83 out of 100 points in SAM rating.
We continued our auditing activities with modified objectives in 2012. Instead of trying to conduct as many audits as possible, we focused more on intensively auditing strategically important and other risk-relevant supplier groups and countries. In order to pursue implementation of CR at the different levels of the ICT supply chain internationally, we cooperate with other telecommunications providers in the Joint Audit Cooperation (JAC), which we co-founded.
Our effective supplier management was recognized this year again. Once again, we received a very good score in the renowned sustainability rating conducted by the Sustainable Asset Management Group (SAM), where we were able to maintain our leading position in the supply chain management category with 83 out of 100 possible points and received the title of "Best in Class." The decline from 94 (previous year) to 83 points can be attributed to the fact that SAM revised its ranking system, so the scores cannot be directly compared.
By expanding the Joint Audit Cooperation (JAC), which was founded in 2010 by Deutsche Telekom, France Télécom-Orange and Telecom Italia, to currently include nine members, we were also able to increase the number of suppliers audited by JAC from 30 to 63. In 2012, JAC audited a total of 26 Telekom suppliers and sub-suppliers within the scope of this collaboration. Telekom itself also commissioned an additional seven audits to be conducted by internal experts and external auditors. Our audit activities are focused on Asia, and we also audit suppliers from other high-risk regions, such as Latin America and Eastern Europe.Find out more
A social audit at Telekom comprises the following essential elements:
- A general risk assessment of suppliers conducted by Telekom,
- An evaluation of the supplier's self-assessment by Telekom
- Personal communication with the suppliers and
- The on-site audit
The auditor then writes an audit report and evaluates the results. Instead of ending our business relationship with suppliers who violate our policies, Telekom works together with these suppliers to permanently improve conditions. We address any problems in an action plan and work together with the supplier to remedy these within a pre-defined period of time.
Contrary to our original aim to conduct 200 social audits between early 2010 and late 2012, we decided to limit our focus during this time on conducting 86 audits of strategically important and other high-risk supplier groups. The audits were conducted either by Telekom or by the Joint Audit Cooperation. By focusing on high-risk suppliers, we were able to significantly increase the share of procurement volume reviewed according to sustainability criteria in 2012. We are planning to conduct at least 30 audits a year using this new approach.
In addition to the social audits, our China office in Shenzhen once again conducted supplier performance visits during the reporting period. Since 2012, our China office has been using a checklist to systematically analyze different corporate departments of our suppliers during these visits, taking certain sustainability criteria into consideration. The China office immediately reports any critical findings to Telekom and the supplier involved becomes a potential candidate for a social audit. The office conducted nine supplier performance visits with direct and indirect suppliers in 2012. We are planning to intensify the supplier performance visits and make them a permanent fixture of our supplier auditing process in the network infrastructure area.
Deutsche Telekom is a founding member of the Joint Audit Cooperation (JAC) of telecommunications companies. In 2012, JAC published its guiding principles on vision, governance and strategy. With these guiding principles, the cooperation is pursuing the objective of becoming a driving force for sustainability in the ICT supply chain and making sure that internationally-recognized social and environmental standards are complied with along the entire supply chain. JAC's strategic approach is to equally promote supplier audits as well as the development of adequate corrective and improvement measures. JAC also encourages cooperation between suppliers and intends to intensify its own collaboration with NGOs.
Activities in 2012 revolved around structuring the auditing process effectively. In addition to further developing the JAC auditing parameters on topics like conflict minerals, bribery and corruption and adjusting the list of questions accordingly, the cooperation also set up a supplier database that provides a clear overview of audit results and corrective measures. The database can also be used to identify potential areas for improvement and future audit priorities for different suppliers.
Adopting the JAC Guidelines and defining KPIs
During the reporting period, the cooperation network expanded its membership to a current total of nine telecommunications providers: Belgacom, Deutsche Telekom, France Télécom-Orange, KPN, Swisscom, Telecom Italia, Telenor, TeliaSonera and Vodafone. All members were asked to approve the JAC guidelines unanimously by the end of March 2013. The next step is to work together with the suppliers and NGOs to define key performance indicators (KPIs) for the topics involving the highrest risks, such as working hours and child labor. The KPIs should be completed by summer 2013.
As part of a unique, industry-wide cooperation, Telekom and its competitors, France Télécom-Orange and Telecom Italia, announced a joint decision to improve the sustainability of their supply chains in Asia in December 2009. In October 2010, this decision resulted in the founding of the Joint Audit Cooperation (JAC). The JAC is setting up a strategy that enables the three companies to audit their shared suppliers globally on the basis of standardized criteria. The collaboration partners are also striving to establish social, ethical and environmental standards amongst their suppliers.
If we find out about violations against employee rights on the part of our suppliers, we work to make sure these violations are remedied and that working conditions are permanently improved. If the violations cannot be promptly remedied, Telekom responds to the situation within the scope of an escalation process, like the one used in 2012 with a supplier from China.
An international non-governmental organization (NGO) made serious accusations against this supplier. The NGO claimed that the supplier's working hours were too long and that they had 16 - 18 year-olds working the night shift. They also claimed that the supplier had used inappropriate disciplinary measures and delayed payment of social security contributions or refused to pay them altogether. Telekom had already imposed strict measures on the supplier within the scope of an audit in October 2011. However, the follow-up audit conducted in July 2012 showed that the supplier had not yet complied with these requirements. As a result, Telekom sent the supplier an internal corrective measure plan in August that was created in consultation with BuyIn and then verified the implementation status on-site at the end of August. We were able to identify initial positive trends at that time. A crisis meeting was held by Telekom representatives and the supplier's management to discuss the working hours, which were still too high. In addition, a high-ranking delegation from Deutsche Telekom visited the company in September, following which the supplier formally agreed to the corrective measure plan sent to them by Telekom in November 2012 and, in their agreement, stated that their objective was to become a model company in the region and within the industry.
Each month, Telekom monitors the supplier's efforts initiated in August 2012 to ensure that improvement measures such as a pay increase, gradual reduction of weekly working hours to the legal 49 hours a week, building collective and individual showers and drawing up a new cafeteria concept are indeed implemented.