Supply Change Sustainability and Other Environmental Challengesthor.inemi.org/webdownload/newsroom/Presentations/Enviro... · 2015-09-10 · •confirm compliance with Philips Regulated

Ric Erdheim

Philips Electronics

iNEMI Conference February 23, 20111

Supply Change Sustainability and Other

Environmental Challenges

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AGENDA

• Background on Philips

• Philips Supplier Sustainability Program

• BOMcheck Supplier Declaration Program

• Plastics Recycling

• Eco Vision 5

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Founded in 1891Headquartered in Amsterdam, the Netherlands

Sales over EUR 25.4 billion in 2010 (USD 33.8

billion)

Emerging Markets 33% of sales generated in Emerging Markets

Globally recognized brand (world top 50)Our brand value doubled to $8.7bln since 2004

118,000 employeesSales and service outlets in over 100 countries

€1.6 billion investment in R&D, 6% of sales50,000 patent rights – 36,000 registered trademarks –

63,000 design rights

A blue-chip company leading

in health and well-being

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Philips Supplier Sustainability

• Philips Public Supplier Sustainability Webpage

– (http://www.philips.com/about/sustainability/oursustainabilityfocus/s

uppliersustainability.page)

• Links to:

– Philips Supplier Sustainability Program Manual

– EICC/Philips Supplier Sustainability Declaration

– Supplier Self-Assessment Questionnaire

– Philips Supply Sustainability Audit Tool

– Corrective Action Plan

– Risk Country List

• Regulated Substances List

– http://www.philips.com/shared/global/assets/Sustainability/rsl.pdf

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Supplier Sustainability Involvement Program

Create

commitment

Supplier

Sustainability

Declaration

and Regulated

Substance List

Training and

capability

building

Follow up

Consequence

management

Repeat audit

cycle every

3 years

Manage

Risk

Working with

StakeholdersBuilding

understanding

Philips risk

assessment

EICC audit tool

Transparency

Constructive

dialogue

Monitor

identified risk

suppliers

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Role of Philips Supply Management

Supplier Sustainability Declaration & Restricted Substances List

Suppliers have to sign as part of General Purchasing Agreement

Audit Program

all 1st tier suppliers with:

- production site in risk county

- min spend 100 k€/yr

Royal Philips 2009 Supplier Risk Country List:

Belarus, Brazil, China, India, Indonesia, Mexico,

Pakistan, Philippines, Russia, Thailand, Ukraine,

Vietnam

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Create Commitment: Supplier Sustainability

Declaration (SSD) and Royal Philips List of

Restricted Substances in Products (RSL)

• Both SSD and RSL are signed as part of General Purchasing agreement

• The SSD is based on the EICC Code and covers 5 Area‟s of attention:

– Labor

– Health and Safety

– Environmental

– Management System

– Ethics

– Additional Philips Annex to recognize the “Right to organize”

and “Collective Bargaining”

• Philips requires that all Products or Parts, Product-Packaging and Transport

Material delivered to Philips comply with all applicable requirements in the

RSL. The RSL contains minimum requirements related to Federal, state,

county, or municipal law, regulation, ordinance or code, and Philips own

requirements.

1010

Build Understanding: Training/capability building

• Objective

– Increase suppliers awareness to our sustainability requirement

– Increase suppliers awareness to local legal requirement

– Prepare suppliers for audit

• Content of our supplier training

– EICC and Philips

– Supplier workgroup sharing on best practices

– Full Audit Checklist

– Document List for Audit (relevant legal permits, approval, license…etc)

• Use of Supplier Self Assessment Questionnaire

• Quick scan to supplier (one day onsite visit to suppliers highlighting the high

risk problems)

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Monitor and Manage Risk:

Supplier Sustainability Audits

• By 2009, we have 1000+ risk suppliers audited/will be audited

• During an on-site audit the compliance to the EICC code is validated

• Audit checklist developed by EICC members is used during audit

• Each violation to the EICC norm is called a non-compliance (NC)

• 3 categories of NCs: red, orange and yellow NC

• Philips uses an external party to do the initial audit

• All other steps are done by Philips purchasing together with the supplier; audit

preparation, plan corrective actions, resolving NCs, monitoring progress,

making audit planning.

