Third-party audits

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From May through September 2007, HP engaged Environmental Resources Management (ERM) and Verité to conduct verification audits of 18 suppliers in China and Thailand, including those suppliers identified in NGO reports as having poor standards. Each facility was audited for compliance with HP, Electronic Industry Code of Conduct (EICC), Verité, ERM, ISO, OHSAS and ILO standards. Policies, procedures, systems, and implementation were evaluated pertaining to labor rights, compensation and hours, health and safety, and the environment. Verité and ERM analyzed the NGO report findings alongside their own audit findings and issued comprehensive audit reports for each facility. HP utilizes third-party auditors to confirm HP’s internal audit findings as part of our continual improvement process. The results of the third-party audits correspond to what HP’s internal auditors typically find in audits.

The most prevalent nonconformances found by Verité and ERM are also the most common issues identified by HP internal auditors. These include:

• Excessive, and often mandatory, overtime hours in violation of the EICC code and local and/or national labor laws
• Discrimination on the basis of pregnancy and age
• Lack of systems to manage and control health and safety in the factories in China
• EICC code awareness and alignment at the management level but not adequately communicated to the workers

In two factories, HP tested a new approach to taking corrective action. Verité conducted Management Action Planning sessions with these suppliers, working with the supplier’s management to identify the root cause of nonconformances found during the audit and to establish sustainable corrective actions to fix the issue. Both of these suppliers have made improvements in their systems and have a deeper understanding of how to identify the root cause of issues and develop sustainable corrective actions.

In 2006, we engaged ERM to provide an independent review our supply chain social and environmental responsibility program. ERM assessed our policies, procedures, tools, resources, audit model and auditor qualifications. In 2007, we continued to work on the recommendations provided by ERM as part of its review, and we plan to have another independent review conducted in 2008. See a copy of ERM's unedited report.