Sustainable procurement strategy

Non-governmental organizations (NGOs) and the media continue to uncover violations of employee and human rights as well as environmental protection standards along the supply chain for phones, laptops and other ICT  products. As one of the largest telecommunications service providers worldwide with more than 30,000 suppliers in over 80 countries, we take this issue seriously. We use effective management tools to make sure our suppliers and manufacturers provide humane working conditions and are involved in effective environmental protection.

 

Sustainability in procurement activities at Deutsche Telekom
Methods, tools and stakeholders

Tools and methods for promoting sustainability in procurement activities
Supply chain management
  • Prequalification questionnaire
  • Supplier selection process
  • Supplier assessment
  • Supplier development
Risk management
  • E-TASC 
  • Social Audits
  • Improving supplier competence
  • Escalation process 
Strategy to promote sustainability in procurement activites
Communication & training
  • Procurement portal
  • Online training tool
  • Reports on sustainability
    in our procurement activities
  • „Stakeholder  Dialog Day“
Rules & regulations
  • Procurement Practices
  • General Terms and Conditions for
    Purchasing,e.g., CR clause
  • Social Charte
  • Statement on Extractives 
Sustainable Procurement Working Group

Tasks: Incorporation of sustainability into procurement, ongoing development of a sustainable procurement strategy and implementation of core measures; measurement and management based on key performance indicators; support for escalation processes; sharing information on best practices and business cases.

Stakeholder 

Intern: Employees, purchasers, other workgroups (“sustainable products,” etc.)

Extern: Suppliers, sustainability-oriented investors, NGOs

One of Telekom's aims is to constantly improve the sustainability of its value chain. We have laid the foundation for this with our sustainable procurement strategy. We adhere to principles for socially and environmentally friendly procurement throughout the Group and manage our processes with the help of internal and external performance indicators and management tools.

Fundamental norms and standards
Telekom has created social and environmental minimum standards for its corporate governance through its Guiding Principles and voluntary commitments. We also require our suppliers to comply with these standards. We use the following documents to guarantee compliance:

With our Social Charter, we have made a commitment to complying with the fundamental principles and standards set forth by the International Labour Organization (ILO ) and the Organisation for Economic Co-operation and Development (OECD ) as well as with the Universal Declaration of Human Rights and the UN Global Compact 

Commitment to sustainable procurement
Our strategy for realizing sustainable procurement practices is based on our CR strategy and has been effectively incorporated into our procurement processes. The Sustainable Procurement Working Group (SPWG) develops recommendations on how to best implement our sustainable procurement strategy and assists our employees in their procurement decisions. The heads of the CR and Procurement divisions together carry general responsibility for the implementation of sustainable procurement practices. They report directly to the Board of Management member for Human Resources and Finance, respectively. Our escalation process calls for decisions to be made at Board of Management level in serious cases. We have also specified sustainable procurement requirements for the Joint Venture BuyIn.

We have incorporated our sustainability principles into the Group's Global Procurement Policy to provide orientation for our buyers. The accompanying Procurement Practices provide instructions on how to conduct procurement transactions at Deutsche Telekom. An e-learning tool is available to train our employees in this respect. An updated version of the tool was released in 2014. Our buyers can, for example, use the tool to learn how to implement our sustainability principles in their daily business activities.

Promoting sustainability with the Sustainable Procurement ESG  KPI 
We use the Sustainable Procurement ESG key performance indicator (ESG  KPI ) to measure and manage our sustainability performance in procurement. This KPI  measures the ratio between the procurement volume we receive from suppliers whose compliance with social and environmental criteria has been verified through self-assessments, the EcoVadis information platform or social audits, and our total procurement volume. Our goal is to cover 75 percent by the end of 2015. We aim to further improve this value continually over the subsequent years.

Sustainability rankings rate supplier management activities
Each year, leading rating agencies rate the sustainability performance of large companies. Deutsche Telekom scored 93 out of 100 points in the supply chain management category of the 2014 RobecoSAM  rating (2013: 88 points), making Telekom an industry leader. 

