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April 10, 2008
Transparent Supply Chain Sends A Clear Message
    by Anne Moore Odell

Hewlett-Packard recently released a list of its largest suppliers in hopes of increasing accountability from factory floors to consumers' front doors.


Hewlett-Packard (ticker: HPQ) casts a huge shadow as the largest IT company in the world. Literally hundreds of thousands of people help produce the components, parts and computers that are sold under HP's name. In an unprecedented move, last week HP made public the list of its largest suppliers as part of its yearly Global Citizenship Report.

The goals in releasing the list are far reaching. First, HP is hoping to increase suppliers' accountability to workers, communities and the environment. Second, HP is hoping the increase in transparency will lead to an increase in collaboration with other IT companies and act as a model for other IT companies to follow.

One of the most important reasons for releasing its suppliers is HP's bottom line. The business case for the HP's supply chain transparency is beyond positive public relations. Working with suppliers to protect the environment and worker safety does help HP's reputation. However, it also creates positive business relationships with suppliers and keeps the supply chain working smoothly. HP also argues that supply chain transparency helps the company be more efficient and decreases costs.

"Each year, as part of HP's annual Global Citizenship Report (GCR), we report publicly on the supply chain SER (Social and Environmental Responsibility) program results," said Judy Glazer, director for HP's Global Social and Environmental Responsibility (SER) Operations. "This report is critically reviewed by socially responsible investors, non-governmental organizations and other stakeholders. They consistently ask for greater transparency about our suppliers as a mechanism for accelerating the effort to raise standards across the industry. In response, we have decided to publicly release the names of our suppliers."

HP's suppliers list of nearly 100 companies accounts for 95% of their spending on components, manufacturing and components. These suppliers consist of commodity suppliers, contract manufacturers, electronic manufacturing services providers, and original design manufacturers.

Glazer told SocialFunds.com: "The expectations we set for suppliers that manufacture HP's parts, components and products, are a key aspect of our social and environmental performance. Beyond product manufacturing, social and environmental impacts also occur during the transport of our products throughout our supply chain. These suppliers are the focus of HP's SC SER Program."

"HP is the first company in the electronic industry to release the list of its top suppliers for materials, manufacturing and assembly," said Rev. David M. Schilling, program director of Global Corporate Accountability, Interfaith Center on Corporate Responsibility (ICCR). "This is an important step in promoting transparency in its supply chain. My hope is that this action will result in HP suppliers taking greater ownership of social and environmental practices that improve the lives of workers on a continuous basis."

HP was instrumental in organizing the Electronic Industry Code of Conduct (EICC), which summarizes the social and environmental standards for the IT supply chain. The EICC was first released in October 2004 with revisions in 2005. Companies that have adopted include: Celestica, Cisco, Dell, Flextronics, Foxconn, HP, IBM, Intel, Jabil, Lucent, Microsoft, Sanmina SCI, Seagate, Solectron, and Sony.

Beyond establishing a supply chain code of conduct for itself, HP also conducts audits of its suppliers to make sure they are adhering to standards set by the EICC. HP has conducted over 400 audits of its first-tier suppliers. In 2007, HP conducted 150 supplier audits. Of these, 92 were follow-ups to verify progress against open non-conformances found during an initial review.

"HP promotes sustainable improvement in our suppliers' factories," said Glazer. "We believe that focusing on management systems and analyzing the root causes of non-conformances increases the probability of lasting change. To achieve this, in addition to auditing our suppliers, we provide training and support to build their internal capabilities."

HP's SER program follows four phases that promote continual improvement in supplier companies. HP developed a network of local internal auditing teams backed by independent verification in the regions where they purchase. However, HP does not rely solely on supplier certification to external standards, because they have observed that standards can vary among certified companies and that suppliers without certification can have equally rigorous SER management systems.

"HP has made supply chain responsibility one of its three global citizenship priorities," explained Schilling at the ICCR. "Over the past few years we have seen the company put substantial resources into monitoring, training and capacity building to improve the social and environmental performance of its suppliers."

Schilling continued, "We appreciate HP's focus on the root causes of violations of its supplier code of conduct and systemic solutions rather than quick remediation plans that aren't sustainable. Clearly, some of the key challenges, such as excessive hours and lack of workers' right to organize and bargain collectively, have not been solved in many locations. But, the company is engaged with non-governmental organizations and other stakeholders to find ways to address systemic injustices."

HP also announced it is starting a HERproject program at a supplier's site in Cuidad Jaurez, Mexico, where a majority of the manufacturing activity for HP takes place. The HERproject (Health Enables Returns project) offers women's reproductive health services and education. Pegatron Technology and Foxconn, two suppliers for HP in Cuidad Jaurez, will partner with HERproject to help meet women's physical and mental health needs. HP is also planning to launch a HERproject site in China as well. HP is initiating the project through a partnership with Business for Social Responsibility (BSR).

"Advancing women's health issues in the supply chain is another step that HP has taken to further SC SER within the technology industry," explained Glazer. "It is consistent with our core values to be a force for positive change in the communities where we work and live. Investing in SC SER and supplier diversity reflects our global citizenship principles and meets our stakeholder expectations."

 

 
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