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Sustainability strategy for procurement.

  • 54 percent of procurement volume reviewed in accordance with sustainability criteria.
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  • Self-assessment on human rights conducted.
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Within the scope of its CR strategy, Telekom is making efforts to live up to its role as a responsible company in terms of our procurement and supplier management policies as well. We once again were listed in renowned sustainability rankings, confirmation that our efforts are paying off. We intend to solidify this position and expand it further. The basis for this is the strategic integration of sustainability into our procurement activities.

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

Tools and methods
for promoting
sustainability in
procurement activities
 
Sustainable
Procurement
workgroup

Internal: Developing standards, KPIs; internal communication, central point of contact and first escalation level

External: External communication, dialog sessions with suppliers, NGOs, investors, scientific community

 
Stakeholder 

Internal: Employees, purchasers, other workgroups (Climate Change Group, “sustainable products,” etc.)

External: Suppliers, sustainability-oriented investors

 
Procurement volumes and regions.

Telekom works with suppliers in more than 50 countries worldwide. In 2012, we purchased goods and services totaling at some EUR 355 million from newly industrialized and developing countries, the equivalent of around 1.6 percent of our total procurement volume.

Collaboration with stakeholders on-site is key when it comes to permanently improving production conditions in these countries. We particularly focus on social and environmental conditions in the production areas in newly industrialized and developing countries.

Last year's CR report

Laying down principles and taking responsibility for the supply chain.

Mandatory standards and tools.
Through our guidelines and voluntary commitments, we require our suppliers to comply with minimum social and ecological standards. Our Group's Code of Conduct and its Social Charter  explicitly incorporate our suppliers in these regulations. The Social Charter  contains guidelines that are valid throughout the Group for the following:

  • Human rights and working conditions
  • Environmental protection
  • Equal opportunities
  • Health and safety at work
  • The right to set up and join a trade union

Download : Code of Conduct
Download : Fraud Policy
Download : Social Charta

We use different tools to make sure these standards are complied with. Before entering into a business relationship, we use a prequalification process via our Supplier Management Portal to ask potential suppliers about their CR activities and voluntary commitments. If a supplier's responses do not yet meet our requirements, we require that supplier to submit additional self-assessments of their CR activities during the course of the business relationship and, with the permission of our suppliers, conduct on-site social audits as well. If a supplier is not able to provide the requested information, an internal, multiple phase process is initiated to enable the supplier to comply with our requirements. In many cases, a few meetings suffice for this purpose. We employ several escalation levels (escalation process) in case of disputes in order to come up with a fast solution in compliance with Deutsche Telekom's sustainability standards. The outcome is recorded throughout the Group.

Handling raw materials.
With our Coltan Statement, which was published in 2005, and our Statement on Extractives , which was published in 2009, we want to make sure that both our direct suppliers and their sub-suppliers work to minimize the social risks linked to extracting raw materials. We require our suppliers to officially state that they will comply with Deutsche Telekom's Statement on Extractives . In cooperation with the Global e-Sustainability Initiative and Electronic Industry Citizenship Coalition programs, we helped further develop the Conflict-Free Smelter Progam , the purpose of which is to enable companies to procure conflict-free raw materials only. We are also working on industry-wide solutions for conflict-free raw materials extraction within the scope of the Program.

Download : Coltan Statement
Download : Statement on Extractives

Positioning within the organization
The Corporate Procurement Strategy department has been responsible for developing concepts and methods for achieving sustainability in our procurement practices since 2010. The Sustainable Procurement Working Group continues to provide assistance when it comes to realizing sustainability in our procurement activities throughout the Group. Experts from the CR area work together with representatives from Telekom's major procurement areas on this international committee. Our sustainability principles have been incorporated into the Group's Global Procurement Policy, and the associated Procurement Practices contain regulations for our buyers in Germany.

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Deutsche Telekom adopted its Social Charter  in 2003. As an integral element of Deutsche Telekom's Code of Conduct , the Social Charter  is based on the values of the UN Global Compact  and the guidelines passed by the International Labour Organization (ILO) and the OECD Guidelines for multinational Enterprises.

The principles described in the Charter apply to all Telekom business units worldwide. In the Charter, which is an integral part of our General Purchasing Terms and Conditions, we require all suppliers to comply with these basic principles as far as possible.

Sustainable procurement strategy.

During the reporting period, Telekom developed a concept for supplier selection that it plans to use to make sustainability criteria a permanent feature in the supplier selection process. In addition to price, quality and other aspects, sustainability criteria should make up 10 percent of the decision to procure goods from a supplier. In 2012, T-Mobile Netherlands tested the new selection process in a pilot project. The results were analyzed in early 2013. The plan is to incorporate the concept into the Sustainable Procurement Strategy and also as in procurement processes throughout the Group. We are also working on integrating product and materials group-specific sustainability criteria into our procurement processes.

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Telekom approved the Sustainable Procurement Strategy in 2007 and revised it in 2010. With the strategy, Telekom acknowledges its social responsibility, e.g., regarding fair payment based on local conditions and the observance of basic human rights. All guidelines and processes to improve sustainability in the supply chain are based on our Sustainable Procurement Strategy. For example, we take potential environmental impact from the entire life cycle of products and services into consideration as far as possible when making our procurement decisions. Some examples of this are our Sustainable Product Portfolio program and our particularly energy-efficient products.

Expanding the Sustainable Procurement CR KPI.

