- Increasing the share of suppliers audited for sustainability
- Weighting sustainability aspects at 10 percent for bids
- Supplier surveys and self-assessments
- Supplier evaluation and development
- Escalation process for violations
- Results of online surveys
- Social audits
- Sustainable Procurement ESG KPI
Depending on the development phase of the supplier relationship, we use different tools to make our supply chain more sustainable. A ten-percent sustainability-weighting factor has been included in all bids for proposals since 2014. This creates strong incentives for suppliers to offer more sustainable products and services in the bidding process.
We also use a four-level approach to minimize risks and encourage our suppliers to improve their practices. The funnel chart illustrates the process. Via our supply chain management system we initially ask all potential suppliers with an annual order volume of more than 100,000 euros about 16 sustainability-related aspects (phase 1). These 16 aspects relate to human rights and corruption as well as environmental protection and occupational health and safety.
As the business relationship proceeds, we ask strategically relevant and high-risk suppliers to enter extensive information about their practices in the E-TASC (Electronics Tool for Accountable Supply Chains powered by EcoVadis) information system. Experts evaluate these statements on the basis of additional background information and targeted research. We take things a step further in our relationships to some suppliers that exhibit a higher CR risk and conduct on-site social audits (phase 2). In doing so, we focus not only on direct suppliers of Deutsche Telekom but also on downstream suppliers as far as possible.
We also boost the effectiveness of our audits by collaborating with a current nine other companies in the Joint Audit Cooperation (JAC). Thanks to the increasing number of JAC members, we are able to conduct a higher number of audits on joint suppliers.
We use the information provided and audit results to classify and evaluate suppliers, especially those that offer several material groups, according to CR criteria (phase 3). This is done using supplier scorecards, which let us assess a supplier's sustainability performance and compare them with other suppliers at a glance. The evaluation is also based on press information and reports from non-governmental organizations (NGOs). We also collaborate closely with selected suppliers to address acute issues and improve their sustainability performance in the long term. Our supplier development program is particularly effective here (phase 4). In cases of significant disregard of our requirements, we initiate an escalation process to effect fast resolution in accordance with the Deutsche Telekom sustainability standards. The results of the supplier evaluations and the measures taken to solve the problems are recorded centrally.
We collaborate as partners with our suppliers to make sure they are able to meet our high sustainability criteria with measures like our development program for key strategic suppliers. In this program we work together to come up with solutions for topics such as environmental protection, working hour regulations and occupational health and safety. It is a clear win-win situation for us as well as our suppliers because better working conditions have a positive influence on employee loyalty and motivation, raise productivity and improve the quality of products. Having launched the pilot with three suppliers in 2014, we extended the project to build a comprehensive development program in which seven companies already participate. We are planning to include four additional suppliers in 2016.
One of our key suppliers has been able to reduce CO2 emissions in its own operations and in its supply chain by 169,000 metric tons since the start of the program. And this is not the only measurable success: one supplier was able to increase its productivity by 34 percent, another was able to reduce the number of employee absences due to occupational health and safety issues by 48 percent and another supplier was able to increase waste recycling from 69 percent to 85 percent.
The diagram shows the areas in which we audit our suppliers. Using the results, we work with them to develop a plan for remedying any issues. Suppliers receive support from Deutsche Telekom experts as well as professional external consultants in applying these measures. All activities and results are documented so that we can gauge the effectiveness of the measures employed. Adjustments are then made as needed.
Various tools are employed to assess the effectiveness of our supplier development program. We ran a pilot project to test an online survey to help us in these efforts in December 2015. We asked employees from a supplier in China to rate their employer in nine categories including overtime, discrimination and occupational health and safety. Employees were given QR codes so that they could use their smartphones to participate in the survey voluntarily and anonymously. After evaluating the results, we found that there is low risk with this supplier in terms of employee fluctuation, child labor and occupational health and safety.
We are planning to gradually expand the survey to all suppliers within the scope of our development program in 2016. Additional improvement measures will be introduced following the survey as needed. We are also planning to use this procedure with other suppliers when applicable. This will make it possible for us to assess the effectiveness of improvement measures introduced in the wake of social audits.