Our approach for sustainable procurement
Encompassing the entire procurement process, our Group-wide sustainable procurement strategy is put into action using internal and external performance indicators and management tools.
- The responsibility for ensuring sustainability in procurement lies with the Board departments for Finance as well as Human Resources and Legal Affairs.
- Our sustainability criteria are factored into the overall procurement process and given a weighting of 10 percent when choosing suppliers who have responded to tenders.
- In the event of a significant violation of our requirements, we initiate an escalation process.
- We train our employees throughout the Group using an e-learning tool. In addition, our Global Procurement Policy provides an overview of which CR criteria must be considered at which point in the procurement process.
- We ensure business partners and suppliers are up to the mark by offering workshops on specific topics and through our Supplier Development Program.
- Our Supplier Code of Conduct is part of the General Terms and Conditions for Purchasing and must therefore be accepted by our suppliers. Ethical, social, and ecological principles as well as fundamental human rights are codified in this Code of Conduct.
- With our Supplier Code of Conduct, we have made a commitment to complying with the fundamental principles and standards set forth by the International Labour Organization (ILO ), the Organisation for Economic Co-operation and Development, the Universal Declaration of Human Rights, and the UN Global Compact.
- The Group Policy on Avoiding Corruption, the Statement on Extractives, and the list of prohibited materials are binding on our suppliers, too. For our strategic suppliers who exhibit a higher CR risk, we have on-site audits conducted regularly by external auditors to check compliance with the Supplier Code of Conduct.
Implementation in the company
- We derive our sustainability strategy in procurement from our CR strategy; it is anchored in the purchasing processes used throughout our Group. The heads of the CR and Procurement units are jointly responsible for implementing sustainable procurement practices. They report respectively to the Chief Human Resources and Legal Affairs Officer and Chief Financial Officer. An escalation process calls for decisions to be made at Board of Management level in serious cases.
- The Sustainable Procurement Working Group supports the international Procurement departments in implementing the sustainability requirements. Our sustainability principles for procurement are laid down in the Global Procurement Policy; the associated Procurement Practices provide specific instructions for procurement in Germany and serve as recommendations for the national companies.
* As of mid-2018, we are no longer using our supplier sustainability questionnaire in the pre-qualification process. Instead, we now demand a commitment from all our suppliers to uphold our comprehensive Supplier Code of Conduct (SCoC).
We have also drawn up a Code of Conduct for our suppliers to place them under an obligation to uphold the principles and values anchored in our Code of Conduct and in the “Code of Human Rights & Social Principles.” We expect our suppliers to impose the same requirements on their subcontractors
, too. Deutsche Telekom suppliers are also under the obligation to do everything necessary to prevent active and passive forms of corruption.
The Supplier Code of Conduct forms part of our General Terms and Conditions for Purchasing, but does not, of course, replace the laws and regulations of countries in which our suppliers operate. Rather, it is designed to facilitate compliance with these laws and regulations and ensure that they are implemented faithfully and effectively. Since 2014, we have offered online compliance training for our suppliers.
We select our business partners in line with compliance criteria, and conduct risk-oriented compliance business assessments for this purpose. Besides customers and suppliers, this also concerns consultants (Consultant Policy), sales agents, development partners, and joint venture partners.
Sustainable Procurement ESG KPI KPI
The Sustainable Procurement ESG KPI 81 percent. Over the next two years, we expect our Sustainable Procurement ESG KPI to remain stable at a high level. Our aim is to keep a coverage of at least 80 % until 2020.remained on a stable level against the prior-year figure. The share of the procurement volume that has been risk-assessed momentarily amounts to
In 2020, we will adopt a somewhat different approach to generating the KPIs for sustainable procurement so that we continue to meet current requirements.
We measure the degree to which our procurement volume is covered by sustainable activities with the Sustainable Procurement ESG KPI. It measures the share of procurement volume we obtain from suppliers where one or several Group companies of the corporate group have been assessed for compliance with our social and environmental standards by way of self-assessments and/or audits. This also applies for audits carried out on subcontractors. In the coming years we expect our Sustainable Procurement ESG KPI to stay at a constant level.
