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Circular Economy and Supply Chain Excellence

Supply Chain Sustainability

Making the world a better place with technology begins with how that technology is made.

Strategy

As a founding member of the Responsible Business Alliance (RBA), Cisco contributed to the development of the RBA Code of Conduct. By adopting the RBA Code as our own Cisco Supplier Code of Conduct, we’ve set standards and expectations for labor, health and safety, environment, ethics, and management systems that are consistent across the electronics industry supply chain.

Adopting the Code is central to our commitment to the UN Guiding Principles on Business and Human Rights (UNGPs). It also reflects our longstanding pledge to uphold and respect human rights for all people, including those who work in our supply chain. See the Global Human Rights Policy for more detail about our human rights commitments.

We hold our suppliers—and their suppliers—to the same high standards we practice through the Supplier Code of Conduct and other responsible sourcing policies. To follow through on our commitments, we conduct due diligence with suppliers and help to protect workers, communities and the environment from harm. Through supplier engagement, we believe in building foundations that can drive positive outcomes for people and ecosystems in our supply chain. We also collaborate extensively with industry groups, peers, suppliers, and other stakeholders to advance responsible, sustainable supply chains across our industry.

See our fiscal 2020
Cisco supplier list

We engage with our suppliers during the lifecycle of the relationship to hold them responsible to our expectations. At the onset, suppliers must acknowledge and affirm that they will abide by:

Cisco's policies are embedded in our standard master purchasing agreements for direct and indirect suppliers. Our Supplier Code of Conduct was also extended to our indirect service suppliers for acknowledgement during fiscal 2020.

The supplier engagement process is essential to drive improvement within our supply chain and across our industry. We believe it is imperative to continually evaluate our suppliers and help them improve through leadership, support, and education. The engagement process includes four main phases, described below:

Supplier engagement process for a more resilience responsible supply chain

We evaluate our supply base annually for social and environmental risk factors, inherent risks from operations and production, and exposure to those risks. We rely on reputable sources to assess vulnerabilities and protections in the geographies where suppliers operate. Reputable sources and data include:

  • The UN Human Development Index
  • World Bank Governance Indicators
  • Indicators for forced labor such as the US State Dept. Trafficking in Persons Report
  • Indicators for environmental health and performance

Since fiscal 2019, our assessment methodology has included criteria for assessing the presence of vulnerable workers such as foreign migrant workers, young workers, and student workers. The inclusion of these factors has helped increase our due diligence focus on protecting vulnerable workers. We continue to improve upon this methodology, accounting for suppliers’ previous performance and likelihood to have repeat nonconformances. The results of this assessment feed into our due diligence, audits and assessments, and supplier engagement plans.

In fiscal 2020, we updated the supplier onboarding process to more deeply assess suppliers for social and environmental risks, such as pollution violations or the employment of foreign migrant workers or workers under the age of 18. All new direct material suppliers have been screened since the process was updated. If risks are identified, we follow up to determine if impacts need to be addressed prior to scaling business with the supplier. When supplier entities are integrated through mergers and acquisitions, they become a part of Cisco’s standard programs and due diligence processes.

We have adopted the RBA’s industry standard accountability and assessment tools. These include Self-Assessment Questionnaires (SAQs) and the Validated Assessment Program (VAP). SAQs engage suppliers to assess their conformance to the RBA Code of Conduct and identify any gaps. Using RBA’s industry-standard protocol reduces audit fatigue and makes clear the expectations suppliers should perform to. They give suppliers insight into their own performance. And they help Cisco develop leading indicators for risks that can be addressed during an audit or another due diligence initiative.

Self-assessment questionnaire coverage by supplier type
  FY19 FY20
Manufacturing partners FY19: 100% FY20: 100%
Components suppliers (by spend) FY19: 80% FY20: 80%
Logistics suppliers FY19: 100% FY20: 100%

Our comprehensive supplier auditing program helps suppliers build capability and improve their performance. Third-party auditors trained and certified in social and environmental auditing and RBA’s VAP protocols conduct audits on site. Auditors walk through production areas, dormitories, and canteens; interview workers and management; and review policy and procedure documentation. More information about VAP standard protocols can be found on the RBA website.

Suppliers share their audit results with Cisco through the RBA-ONLINE platform. We require regular audits of manufacturing partners every two years. And each year, we audit at least 25 percent of component supplier facilities that are deemed high risk according to our risk assessment process.

