Philips 2014 Annual Report Download - page 198

Sustainability statements 14.2.7
198 Annual Report 2014
the accelerated transition to LED street lighting.
Workshops held in 2014 included London, Dubai,
Singapore, Austin (Texas), Sao Paulo, and Beijing.
Innovation Experience
Philips organized Innovation Experiences in 2014 in
Eindhoven, Dubai and Zurich which were attended by
over 2,000 journalists, customers, scientists, partners
and employees.
At the event Philips explored how technology can make
our homes healthier and more tailored to our lifestyles,
how cloud-based solutions can provide care across the
health continuum and connect the patient from the
hospital to their home, and how personalized digital
solutions can help people living with disabilities or
chronic diseases manage their condition from the
comfort of their own home.
We rmly believe that these challenges can only be
addressed through Open Innovation and constructive
dialogue with all stakeholders involved.
14.2.8 Supplier indicators
In addition to our own sustainability activities, we also
engage our suppliers and their suppliers toward better
sustainability practices. To that end, we are active in
various supply chain initiatives around the world.
Philips has a direct business relationship with
approximately 10,000 product and component
suppliers and 30,000 service providers. Given the size
and complexity of our supply chain we need to focus
our eorts. Therefore, we developed an approach
based on the supplier’s sustainability risk prole related
to spend, country of production, business risk and type
of supplier relationship. The risk prole is used to select
suppliers for inclusion in our sustainability audit
program, conict minerals, and IDH Electronics
program.
Philips Supplier Sustainability Declaration
The Philips Supplier Sustainability Declaration is based
on the EICC Code of Conduct and in line with our
General Business Principles, we added requirements on
Freedom of Association and Collective Bargaining. The
topics covered include labor and human rights, worker
health and safety, environmental impact, ethics, and
management systems. We monitor supplier compliance
to the Declaration through a system of regular audits.
We rolled-out the Declaration via the purchasing
contracts signed with suppliers, and via all trainings and
audits.
The Declaration requires suppliers to cascade the EICC
Code down to their next tier suppliers. Suppliers must
regard the Code as a total supply chain initiative and at
a minimum, also require its next tier suppliers to
acknowledge and implement the Code. This roll-out to
deeper levels in the supply chain is reviewed during the
on-site audits, where it is assessed how requirements
have been communicated to the next tier suppliers and
whether there is an eective process in place to ensure
that the next tier suppliers implement the Code.
Risk suppliers with who we have a direct business
relationship are included in the supplier sustainability
audit program, and most of these are tier 1 suppliers.
However, sometimes Philips also selects and prescribes
the tier 2 suppliers, in which case these tier 2 suppliers
will also be included in the audit program.
Supplier Sustainability Audit Program
We monitor supplier compliance with the Declaration
through a system of regular audits. During these audits,
an independent external party visits the supplier’s site
for several man-days to hold interviews with workers
and management, do a factory tour, and review
documentation. Based on their risk prole, 576 risk
suppliers are included in the supplier audit and
development program; the majority of these are in
China. During the audits, compliance with all sections
of the Declaration is reviewed. In the event of non-
compliance (NC) we require suppliers to make a
corrective action plan, and we monitor its
implementation until all major NCs are resolved. Full-
scope audits are conducted in a 3-year cycle; to date
we have audited 99% of all identied risk suppliers.
Philips Group
Audit cycle
2014
3-year
cycle
Initial audit
(full scope)
Corrective action
implementation
Resolution audit
(limited scope)
Continued
conformance audit
(full scope)
Supplier training and
capacity building
Identifying improvement areas
2014 Audits
In 2014 we audited 203 of our current risk suppliers,
including 129 continued conformance audits with
suppliers that we already audited in 2011. This includes
7 suppliers from discontinued operations. Risk suppliers
from recently acquired companies are also included,
and this year we audited 11 suppliers from the
acquisitions of Povos and Preethi. As in previous years,
the majority of the audits were done in China. Also in
Brazil, India and Mexico audits were done, as well as a