Supplier sustainability
We believe in asking our suppliers to share our commitment to sustainability. This includes sound environmental and ethical standards as well as providing working conditions for their employees that reflect both the Philips General Business Principles and the Electronic Industry Citizenship Coalition (EICC) Code of Conduct. We continue to focus on the Philips Supplier Sustainability Involvement Program, closely collaborating with our supplier partners and relevant stakeholders to drive progress. It’s about improving conditions in the chain.   We believe achieving a sustainable supply base is about taking care of workers’ lives and the environment. As a member company of the Electronic Industry Citizenship Coalition (EICC) our goal is to improve conditions in the electronics supply chain. To do just that, we conducted a record total of 858 supplier audits to identify and resolve issues in 2009. Our approachThe Philips Supplier Sustainability Involvement Program is built on five pillars: setting out our requirements; building understanding and agreement; monitoring identified risk suppliers through audits using the EICC checklist (90% of initial audits are now conducted by specialized external auditing bodies); working with suppliers to resolve issues quickly; and engaging stakeholders. To focus our efforts, we developed an approach based on a risk profile related to spend, country of production, business risk and type of supplier relationship. Where risk is identified we conduct awareness training with suppliers to prepare for third-party audits. Corrective action plans are agreed upon within 30 days of an audit. Sustainability officers follow up monthly and can escalate the issue to the responsible purchasing manager as necessary to ensure zero-tolerance issues are resolved within three months. In this way the vast majority of zero-tolerances from 2009 have been resolved. Continual conformance audits show that a multi-year approach to training and auditing is essential to ingrain sustainability in the supply chain. New initiativesMirroring our supplier approach, we audited 12 internal sites in risk countries using the EICC checklist. We selected 10 pilot products whose components are being analyzed to assess CO2 emissions throughout the supply chain. Our goal is to identify large sources of emissions and implement abatement measures with our suppliers.
  We seek constructive dialogue and the opportunity to engage with stakeholders in the supply chain and beyond. This work is done in close cooperation with our suppliers, in bilateral meetings with investors and NGOs, and via projects with the Electronic Industry Citizenship Coalition (EICC). We also believe that cooperation with local governments is the way to truly achieve sustainable change. Integrating new suppliersWith the acquisition of Partners in Lighting, 140 new suppliers were added to the Philips Supplier Sustainability Involvement Program. “To determine our audit schedule we built a plan around two priority axes – supplier size and commodity profile because some industries have more difficult working conditions than others,” explained Geert Tuytens, Chief Operations Officer, Philips Consumer Luminaires. Frameway Glass in Guangdong China is a large Philips supplier and, as a glass factory, it faces safety challenges. “It was the first time we experienced an EICC audit” said Ryan Law, Project Engineer, Frameway Industries Limited. “We learned a lot about how we can improve our internal systems on labor, environment and safety. Our factory is now a safer, cleaner, more comfortable place to work for our 350 employees.” Listening to investorsThe Dutch Association of Investors for Sustainable Development (VBDO) awarded Philips with top sustainability scores in its 2009 Responsible Supply Chain Management Benchmark, ranking the company highest among the 40 large publicly listed Dutch companies benchmarked. Our scores have improved over the benchmark’s four years, reaching 90% in 2009, up substantially from 62% in 2006, 77% in 2007 and 85% in 2008. “This is quite a performance, as Philips managed to even further improve their already high score,” said Giuseppe van der Helm, Executive Director VBDO. Asked how the company could build on this momentum, the VBDO’s recommendations include rolling out similar auditing processes for second-tier suppliers, enhancing recycling possibilities in cooperation with suppliers, and improving energy efficiency in the supply chain.
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