Audits conducted by supplier type
  FY16 FY17 FY18 FY19 FY20
Manufacturing partner facilities FY16: 18 FY17: 4 FY18: 13 FY19: 8 FY20: 6
Components supplier facilities FY16: 37 FY17: 49 FY18: 47 FY19: 67 FY20: 60
Total FY16: 55 FY17: 53 FY18: 60 FY19: 75 FY20: 66

In fiscal 2020, 66 Cisco supplier facilities conducted RBA initial audits. We estimate these audits covered more than 235,0001 workers in our supply chain. Working hours, emergency preparedness, and occupational safety remained the largest portion of our audit nonconformances. There were no priority environment findings in fiscal 2020. Our data shows more working hours nonconformances during fiscal 2020, than in fiscal 2019, while having conducted fewer initial audits. This trend is largely due to our efforts to conduct more third-party closure audits which can identify working hours issues as remaining non-conformant, even if a supplier has made improvement in recent months. We are continuing to work with suppliers to drive conformance to our standards and develop long-term improvement plans when necessary. Our audit program is not the only way we conduct due diligence to address risks to workers and communities. Read more about our other assessments.

1 Includes our manufacturing and components suppliers only.

Key audit nonconformances and actions taken across the globe

Here are some of the most common audit nonconformances in FY20, including non-conformances that are persistent and challenging.

click on the sections for more info

Emergency preparedness

Nonconformance

Exit discharge, exit route doors, or evacuation maps did not meet safety requirements. Lacking special markers for identifying Emergency Response Teams.

Action plan

  • Improve inspections of exit doors, signs, and lights
  • Improve and update evacuation maps and identifying markers
  • Communicate, and train workers on new emergency procedures

Context

Suppliers had inadequate or ineffective management system for maintaining Code requirements for emergency preparedness

Working hours and days of rest

Nonconformance

More than 60 hours were worked in a workweek, with overtime exceeding local law. In addition, workers did not receive at least one day off every seven days.

Action plan

  • Establish limits and procedures for approving overtime
  • Recruit and cross-train more workers
  • Strengthen shift and production planning

Context

Working hours, workers' needs, and variable production cycles and lead times can be complex to balance.

Wages and benefits (social insurance)

Nonconformance

Social insurance coverage or baseline does not meet the local requirements

Action plan

  • Ensure wage deductions for social insurance programs are calculated to expectations
  • Engage workers in dialogue when making changes to insurance withholding

Context

Suppliers struggle to incentivize workers to opt-in for higher withholdings for social insurance.

Occupational safety (pregnant women and nursing mothers)

Nonconformance

No policy, risk assessment, or reasonable accommodations provided for pregnant workers and nursing mothers.

Action plan

  • Update policies and improve risk assessments for pregnant workers and nursing mothers
  • Communicate policy and procedure changes to managers and workforce
  • Identify or develop a safe, private space for nursing mothers

Context

Many facilities had steps in place to remove pregnant women or nursing mothers from high hazards. But, some were not comprehensive in assessing potential risks to mothers or in providing accommodations.

When we receive audit reports, individual nonconformances are recorded and tracked through various phases from discovery until closure. Suppliers must develop Corrective Action Plans (CAPs) for individual nonconformances. In this process, suppliers identify the root cause for the nonconformance and develop an action plan with proposed changes to policies, procedures, worker training, or communications. They also propose key performance indicators to measure the effectiveness of their actions. Plans are submitted to Cisco and approved only if they meet our requirements.

If a CAP does not meet our requirements, we coach suppliers in root cause analysis using best practice frameworks, such as the 5 Whys or Fish-Bone mapping. This work drives lasting positive change by addressing the root cause rather than implementing short-term fixes.

Supplier CAPs must adhere to Cisco deadlines informed by the RBA VAP Protocol. Suppliers must close nonconformances according to Cisco’s policies, depending on the severity of the nonconformance. We consider nonconformances closed after we review evidence confirming that workers have been remediated, communicated to and/or trained on revised policies and procedures. As needed, we use third-party auditors to conduct closure audits onsite, as informed by the RBA VAP protocol.

In fiscal 2020, our closure rate of priority and major nonconformances was 93 percent2. Many of the nonconformances that were not closed involved specific permits awaiting government approval and the related activities did not pose particular risk.

2 Excluding working hours and social insurance

Training and building the capabilities of our suppliers is necessary to make lasting improvement to working conditions. Some suppliers require more coaching and monitoring than others. This depends on the maturity of their programs and the complexity or severity of issues discovered in audits.

Cisco may coach suppliers or assign e-learning courses delivered through RBA’s e-Learning Academy. We assign courses according to the supplier’s audit nonconformances to help them gain understanding of requirements and build more effective CAPs.

In fiscal 2020, 43 unique courses were completed by staff at 11 factories. The factory managers at those sites, who had not previously accessed the e-Learning Academy, collectively completed more than 120 assigned courses. The top courses completed include:

  • Health and safety: developing health and safety management systems, fire safety, effective chemical management
  • Working hours: controlling working hours, working hours management systems
  • Responsible recruitment: working with labor brokers, hiring and working with migrant workers, students and young workers

Last year, we developed a capability building seminar series to address some of the chronic health and safety nonconformances we saw in audits. Topics included emergency response management, fire safety, occupational safety controls, and chemical safety controls. In fiscal 2020, we provided a virtual training to more than 100 learners from 45 supplier sites. The training highlighted best practices in emergency response management, including a Cisco manufacturing partner’s emergency response to COVID-19. We’ll be continuing the health and safety capability building series virtually into fiscal 2021.

