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HP Publishes New Guidelines for Supply Chain Sustainability

HP has announced the publication of guidelines designed to help multinational companies achieve sustainability throughout their supply lines. The guidelines are based on a report ,about the impact multinationals can have on the standards in their supply chains, written with the Danish Commerce and Companies Agency.

The guidelines follow a study of HP’s working practices, on-site assessments of 15 suppliers in Eastern Europe, and the organization and assessment of capability-building activities. According to HP, by following these guidelines, multinationals will be able to better equip their suppliers to effectively compete in the global market while improving environmental standards. “There is a clear link between companies with strong ethics and good performance,” said Carsten Ingersley of DCCA.

EL can’t seem to find a copy of the report to link to – but below is the full executive summary provided with the press release:Executive summary

This report presents findings from a project carried out by the Danish Commerce and Companies Agency during the period June 2006 to January 2008. The objective of the project has been to develop guidelines on how multinational companies (MNCs) can target small and medium-sized (SME) suppliers in their sustainable supply chain management.

The guidelines have been developed on the basis of findings from 1) a study of the sustainable supply chain management practices of the multinational information technology corporation Hewlett-Packard (HP), 2) on-site assessments of the social and environmental practices of SME suppliers in HP’s supply chain in the Czech Republic, Hungary and Poland, and 3) capability-building activities aimed at the SME suppliers.

Main findings from HP’s sustainable supply chain management practices
• HP’s approach to sustainable supply chain management can be characterised as stakeholder-oriented, pro-active and collaborative.
• In a widely outsourced manufacturing environment, HP has a high focus on ensuring that their suppliers are meeting certain social and environmental requirements.
• HP has co-developed a supplier code of conduct, the Electronic Industry Code of Conduct (EICC), launched in 2004, based on the assumption that social and environmental concerns of suppliers are addressed most effectively on an industry-wide basis.
• With the overall aim of cascading requirements down the supply chain, HP launched its Supply Chain Social and Environmental Responsibility (SER) program in 2003. The program includes preliminary risk assessments, supplier self-assessment, on-site audits and capability-building activities.
• Internally, HP’s supplier relationship managers (SRMs) are in charge of managing suppliers – a responsibility that includes evaluation of social and environmental performance. HP acknowledges that stronger involvement and commitment of SRMs is important for passing on requirements to suppliers.
• HP’s experience from suppliers in Central and Eastern Europe is that most suppliers comply with legal requirements. HP experiences that management systems are often lacking or inadequate, and emphasises that ‘living’ a management system is more important than having a certified management system.

Main findings from the SME suppliers’ social and environmental practices
• In general, the SMEs have acceptable social and environmental standards. The main problems encountered primarily relate to inadequate management system processes and inadequate health & safety standards, particularly in terms of occupational safety, emergency preparedness and response, and ergonomics.
• The majority of the companies demonstrate a reactive approach to social and environmental responsibility. Legal requirements are the primary driver for engaging in social and environmental initiatives. Management systems within the areas of environment and health & safety are the most predominant examples of social and environmental initiatives that go beyond legal requirements. Management systems are typically implemented upon request from customers.
• There is no clear evidence that the companies with certified management systems consistently have more adequate processes for identifying and mitigating risks and ensuring continual improvement than those companies, whose management systems are not certified.
• All companies are confronted with social and environmental codes of conduct from customers. The companies generally feel that they are capable of complying with the code of conduct requirements, since the vast majority of requirements relate to local legislation.
• The companies’ management teams often fail to communicate the requirements to the workforce and suppliers.
• The companies’ customers typically do not carry out social and environmental audits.
• The companies are of the opinion that the most useful assistance from large customers is input to the correction of inadequate processes and explanations of the business benefits of improving the processes.
• The main challenges related to working with social and environmental issues are allocation of sufficient financial and human resources as well as time.
• Awareness and experience is generally quite low regarding potential links between social and environmental improvements and improved business indicators (the business case).

Main findings from the capability-building activities
• Capability-building activities included in the project have taken the form of training workshops and exchange-of-experience workshops. The workshops have been successful in raising awareness among the participating SMEs.
• The workshops have revealed that the outcome of capability-building activities largely depends on the organisers’ ability to achieve full commitment of the SMEs towards the capability-building activities; to organise practical training and workshops targeting the needs of the individual participants; to ensure participation of relevant SME personnel; and to engage participants in active dialogue.
• Some of the most proactive SMEs, who have integrated social and environmental concerns into strategy and business operations, have acted as role models during the workshops by inspiring the other SMEs as well as their own customers.

Guidelines for multinational companies
Based on the findings from the study of HP, on-site assessments of SME suppliers, and organisation of capability-building activities, the following guidelines are proposed:

MNCs can encourage SME suppliers to implement more adequate management systems by emphasising that:
• it is important to integrate the management systems into existing operations
• if integrated into business operations and strategy, social and environmental management systems may yield a sound business case
• a management system certificate in itself does not guarantee that a management system is adequately integrated into the organisation
• it is often easier to implement social and environmental management systems in advance rather than after external stakeholders require it

MNCs can emphasise their high priority to social and environmental responsibility by:
• following up their written requirements with social and environmental audits
• following up on the SMEs’ correction of non-conformance issues identified during audits

MNCs can maintain momentum towards social and environmental responsibility at SME suppliers by:
• engaging in continuous dialogue – e.g. using audits as a platform – ¬and providing guidance on how to correct deficiencies
• ensuring that their own personnel in charge of supplier relations are sufficiently aware of and committed to the SMEs’ social and environmental performance
• ensuring that the SMEs’ direct customers (in case SMEs are placed beyond 1st tier of the supply chain) are committed and equipped with relevant knowledge
• encouraging internal dialogue between management and workers within the SMEs, based on the assumption that workers are typically more receptive towards new routines and tasks if they have been involved in the implementation of new initiatives

MNCs can reduce the amount of codes of conduct passed onto the SME suppliers and increase their overall leverage vis-à-vis SME suppliers by:
• engaging in industry-wide initiatives with joint codes of conduct – and possibly joint audits as well – thereby presenting their common suppliers with only one set of requirements to prioritise

MNCs can increase SME suppliers’ benefits of capability-building activities by:
• setting up the activities in collaboration with external organisations with expertise within social and environmental issues, how these issues intersect with business, and relevant legal and cultural aspects, which the MNCs themselves usually do not have in-house
• organising the activities in a form and around topics which are highly relevant to SMEs, thereby ensuring the SMEs’ commitment and active participation
• ensuring that the SMEs are represented by participants who have a certain leverage within their own organisation, are knowledgeable about their organisation’s social and environmental activities and priorities, and are able and willing to share their own experiences

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