The Sustainable Procurement ESG 412-1 (Human Rights Assessment) and GRI 414-1 (Supplier Social Assessment ) GRI indicators. By providing this information, we cover the V28-04 EFFAS indicators (Supply Chain). It is also relevant for criteria 1 (Opportunities and Risks), 3 (Sustainability Goals), 4 (Value Added Chain), 6 (Rules and Processes), 7 (Performance Indicators) and 17 (Human Rights) of the German Sustainability Code. It is also used for reporting in accordance with the Global Compact Principles 1 (Supporting and respecting human rights), 2 (No complicity in human rights abuses) and 5 (Effective Abolition of Child Labor).KPI together with information about our strategic approach fully covers the GRI
CR-qualified TOP 200 suppliers ESG KPI KPI
The ESG KPICR-Qualified Top 200 Suppliers“ is an internal management indicator which complements the ESG KPI “Sustainable Procurement”. While the ESG KPI “Sustainable Procurement” measures the share of procurement volume reviewed according to sustainability criteria, the KPI “CR-Qualified Top 200 Suppliers” reflects the share of suppliers from the Top 200 Suppliers pool. These are reviewed based on sustainability criteria according to Self-Assessments, Audits , Supplier Sustainability Workshops and Supplier Development Programs. The share of CR-qualified suppliers taken from the Top 200 pool amounts to 87 percent in 2019. Thus, our target to reach 75 percent by 2020 is already exceeded.„
In 2020, we will adopt a somewhat different approach to generating the KPIs for sustainable procurement so that we continue to meet current requirements.
Scores in sustainability rankings
Every year, leading rating agencies measure the sustainability performance of large enterprises. Deutsche Telekom scored 83 out of 100 points in the supply chain management category of the 2019 RobecoSAM Corporate Sustainability Assessment. This makes us one of the leading companies in the ICT sector.
Supply chain management
Before doing business with us, every supplier must initially register in our supplier pool. Those who do are fully informed of Deutsche Telekom’s fundamental principles and values regarding corporate responsibility and sustainability.
As a rule, we use a three-step approach to minimize risks and encourage our suppliers to improve their practices.
Leading up to the supplier evaluation, we rate our categories as critical or non-critical based on risk and opportunity (classification).
- Risk categories 2019: 6,208 suppliers (20.6 percent of the procurement volume)
- Non-risk categories 2019: 32,365 suppliers (79.4 percent of the procurement volume)
We classify products based on risk and opportunity analyses, taking into consideration a wide range of sustainability aspects and risks, including risks of forced/child labor or environmental pollution, as well as opportunities such as the potential to reduce energy consumption.
- All suppliers (critical and non-critical categories) are requested to accept our Supplier Code of Conduct.
- Dedicated sustainability assessments and reviews are conducted – e.g., by EcoVadis and RepRisk and by means of social audits and mobile surveys – for selected suppliers operating in critical categories. You can read about these measures and the number of participating suppliers here.
- The decision regarding which tool to use is made on a case-by-case basis and depends, among other things, on the sustainability performance and risk classification of the suppliers.
- We carry out risk monitoring.
Our suppliers’ sustainability performance is optimized in our Supplier Development Program (in close cooperation with selected suppliers), at the JAC Academy, and in regularly held workshops.
Workshops cover topics such as:
- Emissions management
- Avoiding hazardous substances and using alternative materials in products
- Extending the life span
- Reducing electrical scrap and launching collection programs
- Designing for greater sustainability and innovation
In 2018, we reached a major milestone when our supplier development program was adopted by the ICT association GeSi and carried forward throughout the industry under the name “Sustainable Development Program.” The advantage of this is that the program is now also used by other companies and their suppliers, meaning it is not just our own supply chain that is becoming more sustainable.
In the event of a significant violation of our requirements, we initiate an escalation process.
The escalation process comes into effect whenever a supplier refuses to meet our sustainability requirements in full and to our satisfaction. The procurement organization is primarily responsible for the process, with the GCR unit always on hand to offer advice and support. If the focused discussions held with the relevant supplier on various levels during the escalation process do not lead to the desired outcome, the last resort is to involve the Board of Management. The Board will then make the final decision about how to proceed with the supplier. In the worst case, this could lead to the business relationship with the supplier being terminated.
If someone in our supply chain identifies irregularities regarding compliance with laws, internal guidelines, and standards of conduct, they can report these anonymously using our Tell me! portal, which is publicly accessible to all our stakeholders.
In 2018, we established a comprehensive risk monitoring scheme for supplier procurement, subjecting the existing supplier basis to an extended risk analysis. The first step is to classify suppliers (segmentation) based on criteria such as:
- Procurement volume
- Critical components
- Dependence on suppliers
Depending on the segmentation result, appropriate risk monitoring is subsequently carried out:
- Basic monitoring:
Financial, CSR, and compliance scoring is performed (by an external audit firm) for all suppliers within the scope of an ongoing review process.
