Responsible sourcing Responsible sourcing is a top priority for Ericsson. We work towards continuous improvement to ensure our suppliers meet high social, ethical, human rights and environmental standards. Three-phase approach Our suppliers must comply with Ericsson requirements, operate in a safe environment, and strive to minimize their environmental impact. In 2015, we focused on three strategic priorities to help achieve this. Integrate responsible sourcing in relevant processes to ensure that responsible sourcing is consistently part of supplier selection, evaluation and award of business. Drive supplier Code of Conduct compliance by optimizing the supplier audit program, including new supplier categories, and by piloting the anti-corruption screening framework. Boost responsible sourcing commitment by increasing internal and external awareness of responsible sourcing. As a complement to the supplier audit program, in 2015 we initiated the “beyond monitoring” program. Its focus is increased preventive and joint development initiative for service suppliers. The program will support end-to-end process integration, competence development and enhance a business-driven mindset. Assessing risk Ericsson uses a risk-based approach to identify relevant suppliers for Code of Conduct audits. We view each audit as an improvement opportunity, and expect suppliers to address identified non-compliance. Auditors then follow up on actions to ensure continual improvement in the supply chain. In 2015, we closed 60% of critical and warning audit areas, exceeding our target. Monitoring performance In 2015, over 345 supplier Code of Conduct audits and assessments were performed on identified high-risk suppliers be Ericsson’s Supplier Code of Conduct auditors. We had 205 trained and active auditors by end 2015. We view each audit as an improvement opportunity and expect suppliers to address identified non-compliances. Audit results vary, but commonly identified areas of improvement include fire prevention, training and awareness, use of personal protective equipment, and environmental management. For example in China, working hours remain a challenge for some suppliers. Auditors follow up on actions to ensure continual improvement in the supply chain. Year on year, analyses of our audit results demonstrate significant advances in all audit areas. In 2015, we exceeded the target in the closing of 60% of critical and warning audit areas, after follow-up. By closing, we mean evidence has been provided that the supplier has appropriately addressed the non-conformance. Any suppliers who repeatedly fail to comply with our Code of Conduct risk being disqualified from further business. Focus on Tracing Conflict Minerals We are committed to raising transparency regarding conflict minerals in our supply chain and to work with our suppliers with the aim to continue to trade with the Democratic Republic of the Congo (the DRC) without contributing to conflict.