Every Ericsson supplier must comply with the Ericsson Code of Conduct, which is based on the UN Global Compact’s ten principles covering human rights, labor standards, environment and anti-corruption. An internal audit process, supported by Group Sourcing, tracks and monitors compliance. A risk-based approach was piloted in 2006 in order to direct resources at suppliers working in industries or countries where there is a higher risk that standards are not met. This approach also creates an opportunity to raise standards.

In the telecom industry, where tens of thousands of suppliers are common, certain jobs pose higher risks to worker safety than others. The two commodity areas selected for the pilot were die-casting, which involves the pouring of molten metal into molds to form parts for radio base stations, and network rollout, involving the installation of telecom sites. They are among the supply areas that Ericsson put under the lens of the company’s Code of Conduct. 

By the end of 2006, the decision to closely engage with these supply areas had delivered results. The 2006 target was to reduce by 60 per-cent the lowest markings on Ericsson’s supplier scorecards that rank suppliers’ Code of Conduct compliance; in fact, the number dropped by 74 percent for die-casting suppliers. For network rollout the achievement was 52 percent.

The die-casting companies in India and China represented close to 100 percent of Ericsson's die-casting volume in Asia. Companies within network rollout in India and Brazil were also included in the pilots. In India this represents close to 10 percent of the suppliers in this industry. Ericsson’s approach is based on direct engagement and financial incentives. It included quarterly audits and close involvement to raise standards and was received favorably by suppliers.

During 2007, Ericsson will extend the risk-based approach globally, focusing on new areas such as enclosures, printed circuit board manufacturing, and power systems for radio base station solutions, as well as continuing with the die-casting and network rollout. The focus markets will continue to be China, India, and Brazil.

Ericsson's main approach is to engage closely with suppliers to achieve measurable improvements. If necessary, we will put the supplier on notice that they will not receive further business until action is taken – or in the worst case, the supplier contract will even be terminated. Through this approach, suppliers understand that the Code of Conduct is more than a tick-the-box exercise. It comes down to hands-on engagement in order to ensure that Ericsson’s supply chain worldwide lives up to the same high social and environmental standards.

The Supplier Corporate Responsibility Scorecard measures performance in the following areas:

• Human rights (such as adherence to local labor laws and protection of worker safety)
• Labor practices (such as salary and overtime compensation, working hours, financial punishment)
• Environment (such as handling of chemicals, records on incidents/accidents, use of personal protective equipment, environmental management systems)
• Bribery and anti-corruption (such as employee contracts, financial punishment, handling of interviews with workers and documentation)
• Supplier ability to secure their supply chain.