Supplier Sustainability

In line with Philips’ General Business Principles, we are a responsible partner in society, acting with integrity towards our suppliers. Similarly, we award business to suppliers and partners who act legally and ethically, and who are committed to fairness and integrity towards their stakeholders.

We introduced our One Philips approach to supplier sustainability in 2003. Given the importance of this sustainability in the supply chain, this topic is now a routine agenda item at our monthly business review meetings, including continuous monitoring of corrective action implementation.

What we expect from suppliers

As a baseline to build a sustainable business relationship with our supplier, we require our suppliers to conform to The Philips Sustainability Code for Suppliers, which consists of two parts: The Royal Philips Electronics Supplier Sustainability Declaration and The Royal Philips Electronics List of Restricted Substances and obligations as set by REACH.

Supplier Sustainability Declaration
Our Supplier Sustainability Declaration sets out the standards and behaviour we require of our suppliers to improve conditions for workers and promote a cleaner environment for local communities. Its five chapters cover:

• human rights and labor issues
• health & safety
• environmental responsibilities
• suppliers’ management systems; compliance with statuary regulations and industry codes of practice
• ethical standards.

List of Restricted Substances
Our List of Restricted Substances specifies which substances are not permitted in products and manufacturing processes at levels above our established thresholds.
This list of products Philips puts on the market does not contain substances that are restricted by law or other regulations. This includes the European Union’s Directive on the restriction of the use of hazardous substances in electrical and electronic equipment (commonly known as RoHS).

REACH
REACH is EU legislation dealing with the Registration, Evaluation, Authorization and Restriction of Chemical substances. For more information about REACH visit our Sustainability website.

As required by Article 33 we expect that our component or finished products suppliers will provide us with information about so called substances of very high concern (SVHC) from the SVHC list of the REACH regulation.

Periodically (at least 2/yr) this SVHC list will be reviewed and extended with new substances. This will entail a continuous flow of new data throughout the supply chain. Also it will cause that Philips and their suppliers will have systematically periods of being non-compliant with Art. 33. To minimize data exchange and periods of non-compliance Philips will start in 2009 requesting their suppliers to provide a full material declaration (FMD) for components or finished products. For this FMD data we will make use of an Industrial standard IPC1751/52 ver 2.0 and/or IEC62474.

How we work with suppliers to foster sustainability

Industry collaboration
We endorsed the Electronic Industry Code of Conduct (EICC) in 2006 and joined its implementation Steering Committee. Working with EICC member companies to develop standardized tools and processes, allows for increased efficiency, productivity and simplicity for our suppliers and ourselves.

We have also independently supplemented the code with an additional requirement on freedom of association. This supplement is in response to comments from various stakeholder groups. It aims to ensure that constructive dialogue between employers and workers at our suppliers can take place.

Standards
All suppliers with an annual spend of over € 1000 must sign and adhere to the  Supplier Sustainability Declaration. This constitutes an integral part of our purchase agreements, purchase orders and terms and conditions.

Training and capacity building
We know that awareness and engagement are critical for building a sustainable electronics industry and recognize our responsibility in helping create them.
Our training sessions, Supplier Day events and briefings aim to build knowledge and commitment among our suppliers. We also participate in the EICC capacity-building program.
We encourage our suppliers to analyze gaps and areas for improvement by completing the ICT Supplier Self-Assessment Questionnaire  for each site that manufactures products for Philips.

Audit approach
To help us determine our criteria for supplier sustainability audits, we identified risk countries based on independent sources and also determined a threshold on spend Philips conducts onsite sustainability audits to gain a representative picture of the supplier’s overall sustainability performance and compliance with the EICC.
The audits are conducted by a Philips in-house auditor or an EICC-certified auditing body. They are carried out using the Philips Supply Sustainability Audit Tool  and cover the entire site, not just the production lines set up exclusively for Philips products.

Issue resolution
If non-conformances are identified during an audit, Philips expects the supplier to take the initiative to resolve the issues involved. Philips will work with the supplier to define a Corrective Action Plan, specifying the required steps, milestones and responsibilities, and to trace and track progress of the plan.

Supplier ratings and sourcing decisions
We are committed to awarding business to suppliers who conform to our standards of sustainability and performance. To do this, we will periodically audit suppliers against these standards, rating them for performance and improvement.
We communicate these results in our management reviews with suppliers. The results are also incorporated in our overall supplier rating system which helps us decide which suppliers to use.

For more information about our chemical management program click here.