Responsible Sourcing

Clear Links in the Supply Chain

Ericsson focuses on continuous improvement in managing our supply chain to ensure our suppliers meet the high social, environmental and ethical standards set out in the Ericsson Supplier Code of Conduct (S-CoC) requirements. Online training in 13 languages is publicly available for suppliers and other stakeholders on Ericsson’s website, along with other material.

Assessing risk

All Ericsson Regions and Business Units have trained auditors and procedures in place to identify and assess high-risk suppliers and to conduct and follow up S-CoC audits and on-site assessments. A systematic and documented approach for identifying high-risk suppliers assesses regional risk factors. Prioritized risk areas include working at heights and chemical handling and prioritized risk categories include die-casting and network roll-out; tower manufacturing and galvanization; enclosures; mechanical parts; power supply; printed circuit board manufacturing, warehousing, logistics and recyclers.

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Monitoring supplier performance

In 2012, over 640 supplier Code of Conduct audits and on-site assessments were performed by Ericsson’s 179 S-CoC auditors (see graph). The number of audits rose while on-site assessments decreased .This is in line with our effort to prioritized the more robust audit procedure rather than assessments.

Year on year, analyses of our auditing activities demonstrate significant improvement in the supply chain. A review of audit reports from 65 suppliers audited in both 2011 and 2012 showed that critical findings declined by more than 50%. Improvement areas vary between regions and supplier categories but include areas such as overtime, environmental management, corrective and preventive actions following incidents and communication of CoC requirements further down the supply chain.

Environmental management and performance have always been prioritized in S-CoC audits. To further enhance this area, a program for focused Environmental Audits was launched in India and Northeast Asia in 2012, as a complement to the existingS-CoC audits. In 2013, this program will include at least two additional regions.

In 2012, Ericsson published detailed Supplier Occupational Health and Safety (OHS) requirements, including 11 “operational OHS standards”. These requirements are intended to further help our suppliers improve their OHS performance. At the same time they are contractually binding, as part of the S-CoC requirements. Include graph performance of selected suppliers.

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Meeting customer requirements

The Joint Audit Cooperation (JAC) is a cooperation of nine European telecom operators. JAC members conduct Corporate Responsibility audits of their suppliers, including Ericsson factories, and share the audit results between the nine JAC members. The members of JAC, all of whom are Ericsson customers, are: Belgacom, Deutsche Telekom, France Telecom, KPN, Swisscom, Telecom Italia, Telenor Group, TeliaSonera, and Vodafone. Ericsson sites and Ericsson suppliers have been audited by JAC auditors in 2011 and 2012, with satisfactory results.

Reaching out to our suppliers

Ericsson held a forum in 2012 with selected key suppliers to discuss energy efficiency and greenhouse gas emissions, since suppliers play an important role in helping Ericsson to reduce its indirect emissions. The forum resulted in sharing of best practices and challenges related to reducing, measuring and reporting greenhouse gas emissions and established networks for knowledge sharing and joint initiatives.

Tracing conflict minerals

Ericsson is taking steps to increase the transparency regarding ‘conflict minerals’ in our supply chain. These minerals include tantalum, tin, gold, or tungsten, which may be mined in conditions of armed conflict and human rights abuses, notably in the Democratic Republic of Congo (DRC) and neighboring countries. All the four minerals can be used in electronic components in our products. Tin is the most widespread and used in the solder in almost all electronic products.

Due to the small quantities and the long supply chain with several actors between Ericsson and the smelters, and between the smelters and the actual mine, traceability is very complex. To effectively address the issue of conflict minerals, including compliance with section 1502 of the Wall Street Reform and Consumer Protection Act and the disclosure rule adopted by the US Securities and Exchange Commission during 2012, Ericsson takes active measures in accordance with its sourcing and product management processes. The first disclosure is due in May 2014. Ericsson’s suppliers are expected to comply with the Ericsson list of “Banned and Restricted Substances”, which now states that suppliers must establish due diligence processes consistent with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and to report, upon Ericsson’s request, on the use of conflict minerals and on actions taken to verify the origin of used conflict minerals.

Our longstanding use of material declarations means the company already has significant awareness of the products where conflict minerals are used, which will assist greatly in identifying suppliers important in the further assessment of mineral origin. Most suppliers in the pilot were well prepared for the upcoming legislation and were able to report on smelters used in their supply chain. Extensive inquiries and due diligence efforts are expected to be required in order for Ericsson to be able to fulfill the new rules and make the requested disclosures. During 2012, Ericsson piloted the common industry questionnaire developed by the Global e-Sustainability Initiative (GeSI) and the Electronic Industry Citizen Coalition (EICC) with our major suppliers of tantalum- and tungsten-containing components. We found that most suppliers in the pilot were well aware of the issue. We received more than 160 unique smelter names in this pilot.

Ericsson is a participant of the Extractives Workgroup, a collaboration between GeSI and the EICC, focusing on conflict minerals. Ericsson is also active in the ongoing standardization regarding conflict minerals via the Electronics Industries Association, IPC.