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April 10, 2008
Transparent Supply Chain Sends A Clear Message
by Anne Moore Odell
Hewlett-Packard recently released a list of its largest suppliers in hopes of increasing
accountability from factory floors to consumers' front doors.
SocialFunds.com --
Hewlett-Packard (ticker: HPQ) casts a huge shadow
as the largest IT company in the world. Literally hundreds of thousands of people help produce the
components, parts and computers that are sold under HP's name. In an unprecedented move, last week
HP made public the list of its largest suppliers as part of its yearly Global Citizenship
Report.
 The goals in releasing the list are far
reaching. First, HP is hoping to increase suppliers' accountability to workers, communities and
the environment. Second, HP is hoping the increase in transparency will lead to an increase in
collaboration with other IT companies and act as a model for other IT companies to follow.
One of the most important reasons for releasing its suppliers is HP's bottom line. The
business case for the HP's supply chain transparency is beyond positive public relations. Working
with suppliers to protect the environment and worker safety does help HP's reputation. However, it
also creates positive business relationships with suppliers and keeps the supply chain working
smoothly. HP also argues that supply chain transparency helps the company be more efficient and
decreases costs.
"Each year, as part of HP's annual Global Citizenship Report (GCR), we
report publicly on the supply chain SER (Social and Environmental Responsibility) program results,"
said Judy Glazer, director for HP's Global Social and Environmental Responsibility (SER)
Operations. "This report is critically reviewed by socially responsible investors, non-governmental
organizations and other stakeholders. They consistently ask for greater transparency about our
suppliers as a mechanism for accelerating the effort to raise standards across the industry. In
response, we have decided to publicly release the names of our suppliers."
HP's suppliers
list of nearly 100 companies accounts for 95% of their spending on components, manufacturing and
components. These suppliers consist of commodity suppliers, contract manufacturers, electronic
manufacturing services providers, and original design manufacturers.
Glazer told
SocialFunds.com: "The expectations we set for suppliers that manufacture HP's parts, components and
products, are a key aspect of our social and environmental performance. Beyond product
manufacturing, social and environmental impacts also occur during the transport of our products
throughout our supply chain. These suppliers are the focus of HP's SC SER Program."
"HP is
the first company in the electronic industry to release the list of its top suppliers for
materials, manufacturing and assembly," said Rev. David M. Schilling, program director of Global
Corporate Accountability, Interfaith Center on Corporate Responsibility (ICCR). "This is an important step in promoting transparency in its
supply chain. My hope is that this action will result in HP suppliers taking greater ownership of
social and environmental practices that improve the lives of workers on a continuous basis."
HP was instrumental in organizing the Electronic Industry Code of Conduct (EICC), which summarizes the social and environmental standards for
the IT supply chain. The EICC was first released in October 2004 with revisions in 2005. Companies
that have adopted include: Celestica, Cisco, Dell, Flextronics, Foxconn, HP, IBM, Intel, Jabil,
Lucent, Microsoft, Sanmina SCI, Seagate, Solectron, and Sony.
Beyond establishing a supply
chain code of conduct for itself, HP also conducts audits of its suppliers to make sure they are
adhering to standards set by the EICC. HP has conducted over 400 audits of its first-tier
suppliers. In 2007, HP conducted 150 supplier audits. Of these, 92 were follow-ups to verify
progress against open non-conformances found during an initial review.
"HP promotes
sustainable improvement in our suppliers' factories," said Glazer. "We believe that focusing on
management systems and analyzing the root causes of non-conformances increases the probability of
lasting change. To achieve this, in addition to auditing our suppliers, we provide training and
support to build their internal capabilities."
HP's SER program follows four phases that
promote continual improvement in supplier companies. HP developed a network of local internal
auditing teams backed by independent verification in the regions where they purchase. However, HP
does not rely solely on supplier certification to external standards, because they have observed
that standards can vary among certified companies and that suppliers without certification can have
equally rigorous SER management systems.
"HP has made supply chain responsibility one of
its three global citizenship priorities," explained Schilling at the ICCR. "Over the past few
years we have seen the company put substantial resources into monitoring, training and capacity
building to improve the social and environmental performance of its suppliers."
Schilling
continued, "We appreciate HP's focus on the root causes of violations of its supplier code of
conduct and systemic solutions rather than quick remediation plans that aren't sustainable.
Clearly, some of the key challenges, such as excessive hours and lack of workers' right to organize
and bargain collectively, have not been solved in many locations. But, the company is engaged with
non-governmental organizations and other stakeholders to find ways to address systemic injustices."
HP also announced it is starting a HERproject program at a supplier's site in Cuidad Jaurez,
Mexico, where a majority of the manufacturing activity for HP takes place. The HERproject (Health
Enables Returns project) offers women's reproductive health services and education. Pegatron
Technology and Foxconn, two suppliers for HP in Cuidad Jaurez, will partner with HERproject to help
meet women's physical and mental health needs. HP is also planning to launch a HERproject site in
China as well. HP is initiating the project through a partnership with Business for Social
Responsibility (BSR).
"Advancing women's
health issues in the supply chain is another step that HP has taken to further SC SER within the
technology industry," explained Glazer. "It is consistent with our core values to be a force for
positive change in the communities where we work and live. Investing in SC SER and supplier
diversity reflects our global citizenship principles and meets our stakeholder expectations."
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SRI World Group, Inc. All Rights Reserved.
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