We use supplier scorecards to help us measure and manage conformance to Cisco’s requirements for suppliers on environmental stewardship and human rights. Sustainability performance is incorporated into our supply chain business processes for sourcing and procurement decisions. In the sustainability section of the scorecard, we score suppliers for completing required activities including:

  • Conflict minerals reporting
  • Audits and CAP management
  • Pollution prevention activities
  • Greenhouse gas and waste reporting

They also receive points for strong sustainability performance or have points deducted for weak performance. Performance metrics include:

  • RBA Audit performance
  • Closing nonconformances to the RBA Code ontime
  • Issues identified related to the ethical treatment of vulnerable workers (e.g., foreign migrant workers and young workers)
  • Percentage of Responsible Materials Assurance Process (RMAP)-conformant smelters in their supply chain

Having sustainability metrics alongside cost, quality, and service delivery allows procurement managers to make informed decisions when awarding business to suppliers.

Multiple teams collaborate to hold suppliers accountable to Cisco’s sustainability standards. Managers and executives are routinely informed about of suppliers’ performance. Priority audit nonconformances and forced labor allegations are regularly reviewed in executive committees such as the Supply Chain Human Rights Governance Committee. If a supplier fails to meet Cisco’s policies or specifications, we escalate the issue through management, including to the senior executive of supply chain when necessary. We always work to continuously improve. If a supplier fails to make efforts to improve, we stop awarding new business, and when warranted, will discontinue the relationship.

COVID-19 interrupted our normal processes for auditing suppliers. From February through July 2020, the second half of our fiscal year, third-party audits were limited until protocols could be set up to protect the health and safety of auditors and the factory workers they visited. Auditor capacity in some regions was also affected due to travel restrictions. As a result, several suppliers with audits scheduled during fiscal 2020 postponed audits to the first half of fiscal 2021. These include logistics suppliers whom we planned to audit as part of our human rights commitments. Despite these challenges, we were able to complete 66 of our planned audits - 90 percent of our fiscal 2020 goal of 73. Though onsite audits did not occur for several months, we continued supplier engagement in a remote capacity to ensure our standards were upheld. Read more about our work to address the effects of the pandemic.

Table: Supply chain sustainability initiatives and organizations in which Cisco participates
Organization Engagement areas
OrganizationResponsible Business Alliance Engagement areasCisco is an original founder and full member of the RBA. We collaborate with peers at the RBA to propagate best practices across the industry and supply chain.
OrganizationRBA VAP Advisory Council Engagement areasCisco participates in RBA’s VAP Advisory Council which comprises of member companies who advise RBA leadership regarding the VAP program.
OrganizationCDP Engagement areasCisco participates in CDP’s disclosure system to report on our efforts and promote public reporting within the supply chain.
OrganizationResponsible Minerals Initiative (RMI) Engagement areasWe actively participate and collaborate with peer companies at RMI to address concerns and develop new solutions for responsibly sourcing minerals.
OrganizationResponsible Labor Initiative (RLI) Engagement areasWe actively participate in the RLI, a multi-stakeholder initiative focused on ensuring the rights of workers vulnerable to forced labor in global supply chains.
OrganizationInstitute of Public and Environmental Affairs (IPE) Engagement areasCisco has an ongoing partnership with IPE to prevent, mitigate, and remediate environmental risks with supplier sites in mainland China.
OrganizationEuropean Partnership for Responsible Minerals (EPRM) Engagement areasWe are a member of EPRM, a multi-stakeholder partnership aimed at increasing the availability of responsibly produced minerals through supporting mine sites, supporting mid- and downstream companies, and strengthening linkages between production and sourcing.
OrganizationClean Electronics Production Network Engagement areasWe are a full member of CEPN, a multi-stakeholder network with the goal to address workers’ exposure to toxic chemicals during electronics manufacturing. We work to develop tools for due diligence and identify best practices to be propagated in the supply chain.
OrganizationRBA Environmental Sustainability Working Group (ESWG) Engagement areasWe collaborate with peers at the RBA ESWG to develop tools and disseminate resources to build more sustainable supply chains.
OrganizationAlliance for Water Stewardship (AWS) Engagement areasCisco has adopted AWS International Water Stewardship Standard for evaluating and driving water stewardship in the supply chain.
OrganizationRBA Chemical Management Taskforce Engagement areasWe promote the adoption and dissemination of tools and resources to improve chemical management practices and protect workers from exposure to chemicals in the electronics supply chain.