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 is included in all bids for proposals. This creates strong incentives for suppliers to offer more sustainable products and services.
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 18 sustainability-related aspects (phase 1). These aspects relate to human rights and corruption as well as environmental protection and occupational health and safety. All suppliers are subject to mandatory re-qualification after three years.
As the business relationship proceeds, we ask strategically relevant and/or high-risk suppliers to enter extensive information about their practices in the E-TASCsocial 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 thirteen other companies in the Joint Audit Cooperation (JAC). The increase in the number of JAC members means that the number of suppliers that do business with several members of the cooperation is growing. This prevents audit redundancies.(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
Based on the information obtained from suppliers and on audit results we classify and evaluate suppliers 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. All available sustainability information (from the E-TASC information system, our own research, audits and pre-qualification results) are included in our assessments of top suppliers.
Further information on supply chain management
We work closely with our suppliers to address any acute problems that are identified. We have set up a continuous process to help these suppliers improve their sustainability for the long-term. Our supplier development program (phase 4) and sustainability workshops are key elements of this process. We held workshops with four suppliers in 2016. 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.
Four new additions to supplier development program
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. In 2016 we added four new suppliers to the program; it now comprises a total of eleven suppliers.
The program's success is tangible. The following improvements have been made at Chinese suppliers, for example:
- Work hours at one of our suppliers have dropped from 68 to 48 hours a week.
- Another supplier upped its productivity by 12 percent thanks to improved production processes.
- Waste at the main facility of another supplier was reduced by 16 percent thanks to a waste analysis.
- One supplier now generates 16,902 metric tons less CO2 per year, equivalent to the CO2 emissions of 10 fully booked flights from Berlin to New York.
The diagram shows the areas in which we audit the suppliers participating in our program. 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.
We conducted a pilot online survey during the reporting period to assess the effectiveness of corrective measures following social audits. Supplier employees had the opportunity to anonymously rate improvements in nine different areas. We analyzed the results of the survey and introduced additional improvement measures where necessary.
We are planning to use such surveys as a standard tool in the future to assure the quality of improvement measures introduced in social audits and in our supplier development program.
We also developed training content for our suppliers. This content will be made available via an online tool in 2017 and suppliers will be able to use it independently. We are hoping this will help us reach even more suppliers.
Commendation for commitment to sustainable supply chain
We are committed to the sustainability of our supply chain and were once again recognized for our efforts in 2016. The Ethical Business Corporation presented us with 1st prize for Best Supplier Engagement. The jury was impressed by our supplier development program (SDP). They were particularly inspired by the results that our suppliers have already achieved.
From left to right: Luis Neves (Climate Change & Sustainability Officer, GCR DTAG), Antonio Veloso (Senior Expert for Supply Chain Management, GCR DTAG), John Spear (SDP, EPI Consulting cooperation partner)
We were also able to score points with our engagement in the supply chain during the previous year. In 2015 we were presented the German Award for Excellence in the "Responsible sourcing" category at the DQS Sustainability Conference for our "ongoing supplier development efforts for permanent improvement of sustainability performance." In 2015 we also received an award in the "CSR along the supply chain" category of the German CSR Award. The award recognized our genuine approach to ongoing supplier development.
Award for climate protection along the supply chain
The NGO CDP2016 how they involve their suppliers in their climate protection activities. We were among the leading companies right away.regularly reviews the climate protection activities of companies. For the first time CDP asked companies in
- After all, we act ourselves as a supplier to our customers. Suppliers publish their CO2 emissions within the scope of the CDP supplier program. We received a top score of "A." Out of 4,300 participants only 112 suppliers received this score.
- CDP's new supplier engagement rating assesses how well companies have been able to integrate the topic of climate protection into their supply chain. In 2016 only 29 out of over 3,300 participants qualified for the Supplier Engagement Leader Board, among them Deutsche Telekom.
We were also included in the A list in CDP's general ranking for the first time in 2016.