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We continue to develop our reporting of our supply chain’s performance. This year we have enhanced the way we report supplier performance and our efforts to improve working conditions throughout our supply chain.  Key information is reported through an interactive tool and can be viewed globally or by region. The online tool aggregates the results of HP’s audits and outlines the major causes of nonconformance. It also describes improvements our suppliers have made and links to case studies highlighting specific ways we’ve helped strengthen their capabilities. In addition to enhancing the way in which we report audit results, HP has also disclosed a list of our key suppliers. This list includes contract manufacturers, electronic manufacturing services providers, original design manufacturers, and commodity suppliers.  HP is sharing this list with the intent of promoting transparency and progress in raising social and environmental standards in the electronics industry supply chain.

Our SER program follows four phases that promote a continual improvement cycle in supplier companies (see table). HP has developed a network of local auditing teams along with independent verification efforts in the regions from which we purchase. We do not rely solely on supplier certification to external standards such as ISO 14000, OHSAS 18000 and SA 8000. Our experience has shown that standards vary even among certified companies and that some suppliers who are not certified have equally rigorous SER management systems.

The following are highlights of the program results for 2007.  For detailed results see HP’s Global Citizenship Report.
Supply chain SER management system
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 has 1-2 year ongoing training courses for more than 50 key first and second tier suppliers in 2006.

Held HP supplier forums in China, India, Mexico and Singapore with more than 150 supplier representatives in 2006.

Capability Building

We promote sustainable improvement in our suppliers’ factories. We believe that focusing on management systems and analyzing the root causes of nonconformances increases the probability of lasting change. To achieve this, in addition to auditing our suppliers, we provide training and support to build their internal capabilities.

Sustainable change in the factory requires participation at all levels: factory owners, senior management, product line and mid-level factory floor managers and workers. During 2006, HP started two capability building projects: the Focused Improvement Supplier Initiative (FISI) in China and the Central Europe Supplier Responsibility (CESR) Project.

» View capability building information

Monitoring effectively

Auditing is central to our SER program. Since 2004, we have conducted 410 audits, including 252 initial and 158 follow-up inspections at sites employing more than 400,000 workers. Through these audits, we examine suppliers’ management processes and identify nonconformances with our SER program.


2007 audit results


Audits conducted, 2004-2007 [cumulative]
  Audits conducted
Location Initial Follow-up # of workers at sites audited1
Greater China      
  China 111 98 266,500
  Taiwan 11 2 15,000
Central Europe      
  Czech Republic 18 10 9,500
  Hungary 13 4 12,000
  Poland 4 1 400
Latin America      
  Brazil 9 3 7,000
  Mexico 22 21 18,000
Asia Pacific      
  India 3 0 350
  Indonesia 6 0 5,000
  Korea 5 0 1,500
  Malaysia 15 6 21,000
  Philippines 5 1 9,500
  Singapore 20 5 11,000
  Thailand 10 7 39,500
Total 252 158 416,250

Total major nonconformances by EICC section for global audits of high-risk suppliers, 2005-2007 [% by section]
Health and safety 30%
Labor 25%
Labor management system 16%
Environment 12%
EHS management
system
9%
General 5%
Ethics 3%

The following chart represents the top ten provisions with major nonconformances in initial audits from 97 of our key supplier sites and the improvements measured through subsequent verification audits at those sites. The data include only sites for which verification audits were conducted; these sites tend to have higher initial levels of nonconformance than other audited sites.

Percentage improvement of major nonconformances, 2005-2007 [based on verification audits of 97 sites]
 
Major nonconformances are Supplier management, Nondiscrimination, Dormitories and canteens, Emergency preparedness, Physically demanding work, Hazardous substances, Labor management system (1), Industrial hygiene, Wages and benefits, Working hours

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.

» View HP Global Citizen Report (regional audit data and case studies)

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