- Active risk monitoring:
Suppliers exhibiting the greatest risk are subject to additional active monitoring with regard to other, global risks (e.g., natural disasters, political risks).
2019 supplier sustainability reviews (excl. T-Mobile USA) KPI
In 2019, external auditing firms conducted 84 on-site social audits on our behalf – 26 at our direct and 58 at our 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 contacts in key functions are present for the audit. In 2019, we also commissioned qualified supplier experts to conduct another 20 internal audits. On top of that, we completed 20 mobile surveys, which give our suppliers’ employees the opportunity to provide anonymous information about the social and ecological situation at their company. The surveys are primarily used to gain an initial impression of the local working conditions in order to then initiate further measures as needed, such as dedicated on-site reviews (social audits).
|Number of reviews||Number of findings||Number of completed findings|
|Social audits(via external audit firms)||84||567||165|
|Social audits (via internal auditors)||20||309||98|
|CDPsupply chain **||204||-||-|
*Mobile surveys with selected suppliers as a supplementary, innovative review method
Our auditing activities center primarily on strategically important and/or particularly risky supplier groups. As part of these efforts, we focus on roughly 250 of our 30,000 or so suppliers, which are routinely audited every two to three years. These 250 suppliers already cover around 80 percent of our procurement volume, giving us transparency about the risks in large parts of our supply chain.
The majority of these audits are conducted within the scope of the Joint Audit Cooperation (JAC). The audits cover the following areas:
The JAC Guidelines require, among other things, that our suppliers:
- Pay a fair wage that enables employees to enjoy a decent standard of living.
- Respect the right to freedom of association and collective bargaining, and provide a healthy, safe working environment.
- Do not exceed a 48-hour working week and a weekly maximum of twelve hours’ overtime, and grant at least one free day after six consecutive days of working.
Compliance with all these requirements is regularly reviewed by means of on-site audits, during which the features and quality of the working, sleeping, and cafeteria areas are also inspected.
Deutsche Telekom does not require its suppliers to obtain external environmental or social certification. But if suppliers cannot show any environmental and social accountability certificates, we do expect comparable management systems to be used. Our auditing experience shows, however, that the majority of our relevant manufacturing suppliers have an external certificate 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 ILOcore labour standards, the UN Guiding Principles on Business and Human Rights, and the OECD Guidelines for Multinational Enterprises.
2019 audit results KPI
In the audit program, which was established and is controlled at the Group level, a total of 84 audits were carried out in 2019.
As in previous years, we concentrated our auditing activities on suppliers in Asia, Latin America, Southern Europe, and Eastern Europe.
Audited suppliers included manufacturers in the areas of IT hardware, software and services as well as networks and devices.
During the audits, we identified one case of bribery and consequently ended the business relationship with the supplier with immediate effect. Beyond this, no other cases of corruption, bribery, or critical violations of compliance policies or the right to intellectual property were found.
- Of the 84 suppliers we audited in 2019 (13 of which were in accordance with the validated audit processes of the Responsible Business Alliance ), around 31 percent (26 audits) were direct suppliers and 69 percent (58 audits) were tier 2, 3, and 4 suppliers – that is, indirect suppliers.
- The audits carried out in 2019 revealed a total of 567 violations of Deutsche Telekom’s supplier requirements. In the process, a total of 165 violations were corrected in 2019, including several open improvement measures from previous years. These violations included two unacceptable incidents and eight critical findings. Examples of unacceptable and critical violations, as well as introduced improvement measures, are published here. Critical findings were discovered at 45 suppliers regarding occupational health and safety, at 45 suppliers regarding working hours, at 34 regarding environmental protection, at 24 regarding labor practices, and at 23 regarding wages and performance-related remuneration. Some 15 critical findings were discovered regarding business ethics. As in previous years, most violations were linked to occupational health and safety (43 percent, compared to 47 percent in 2018), followed by environmental issues at 16.4 percent (12.5 percent in 2018). At 15.7 percent, working hours constituted the third biggest issue (2018: 16 percent).
