Depending on the development phase of the supplier relationship, we use different tools to make our supply chain more sustainable. When selecting a new supplier, the topic of sustainability is included in the decision-making process with an importance of 10 percent. This creates strong incentives for suppliers to make their business more sustainable and 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. In the first step, the pre-qualification, we obligate all of our suppliers to acknowledge our Supplier Code of Conduct (SCoC), which places strict ethical, social, ecological, and human rights requirements on our suppliers. We conduct a risk analysis to identify suppliers with a particularly high risk with regard to these aspects. We require strategically relevant or high-risk suppliers to provide us with comprehensive self-disclosures. They can provide this information to us using the E-TASC (Electronics-Tool for Accountable Supply Chains powered by EcoVadis) system. Our experts then assess the self-disclosures as well as additional background information. We take things a step further in our relationships to certain suppliers that exhibit a higher CR risk and conduct on-site audits (2017 audit results) (step 2).
In 2017 we conducted 89 on-site assessments (audits) on direct and indirect suppliers. We let the supplier know the approximate time of the audit in advance ("semi-announced audit"). This is necessary to make sure that relevant representatives and employees in key functions are present for the audit.
In doing so, we focus not only on Deutsche Telekom's direct suppliers but also on downstream suppliers as much as possible. We also boost the effectiveness of our audits by collaborating with thirteen other companies in the Joint Audit Cooperation (JAC). Due to the growing number of JAC members, the intersection of audited suppliers is also increasing, with multiple audits for individual suppliers being prevented.
We employ the "quality over quantity" principle when auditing suppliers. That is why we focus on some 250 strategically relevant and particularly risky suppliers among our more than 30,000 suppliers worldwide. We aim to audit these suppliers at least every two to three years.
We do not require our suppliers to obtain external environmental or social certificates. Based on our auditing experiences, however, the majority of our relevant manufacturing suppliers have an external "Environment" and "Social Accountability“ certificate pursuant to ISO14001 and SA8000 or comparable management systems. Verification of important social and ecological aspects as well as fundamental human rights during our audits is in line with internationally recognized guidelines and standards such as the ILO Labour Standards, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.
Based on all available sustainability-relevant information (from the E-TASC information system, our own research, audits, and pre-qualification results), we classify and evaluate suppliers according to CR criteria (step 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.
We work closely with our suppliers to address and resolve any acute problems that are identified. The subsequent process for improving the sustainability performance of these suppliers aims at long-term, continuous progress. This will primarily take place through our supplier development program (step 4).
In cases of significant disregard of our requirements, we initiate an escalation process to effect fast resolution in accordance with our sustainability standards. If employees have concerns along our supplier chain regarding compliance with laws, internal guidelines, and standards of conduct, they can report these anonymously using our whistleblower portal.
One of the goals of the BuyIn procurement joint venture between Deutsche Telekom and Orange is to ensure a sustainable supply chain. To this end, both companies introduced a joint Supplier Code of Conduct (SCoC) in 2017. It specifies joint principles and values in the corporate responsibility area and sets forth strict ethical, social, ecological, and human rights expectations and requirements for suppliers.
This Code can obviously not replace the laws and regulations of countries where our suppliers are active. Rather, its aim is to facilitate compliance with these laws and regulations and guarantee that they are implemented faithfully and effectively. As of July 2017, the Code applies to all procurement activities of Deutsche Telekom, Orange, and the BuyIn joint venture, that is:
The Supplier Code is a fixed component of the General Terms and Conditions/General Terms and Conditions for Purchasing. All new suppliers must accept it within the scope of the supplier onboarding process.
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. Under this program we work together to come up with solutions for topics such as environmental protection, working hour regulations, and occupational health and safety. Better working conditions have a positive influence on employee loyalty and motivation, raise productivity, and improve the quality of products; a clear win-win situation for our suppliers as well as for our company. In April 2017 we welcomed three new suppliers in China to the program, which now counts 14 suppliers. The new participants are currently working on creating their CR improvement plans.
Improvements achieved in 2017
The program's successes are tangible. During the operational review meeting in November 2017 in China, we evaluated last year's results together with the suppliers. As in previous years, the program suppliers achieved significant improvements*, such as the following:
The suppliers were once again honored for their performance in 2017. Significant and meaningful improvements of social or ecological aspects by our suppliers resulted in notable cost savings in 2017. Since the start of the program, total savings amounting to double-digit millions (in euros) could be achieved.
* All figures and success stories pertain to one year and to specific suppliers (i.e. the above numbers do not represent cumulative statistics for all program participants).
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. These are corrected, if needed.
We want to establish our supplier program as an industry-wide approach in 2018 using the GeSI ICT sustainability initiative. Participating suppliers will be trained using a web-based tool. After completing the training successfully, they will be able to use the tool independently so that they can in turn train their own suppliers. This way we hope to achieve larger economies of scale.
The non-governmental organization CDP2 emissions within the scope of the CDP supplier program. We ourselves act as a supplier to our customers. Just like the previous year, we were once again among the leading companies in 2017 and received the top grade "A."regularly assesses the climate protection activities of companies worldwide and compiles an index of leading companies called the A List. Suppliers publish their CO
We invited 195 suppliers in 2017 (compared to 181 in 2016) to participate in the CDP Supply Chain Program. These suppliers cover 73 percent of our procurement volume. A total of 109 suppliers took part in the program (compared to 108 in 2016). They cover 66.4 percent of the procurement volume (2016: 65 percent).
In 2017 we were also again included in the A List based on the CDP's general ranking.