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Changing the supply chain equation

Changing the supply chain equation

HP is the world’s largest information technology (IT) company and has the industry's most extensive supply chain—with more than 700 production suppliers working in more than 1,200 locations worldwide and employing more than 300,000 people. We embrace the challenge of raising standards in our supply chain and have been driving social and environmental responsibility (SER) progress for ten years. The insight we have gained helps us to continue to make improvements in our global production network even as we continue to uncover new challenges.

Raising standards through collaboration

When we founded our program in 2000, we designed it to be collaborative and to promote continual improvement in supplier facilities. Working with industry and community groups and other stakeholders helps us widen and strengthen our influence. Early in our program, we co-led the development of the Electronic Industry Code of Conduct (EICC), the standard which is now applied across the industry’s global supply chain and which HP has adopted.

Based on this code of conduct, our work with suppliers follows a four-phase process. In phase one, we assess suppliers’ risks and establish a contractual framework for SER performance expectations. In phase two, HP’s suppliers conduct self assessments that help them to understand, prioritize and address specific risks. Higher-risk suppliers move into a third phase of validation and improvement through onsite audits. In the fourth phase, we address needs for supplier capability building and education and implement regionally based programs designed for continual improvement.

HP has engaged more than 600 suppliers in this process and conducted over 500 supplier site audits since 2000. Since then, suppliers’ performance has improved and the number of nonconformances seen in our earlier audits has decreased in many areas.

Engaging locally and regionally for long-term success

Improving supply chain standards is an ongoing process, and collaboration is vital to our program’s success. While assessing conformance is essential, our goal is long-lasting change. To achieve this we have found it important to go beyond assessment and actively support suppliers in developing their labor, health and safety, environmental, and ethics management capabilities.

HP provides the level and types of support appropriate for each region’s specific needs within our supply chain. We invest in supplier training, often in collaboration with local nongovernmental organizations (NGOs) and industry partners.

Engaging locally ensures our programs address the area’s key challenges and concerns raised by audit results, while strengthening our relationships. For example, in 2009 we concluded a two-year project with local training providers and the Hong Kong–based labor rights organization Students and Scholars against Corporate Misbehaviour to conduct programs in two supplier factories in China. The pilot program, which included labor rights training for workers, was the first of its kind in the IT industry. The program trained more than 4,000 workers, as well as dozens of workers’ representatives, and tested the feasibility of a third-party hotline for workers to raise their concerns.

Another example is the Health Enables Returns project (HERproject). HP joined the HER project in 2008 in Mexico, initiating a health training program at two supplier factories. The program helps female workers meet their health needs by improving their awareness and access to services through partnerships between companies, factories and local nonprofit service organizations. Training involves health assessments of female workers followed by peer health educator training. Supplier management has responded positively as well, satisfied by the positive impact on health, workplace satisfaction, and turnover generated by the program without disrupting production.

We continue to adapt and implement similar programs where they are needed in different regions.

Promoting transparency in the supply chain

We believe that transparency gains trust, which improves the effectiveness of our supply chain work. We provide global and regional summaries of our audit findings as well as detail of our supplier capability building programs in our Global Citizenship Report.

In 2007 we were also the first in our sector to publish the names of our suppliers and we continue to do so. This remains an industry-leading practice.

Addressing new challenges in materials sourcing

We continue to face new challenges in our supply chain and are committed to addressing them. For example, a number of stakeholders have alerted us to reported human rights violations associated with trade in minerals from conflict regions of The Democratic Republic of Congo (DRC). The minerals are ores of gold, tantalum, tin and tungsten, metals used in components commonly found in electronics products. While all four metals are used by many other industries and are also sourced from regions other than the DRC, HP considers it unacceptable that the sourcing of metals eventually incorporated into our products could be contributing to armed conflict.

Although companies who source these minerals are generally far removed from HP, typically multiple tiers from our direct suppliers, we have a shared responsibility regarding conflict-free mineral sourcing. At this time, there is no certification mechanism that can assure us that the metals used in our products are not sourced from mineral trade associated with the conflict in the DRC. HP is working alongside companies in other industries to drive the creation of such a mechanism. We believe that it is our responsibility to create awareness and encourage accountability in our supply chain and we will continue to do so until a defined certification process is established.

As we continue to develop our supply chain SER program to achieve lasting results in our supply base, we remain committed to the open and collaborative process we established ten years ago.