Adopting a consistent industry approach

In 2014/15, we used a range of common industry tools to assess and improve suppliers’ environmental and social performance, while reducing the need for suppliers to complete separate assessments for each of their customers.

We use the EcoVadis platform to evaluate suppliers’ performance on sustainability and develop improvement plans. Using this common industry platform helps to reduce the reporting burden on suppliers allowing greater focus on improving the performance of our suppliers on important issues. As Vodafone is itself a supplier to other companies, we also complete the EcoVadis assessment for our own business and share the results with relevant enterprise customers. In 2014/15, we ranked in the top 2% of suppliers evaluated across all sectors with a score of 71 out of 100.

Vodafone is one of 10 telecoms operators that are members of the Joint Audit Cooperation (JAC) initiative. Working together enables us to establish and conduct common audits across our industry and to develop joint follow-up plans for improvement. In 2014, JAC conducted a total of 35 joint audits.

In January 2015, we participated in the fourth annual JAC Forum on Sustainability and Corporate Social Responsibility in Suzhou, China. The forum discussed how to improve transparency on working conditions and environmental standards and the benefits this would bring. We presented on how mobile technology could help to achieve this, for example by contacting workers directly via their phones -keeping responses anonymous- to gain insights on factory conditions and identify areas of improvement (see case study). Around 150 participants representing telecom operators, industry forums, suppliers, audit firms and non-governmental organisations were involved in the forum.

JAC is also developing common key performance indicators (KPIs) to accompany its guidelines on various relevant issues, starting with a KPI on working hours. This KPI on working hours tracks the:

  • percentage of total workforce that have exceeded overtime limit of 12 hours per week
  • percentage of total workforce that have had not one day off in seven per week.

Vodafone engaged three of its suppliers through findings from a JAC audit where excessive working hours was identified as an issue by monitoring KPIs defined by JAC.

In one case, across a period of four months, there was a reduction in the proportion of the workforce exceeding the overtime limit from 80% to 60% and a reduction of the workers that have not had one day off in seven from 50% to 10%. In two other cases, the improvement plans are ongoing and require additional resources. We will continue to monitor improvement in these cases and also explore the use of mobile technology to verify the situation (see case study).

We were a founder of, and participate in the CDP supply chain program which helps large companies and their suppliers report climate impacts transparently, share information and target carbon reductions. In 2014/15, 76 suppliers disclosed information through the CDP and achieved an average score of 79, which is better than the global average of 53. We also worked closely with some of our key suppliers to improve the efficiency of equipment used in our networks (see Minimising our carbon footprint).

As a member of the Conflict Free Sourcing Initiative (CFSI), we use its common industry tools to tackle conflict minerals in the ICT supply chain (see below).

Driving improvements through supplier assessments

In 2014/15, we focused on improving the way we assess suppliers’ sustainability performance at the qualification stage. This is the most effective point to influence which suppliers we choose to work with. We use a risk-based approach to select which suppliers to ask for additional information on acting responsibly, during supplier qualification.

To work with Vodafone, suppliers are expected to follow our Code of Conduct and comply with our policies on sustainability issues such as health and safety. We assessed over 1,610 potential new suppliers on sustainability criteria during the qualification process in 2014/15 and rejected 20 potential new suppliers because they did not meet our requirements.

We performed 21 on-site assessments of suppliers identified as high-risk to check compliance with our standards and monitor their performance on sustainability in 2014/15. 17 of these audits were performed at Tier 2 suppliers’ sites as we continued our focus further down the supply chain, working together with our Tier 1 (direct) suppliers to assess their suppliers’ performance and help them improve. In addition to our own audits, 35 additional on-site assessments of suppliers within the industry were conducted jointly with other telecoms operators through JAC. Most of these related to the Vodafone supply chain.

Supplier site assessments conducted

  2012/13 2013/14 2014/15
Number of supplier site assessments conducted 33 30 21
Number of site assessments conducted by JAC1 35 38 35
Number of sites assessed using a mobile survey of workers - - 5
Total 68 68 61

Notes:

  1. JAC assessments are reported on a calendar year basis.

Based on the 21 site assessments Vodafone conducted, we made 260 recommendations for improvement. Managing health and safety continues to be the most common area identified for improvement by far, followed by working hours and environmental issues.

Number of recommendations for improvement in 2014/151

  Policy Performance Total
Health and safety 0 165 165
Environment 4 30 34
Working hours 0 31 31
Implementation of Code of Ethical Purchasing or equivalent 0 20 20
Payment 0 8 8
Child labour 2 9 11
Discrimination 5 5 10
Forced labour 6 0 6
Disciplinary practices 4 2 6
Freedom of association 1 0 1
Individual conduct 0 0 0
Total 22 270 292

Notes:

  1. This data excludes the results of the audits conducted through JAC, which are subject to a non-disclosure agreement.

Working hours is a common industry issue. We are working with JAC to develop a KPI that will help monitor improvements over the long term and tackle the root causes of this issue. Our collaboration with Good World Solutions to gain feedback directly from factory workers in our sub-suppliers’ facilities is enabling us to obtain more meaningful information directly from suppliers’ workers on this issue (see case study below).