A key component of our supplier management policies is the electronic industry information system, the Electronics Tool for Accountable Supply Chains (E-TASC). We also use the supplier information recorded in E-TASC to calculate our Sustainable Procurement CR Key Performance Indicator (KPI). We use this KPI to measure the procurement volume with suppliers that are being reviewed for compliance with our social and environmental standards within the group or at one or several group companies. We have also been using supplier data from the Supplier Management Portal to calculate the CR KPI since 2012. In this way, we focus above all on suppliers who are of strategic relevance and have a higher CR risk.

We were able to considerably increase the procurement volume reviewed according to sustainability criteria by 16 percent to a total of 54 percent in 2012. This increase can in part be attributed to the fact that we are now using additional supplier data in our CR KPI calculation. Other measures introduced in 2012 contributed to this result as well. For example, we increased the number of suppliers that we require to undergo a prequalification process. This process is now mandatory for suppliers with whom we expect an order volume of more than EUR 100,000.

We have also developed a matrix that categorizes suppliers according to specific, risk-relevant criteria including procurement volume, country, material group and strategic significance for Telekom. The matrix helps us identify potential suppliers for audits as well as those suppliers who we would like to provide us with a self-assessment. Telekom is pursuing the objective of requiring all strategic suppliers as well as those at high risk in terms of CR to provide us with a self-assessment via E-TASC by 2015.

Supplier code of conduct integrated at BuyIn.

In 2011, partners Deutsche Telekom and France Télécom-Orange combined their procurement activities in the areas of end devices and mobile communications networks as well as a large portion of their fixed-network equipment and service platform procurement activities in the BuyIn joint venture. During the reporting period, we met key prerequisites for integrating the sustainability standards of the two parent companies in this joint venture as well.

We published the BuyIn code of conduct for suppliers during the reporting period in consultation with France Télécom-Orange and BuyIn. The code of conduct covers topics such as ethics and anti-corruption, the ban on child and forced labor and the right to freedom of association. The code is mandatory for all of the procurement joint venture's suppliers. BuyIn also expects its suppliers to require their own suppliers to comply with the provisions set forth in the code of conduct. Should a supplier violate the code of conduct, BuyIn has the right to demand improvements and, should the supplier fail to meet these demands, to terminate the contract. During the reporting period, BuyIn also set up an online whistleblower system where people can anonymously report mismanagement, problems or violations of the principles set forth in the code of conduct.

Code of conduct announced internally and externally
BuyIn has been informing its employees of the content of the code of conduct for suppliers via training courses and internal communication. In October 2012, for example, the company provided online training courses, which more than 80 out of the total of 240 employees had completed by the end of 2012.

All BuyIn suppliers were sent the code of conduct in early 2013 along with a questionnaire for them to provide a self-assessment. The purpose of the questionnaire is to help BuyIn assess compliance with the requirements specified in the code of conduct as well as the suppliers' general sustainability performance.

Creating structures for steady CR integration
We established two committees in 2012 in order to structure BuyIn's procurement processes so that they continue to correspond with the sustainability criteria of Deutsche Telekom and France Télécom. The CR Steering Board meets every six months and is responsible for defining strategic priorities and sustainability objectives. The CR Operations Committee is responsible for operative implementation of the policies. The committee meets at least every two months. Both committees are comprised of employees of Deutsche Telekom, France Télécom-Orange and BuyIn.

BuyIn also defined specific CR clauses during the reporting period. The company is planning to integrate these clauses into all future supplier contracts and has already conducted initial pilot bidding processes. The clauses contain sustainability-relevant requirements such as external audits of sustainability performance and self-assessments on the energy efficiency of certain products.

Principles for a sustainable supply chain
With the CR Steering Board and the CR Operations Committee created in 2012, BuyIn has appropriate structures to make sure that suppliers will comply with local regulations as well as Deutsche Telekom and France Télécom's environmental and social standards. These include in particular:

  • Mandatory compliance with the code of conduct, even during the bidding process
  • Prequalification of new suppliers
  • Regular provision of information to current suppliers regarding the requirements specified in the code of conduct
  • Social audits within the scope of the Joint Audit Cooperation (JAC).

BuyIn is also planning to make its supply chain more sustainable in close cooperation with strategic suppliers. The company plans to use a key performance indicator to conduct regular reviews. The KPI will be specifically designed to measure sustainability performance as well CR action plans.

Participation in the German Global Compact Network.

In January 2013, Deutsche Telekom employed the German Global Compact  Network's Organizational Capacity Assessment Instrument (OCAI). The tool helps companies assess their own capacities in the area of human rights and increase their management capabilities in this area. It comprises 22 questions related to integrating respect for human rights and other sub-topics. The results are rated using a six-level rating scale from "non-responsive" to "human rights promoter." According to the results of the assessment, we are currently at level three in terms of efficiently managing human rights in almost every issue. Some of our answers point to the next level, "proactive experimentation," which indicates the ambition to take on a leading role when it comes to human rights.

Based on these results, we are planning to make improvements in the areas of training measures and complaint mechanisms for human rights violations. Deutsche Telekom is also planning to conduct a Human Rights Impact Assessment and develop measures based on the results. The point of this assessment is to identify human rights risks within the Group. The assessment is based on recommendations made by the United Nations in its Guiding Principles on Business and Human Rights. We will be conducting the assessment throughout 2013 and possibly longer, followed by an annual review to address the need for constant improvement.

In 2012, we also participated in two workshops held by the science and human rights learning group of the Germany Global Compact  Network. The workshops focused on the question of how to guarantee that human rights are respected in the mining and metal industries.

Common Supplier Code of Conduct and Policy for OTE and Cosmote.

The OTE Group has introduced a common Supplier Code of Conduct covering labor, health and safety, environment and ethical issues in early 2013. The Suppliers' Evaluation System included in the Suppliers' Policies for both OTE and Cosmote contains specific CR criteria.