Sustainability in the supply chain has become a key issue in the telecommunications sector, in which companies share more and more parts of the value chain with our suppliers and outsourcers.
Each company is responsible for identifying and managing the associated risks, as set out in the United Nations Guiding Principles on Business and Human Rights and in the Sectoral guides drawn up by the European Union.
At the same time, global risks require sectorial and multi-stakeholder solutions in order to ensure that the goods and services purchased are increasingly sustainable. An example of this is the collaboration initiatives which have arisen for the uniform evaluation of the performance of suppliers. These projects make it possible to share the evaluations and actions deriving from them with outsourcers from the same sector or from various industries. Telefónica is aware of the impact associated with purchasing goods and services due to our volume of purchases – over 25.000 billion euros a year — and the high local component — over 11,000 suppliers and almost 83% awarded to local suppliers.
In the company, we understand sustainability in the supply chain within a management framework which enables us to mitigate risks and identify opportunities. In addition, in some services, it is a key element for the satisfaction of our customers, and it is, in short, a critical point for our reputation.
We have more than 10,500 suppliers. Our volume of purchases exceeds 25,800 million euros and 81% we allocate to local suppliers
Our Business Principles, Telefónica’s code of ethics, lead us to take on a commitment to sustainability throughout the process of relations with suppliers:
- Our Purchasing and Business Lines Teams know the sustainability criteria and are aware of the benefits of responsible action in the supply chain.
- Telefónica Procurement teams are regularly trained on sustainability issues (in particular any changes to the Supply Chain Sustainability Policy or specific clauses to be included in high risk contracts).
- We inform and assess our suppliers with regard to the contents and objectives of our Principles and Policies, in order to guarantee that we all share the same vision.
- We ensure that our suppliers respect current local legislation, encouraging them to be proactive and to go one step further, considering more demanding legislations in this regard.
- We promote ongoing training and improvement programmes of our suppliers, based on our prior knowledge and their performance.
- We encourage our suppliers to undertake initiatives of this kind in their own supply chains in order to multiply the positive impact on the social, labour and environmental aspects.
We are transforming our supply chain with BlockChain to gain efficiency and sustainability
This commitment is detailed and regulated in internal standards and external requirements such as our Supply Chain Sustainability Policy and the General Conditions for the supply of goods and provision of services, which outline the ethical, social, environmental and privacy behaviour standards for the supply chain. All of this forms part of our global purchasing model and it is complemented by our commitments to Human Rights and responsible minerals trade.
Telefónica requires its suppliers to carry out their activities applying similar principles and respecting existing laws and regulations in the countries in which they operate. To make them aware of the importance of being aligned, we use communication, dialogue — through forums — and training.
We identify the risks of ethical behavior and corruption of our suppliers thanks to the Dow Jones Risk & Compliance tool
To ensure that they comply with our policy and standards, we use a wide range of measures, from pre-evaluation processes through to audits in situ. We consider it basic to evaluate the risk level of our suppliers a priori, through an external, independent source. At present, we promote self-evaluation through the EcoVadis, solution, a platform based on international corporate responsibility standards which take into account 21 sustainability criteria and which is used by the leading telecommunications companies. Telefónica already has evaluated more than 900 critical suppliers.This evaluation model is complemented by the Annual Audit Plan, developed in accordance with critical aspects in Europe and Latin America, and the local audits (such as those developed through the Allies programme).
Telefónica belongs to JAC (Joint Audit Cooperation), the association of telecom operators for the realization of common audits to critical suppliers
If a supplier does not reach the required level or is not able to provide the information requested, an internal process is started, with different phases and tools, in order to reach an agreement with that supplier so that it meets our requirements. In extreme cases, if this is not feasible, and depending on the agreement reached, relations are suspended until it has demonstrated that it has corrected the situation and has reached the required levels.
Allies is an initiative of transformation and commitment to the companies which collaborate with Telefónica and third parties. The importance of the programme, which began in Latin America in 2008, lies in the fact that almost 80% of direct contact with our customers in the region is made by third parties.The aims of Allies are:
- To build strategic allies.
- To guarantee fulfilment of the organisational objectives and technical security and to develop early detection and risk prevention mechanisms.
- To raise awareness among outsourcers regarding fulfilment of Telefónica’s regulations.
