We use supplier audits to verify conformance with HP's Electronic Industry Code of Conduct (EICC) and establish whether the supplier has systems in place to facilitate continued conformance. Audits also enable HP to identify pressing issues and build corrective action plans with suppliers to address them. Our capability building programs train suppliers in areas of concern revealed in audits.
In 2011, HP plans to perform the first audits of our nonproduction suppliers. Nonproduction suppliers in some locations, such as call centers and temporary labor agencies, still present social and environmental responsibility risks, for example, related to excessive working hours and treatment of migrant labor. Global nonproduction suppliers generally have corporate strategies to mitigate these risks, and in 2011 we will audit five of these suppliers in China, India, and Mexico to confirm that local practices reflect those strategies.
Achieving suppliers' cooperation is essential to creating an environment conducive to lasting improvement. We usually announce audits in advance, and conduct them in the presence of facility management. Although this could allow suppliers to present an artificially positive picture, skilled local auditors and our robust audit methodology provide reasonable safeguards against suppliers hiding issues, and we believe this level of collaboration is an important aspect of building capability and helping management understand the issues. Announcing audits also contributes to building and maintaining strong relationships.
Unannounced investigative audits are an exception. We use these in response to a serious, credible allegation. Three such instances occurred in 2010, relating to a National Labor Committee report (see Measuring performance) and issues at Foxconn.
Building suppliers' audit capabilities
We have begun to partner with some of our longer-standing suppliers to improve their own supplier auditing capabilities. This forges a better understanding of the requirements and processes needed to resolve issues, while encouraging greater ownership of the audit results, and of the overall performance. In 2010, HP trained SER auditors of a manufacturing partner in Latin America, using the new Electronic Industry Citizenship Coalition Validated Audit Process (VAP) (see side panel). The training will also help build participants' ability to audit their own suppliers (our tier-two suppliers). Around 25 second-tier supplier audits will be performed by first-tier suppliers using the VAP methodology in 2011.
By building suppliers' internal audit competencies, we also allow our auditors to focus on capability building. We have trained ten HP auditors as SER consultants to suppliers, helping suppliers improve performance and strengthen their SER management systems.
HP engages third-party audit firms, including Environmental Resources Management (ERM) and Verité, to conduct verification audits of our suppliers, including suppliers associated with a specific allegation in nongovernmental organization (NGO) reports. We also use their findings to validate our internal audit results.