Program Structure

Management System

Our Social and Environmental Responsibility (SER) Program follows four phases that promote continual improvement in supplier companies. These are described in detail below.
 

Introduction

We employ a risk-based approach to prioritize implementation of our Social and Environmental Responsibility (SER) program with our first-tier suppliers—those with whom we have a direct contractual relationship. These suppliers select and manage their own suppliers, also known as second-tier suppliers or subcontractors.

The risk factors we use to prioritize suppliers are:

• Location: Risk is higher in some geographies and locations than others.
• Purchases: Risk is higher in some procurement categories we buy than others (for example, manufactured parts, components, products, facilities management and outsourced services).
• Relationships: Risk is higher for some types of contracts, such as large contracts for branded products or contracts with new suppliers.
• Company information: Information from previous audits, press articles, incidents or accidents may impact our assessment of supplier risk.

We have also partnered with some of our suppliers to conduct audits with them of their suppliers, to demonstrate how HP conducts the audit process.

Assessment

HP requests suppliers we identify as high-risk to complete a self-assessment questionnaire to identify potential social and environmental responsibility performance risks. The questionnaire is administered electronically through E-TASC, an IT platform for companies to effectively implement a standards-based approach for improving supplier conformance to standards related to labor, health, safety, ethics and environmental activity. In addition to helping HP evaluate risk, self-assessments help suppliers become more familiar with HP’s expectations of what it means to conform to HP’s Electronic Industry Code of Conduct.

HP will review the results of the self-assessment and provide feedback, and suppliers will create and implement an improvement plan, if required.

Validation

Validating Conformance

HP believes that baseline auditing will always remain a critical part of the overall supplier engagement process and model.

The principles of strategic auditing are:

• The philosophy of the audit is a joint and collaborative effort between the supplier and the audit team.
• The purpose of the audit is to identify the level of conformance with HP’s Electronic Industry Code of Conduct.
• The objective of the audit is to identify areas for continuous improvement over time and to focus our efforts appropriately.

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.

HP uses three types of audits to assess conformance with HP’s Electronic Industry Code of Conduct:

• Audits conducted by HP employees
• Audits conducted by an external organization to verify the results of HP-conducted audits or investigate allegations
• EICC joint audits conducted by an external organization on behalf of HP and other EICC-member customer companies of the facility

Responding to Nonconformance

Nonconformances to HP's Electronics Industry Code of Conduct are categorized as "major" or "minor." HP ranks nonconformances 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 HP’s Electronic Industry Code of Conduct or General Specification for the 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. If such an item is uncovered, our zero tolerance policy requires auditors to escalate it immediately and requires the supplier to correct it 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 HP’s EICC. 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, detailed corrective action plan addressing all identified non-conformances within 30 days of receipt of the site audit report. Depending on the severity, the supplier has up to 180 days to correct an identified major non-conformance, and 180 to 360 days to address minor non-conformances. HP will monitor the supplier’s progress closely to ensure resolution is completed within the specified time.

Continual Improvement

In assessing conformance, we seek long-lasting change. We believe that remaining engaged with suppliers and providing support and tools is the best way to help them improve their performance. A supplier monitored for specific areas of non-conformance 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 building suppliers’ capability and the development of management systems. If a supplier rejects the continual improvement 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.

Our 2008 Global Citizenship Report includes a number of examples of how our proactive collaboration with suppliers has led to higher supply chain standards.

Governance and Integration into Sourcing

HP integrates social and environmental considerations into its core sourcing practices. Our Supply Chain Social and Environmental Responsibility (SER) governance system clarifies reporting and responsibility across relevant HP businesses and functions. All HP businesses sponsor and support our Supply Chain SER Program through the Supply Chain Board, which meets monthly and reports directly to the HP Executive Council.

For HP's Supply Chain SER Program to succeed, HP's procurement teams must understand SER issues and consider them in day-to-day sourcing decisions. Our supplier relationship managers (SRMs) complete  training on our supplier SER program.

HP's Procurement Management Process (PMP) defines how our procurement organizations worldwide manage suppliers. The PMP's business objective is to identify and assess suppliers for their ability to meet HP's needs by evaluating risk and applying HP's sourcing strategy consistently. HP follows the PMP to integrate new product materials, components, manufacturing and distribution, and goods and services suppliers into the supply chain.

Supply Chain SER is included in the Supplier Evaluation, Contract Development and Execution Management phases of the PMP. Compliance with our Procurement Management Process is audited internally and by external organizations that certify HP's quality system (ISO 9000).

HP uses a High-Performance Supplier Scorecard to evaluate and improve overall supplier performance. The scorecard has multiple weighted performance categories, including but not limited to: Business (including SER), Cost, Quality, Supply and Technology. The scorecard rating system supports HP's commitment to continual improvement toward full conformance with HP’s Electronic Industry Code of Conduct by ranking a supplier's management capacity as well as their SER performance. Scorecards are reviewed regularly to identify issues or trends to prioritize. HP also has a reverse scorecard process, where the supplier can rates us as a customer on our order and supplier management process.

For procurement of product materials, components, and manufacturing and distribution services – where risk is greater – SER comprises 10 percent of a supplier’s HPSS score.