The Italian NGO, Acquisti & Sostenibilità, was also impressed by our suppl chain management policies. We came in first place among 430 multinational companies from 30 industries in the "Sustainable Supply Chain Review" study published by the NGO in 2014.

The Sustainable Procurement Working Group (SPWG ) has served as an instrument for the comprehensive implementation of social and environmental standards in Procurement since 2007. In addition to representatives from all of the functional Procurement areas (such as Devices and IT) the SPWG  also includes representation from the national companies and T-Systems International. The focus of our Sustainable Procurement Working Group in 2014 was harmonizing sustainability management at the procurement departments of all of our national companies.

Participants once again discussed the basic elements of our sustainable procurement strategy at an event in March 2014. We have also recently introduced monthly conference calls to encourage participants to share their knowledge and experience, review progress and increase their level of involvement in the supplier qualification process. In this context, a large part of our strategic suppliers and those with higher risk are assessed on the basis of sustainability criteria via the EcoVadis platform or through audits. Since June 2014, we have been directly addressing the individual needs of our national companies with a Group-wide roadshow.

The sixth Sustainable Procurement Dialog Day took place on March 26, 2014, at Deutsche Telekom's Group headquarters in Bonn. A total of 108 participants including selected international suppliers, NGO representatives, politicians, researchers and employees from different Telekom departments participated in the dialog event. This year's dialog focused on how to better manage and implement ethical responsibility along the global value chains. Three workgroups discussed human rights due diligence, conflict resources and the basis for improved collaboration between suppliers and their customers.

One of the three workgroups discussed how to structure an effective human rights due diligence policy for Deutsche Telekom. Participants stressed the fact that the due diligence practices needed to be adjusted to meet the requirements in each country. They pointed out that this included informing employees of their rights and teaching consumers how to deal with digital risks. Workgroup participants also said that good collaboration with governmental institutions, ICT  companies, suppliers and other stakeholders was key to creating effective sustainability management practices.

Dialog Day participants recommended developing common standards and sustainability requirements that would apply to as many companies in the ICT  industry as possible in order to improve and simplify collaboration with suppliers. Doing this would prevent suppliers having to check and comply with the varying requirements of their different customers. As part of a project launched in 2014, Deutsche Telekom therefore aims to further standardize supplier requirements between companies, together with the French telecommunications service provider Orange and the BuyIn joint venture. Dialog Day participants also emphasized the importance of engaging in dialog with each supplier in order to establish and maintain trust.

We hosted our seventh CR Stakeholder  Dialog Day in November 2014 in the Chinese city of Shenzhen. At the event, Deutsche Telekom and 118 participants discussed what sustainable business might look like in light of the global transformation. Suppliers and experts from politics, business, science and civil society, including high-ranking representatives from the Chinese Environment Ministry, were invited to take part.

Birgit Klesper, Senior Vice President for Group Transformational Change and Corporate Responsibility, made it clear in her opening speech that "Corporate responsibility is not a question of charity. Doing business responsibly also drives growth." The Together for Sustainability program for sustainable supplier development was one of the measures launched in order to maintain high environmental and social standards along the supply chain. "Based on the considerably higher re-entry rates of satisfied employees, the investment pays off within just a few months," Eva Wimmers, Senior Vice President for Group Procurement at Deutsche Telekom, emphasized.

Work conditions have to change due to the demographic shift alone. Jungfeng Zhang, Deputy Director of the International Institute for Occupational Health and Safety at the Chinese Ministry of Human Resources and Social Security, said, "The younger generation today has many more opportunities and they use their own voice. Chinese employers in particular will have to understand this in order to recruit and retain qualified employees in the future."

The dialog in Shenzhen pointed out that the challenges of our time can only be met with close cooperation among the ICT  industry, politics and NGOs.

Our Global Procurement Policy clearly regulates sustainability in our procurement practices. We offer the Procurement Sustainability e-learning tool to Procurement employees at our national companies to help them put the policy into practice effectively. During the training, employees learn about and are tested on important CR measures and processes. For example, the tool explains in detail the steps that need to be followed to introduce countermeasures in cases of violations (escalation process).

The tool was thoroughly revised and updated in 2014 during a several-week process. A total of 490 employees successfully completed the e-learning course between August and December 2014.