A new global ICT supply chain initiative could significantly improve social, economic, and environmental conditions for workers in the supply chain. And, by introducing a single set of agreed high standards, it could also reduce the cost and time involved in compliance for suppliers like ST.

The initiative brings together about 30 companies from two working groups, one set up by the Electronic Industry Code of Conduct (EICC) initiative, the other by the Global e-Sustainability Initiative (GeSI).

The EICC initiative was launched in late 2004 by a coalition of technology companies including HP, IBM, Dell, Celestica, and Flextronics. Designed to ensure that working conditions are safe, that workers are treated with respect and dignity, and that manufacturing processes are environmentally responsible, it outlines new common standards in ethics, labor practices, environmental impact, and health and safety. For its part, the GeSI is an international coalition of ICT companies supported by the United Nations Environment Programme. Members include BT, Nokia, Vodafone, Alcatel, Deutsche Telekom, and Telefonica.

Both groups are now collaborating on the basic tools that can be used by companies in the ICT sector to monitor and support their suppliers in improving their social and environmental performance – for example, risk assessment, self-assessment, and a shared audit results database.

How ST became involved

ST became involved in the EICC initiative in November 2005 after closely following the development of the EICC and wider issues relating to the management of the supply chain in the ICT sector. As a key supplier of several of the EICC companies, we had already been asked to confirm our acceptance of the EICC in the USA and Asia-Pacific region. We were particularly attracted by the idea of the enhanced efficiency and synergies that could result from a sector-wide initiative covering environment, health and safety, labor, and ethics, especially since many of the companies involved are major customers of ours. This was because our own experience told us that filling in lengthy self-assessment forms from our many customers and complying with countless different codes of conduct was extremely time-consuming. By reducing the time spent complying with different codes and audits, we can focus our resources on actually improving the conditions in our facilities.

Bringing a supplier's perspective

However, we did have questions about how a single framework might work in practice and we have contributed to the development of the EICC implementation tools by sharing our unique supplier perspective. How, for example, would the industry supply chain organize and distribute the costs of shared audits? What about suppliers who already make a big effort to achieve environmental and social certification to internationally recognized standards such as ISO 14001 and OHSAS 18001? Would these efforts be recognized? And would the new risk assessment and other industry tools be sufficiently flexible to allow companies to adapt them to their existing processes and procedures? These are all questions that we have raised since joining the initiative, questions that have brought a 'supplier' perspective to discussions.

Integrating EICC with existing processes

At the same time, we have started to look at how far our existing management systems and performance measure up to the EICC. We began by integrating EICC-related criteria into our internal performance self-assessment, beSTick, which integrates all aspects of corporate responsibility for internal assessment and auditing purposes. So far, progress at the two pilot sites has been good, with the integration of EICC considerations enriching our existing processes. In 2006, we plan to take the experiment one step further, receiving external audits on one or two of our own sites using the new EICC tools.

Applying the tools to suppliers

To date, we have concentrated largely on how we can comply with the EICC within our own facilities rather than applying the tools to our suppliers. This is because we feel we have a responsibility to demonstrate that our performance reaches the industry standard before we have the right to expect or demand this of our suppliers. However, in 2006, we will send the code to our key suppliers and track their acceptance, and we will ask them to fill in a risk assessment questionnaire based on the GeSI/EICC tool. Our Global Sourcing and Purchasing organization will also develop communications and training to raise awareness of the code internally.

Safety in numbers

The road ahead is still challenging for many companies wishing to tackle CR issues in their supply chain. For many, including ST, it will be a case of small steps and gradual improvement over time. But there are encouraging signs suggesting that sustainable procurement is here to stay, and the drive for efficiency and synergies in the sector is clearly one of them. By acting together with other industry partners, we can share best practice and minimize the costs. "Industry collaboration is the most effective way to raise standards in a way that avoids 'first-mover disadvantage'," says Claudia Kruse, Associate Director, Governance and Socially Responsible Investment, one of many stakeholders invited to comment on the code. David Logan, a consultant on socially responsible sourcing quoted in an article by The Financial Times on supply chain management, puts it slightly more succinctly: "There is safety in numbers," he says.