The programme aims to ensure fulfilment of the social, labour and ethical standards, promotes excellence of service to customers and facilitates the progress of allied companies with regard to sustainability, guiding them, avoiding interferences. The global model for managing third parties materialises in shared tools, notably a policy of minimums, a risk detection and management model, labour audits, an online platform for supplier the training, communication and good practices.
The cornerstone of Allies is the Allies Committee, the body responsible for putting the model into practice and monitoring and updating it. The Committee, present in the main countries in the region, is composed of the Human Resources Department (guarantor of labour and health and safety aspects), the Purchasing Department (which guarantees that the sustainability criteria are incorporated into the Purchasing process), the Sustainability Department (which assesses the sustainability performance of suppliers: evaluation and monitoring), the General Secretariat and management and requests departments (they identify the key suppliers for the provision of the service to be incorporated in the sphere of Allies, following analysis by the Committee).
Against Child Labour
We work together with our suppliers to prevent and eradicate the existence of child labor in the supply chain.
"Aquí Estoy y Actúo" is a program of Telefónica so that all companies can actively collaborate in eradicating child labor.
Minerals from High-Risk Areas
Extracting and processing minerals to obtain metals involves a series of actions which cause a significant environmental and social impact that linger over time beyond the activity period of said extractions.
Many services are now incorporating digital technology which means that metal is present in a number of sectors, ranging from the automotive industry and equipment manufacturers to the technology sector and terminal manufacturers. This rise in the use of electrical components has increased the impact on society and the environment. This is why the responsible supply of minerals has become an increasingly important and current topic, both from a regulatory and public opinion standpoint.
At Telefónica, despite not having direct business relationships with smelters or refiners (SORs), we are aware of our role as agents that promote the solution of this problem. That's why we are committed to respecting Human Rights and work with our suppliers to efficiently implement our Supply Chain Sustainability Policy by finding an appropriate way to manage the impact of our operations. We believe that, in some areas, extracting, processing and trading minerals could lead to armed conflict or cause a breach of Human Rights for the affected people and communities. We understand that mineral extraction is an important economic driving force in the previously mentioned countries and regions; meaning that if mineral extraction and processing were to stop, it would have a negative impact on the development of said places.
As a listed company on the New York Stock Exchange, we duly comply with Section 1502 of the Dodd-Frank Wall Street Reform and with the Consumer Protection Law. In particular, we have introduced sustainability criteria on this aspect in our procurement process, as part of sustainable supply chain management to ensure due diligence.
In this way we actively work to include sustainability criteria throughout the value chain:
- Suppliers must accept our minimum sustainability standards, which regulate, among other aspects, the use of minerals in High-Risk areas.
- Our Supply Chain Sustainability Policy argues that suppliers must have a clear policy and processes that ensure that they comply with section 1502 of the Dodd-Frank Wall Street Reform and with the Consumer Protection Law.
- Our General Conditions for the Supply of Goods include a requirement on this subject that requests the guarantee that "the products offered do not contain any of the so-called minerals from conflict zones".
- Based on our risk methodology we identify those suppliers may carry a high risk in this area given the products supplied.
- We evaluate the compliance of these suppliers through the EcoVadis self-assessment platform, which through its evaluation module of the management of its supply chain we analyze those risk suppliers in this field.
- We verify the compliance of our suppliers through on-site audits of risk providers. For example, the audits we carry out within our participation in the Joint Audit Cooperation (JAC) initiative, which specifically addresses the use of this type of minerals by manufacturers.
To achieve a major impact on the responsible supply of minerals and also to facilitate the actions developed in collaboration with our suppliers, we actively participate in various existing initiatives in the sector, both international and sectorials, aimed at reducing these types of risks:
- Responsible Minerals Initiative, involving more than 350 companies from ten different sectors.
- The Public-Private Alliance for Responsible Trade in Minerals (APP). A joint effort by the US Department of State, the US Agency for International Development, non-governmental organizations, companies and industrial organizations, which takes on the challenge of managing the problems associated with conflict minerals while offering solutions that benefit people involved in responsible trade in minerals in the Democratic Republic of the Congo and the Great Lakes region.
Thus, we follow the OECD guidelines established in its OECD Due Diligence Guide for Responsible Mineral Supply Chains in Conflict or High-Risk Areas, and we promote its application among our suppliers who work with these minerals.