work or apprenticeship), forced labor, health and safety issues posing immediate danger to life or serious injury, and violation of environmental laws posing serious and immediate harm to the community. Although not common, the auditor must report any zero tolerance violation immediately to the supplier, the Supply Chain SER Program Office and the HP Supplier Relationship Manager. The supplier must correct zero tolerance items in a short and agreed-upon timeframe, depending on the nature of the problem.
  • Minor nonconformance: Not a systemic problem and typically an isolated finding, such as an overdue corrective action from an internal audit or a procedure that has not been revised to reflect a change in regulations.
  • Observation: An observation is not considered to be a nonconformance to the code. It is typically recognition that there may be a better way to monitor a process or document a procedure.

HP requires suppliers to provide a written corrective action plan within 30 days of receipt of the site audit report. The plan must detail how the supplier will correct all identified nonconformances.

When a major nonconformance is identified, the supplier has up to 180 days to correct it, depending on the severity. Suppliers have 180 to 360 days to address minor nonconformances.

The HP supplier relationship manager and the audit team monitor supplier progress closely to ensure that the supplier resolves all major nonconformances within the specified time. We believe that remaining engaged with suppliers and providing support and tools is the best way to help them improve their performance. If a supplier rejects this approach, HP makes it clear that we will not tolerate serious or repeated violations of our code and will terminate the relationship. Because terminating a contract can have negative consequences, including the loss of jobs for workers, we prefer to collaborate with suppliers to improve conditions at their factories.

 

 

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