• Corrective Action plans must be agreed to within 30 days

• Zero Compliance issues (improper disposal, lack of permits, working hours,

occupational safety, emergency preparedness) must be resolved within 3

months unless extension granted

risk country

> 100 K€/yr

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5 Sections in the Audit Checklist

• Freely Chosen

Employment

• Child labor

avoidance/youn

g

worker

management

• Working hours

• Humane

Treatment

• Non-

discrimination

• Freedom of

association

• Occupational

Safety

• Emergency

Preparedness

• Occupational

Injury and

Illness

• Industrial

Hygiene

• Physically

demanding work

• Machine

safeguarding

• Dormitory and

canteen

• Environmental

permits and

reporting

• Hazardous

substances

• Waste water and

solid waste

• Air emissions

• Product content

restrictions

• Company

Commitment

• Corrective action

process

• Documentation

and records

• Management

Accountability

and responsibility

• Legal and

Customer

Requirements

• Risk Assessment

and Risk

Management

• Performance

Objectives

• Training

• Communication

• Worker feedback

and participation

• Audits and

assessments

• No improper

advantage

• Disclosure of

information

• Intellectual

property

• Fair business,

advertising and

competition

• Protection of

identity

• Community

engagement

B: HEALTH AND

SAFETY

A: LABOR C: ENVIRONMENTAL D: MANAGEMENT

SYSTEMS

E: ETHICS

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Working with Stakeholders

• Publicly report results yearly in annual report

• 2009 Audits

249 initial audits of potential suppliers, new suppliers including those

from acquisitions, new sites or spend exceeding EUR 100,000,

111 continual conformance audits at suppliers audited in 2006, and

498 resolution audits focusing on zero-tolerance issues

(continual seven-day work weeks, immediate life threatening situations,

hazardous waste handling).

12 suppliers phased out because of lack of improvement

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Audits per Country Non-Compliances

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Results 2009 Audits

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What Works Well

• Philips expertise available to suppliers

– Group training and on-site consultancy

– Support in audit preparation and follow-up

• Outsourced audit model: suppliers own audit report

– Over 1000 supplier audits completed in risk countries

• Auditing on „hard topics‟: working hrs, wages, permits, waste handling

• Increased interest from e.g. investors

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Number of people‟s lives that were touched

upon through the program in 2008 - 2 highlights

• We solved more than 40 cases of continuous working week in our supply

base, resulting more than 30,000 workers are benefited from a better

work/rest balance.

• We solved more than 55 cases of immediate health and safety threat in

working place, bringing a healthier and safer working condition to more than

23,000 workers.

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Challenges

• Management systems to enable structural improvements in the areas

of labor, health & safety and environment

• Sustainability issues deep down in the supply chain

– Example conflict minerals

• Supplier to take ownership instead of the customer

• Structural societal problems

– Phantom unions in Mexico

– Working hours in China

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Philips needed an alternative to a signature

under Regulated Substances List because…

1. More and more legislation about substance information in products:

– REACH: companies need to declare whether articles contains

Substances of Very High Concern (SVHC) in > 0.1% by weight

– 38 in 2010, >100 SVHC in 2012, >300 SVHC in 2015

2. Philips cannot manage the compliance evidence on paper anymore as

legislation is updated every 6 months

Conclusions:

1. Philips needs one central database for Substance Management!!

2. Philips should encourage Full Material Declaration

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BOMcheck Other system

(e.g. PTC, JAMP,

Technidata)

Share data with multiple

customers

yes no

Guidance on

substances

yes no

Multiple language

platform

yes no

Free training to supplier yes no

BOMcheck is the most effective tool in electronics sector for making declarations

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A wide range of OEMs are using BOMcheck

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BOMcheck: from risk to opportunities roadmap

Compliance

stakeholder/customer

expectations

Eco-Design, CO2, preferred

Materials

Cost savings/Revenue

growth

License

To

operate

Staying

Afloat

Ahead

of

The

curve

Short Term Long Term

Full Material

Declaration

Regulatory

Compliance

Declaration

Setting the standard

in 2015

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Suppliers PhilipsBOMcheck

PLMPLMBOMcheck

Philips architecture for REACH and Other Chemicals

Knowledge Program (ROCK)

BOM

PLM

Pa

rt M

ap

PLM

1-level BOM

with alternatives

Supplier

Supplier

Supplier

Declaration

calculator

Declaration

database

Supply management

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Full Material Declaration vs. Regulatory Compliance

Declaration

FMD benefits Regulatory compliance declaration

benefits

1. Only done once

2. Anticipate future regulations

3. Analyze materials

4. Improve Life Cycle Assessment

5. Stimulate Ecodesign (e.g. CO2

footprinting)

6. After sales service analysis

1. Less effort than FMD

FMD disadvantages RCD disadvantages

1. High initial effort

2. Need to declare >95% of weight

3. More effort to get supply chain to

cooperate

1. Needs to be updated every 6

months

2. Cannot predict future regulatory

impact

3. Cannot use for LCA

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Tech-Clarity survey amongst 300 electronics companies, 2009

Supply Management

Challenges

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Philips request to suppliers

1.

