Supply chain: performance 2007/08

We said:

We would implement a project with two strategic Chinese suppliers to manage CR risk within our sub-tier suppliers.

Enhance our CR programme and capability within the China region through our recently established China-based supply chain offices by March 2008.

Achieve 100% follow up within three months for all local and global suppliers identified as high risk during qualification.

Maintain levels of training for supply chain managers to ensure that more than 90% have received CR training.

Incorporate the ICT industry common tools and approach within Vodafone programme by March 2008.

We have:

Implemented a project with two strategic Chinese suppliers to manage CR risk within our sub-tier suppliers
In 2007/08, we worked with mobile handset supplier ZTE and radio equipment supplier Huawei to assess CR risks among our sub-tier suppliers in China. We audited their supplier assessment processes, shared best practice and carried out ten joint sub-tier supplier assessments, including site visits. These enabled Vodafone to witness ZTE and Huawei’s assessments in action.

As a result of these sub-tier supplier assessments, 314 issues requiring corrective action were identified – 299 of which have now been completed. The outstanding actions relate to health and safety, overtime and payment, and disciplinary practices. The assessments provided significant reassurance that our standards are being met by sub-tier suppliers. See building capability.

Enhanced our CR programme and capability in the China region 
In 2007/08, we increased our CR capability in the China region by basing two CR-qualified auditors within the purchasing team in our new supply chain offices in Beijing and Hong Kong. We embedded CR in our supplier selection and management in the region by using our global qualification process and ICT industry common tools to assess suppliers in our sourcing centres in China. All supply chain employees in China have been trained on our Code of Ethical Purchasing and the industry Electronics Tool for Accountable Supply Chains.

Conducted evaluations of 63 strategic suppliers
We evaluated 488 suppliers – including 63 strategic global suppliers – in 2007/08 using our supplier performance scorecard. The scorecard evaluates each supplier’s CR management systems, public reporting and approach to managing CR in its own supply chain.

Followed up all supplier assessments within three months
During the supplier qualification process, we identified seven potentially high-risk new global suppliers using our risk assessment tool. We reviewed all of these within three months and followed up with either on-site assessments or requests for more detailed evidence of compliance with our Code of Ethical Purchasing, as appropriate.

Some suppliers may be highlighted as high risk by the rules of the process and on further investigation, actual risks are significantly lower. For example, two new suppliers based in Europe were identified as high risk, one supplied radio tower services and the other printed bills and printed postage for customers. On review, both suppliers had professional management systems in place to provide Vodafone with the confidence that our CEP requirements would be met. Both suppliers were readily qualified with minimal additional requirements.

Recommended improvements to be made by suppliers
Based on our 23 site assessments of new and existing suppliers, we made 116 recommendations for improvement (see table).

^{* Performance issues are either actual instances of non-compliance against our CEP or opportunities for suppliers to improve their current practices.}

^{** Policy issues are instances where suppliers did not have any/adequate policies or management systems in place to address the ethical, health and safety, or environmental requirements of our CEP. Policy issues do not necessarily correlate to performance-related RFIs on the same issue.}

The recommendations for improvement (RFIs) listed in this table represent instances where non-compliances with our CEP were identified, as well as less serious recommendations, where we found an opportunity for a supplier to improve current practices. The average number of RFIs across all 23 supplier visits was five. Based on these visits, we decided not to qualify three potential suppliers in 2007/08. All three used fines as a disciplinary measure. Issues of discrimination and poor levels of personal protective equipment were also identified.

Our approach to non-compliances found on site assessments is to work with the supplier to improve their ethical and environmental performance. In a few cases, like the three mentioned here, the decision not to approve a supplier on the basis of non-compliance against our CEP, may be based on the severity of the non-compliance, but more often the supplier’s unwillingness to rectify the issue.

The table shows that we identified three instances of child labour under supplier performance and policy issue criteria. In each performance-related case, the non-compliances involved evidence of children aged 15 years old having been employed by the suppliers concerned which, not uncommonly, is a factor directly attributable to the use of independent recruitment agencies. In each case, the supplier welcomed our guidance on strengthening their recruitment policies and procedures to minimise the risk of employing under-age workers. As a result, we are confident in our decision to grant them approved supplier status.

Trained 94% of our supply chain managers in CR
A total of 94% of supply chain managers across the Group undertook CR training in 2007/08, either for the first time (new employees) or as a refresher course. This exceeded our target to ensure 90% had received training by March 2008.

Published a guide for suppliers and contractors
The guide, 'Working for Vodafone', describes our approach to being a responsible business and how we assess and manage supplier performance to ensure it is in line with our Business Principle and CEP.

Increased awareness of our Duty to Report programme
In 2007/08, 12 suspected incidents of non-compliance with our CEP and Business Principles were reported through our Duty to Report programme. These related to conflict of interest issues, and allegations of corruption and unfair tending processes by suppliers. All have been resolved.

Continued to work with industry 
We continued to participate in a number of industry supply chain initiatives through our membership of the Global e-Sustainability Initiative. The joint activities in 2007/08 include the promotion of the E-TASC tool, the development of joint audits and capability projects. See industry partnership.

Recognised outstanding supplier performance through our supplier award 
In 2007/08, we gave Capgemini the CR Engagement Award for continually demonstrating its commitment to meeting the global ethical standards in line with the expectations set by our Code of Ethical Purchasing, and for the vast improvements it has made to its CR programme. For more details on why we gave Capgemini this award and for information on their CR programme, please see building capability.

We will:

• Ensure 80% of all local strategic and preferred suppliers are reporting their compliance against the requirements of Vodafone’s Code of Ethical Purchasing by March 2009
• Communicate key policies to local strategic and preferred suppliers and assess their compliance with them by March 2009
• Implement projects with two suppliers and within our own organisation to support our new climate change commitment by March 2009
• Deploy a non-compliance management system to improve our existing process and support systematic action on CR issues identified within our supply chain by March 2009.