Philips 2008 Annual Report Download - page 67

Supplier performance
We continued to drive progress in our Supplier
Sustainability Involvement Program in 2008. A total
of 572 audits of Bill of Material (BOM) and non-
product related (NPR) identified risk suppliers were
carried out in 2008, comprised of:
244 initial audits of new suppliers, including those
•
from acquisitions, new sites or spend growth
exceeding EUR 100,000
33 continual conformance audits at suppliers audited •
in 2005, and
295 resolution audits focusing on zero-tolerance •
issues (for example: child labor, continual seven-day
work weeks, immediate life-threatening situations,
slave labor conditions and banned substances).
The majority (80%) of BOM-related audits were
conducted in China, where the vast majority of
non-compliances (89%) were found.
2008 supplier audit results
The most frequently identified issues coming out of
the 277 initial and continual conformance audits were
as follows:
Zero-tolerance – emergency preparedness (blocked fire •
exits); occupational safety (immediate threat to health and
safety); working conditions (exposure to hazardous
substances); working hours (continual seven-day work
weeks); and lack of environmental permits.
Limited-tolerance – improper handling/processing of •
chemical waste; working hours (above legal limits/60
hours a week); wages and benefits (below minimum
wages and absence of legal overtime payment);
environmental performance objectives do not meet
legal requirements; lack of industrial hygiene (lack of
personal protective equipment); occupational injury
and illness (no medical treatment facility).
Increased speed of resolution
During 2008 we focused on resolving zero-tolerance
issues, leading to a 60% improvement in resolution
speed. During the last four months of the year all zero-
tolerance issues were resolved within 105 days, down
significantly from the average resolution time of 250
days in 2007. At year-end there were no zero-
tolerance issues older than three months.
The most frequently identified zero-tolerance issues
related to occupational health and safety risks and
continual seven-day work weeks. Health and safety
issues can be resolved quickly. Dealing with working
hours often entails installing extra shifts with additional
personnel, which can take at least a month.
Where no improvement could be established,
25 suppliers were phased out.
Lost workday injuries
per 100 FTEs
1.00
0.75
0.50
0.25
0
0.78
2005
0.78
2006
0.81
2007
0.68
2008
Distribution of supplier audits by country
as a % of BOM-related audits in risk countries
China 80
India 1
Taiwan 3 Others 2
Brazil 4
Mexico 5
Malaysia 4
Indonesia 1
Distribution of non-compliances by country
as a % of BOM-related audits in risk countries
China 89
Taiwan 1
India 1
Mexico 4
Malaysia 3
Indonesia 2
Distribution of non-compliances by grouping
as a % of BOM-related audits in risk countries
Labor
22
Health
and safety
27
Environmental
19
Management system
27
Ethics
5
Philips Annual Report 2008 67
122
Performance statements
114
Supervisory Board report
110
Our leadership
94
Risk management
70
Our sector performance