Koninklijke Philips Electronics N.V.
Netherlands
Technology
Global
General
Engagement with Suppliers
The trend in outsourcing manufacturing activities continues in electronics industry. Philips believes in asking our suppliers to share our commitment to sustainability. This includes sound environmental and ethical standards as well as providing working conditions for their employees that reflect both the Philips General Business Principles and the Electronic Industry Citizenship Coalition (EICC) Code of Conduct. It is about improving conditions in the chain.
The Philips Supplier Sustainability Involvement Program is built on five pillars: setting out our requirements; building understanding and agreement; monitoring identified risk suppliers through audits using the EICC checklist (90% of initial audits are now conducted by specialized external auditing bodies); working with suppliers to resolve issues quickly; and engaging stakeholders.
- Setting requirements
We endorsed the Electronic Industry Citizenship Coalition (EICC) Code in 2006. Philips Supplier Sustainability Declaration adopted the Code verbatim including an addendum on Right of association/Collective bargaining. All suppliers are required to sign the Supplier Sustainability Declaration, which constitutes an integral part of our purchase agreements, purchase orders and terms and conditions.
- Building understanding and agreement
We know that awareness and engagement are critical for building a sustainable electronics industry and recognize our responsibility in helping create them. Our training sessions, Supplier Day events and briefings aim to build knowledge and commitment among our suppliers.
- Monitor identified risk suppliers
To focus our efforts, we developed an approach based on a risk profile related to spend, country of production, business risk and type of supplier relationship. Suppliers with high risk profile are cooperated into the audit program. It is carried out using the EICC audit checklist and EICC accredited auditing companies. The audit cycle is every three years.
We require our suppliers to pay for the third-party sustainability audits, believing this is an effective way of embedding our requirements in the supply chain. This approach is well accepted and appreciated by our suppliers as it helped improving their performance.
- Issues resolution
In case of non-conformances are found during the audit, corrective action plans are agreed upon within 30 days of an audit. Philips Supplier Sustainability officers follow up monthly and can escalate the issue to the responsible purchasing manager as necessary. For transparency and credibility, we publish our findings and audit result in our internet site and annual report.
- Working with stakeholders
We seek constructive dialogue and the opportunity to engage with stakeholders in the supply chain and beyond. This work is done in close cooperation with our suppliers, in bilateral meetings with investors and NGOs, and via projects with the EICC. We are also active sharing with stakeholders about our concerns in working conditions at the base of the electronics industry supply chain, specifically in the extractives sector for metals such as tin, tantalum and tungsten.
Audit results show that a multi-year approach to training and auditing is essential to ingrain sustainability in the supply chain. We also believe that cooperation with local governments is the way to truly achieve sustainable change.
Philips Supplier Involvement Program has audited more than 1000 supplier sites against EICC Code of Conduct between 2006 and the end of 2009. After audits, we work with suppliers to improve conditions like 7 day continual working week, fire safety and handling hazardous substances.