Strengthening requirements for suppliers

In 2013/14, we updated our requirements for suppliers based on our Code of Conduct and policies for our own business. We updated requirements and simplified policies that we expect our suppliers and partners to sign up to. These policies are published on our supplier website. Updates to our Code of Ethical Purchasing (pdf, 76 KB) included strengthening requirements on conflict minerals, environmental standards, anti-bribery and anti-money laundering.

In 2013/14, we also updated key supplier contracts to include our revised consequence management process for contractors who fail to act responsibly on health and safety (see Health and safety). Guidance on applying this process was included in annual training on our Code of Ethical Purchasing completed by all our supply chain employees globally (more than 1,000 staff).

Developing a consistent industry approach

We continued working with other members of the Global e-Sustainability Initiative (GeSI) in 2013 to evaluate a range of tools for assessing and managing suppliers, and explore the potential to adopt a common tool across the industry. We also work with GeSI and the Electronic Industry Citizenship Coalition (EICC) to tackle conflict minerals in the ICT supply chain (see below).

Following a pilot in 2012/13, we began using the EcoVadis platform as an industry standard approach to evaluate supplier performance on sustainability and develop improvement plans, helping to reduce the reporting burden on suppliers. As Vodafone is itself a supplier to other companies, we also complete the EcoVadis assessment for our own business – achieving the Gold Standard in 2013 – and share the results with relevant enterprise customers.

Membership of the Joint Audit Cooperation (JAC) initiative has grown to 10 telecoms operators since we joined in 2011/12: Belgacom, Deutsche Telekom, France Telecom, KPN, Swisscom, Telecom Italia, Telenor, TeliaSonera, Verizon and Vodafone. This has strengthened our ability to establish and conduct common audits across our industry and to develop joint follow-up plans for improvement, while reducing the burden of multiple audits on suppliers. In 2013, JAC conducted a total of 38 joint audits.

In January 2014, together with the nine other telecoms operators, we launched the JAC Supply Chain Sustainability Guidelines (pdf, 173 KB) – a set of common requirements expected from the telecommunications industry – at the third JAC Conference on Sustainability and Corporate Social Responsibility in Chengdu, China. More than 130 people representing telecom operators, industry forums, suppliers, audit firms, non-governmental organisations and institutions from all over the world participated in the conference to discuss how to improve issues identified by JAC’s work and provide feedback to the initiative.

The JAC guidelines cover a range of topics based on international laws, standards and guidelines and dialogue with a range of stakeholders. The sections within the topics define expectations on child labour, forced labour, fair remuneration, disciplinary practices, discrimination, freedom of association, health and safety, the environment and ethics. Along with other members of the JAC initiative, we shared our intention to develop and measure key performance indicators (KPIs) to accompany the guidelines. The first KPI to be developed will focus on working hours.

We also continued to participate in the CDP Supply Chain programme, which helps large companies and their suppliers report climate impacts transparently, share information and target carbon reductions. In 2013/14, 74 suppliers disclosed information through the CDP. In addition, we work closely with some of our key suppliers to improve the efficiency of equipment used in our networks (see Environmental footprint).

Driving improvements through supplier assessments

In 2013/14, we improved our process to assess suppliers based on sustainability criteria at the qualification stage, as this is the most effective point to influence which suppliers we choose to work with. Taking a risk-based approach, we asked for additional information relating to acting responsibly during supplier qualification. We assessed 180 potential new suppliers on sustainability criteria during the qualification process in 2013/14. To work for Vodafone, suppliers must also agree to our policies. In 2013/14 we rejected one potential new supplier based on an issue of integrity raised during the qualification process.

We performed 30 on-site assessments of suppliers identified as high-risk to check compliance with our standards and monitor their performance on sustainability in 2013/14. Twenty-two of these audits were performed at Tier 2 suppliers’ sites as we continued our focus further down the supply chain, working together with our Tier 1 (direct) suppliers to assess their suppliers’ performance and help them improve.

Based on the 30 site assessments, we made 172 recommendations for improvements to suppliers in 2013/14. Management of health and safety remains by far the most common area identified for improvement – and this is a key focus of our capability building efforts with suppliers (see below) – followed by working hours and environmental issues (see Data for more detail on audit findings). Working hours is a common industry issue and we are working through the Joint Audit Cooperation (JAC) to develop a key performance indicator to help monitor improvements over the long term and tackle root causes. We are also using the Labor Link tool (see below) to obtain more meaningful information directly from supplier workers on this issue.

