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Supplier risk management

Risk management system

The Supply Chain Risk Management (SCRM 360) was implemented in stages in 2015. The comprehensive SCRM 360 approach will enable Swisscom to reduce the risks it is exposed to not only in terms of the environment and society, but also in terms of finances, security, logistics and quality. Swisscom continuously checks external data sources using individual, weighted score cards (featuring more than 50 risk indicators). If a top 100 supplier and numerous upstream suppliers breach a pre-defined threshold, the purchasing organisation is automatically notified. Top 100 suppliers are selected based on the following criteria: purchase volume, strategic importance and risk profile of the product group.

In 2015, Swisscom reviewed and reclassified existing and some new product groups from the perspective of Corporate Responsibility. It decided to maintain the current risk structure and has completed a critical revision of the list of suppliers in high-risk product groups. Of these, all of the major suppliers are already registered on the e-tasc platform from EcoVadis. For potential supply partners and invitations to tender, Swisscom continues to use the implemented process. In addition, the new SRN platform will enable a first estimate of a supplier’s overall risk.

Risk management procedure in the supply chain

Swisscom does not assess the risk of all its supply partners. Instead, it uses a filtering process to determine the effective risk potential at an early stage, while at the same time reducing the number of supply partners to be assessed.

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Filtering process: Risk management procedure in the supply chain

In the first stage of the filtering process, Swisscom assesses all product groups in terms of their environmental and social risks using clearly defined criteria, with the individual product groups being assigned to one of three risk profiles – low, medium or high.

In the second stage, Swisscom then identifies the supply partners whose goods have been assigned to the product groups with high- and medium-risk profiles. It reviews the risks of these supply partners individually using clearly defined criteria. Goods belonging to a category with medium and high risks are also used to determine the risks of potential supply partners. The results of the assessment are then taken into account when deciding on a possible collaboration.

Overview and requirements of risk management in the supply chain
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Corporate Responsibility Contract Annex

In 2015, nearly 100% of the total order volume came from suppliers that had accepted the CR Contract Annex (CRCA). The proportion of suppliers who have signed the CRCA remains stable at a high level.

Self-declarations/self-assessments

Swisscom met its objective for 2015 to assess 120 suppliers on the e-tasc platform.

Swisscom re-registered and assessed 22 suppliers over the course of two campaigns in 2015. Of the registered suppliers, a total of 23 have not yet met expectations in terms of Corporate Responsibility. Swisscom has therefore set up a corrective action plan (CAP) which documents potential improvements. After 12 to 24 months, Swisscom will decide which suppliers need to be reassessed.

A total of 16 guided re-assessments were carried out in 2015. These Swisscom suppliers improved by an average of 34% as a result of the corresponding corrective measures. Compared with all suppliers entered in the platform around the world (numbering 10,000), Swisscom suppliers fared 27% better.

In 2016, Swisscom intends to register further key and strategic suppliers as well as high- and medium-risk suppliers, in e-tasc.

Swisscom was also subjected to a re-assessment in 2015, achieving the “Gold Level”.

Audits

Swisscom has been a member of the Joint Audit Cooperation (JAC) for several years. Swisscom carried out four audits in 2015 as part of its collaboration with the JAC (one was postponed). The JAC is a consortium of telecoms companies which checks, assesses and promotes the implementation of social responsibility in the production centres of the major multinational ICT suppliers. The following guidelines apply to the on-site audits:

  • Preparation: Audits are based on information that must be obtained in advance via the company to be audited.
  • Qualified auditors: Audits are carried out by international auditing companies that have specialist knowledge of the social and environmental conditions particular to the country in question.
  • Confidentiality: Confidentiality agreements are signed with suppliers, so audit results are only known to JAC members.
  • Methodology: The JAC members create a checklist based on the SA 8000 (including in relation to working conditions, health and safety, environment, business ethics, management system) and ISO 14001 standards. On-site audits with the relevant dialogue partners are also taken into account.
  • Report: The report formulates the findings based on objective evidence.
  • Collaboration with suppliers: The collaboration is based on the common understanding that the CR risk management system plays a key role in supporting responsible and sustainable development.
  • Collaborating with and further developing suppliers: On the basis of the findings from the audit, corrective measures are drawn up with suppliers to correct shortcomings. The respective JAC member follows the implementation of these measures until they have been successfully completed.

