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What we ask of our suppliers
Conditions
General Conditions of Purchase
KPN’s General Conditions of Purchase are the basis for the framework agreements and other contracts. Conditions are set out for the supplier as well as for the products and services that are procured, including conditions relating to CSR.
Supplier Code of Conduct
In our Supplier Code of Conduct we have laid down social and environmental requirements for suppliers. This code is based on the United Nations Universal Declaration of Human Rights and the core treaties of the International Labour Organization (ILO). The code contains conditions relating to human rights, labor conditions, privacy, safety, environment, bribery and fraud. All KPN’s suppliers must comply with the Supplier Code of Conduct. The code is part of the General Conditions of Purchase and the standard contract for suppliers. Suppliers with ongoing contracts of which the code does not form part are asked to sign the code separately.
Audits and compliance
High risk suppliers are asked to carry out a self-assessment via E-TASC, the global audit system for suppliers in the IT sector. At the request of KPN, the supplier has to register with E-TASC and complete the corporate questionnaire. This questionnaire poses questions about the characteristics of the company and its social and environmental policy. The results give a detailed picture of the risks of a supplier. Once a supplier has registered with E-TASC, this applies to all the suppliers’ IT customers that are registered with E-TASC. In this way, the audit costs and time remain small.
If it is the results of the corporate questionnaire prompt so, suppliers are asked to complete the facility questionnaire. This is a detailed questionnaire that is completed for each production location, thereby making the risks of a supplier even more easily identifiable.
Various actions may be taken on the basis of the Facility Questionnaire:
- no action: the risk is acceptable.
- help the supplier to develop: the risk exists, but can be eliminated. KPN discusses improvements with the supplier.
- further investigation of the supplier: for instance, by visiting the supplier. The next step is then decided.
- temporarily stop doing business with the supplier until the problems are shown to have been resolved.
- part company with the supplier: the risk is high and improvement is not possible or desirable.
The KPN buyer keeps in close contact with the supplier about the steps to be taken.
To complement E-TASC, audits are performed at suppliers. These are carried out by the Joint Audit Cooperation (JAC), in which we participate with Belgacom, Deutsche Telekom, France Telecom, Telecom Italia, Swisscom and Vodafone.
What is JAC?
JAC is an association of telecom operators aiming to verify, assess and develop the CSR (Corporate Social Responsibility) implementation across the manufacturing centers of the most important ICT multinational suppliers. JAC members share resources and best practices to develop long term CSR implementation in the different layers of the ICT Supply Chain at international level.
Who are the members of JAC and how to join?
JAC has been set up by Deutsche Telekom, France Telecom and Telecom Italia in January 2010 with the signature of a Memorandum of Understanding. By this agreement the first members have defined the audit process and tools that have started to implement in June 2010 during the first JAC campaign.
In 2011, four additional members have joined, enlarging the association to a total of seven Telecom Operators: Belgacom, Deutsche Telekom, France Telecom, KPN, Swisscom, Telecom Italia and Vodafone.
Telecom operators that wish to be part of JAC, should respond to the following prerequisites. A JAC member:
- has a structured CSR sourcing department with experienced resources.
- has signed or will sign a contract with a third party certified audit company specialized in on-site CSR audits at international level.
- has a contract with supplier which is common at least with 2 JAC members.
- accepts all terms of the JAC 2010 Memorandum of Understanding and related supplements.
- accepts all Non Disclosure Agreement terms already signed between the JAC and the suppliers audited
- will support at its own cost the on-site audits that it will carry out on behalf of JAC.
No subscription costs are required.
How does JAC work?
The JAC process is a coordinated on-site audit program in the area of Corporate Social Responsibility (CSR) based on a common verification, assessment and development methodology, including follow up of corrective action plans. Each member has the responsibility, on behalf of the others, to lead a complete audit process at its costs to suppliers pre-identified in equal parts among the JAC members.
The on-site audit operations follow these guidelines:
- Preparation: knowledge of the audited plant.
- Skilled auditors: the audits are conducted by international audit companies, specialized in social and environmental issues in the plant country.
- Confidentiality: Non-Disclosure Agreements are signed with suppliers in order to restrict audit results to JAC members only.
- Methodology: check list defined by the JAC members based on the SA 8000 and ISO 14001 standards, and on-site audit with interviews.
- Report: describing the audit findings based on objective evidence.
- Cooperation with the suppliers: based on the reciprocal awareness of the CSR risk management as key factor for a responsible and sustainable development.
- Collaboration and development with the suppliers: based on the audit results, corrective action plans are defined with the suppliers to solve any gap highlighted in the audit report, which is followed up by each JAC members up to the full resolution.
The JAC members meet weekly to set the JAC audit agenda, validate audit reports and follow up on corrective action plans. These regular meetings reinforce the optimization of CSR assessments through the exchange of best practices to make the JAC initiative more effective. Twice a year, the JAC Steering Committee, consisting of senior management representatives of the respective CSR and Sourcing departments, meet to verify the results of the audit campaign and take decisions on next steps.
What are the JAC benefits?
JAC activities lead to cost and process optimization for both suppliers and telecom operators:
What are the JAC results?
The first JAC audit campaign was carried out in July 2010. Up to December 2011, 33 audits have been carried out on ICT suppliers in China, Taiwan, India, Japan, South Korea, Eastern Europe and South America covering 155,000 workers in total. 4000 questions have been checked in these trials. A limited number of non-conformities were found and various types of non-compliances. The most common ones relate to working hours, health and safety and wages. A few cases of discrimination and juvenile work were discovered.
The resolution time for the incidents of non-compliance varies for each type. In particular, working hours issues (the limits relate both to regular time and overtime), need several months to be resolved due to the impact on Human Resources management.
Most of the suppliers have accepted to take part in the JAC initiative but some big ICT multinational companies have expressed reluctance to be audited. An escalation by JAC members is in course, in order to overcome such temporary criticality.
The enlargement from 3 to 7 telecom operators has allowed JAC to increase the scope from 30 to 64 suppliers, and will pave the way to cooperate further with the suppliers to ensure long term solutions of CSR Issues and the development of the CSR standards to other layers of the supply chains. Other European telecom operators are kindly invited to join this Joint Audit Cooperation.
Additionally, we have developed the Sustainability Tool for hardware suppliers and procurement of services. This tool asks them for information about the energy consumption, recyclability, packaging and raw materials consumption of the products they supply. It is our standard practice to use the Sustainability Tool when procuring products. Suppliers are obliged to respond to it. Suppliers then know that we evaluate their bids also on the basis of sustainability aspects. Modems, TVs and other consumer equipment account for almost 0,5% of the electricity consumption in the Netherlands, so we can help our customers make significant energy savings.
All strategic and preferred suppliers are assessed on the key performance indicators (KPIs) and strategic performance indicators (SPIs) that are set out in the contract with KPN. A good relationship of mutual trust with our strategic suppliers is essential. Consequently, every year we evaluate what our suppliers think of us, and where and how we can improve as a buyer. We also evaluate what we think of the performance of our suppliers. Topics covered by this evaluation are innovative capacity, communication, expertise and quality. The results of the assessment of suppliers are discussed by the quality management board of KPN and the procurement teams. There is a procurement team for each strategic supplier. If the results are unsatisfactory, an improvement action plan is drawn up together with the supplier.
