Sustainability in the Supply Chain: A Crucial Component of Corporate Responsibility

Deutsche Telekom conducts business in more than 50 countries. This presents opportunities for companies, particularly in supplier management, but it also poses risks. To ensure that its supply chain has a sustainable focus, Deutsche Telekom has established a systematic supplier management system. As a founding member of the Joint Audit Cooperation (JAC), Deutsche Telekom is committed to shaping sustainable relationships with suppliers. Based on a standardized methodology, JAC examines shared suppliers worldwide, with a particular focus on Asia, South Korea, Eastern Europe, and South America.

In 2010, Deutsche Telekom hired external auditors to further professionalize its social audit processes. As a result, it became possible to improve the quality of the assessments and audit a much larger number of suppliers. In addition, a newly developed risk-matrix standardized the selection process for particularly at-risk suppliers. The primary components of a social audit include:

• a general risk-assessment for suppliers
• an assessment of the supplier’s selfdisclosure
• direct interchange to develop the suppliers
• ongoing review of the local situation

To promote the international implementation of Corporate Responsibility (CR) at all levels of the supply chain, Deutsche Telekom founded JAC together with France Telecom and Telecom Italia. The overreaching goal was to help shape all supplier relationships to be long-term, trusting, and uniform. The cooperation is open to all companies in the industry and launched its first campaigns as early as June 2010. The concept has since spread: As a result of its successful work over the past five years, JAC has now grown to include ten telecommunications providers.

The key to the approach taken by Deutsche Telekom and the other JAC members is a close combination of monitoring and dialog. “We follow a cooperative approach in the integration of our suppliers,” says Birgit Klesper, Senior Vice President Group Transformational Change and Corporate Responsibility at Deutsche Telekom AG. “For us at Telekom, it is important to know that our business partners are supporting new ways of achieving sustainable business practices. We need this information to be able to effectively improve the supply chain.” To make the process transparent and results-oriented, external NGOs, business initiatives, and research institutions are also included. The common objective is the ongoing improvement of the supply chains toward more responsibility and sustainability.

A general aim is to simplify the selection process for suppliers. This applies both to the telecommunications companies – which benefit from improved structures for the monitoring and assessment process as the result of uniform standards and synergy effects – and to the suppliers. The latter often produce for a number of different consumers in Europe and North America and were previously subject to a number of different audit processes. In contrast, if they work together with the JAC, one assessment is enough for ten of the largest telecommunications companies in the world. This standardized approach saves time and also helps to spread solution approaches among the individual supplier groups.

The foundations for JAC’s work are defined by a central steering committee, which meets twice per year and defines guidelines for further procedures. As early as the initial meetings, it was very important to Deutsche Telekom for all involved companies to appoint representatives from upper management of the respective CSR and sourcing departments to the committee.

In its current form, the initiative’s work consists largely of a local audit program, including tracking of planned corrective measures. All members are individually responsible for conducting the complete audit process for a supplier, in the name of the Cooperation. Each JAC member is assigned the same number of suppliers. The local audits are carried out according to the following, jointly defined criteria:

• The audits are carried out by international auditing firms that are specialized in the specific social and environmental aspects in the respective country.
• Confidentiality agreements are signed with the suppliers, ensuring that the audit results are disclosed only to the JAC members.
• The checklist defined by the JAC members is based on the SA 8000 and ISO 14001 standards, along with site audits.
• The documented results are presented in the final report.
• Cooperation with the suppliers is based on the common awareness that CSR risk-management is a decisive factor for sustainable development.
• When the audit results are available, corrective measures to rectify the vulnerabilities addressed in the audit report are agreed upon with the suppliers and their compliance is tracked.

A total of 112 audits were carried out worldwide by the end of 2013. The questionnaires used for the audits contained more than 4,000 questions in total and had an impact on more than 400,000 employees at the audited companies. The most significant findings were in the areas of working hours, occupational safety, and pay. Should the auditors identify grievances at a supplier, the correction procedure applies. Deutsche Telekom and JAC do not aim to shut out the suppliers, but instead to accompany them on their path toward sustainable business management. To this end, measures are defined jointly and progress is reviewed at regular intervals. Individual problems can often be corrected in a matter of days, whereas suppliers are given more time for larger interventions – such as corrections to working time models. “When it comes to working hours, in particular, we expect the involved companies to be compliant with local laws and international standards,” explains Antonio Luz Veloso, Senior Expert for Sustainable Supply Chain Management at Deutsche Telekom. He continues, “We want tangible results that are effective in the long term. We acknowledge that the changeover process can take several months. Accordingly, we define clear targets and milestones for this process, which we review regularly.”