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Supplier risk management

Risk management system

Supply Chain Risk Management (SCRM 360), which was implemented in stages in 2015, was solidified during the year under review. 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, strategic supplier or critical supplier and numerous upstream suppliers breach a pre-­defined threshold, the purchasing organisation is automatically notified. The top 100 suppliers are selected based on the following criteria: purchase volume, strategic importance and risk profile of the product group.

Swisscom reviews and reclassifies product groups from the perspective of Corporate Responsibility. It decided to maintain the current risk structure and has completed a new 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, which was revised in 2016. In addition, the new SRN (Supply Risk Network) 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 their effective risk potential at an early stage, while at the same time reducing the number of supply partners to be assessed.

WSGE_DP_GR_RisikomngtVorgehen
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. Where deemed appropriate to avoid risks, the supply chain is integrated into risk monitoring. Goods belonging to a category with medium and high risks are also used by Swisscom 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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Self-declarations/self-assessments

Swisscom met its objective for 2016 to assess 140 suppliers on the e-tasc platform.

Swisscom registered nine new suppliers in 2016, all of whom were subjected to an assessment. Of all registered Swisscom suppliers, a total of 28 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, provided the supplier has not initiated the reassessment themselves.

Swisscom AGain carried out a number of guided re-assessments in 2016. The Swisscom suppliers concerned improved by an average of 31% as a result of the corresponding corrective measures. Swisscom suppliers scored 32% better than the suppliers registered on the platform worldwide (several tens of thousands).

In 2017, Swisscom intends to register further key and strategic suppliers as well as high- and medium-­risk suppliers, in e-tasc. It will also conduct another critical review of the list of suppliers in high-risk product groups.

Swisscom itself was also subjected to a re-assessment in 2016, in which it improved and once again achieved the “Gold Level”.

Audits

Swisscom has been a member of the Joint Audit Cooperation (JAC) for several years. Swisscom carried out six audits in 2016 as part of its collaboration with the JAC. The JAC is a consortium of 13 telecoms companies which checks, assesses and promotes measures intended to safeguard social responsibility in the production centres of the major multinational ICT suppliers.

See www.jac-initiative.com

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 regular 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.

In 2016, mobile surveys were conducted for the first time alongside the classical CR audits, whereby workers outside the factories were surveyed on working conditions by mobile phone. These mobile surveys are a new survey method that offers a great deal of potential for the future. They are conducted by NGO Good World Solutions. The JAC launched a total of seven mobile surveys in the year under review.

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, 69 audits of suppliers were carried out within the JAC network (prior year: 61). The proportion of audits at supply partners (tier 2/3) increased to 82%.

The 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 2016. 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 278 audits in 24 countries on four continents since 2010.

The audits covered more than 740,000 employees in total and identified 1,777 cases of short­comings, with 386 yet to be resolved.

The audits identified the following number of shortcomings:

Number of problems   2013   2015   2016
Health and safety   68   100   114
Working hours / overtime   73   77   52
and “Worksheet emissions factors combustion”, FOEN, 2005 (in german).   64   45   67
Child and juvenile labour   10   12   7
Remuneration   9   34   20
Environment   30   44   34
Forced labour and discrimination   10   13   9

Of the 517 shortcomings established in 2016, 314 are still outstanding or unresolved. 52 of the outstanding cases were connected to issues involving working hours. 23 of these 52 shortcomings occurred in the years 2010 to 2015, and 29 in 2016. 262 identified shortcomings fall into other categories. Of those, 49 occurred in the years 2010 to 2015, and 213 in 2016. 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 not 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 programme

In the year under review, Swisscom continued its cooperation with the Carbon Disclosure Project (CDP) – a non-profit organisation founded in 2000. The organisation encourages 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 54 (prior year: 53) of its key suppliers. The suppliers surveyed have a high order volume or a high degree of environmental relevance. The response rate was 90% (prior year: 91%), thus once again allowing the survey to be brought to a successful conclusion. In the fourth quarter of 2016, 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 will therefore take part in the Action Exchange programme in 2017 as part of its work with the CDP and define specific reduction targets with individual suppliers. Thanks to the emission data that the CDP collects from suppliers, Swisscom has a reliable basis for determining reduction targets for itself as well as for its key suppliers.

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 requiring 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 Sustainability Assessment Standard Framework (SASF) 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. Going forward, GeSI will align its organisation and its activities to the Sustainable Development Goals (SDGs).

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. In 2016, Swisscom published a new Human Resources Policy on its website.

See www.swisscom.ch/​humanrights
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 into account in its strategic priority on climate protection.

Raw materials

The raw materials contained 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 raised. Swisscom is addressing the issue of raw materials and has implemented the following measures in this regard in recent 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 “Brot für alle” and participation at the “High Tech – No Rights” symposium in Berne.
See www.worldresources​forum.org
  • 2014/15: Preliminary enquiry into a partnership with Fairphone.
  • March 2016: Marketing of Fairphone via an indirect sales channel. – Dutch start-up Fairphone hopes to shake up the telecommunication sector with its smartphone, which is manufactured in accordance with fair trade principles. The focus is on the ethical extraction of raw materials, socially responsible production conditions and the longevity of the product. Fairphone sought out Swisscom as a sustainable partner. Swisscom will examine the option of marketing via its own channel in 2017.
  • May 2016: As part of their “Stop benzene” petition in the summer of 2016, the two aid organisations “Brot für alle” and “Fastenopfer” raised awareness of the risks associated with using benzene in the manufacture of mobile phones. For this purpose, they compiled a ranking of the largest Swiss sellers of mobile phones, with Swisscom achieving the best results. As a reseller of mobile phones and tablets, Swisscom is committed to improving sustainability and working conditions along the supply chain through its ongoing international cooperation with GeSI and the JAC.
Corruption

Swisscom has established a policy of zero tolerance towards corruption in its guidelines. The guidelines are implemented through regular training, reviews and audits across the Group. In addition, Swisscom requires its suppliers to comply with these 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 will be reprimanded and, as a last resort, removed from the supply chain.