Our general approach on issues related to performance findings is to request the supplier for a corrective action plan, typically following up by re-audit to confirm closure. As an example, we identified three instances related to child labour where people under the age of 18 but of legal working age were found to be working on late shifts, which is non-compliant with our policy. In these cases, which related to two suppliers, one supplier resolved the issue (checked on repeat audit) and the other supplier was informed their qualifying audit failed to meet our requirements. We wait to engage any business with them until such time as they correct the issues and the performance issues are validated as closed on re-audit.

In addition to our own audits, 38 additional on-site assessments of suppliers were conducted jointly with other telecoms operators through the JAC – 30 of which related to Vodafone suppliers.

In focus: Using mobile technology to gain direct input from supplier workers to improve conditions

We are working with Good World Solutions to implement technology that enables our suppliers’ workers to provide direct, anonymous feedback on working conditions using their mobile phones.

The tool, known as Labor Link, aims to use mobile solutions to enhance the visibility of working conditions in our supply chain by obtaining feedback directly from workers. Voice surveys will be used to give workers an opportunity to feedback on topics such as their working conditions, and suggestions about their jobs. Their responses will be aggregated anonymously and provided directly to Vodafone and the supplier to identify areas for improvement. Data will be collected from a large number of workers who have volunteered to participate in an anonymous panel.

This is one example of the concepts featured in our Connected Worker (pdf, 2.52 MB) research report (see Smart working).

Working with suppliers to build capability

Working with suppliers to develop improvement plans is a critical and lengthy part of the audit and follow-up process. We engage with suppliers to improve their performance on specific issues such as working hours and health and safety.

In China, we worked with one of our key suppliers to improve its sustainability performance from being unsatisfactory on its first EcoVadis assessment to increasing their rating by 26 points, obtaining a silver badge rating on reassessment during 2013/14. Our team (Asia Sourcing Centre), located in Hong Kong, guided the supplier to establish governance structures and processes and to focus on improvements in labour standards, environmental management, fair business practices and management of its suppliers.

We also work closely with high-risk suppliers, particularly those supporting the deployment and maintenance of our networks, to improve health and safety. In 2013/14, we fully embedded our consequence management process globally to make it clear that failing to demonstrate a robust safety procedure is directly linked to termination of purchase orders or contracts. When red cards are issued, suppliers are excluded from tendering for new work for a period of up to 12 months. In 2013/14, we issued eight red cards and eight yellow cards, and excluded suppliers from tendering for new work for a total of 23 months. The system is intended to help protect the people working in our supply chain.

We invited 15 key network suppliers to a workshop on health and safety held in April 2014. See Health and safety for more examples of our work with contractors.

Tackling conflict minerals

In 2013/14, to meet the requirements of new US legislation (see Our approach), we carried out due diligence to determine the source of any tantalum, tin, tungsten or gold (‘3TG’) contained in the products where we have influence over manufacturing and design. We set up a cross-function working group to help drive our conflict minerals programme, established a due diligence framework (aligned with the internationally recognised framework developed by the Organisation for Economic Cooperation and Development) and engaged with relevant suppliers regularly throughout the year to raise awareness of due diligence requirements.

We identified 53 products considered to be within the scope of the requirements in 2013, sourced from 12 suppliers. We asked these suppliers to complete the Conflict-Free Sourcing Initiative’s Conflict Minerals Reporting Template to determine the source of the 3TG in their products. We received responses from all 12 suppliers, covering approximately 81% of individual in-scope products. We analysed their responses and followed up with all these suppliers to request improvement plans.

Through this due diligence process, we determined that all Vodafone’s products that fall within the scope of the regulation are ‘DRC Conflict Undeterminable’. This is partly because the information we received from suppliers is not sufficiently complete or reliable to determine the origin of the 3TG contained in these products with certainty and partly because the vast majority of smelters identified through the process are not currently certified as conflict-free. These are industry-wide challenges and we are supporting industry initiatives to overcome them, as well as continuing to engage with our own suppliers to improve the completeness and quality of information provided and to seek their commitment to develop and implement improvement plans in relation to due diligence processes.

For more information on the due diligence process and findings, see our Conflict Minerals Report (pdf, 298 KB), published as part of our legal filing to the US Securities and Exchange Commission.