• Sign Annex• confirm compliance with Philips Regulated Substances List and make

declarations in BOMcheck

2.• Attend BOMcheck introduction webinar

3. • Buy BOMcheck license

4.• Attend BOMcheck expert webinar

5.• Make BOMcheck declarations

• Preference for FMD. Priority: ROHS, SVHC, PVC, and BFR

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Support for BOMcheck roll out

• Hotline support:

– Environ: www.bomcheck.net/contact

– Philips BOMcheck Support Centre:• Email: [email protected] or [email protected]

• Phone:+86 571 8793 0464 or +48 42 291 8140

• Internet/user manual/video:

– www.philips.com/suppliers

– www.bomcheck.net/suppliers

• Training:

– Environ: Bi-weekly webinars

– Philips: face-to-face training for suppliers

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Results of BOMcheck roll out to suppliers

0

500

1000

1500

2000

2500

3000

3500

to date

target end 2010

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Challenges & learnings of BOMcheck roll out

Challenges Learnings

1. Lack of chemical knowledge•Need for guidance on SVHCs

•Improve component management &

product design processes

1. Focus on priority suppliers •Plastics, cables, finished articles

•Low risk suppliers: make own-

declaration

2. Language support •Chinese, German, Japanese, etc.

•Q: Why not needed for paper

declarations?

2. Focus on priority substances•SVHC, ROHS, PVC,BFR. FMD later

•Validate declarations (completeness,

correct families, reliability)

3. First mover syndrome•“Philips is the only one asking”

•“You have to pay for this information”

•“I am worried about confidentiality for

FMD data”

3. Internal organization•Get your house in order!

•Engage supplier account managers

•Central support organization

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Conclusion

• Online database is the future for substances management in the

electronics sector

– Nobody can manage spreadsheets and paper anymore

• Promulgation of different online dbases is not desirable

– Harmonization reduces administrative burden and increases

knowledge/reputation of the entire sector

• Resistance to BOMcheck mainly related to confidentiality issues around

FMD

• BOMcheck can be the industry standard that meet all ambitions:

– Risk management: Regulatory Compliance Declaration

– Eco-design: Full Material Declaration

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Our vision/dream: make use of recycled plastics

common practice for our products

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+ Less scarcity issues

+ Less landfill and incineration

+ Lower CO2 footprint (> 50 % less for recycled plastics)

+ We want to establish a lasting cost benefit for Philips (lower

prices)

+ Use of recycled plastic will stimulate

proper recycling of our products

… and it contributes to EcoVision 5 / our image

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It is not as simple as it seems

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Philips chemical

requirements (RSL)

not tuned to recycled

materials

Conflict in legislation:

• WEEE requires

recycling and reuse

• REACH requires full

transparency of

materials

Availability Quality Price

Post Industrial recycled

Plastics (PIR)

(from industrial waste)

• Offers choice, but

availability is limited

Post Consumer recycled

plastics (PCR)

(from used products)

• In principle high availability,

but difficult to get high

quality

Challenge to be explored: application recycled plastics at OEMs

Challenges in

High quality recycled

plastics are scarce.

Suppliers tend to

ask price premium

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How we have tackled the challenges

Co-development with suppliers

Supply base has better understanding of our needs

Understanding of suppliers‟ long term directions in recycled materials

Solution oriented cooperation

I&D & Purchasing & Businesses & Sustainability & Quality

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Pragmatic approach to deal with compliance issue

Today compliance tests per batch.

Next phase: release of compliant processes

Understand price build-up

Created in-depth understanding recycling process and price build-up

Use all knowledge

Learnings shared quickly between the projects in the various businesses

Central knowledge build-up to enable scaling-up

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EcoVision5 programGoing beyond the environmental impact with EcoVision5 (2010-2015)

Improving the energy

efficiency of our total

product portfolio with

an average of 50%

Bringing care to more

than 500 million

people

Doubling our global

collection, recycling

amounts and recycled

materials in products

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CONTACT INFORMATION

• Ric Erdheim

• Senior Counsel

• Philips Electronics Government and Industry Affairs

• Suite 900

• 1050 K Street NW

• Washington, DC 20001

• [email protected]

• 202-962-8558

3636

EICC VisionElectronics Industry Citizen Coalition: http://www.eicc.info/

Many companies have come together in the electronic sector to address

corporate

responsibility issues:

• To collaborate

• Establish common tools and practices

• Reduce duplication of effort and cost, increase efficiency

Through the application of high standards we can create better social, economic

and environmental outcomes for all those involved in the supply chain:

• Increased efficiency and productivity for companies and suppliers

• Improved conditions for workers

• Economic development and a cleaner environment for local communities

• Understand and/or reduce risk to ensure the continuity of supply or business

continuity in the supply chain