Philips 2009 Annual Report Download - page 225

Accumulative number of total audits
(including resolution audits)
2,400
1,600
800
0
152
05
373
06
257
07
572
08
858
09
2,212
total
Most audits conducted by third parties
For reasons of independence, professionalism and capacity, we have
implemented a policy that requires third parties to conduct initial and
continual conformance audits. As a result 90% of these audits were
performed by external auditing bodies, a significant increase over 60% in
2008.
Audit results
As of 2009 all risk suppliers from acquisitions are included in our
supplier audit program. As a result the number of identified risk
suppliers and indentified non-compliances has increased substantially.
During initial audits, for example, many suppliers failed to meet the
requirement for management systems, which are thoroughly evaluated
according to the EICC checklist.
The average number of non-compliances per audit in the risk countries
(selection based on the Maplecroft Human Rights Risk Indexes) varies
between 22 in India down to 3 in Thailand and Indonesia.
The most frequently identified issues coming out of the 360 initial and
continual conformance audits were as follows:
• Zero-tolerance – hazardous substances (improper disposal of
hazardous waste); lack of environmental permits; working hours
(continual seven-day work weeks); and occupational safety
(immediate threat to health and safety) and emergency preparedness
(blocked fire exits).
• Limited-tolerance – lack of adequate management systems to meet
the legal requirements for labor, health and safety, and
environmental standards (improper handling/processing of chemical
substances).
Increased speed in resolving zero-tolerance issues
In 2009 most zero-tolerance issues were solved within 90 days after
identification, with the exception of working hours and government
permit issues, which take longer to resolve due to their complex nature.
Only 7% of zero-tolerances were granted deadline extensions after
detailed corrective action plans were reviewed by auditors.
Where no improvement could be established, 12 suppliers were phased
out.
Global operating structure
2009 saw the embedding of the Philips Supplier Sustainability
Involvement Program as a One Philips approach with a single set of
standards, processes, training, certifications, resources and one
database across sectors. As the majority of risk suppliers continue to be
in China, the Global Supplier Sustainability Office is now headquartered
in Shanghai.
Auditing Philips sites
Mirroring our supplier approach, external auditors carried out audits at
12 of our internal sites in risk countries using the EICC checklist. This
will continue in 2010.
Summary supplier sustainability audit results
of major non-compliances found in supplier audits in risk countries
zero
tolerance
limited
tolerance
Labor
Freely chosen employment − 2
Child labor avoidance − 1
Working hours 10 6
Wages and benefits − 7
Humane treatment − 1
Non-discrimination 1 1
Freedom of association 1 1
Collective bargaining − −
Health and safety
Occupational safety 7 2
Emergency preparedness 30 −
Occupational injury and illness − 3
Industrial hygiene 2 5
Physically demanding work − −
Machine safeguarding 3 1
Dormitory and canteen 3 1
Environmental
Environmental permits and reporting 11 −
Pollution prevention and resource
reduction − −
Hazardous substances 13 8
Waste water and solid waste 3 1
Air emissions 2 −
Product content restrictions 6 −
Management system
Company commitment 1 2
Management accountability − 7
Legal and customer requirements − 1
Risk assessment and management − 5
Performance objectives − 8
Training − 9
Communication − 10
Worker feedback and participation − 5
Audits and assessments − 6
Corrective action process − 3
Documentation and records − 5
Ethics
Business integrity − −
No proper advantage − 2
Disclosure of information − −
Intellectual property 2 −
Fair business, advertising and
competition 4 −
Protection of identity − −
13 Sustainability performance 13.5 - 13.5
Philips Annual Report 2009 225