|Area||Findings at suppliers||Initiated improvements|| Status |
(end of 2019)
|Child Labor & Juvenile Workers||Based on onsite observations and worker interviews, two juvenile workers were found in a soldering station which represents a hazardous task and a violation of national legislation.||Implementation of a new management and monitoring system for juvenile workers including training of line mangers to avoid placement of young workers in hazardous working stations.||Closed|
|Health & Safety||Factory did not provide valid fire inspection certificate for two production buildings and a dormitory building.||Fire inspection certificates available now for all buildings; fire drills are conducted on a regular basis.||Closed|
|Some evacuation indicating signs in production buildings were not working correctly. In addition, fire exits and escape routes in the dormitory building were not marked properly.||All evacuation signs in production facilities are functioning correctly now. Fire exits and escape routes in the dormitory buildings have been marked properly. In addition, specific inspections of fire protection equipment at all production facilities and dormitories are conducted regularly.||Closed|
|Thin-walled containers stored and used in an assembly workshop and marked with the names of the chemicals contained but not with their main components, safety warnings etc..||All chemical containers were marked with appropriate safety labels. In addition, Material Safety Data Sheets (MSDS) for all chemicals were made available||Closed|
|Wages & Benefits||The factory paid workers below the legal minimum wage. Further, the factory did not pay adequate overtime compensation as required by law.||Workers' salary has been raised and exceeding now the local legal salary level. Overtime is payed according to legal requirements now.||Closed|
|Working hours||Workers' working hours exceeded legal requirements and also SA8000 standards.||Introduction of an electronic time recording system to monitor regular working hours including overtime. Working hours are now under control and meet requirements of national legislation as well as SA8000 standards.||Closed|
|Environment||The factory has no written emergency procedures in place to address accidental leaks, spills or uncontrolled releases of polluting substances.||Emergency procedures have been established and communicated to address accidental leaks, spills or uncontrolled releases of polluting substances. In addition, chemical spill drills are conducted on a regular basis.||Closed|
Supplier Development Program
We collaborate as partners with our suppliers to make sure they are able to meet our high sustainability criteria.
In 2018, we placed our supplier program under the umbrella of the ICT industry’s Global Enabling Sustainability Initiative (GeSI ) as an industry approach. The program has since been carried forward there as the Sustainable Development Program (SDP). 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. All activities and results are documented so that we can gage the effectiveness of the measures employed.
CDP Supply Chain Program KPI
Since as early as 2016, we have been disclosing our activities to bring on board suppliers under the auspices of the supplier engagement rating of the CDP (formerly the Carbon Disclosure Project). This rating assesses how well companies have been able to integrate the topic of climate protection into their supply chain. In 2019, we once again improved on the previous year and achieved an “A”, as we did in 2016. This has secured our place on the Supplier Engagement Leader Board. An important step in achieving this was calculating the supplier-specific emission intensities based on supplier responses to the CDP Supply Chain Program. This involves calculating the ratio between a supplier’s overall emissions (Scope 1 and 2 and Scope 3 from the upstream supply chain) in grams and the supplier’s overall sales.
The CDP Supply Chain Coverage ESG KPI 2017. It indicates the degree to which our procurement volume from carbon-intensive suppliers is covered by the CDP Supply Chain Program. In 2019, 63 percent of the procurement volume was covered by CDP’s supply chain program. As the responses from individual major suppliers have a disproportionate impact on this KPI, we make sure to discuss this with the relevant suppliers. Our goal is to cover 70 percent of our carbon-intensive suppliers by 2020.was reported externally for the first time in
Supplier relationships KPI
The percentage of audited procurement volume increased from 29% in the previous year to 31% in 2019. At the same time, the percentage of procurement volume covered by E-TASC increased slightly to 45 percent. A supplier prequalification process via the Supplier Management Portal (SMP) took place for 61% of the procurement volume in 2019. Prequalification is mandatory for all suppliers for which we anticipate an order volume of more than 100,000 euros.
The Sustainable Procurement ESG 414-1 (Supplier Social Assessment) GRI indicators. We also comply with criterion 17 (Human Rights) of the German Sustainability Code. The KPI is also relevant for the EFFAS indicator (V28-04) and for criteria 1 (Opportunities and Risks), 3 (Sustainability Goals), 4 (Value Added Chain) and 6 (Rules and Processes) of the German Sustainability Code. It is also used for reporting in accordance with the Global Compact Principles 1 (Supporting and respecting human rights), 2 (No complicity in human rights abuses) and 5 (Effective Abolition of Child Labor).KPI together with information about our strategic approach fully covers the GRI
Responsible procurement of raw materials
We require our suppliers to protect the environment and use resources responsibly. This is anchored in our “Code of Human Rights & Social Principles” and in our Supplier Code of Conduct.
As a form of verification, we request our suppliers to disclose information about their activities and we perform supplier audits (social audits). In these audits, we check whether our suppliers use an environmental management system, including a waste management system, and review how they manage their energy and water consumption. In addition, we explicitly check whether there is a management system in place to address the issue of conflict resources.