In weekly teleconferences, the JAC members set the audit agenda, check the audit reports and monitor the progress of the planned corrective measures. These regular conferences and the exchange of best practices help to optimise the Corporate Responsibility assessments and make the JAC initiative more efficient. The JAC steering committee, which is made up of representatives from the senior management level of the respective CR and sourcing areas, meets four times a year to review the audit campaign, decide on how to proceed and launch new projects.

As part of its overarching CR Strategy 2020, Swisscom aims to improve the working conditions of two million people by 2020. To this end, it has intensified its international partnerships, such as the one it maintains with the JAC, in order to ensure implementation of the measures in close collaboration with its suppliers.

Audit results

In total, 61 audits of suppliers were carried out within the JAC network (prior year: 38). These audits involved production facilities, most of which are located in China, Taiwan, India, Japan, South Korea and South America. A limited number of instances of non-conformity and various types of non-compliance were noted in the audits carried out in 2015. The instances of non-compliance mainly concern working hours, occupational safety, environment, wages and health/security. The audits also identified several cases of discrimination and the employment of minors. The time period for rectifying the problems depends on the type of non-compliance.

Due to the impact on the human resources of the company concerned, rectifying irregularities with respect to working hours in particular (e.g. limiting regular working hours and overtime) requires several months.

The JAC network has conducted a total of 209 audits in 22 countries on four continents since 2010. The audits covered more than 600,000 employees in total and identified 1,260 cases of shortcomings, with 336 yet to be resolved.

The audits identified the following number of shortcomings:

Number of problems   2013   2014   2015
Health and safety   62   68   100
Working hours / overtime   52   73   77
and “Worksheet emissions factors combustion”, FOEN, 2005 (in german).   31   64   45
Child and juvenile labour   10   10   12
Remuneration   18   9   34
Environment   11   30   44
Forced labour and discrimination   7   10   13

Of the total 1,260 shortcomings, 337 were published during the 2015 reporting year. 77 of the outstanding cases were connected to issues involving working hours. 46 of these 77 shortcomings occurred in the years 2010 to 2014, and 31 in 2015. 259 identified shortcomings fall into other categories. Of those, 92 occurred in the years 2010 to 2014, and 167 in 2015. The shortcomings in terms of under-age workers relate to excess hours or night shifts, but not child labour. The cases of discrimination that have been highlighted involve inadequate formalisation of contracts, but no cases of forced labour. Environmental shortcomings refer to the storage of chemical products and the lack of environmental reports and objectives.

The individual JAC members are continuously addressing these shortcomings. The collected data is updated regularly and discussed in the steering committee.

Carbon Disclosure Project (CDP) – Supply Chain Program

In the year under review, Swisscom continued its cooperation with the Carbon Disclosure Project (CDP) – a non-profit organisation founded in 2000. The organisation wants companies to publish relevant environmental data, including data on harmful greenhouse gas emissions and water consumption. Once a year, the CDP, on the behalf of investors, uses standardised questionnaires to collect information and data from companies on a voluntary basis as regards CO2 emissions, climate risks and reduction goals and strategies. The CDP now maintains the world’s largest database of this kind. As part of its cooperation with the CDP, Swisscom contacted and surveyed 53 (prior year: 47) of its key suppliers. The suppliers surveyed have a high order volume or a high degree of environmental relevance. The response rate was 91% (prior year: 85%), thus allowing the survey to be brought to a successful completion. In the fourth quarter of 2015, the CDP analysed the responses and applied a scoring system to rate the suppliers who took part. The results are partly incorporated into the e-tasc platform from EcoVadis and used as a basis on which to comprehensively assess Swisscom’s key suppliers.