Our standard approach to manage suppliers’ performance issues is to request that the supplier creates a corrective action plan and then follow up by re-auditing to confirm the agreed actions have been completed. For example, in 2014/15 we identified nine instances where our Tier 2 suppliers’ factories were not meeting our Code and employing young people (16-18 year olds) to work at night or in hazardous conditions that were unsuitable for their age. After we informed the suppliers that their qualifying audit had failed to meet our requirements, they developed new policies and implemented process controls to regularly check that young workers are not subjected to hazardous or night working. Through follow-up site visits, we verified that these corrective actions had been properly implemented and that those workers working at night or in hazardous activities were reassigned accordingly. The suppliers also agreed to pay for medical check-ups for the young workers.

In focus: Using mobile technology to monitor our suppliers’ working conditions

In collaboration with Good World Solutions, we are using mobile technology to better understand the working conditions in our supply chain, thereby helping us and our suppliers to identify areas for improvement.

In 2014/15 we used a tool, known as Labor Link, to survey people working for five of our Tier 2 suppliers in China. Conducting the survey using a mobile phone meant that participants could easily reply to the pre-recorded voice questions anytime and anywhere – even in privacy away from their workplace. It enabled us to gather anonymous and unbiased feedback directly from workers. To help workers complete the survey, the questions were asked in their local language and in-person training was provided.

The survey asked the workers how many days a week they usually work more than 10 hours a day. Of the 157 who responded: 28% said never, 45% one to three days, 24% four to six days and 3% seven days a week. We also asked if overtime was voluntary: 89% responded yes and 11% no. Furthermore, we asked how they felt about overtime: 48% wanted to work as many hours as possible, 46% were sometimes willing to work overtime and 6% did not want to work overtime. This feedback helps to provide data on complex issues that are interconnected with other topics such as payment and culture. Objective data such as this helps to highlight problem areas such as excessive working hours. We are also able to compare results across different sites and focus effort on poor performing areas.

Vodafone is the first telecoms operator to use this technology as a means of verifying working conditions in part of our supply chain and we are sharing these learnings to encourage greater adoption. These surveys were performed at smaller suppliers’ factories, where we have undertaken on-site audits in the past. We aim to deploy surveys using mobile phones at more of our suppliers’ factories in 2015/16 to increase and improve the feedback we receive.

This is one example of the concepts featured in our Connected Worker (pdf, 2.6 MB) research report.

Working with suppliers to build capability

Developing improvement plans with suppliers is a critical and lengthy part of the audit and follow-up process. We focus on improving their performance on specific issues such as working hours and health and safety.

We work closely with high-risk suppliers, particularly those supporting the deployment and maintenance of our networks, to improve health and safety. Our consequence-management process (pdf, 200 KB) is implemented globally and makes it clear to suppliers that failing to demonstrate a robust safety procedure is directly linked to termination of purchase orders or contracts. When red cards are issued, suppliers are excluded from tendering for new work. In 2014/15, we issued 9 red cards and 14 yellow cards and excluded suppliers from tendering for new work for a total of 23 months. When suppliers get a red card we generally exclude them from new opportunities to work with us for around three months. The system is intended to protect the people working in our supply chain.

We bring together key global suppliers through our supplier safety forums to share best practices on how to improve safety. For example, in 2014/15, we held three safety forums to encourage suppliers to set common standards on driver safety and share examples of successful safety initiatives. See Health and safety for more examples of our work with contractors.

Tackling conflict minerals

In 2014/15, to meet the requirements of US legislation (see Our approach), we carried out due diligence to determine the source of any tantalum, tin, tungsten or gold (3TG) contained in the products where we have influence over manufacturing and design. We implemented our due diligence framework (aligned with the internationally recognised framework developed by the Organisation for Economic Cooperation and Development) and engaged with relevant suppliers regularly throughout the year to raise awareness of due diligence requirements.

We identified 30 products considered to be within the scope of the requirements in 2014, sourced from 12 suppliers. We asked these suppliers to complete the Conflict Minerals Reporting Template developed by the CFSI to determine the source of the 3TG in their products. We received responses from 10 of the 12 suppliers, covering 28 of the 30 in-scope products (93%). Two suppliers failed to respond. Vodafone no longer sources products from either of these suppliers.

Based on our due diligence, we have determined that the majority of suppliers of in-scope products have not identified all of the smelters in their supply chain. However, the quality of smelter information provided by suppliers improved significantly in 2014/15. The proportion of smelters listed as known smelters by the CFSI’s flagship programme – the Conflict-Free Smelter Program (CFSP) – increased to around 75% from 10% in 2013/14. Of these, 60% were certified as CFSP-compliant (up from 5%), including all 11 of those identified as operating in covered countries.

We are continuing to engage with suppliers to improve the completeness and quality of information provided and to seek their commitment to improve their due diligence processes.

For more information on the due diligence process and findings, see our Conflict Minerals Report (pdf, 327 KB), published as part of our legal filing to the US Securities and Exchange Commission.