As part of its CR Strategy 2020, Swisscom is pursuing a specific target in the area of climate protection (2:1 target). As the supply chain is responsible for a major portion of Scope 3 emissions, CO2 emissions in the supply chain play a very important role. Swisscom therefore aims to define set reduction targets with individual suppliers in 2016. Thanks to the emission data that the CDP collects from suppliers, Swisscom has a reliable basis for determining these reduction targets for itself and for its key suppliers.

Optimisation of delivery

Thanks to the OPAL project (optimisation of delivery), Swisscom reduced its costs and its impact on the environment during the year under review. Swisscom now delivers most routers and TV boxes from the same location where they are manufactured. This results in CO2 savings as a result of the lower number of trips and smaller amount of transport packaging made of cardboard and plastic.

GeSi – commitment

As part of GeSi, the Global e-Sustainability Initiative, the world’s leading ICT providers are committed to sustainable change using new technologies. In particular, Swisscom works within the GeSi framework to promote fair and sustainable supply chains based on global cooperation. It participates in numerous CR projects and plays an active role in them. These projects include, for example, sponsoring and collaborating in the “Smarter 2030” study; developing and positioning the “SASF (Sustainability Assessment Standard Framework)” as the future standard for the entire ICT sector; and the continuing development of e-tasc as an overarching platform for conducting self-assessments and audits of suppliers.

See www.gesi.org

Main risk factors in the supply chain

Human rights

Swisscom attaches great importance to the observance of human rights in the areas specified by the Social Accountability International (SAI) SA 8000 standard, which include child labour, forced labour, health and safety, freedom of association and the right to collective bargaining, discrimination, discipline, working hours and remuneration.

Climate risks from CO2 emissions

Climate change poses risks, for example in the form of increasing levels of precipitation as well as higher average temperatures and extreme meteorological events. These risks could compromise the manufacture of telecommunication products and network equipment and its transport into Switzerland, and thus have a negative effect on Swisscom’s market opportunities and operations. Swisscom’s greenhouse gas inventory shows that the majority of its CO2 emissions are attributable to the supply chain, a fact Swisscom takes account of in its strategic priority on climate protection.

Raw materials

The raw materials used in Swisscom’s various products stem from a wide range of countries and regions. Questions on the origin of the raw materials used and the associated environmental and sociological risks are increasingly being asked. Swisscom is addressing the issue of raw materials and has implemented the following measures in this regard over the last two years:

  • January 2012: Swisscom became a member of the World Resources Forum Association (WRFA) through its membership in the Global e-Sustainability Initiative (GeSI).
  • March 2012: Inaugural meeting of the WRF Association, at the meetings of which Swisscom represents GeSI.
  • March/October 2013: Participation at the Annual General Meetings of the WRFA in St. Gallen and the WRF in Davos.
  • October 2013: Dialogue with the NGO “Bread for All” and participation at the “High Tech – No Rights” symposium in Berne.
  • 2014/15: Preliminary enquiry into participation in Fairphone. Participation is planned for the beginning of 2016, at the same time as the launch of the second generation of end devices.
Corruption

Swisscom has established a policy of zero tolerance towards corruption in its guidelines. These guidelines are implemented through regular training, reviews and audits across the Group. Suppliers are required to comply with the guidelines as well. Swisscom expects neither its own employees nor any of its suppliers to grant or accept any undue advantages. Infringements may result in disciplinary actions for Swisscom employees, up to and including dismissal. If it is proven that a supplier violated anti-corruption laws, they may be reprimanded and, as a last resort, removed from the supply chain.

See www.worldresources​forum.org

Supply chain ratings

With a score of 93 out of 100 in the Dow Jones Sustainability supply chain ratings and 98A from the CDP, Swisscom is positioned as one of the top telecoms companies.