Supply chain environmental stewardship

As part of our commitment to Power an Inclusive Future for All, we work with our suppliers to support climate action and healthy ecosystems in the communities where we operate. Through various activities, we enable suppliers to use natural resources efficiently, reduce pollution, and improve climate resilience. We believe it is a human right for workers and communities to be able to live on a planet that can support their livelihoods.

Greenhouse gas (GHG) emissions

Measuring and managing environmental performance extends to Cisco's global supply chain operations. We require Tier 1 and Tier 2 suppliers to disclose corporatewide GHG emissions annually through the CDP supply chain program. Over the years, we've continued to improve our visibility to supplier performance by laying out clear and consistent expectations. These expectations are built into the standard supplier management process and build on our own experience setting and achieving absolute reduction targets for our internal operations.

Given the increasing priority for all companies to align their operations with climate science that requires limiting warming to 1.5°C above preindustrial levels, we actively engage our suppliers to set absolute GHG emissions reduction targets. Cisco believes that setting absolute reduction targets is the most impactful way for suppliers to establish clear accountability toward long-term GHG emissions reductions.

Supplier adoption of absolute GHG reduction goals

	FY19	FY20	FY21	FY22
Suppliers, by spend, with a public, absolute GHG reduction target Goal: 80 percent of Cisco component, manufacturing, and logistics suppliers by spend will have a public, absolute GHG emissions reduction target by fiscal 2025.*	FY19: 23%	FY20: 33%	FY21: 38%	FY22: 78%

Cisco has committed to reduce supply chain-related Scope 3 GHG emissions by 30 percent absolute by fiscal 2030 (fiscal 2019 base year). To support Cisco in meeting this goal, suppliers are expected to report GHG emissions and energy consumption to CDP on an annual basis. Our expectations for supplier reporting are laid out below:

• Provide a complete and accurate inventory of corporatewide Scope 1 and 2 GHG emissions
• Make response publicly available via the option provided by CDP
• Demonstrate verification (third-party review) of reported GHG emissions
• Set a public absolute GHG emissions reduction goal and publicly report annual progress against that goal
• Request that suppliers and business partners also report to CDP using the same process as above

*Preferably in line with an approved science-based methodology (applying either a 1.5°C or well below 2°C reduction scenario). Includes suppliers that set intensity targets that produce an absolute emissions reduction during the target period.

Learn more about Scope 3 emissions categories.

In fiscal 2022, Cisco contributed to several industry efforts to educate and drive alignment on supplier engagement around GHG emissions reductions. For the third year in a row, we were a signatory on a CDP-sponsored letter to suppliers outlining industry alignment and priorities for environmental reporting.

Cisco partnered with CDP to cohost two training webinars with our suppliers, one in English and the other in Mandarin. The first session covered Cisco's CDP requirements and resources for suppliers around meeting those requirements. The second, organized by CDP, provided best practices around GHG-related information sharing and offered step-by-step support on completing CDP questionnaires. These webinars stressed the importance of establishing science-based GHG reduction targets as part of a comprehensive environmental strategy.

In addition, Cisco collaborated with industry peers to design an energy survey to collect facility-level energy data from suppliers. As CDP is a company-level report, this questionnaire gives insight at the site level. The energy survey is now available for RBA members to leverage with their suppliers to gather progress on energy efficiency initiatives and renewable energy sourcing. The survey will provide a standardized format for suppliers to share information on energy metrics and programs at individual sites, supporting further engagement and collaboration across the industry.

Cisco uses a supplier management platform that allows tracking of suppliers' emissions data, targets, and performance against science-based reduction pathways. The platform includes data for our component, manufacturing, and warehouse suppliers. In fiscal 2022, we onboarded 16 strategic suppliers into the tool to use it as an engagement platform to track GHG reduction plans and facilitate strategic discussions with our highest-impact suppliers. In the coming year, we plan to onboard additional suppliers into the platform.

Reducing material waste

Our focus on promoting a circular economy has driven efforts to better understand how materials are consumed upstream in our supply chain. Cisco has committed that 70 percent of Cisco component and manufacturing suppliers by spend will achieve a zero-waste diversion rate at one or more sites by fiscal 2025. To support Cisco in meeting this goal, manufacturing suppliers are expected to monitor and collect waste diversion data. These requirements include:

• Reporting facility-level data to Cisco as requested
• Striving to achieve a zero-waste diversion rate across each site

In fiscal 2022, we continued our partnership with TRUE Zero Waste, a site-level certification program provided by Green Business Certification Inc. This partnership allows us to support and verify completion of our manufacturing partners' efforts to achieve a zero-waste diversion rate and maximize resource efficiency at manufacturing sites. We have also been supporting manufacturing partners who utilize UL and ISO Certification programs in order to meet zero-waste goals. This includes Cisco's acceptance of UL and ISO certification toward waste targets. Further support included Cisco's helping suppliers recertify their sites and analyze data on waste diversion. Cisco is on track to meet our fiscal 2025 solid waste goals at supplier sites.

Performance toward supplier zero-waste goal

	FY20	FY21	FY22
Performance toward supplier zero-waste goalSuppliers achieving zero-waste diversion at one or more sites Goal: 70 percent of Cisco component and manufacturing suppliers by spend achieve a zero-waste diversion rate at one or more sites by FY25.	FY20: 23%	FY21: 23%*	FY22: 51%

*FY21 data has been updated based on data availability and to maintain methodological consistency with FY20 and FY22.

Learn more about how Cisco manages operational waste.

Transportation

Cisco is focused on engaging our component, manufacturing, and logistics suppliers on setting public, absolute GHG emissions reductions targets. Our logistics partners' reductions will enable Cisco to meet our own fiscal 2025 and 2030 goals.

Over 90 percent of our transportation-related emissions come from air shipments, so this is a key area of focus. Cisco has a Mode Shift initiative that optimizes global factory-to-factory shipments, shifting transportation modes from air to ocean whenever feasible, while still meeting customer expectations. This leads to a lower transportation footprint since the GHG emissions from transporting products by ocean are significantly lower than when transporting products by air.

In fiscal 2022, Cisco took action to improve how we measure and manage our logistics emissions footprint. We interviewed 11 of our logistics partners to learn more about their GHG reduction strategies, explore opportunities for collaboration, and discuss ways to increase the granularity and specificity of reported emissions data.

In addition to our GHG reduction efforts, we are also working to minimize material waste associated with logistics. For example, at our fulfillment centers in North America, we are utilizing reusable pallets, which are more durable and have a longer lifespan than the wooden pallets they replace. Since fiscal 2019, we have also leveraged reusable pallet wraps as a sustainable alternative to the traditional plastic stretch film. This effort allowed us to avoid the use of 202,953 pounds of plastic wrap from fiscal 2019 to fiscal 2022, which is equivalent to over 16 million high-density plastic shopping bags.

Improving water security

Cisco takes an active role in managing our water use as part of our overall goal of ensuring an environmentally responsible supply chain. Given the unpredictable nature of climate change, it is important for us to be aware of our water consumption and overall management.

For Cisco, water is also a human rights issue. Suppliers operating in areas with droughts have to balance their water use with the needs of surrounding residents. That is why Cisco asks all our top suppliers to report water consumption amounts and set reduction targets. Cisco works with suppliers categorized as high-water-risk to improve their water stewardship. As part of our due diligence process, Cisco needs to understand all risks and opportunities that could affect a supplier site. Also, Cisco has a responsibility to use our influence to encourage responsible use and management of suppliers' water sources.

Overall, Cisco's Tier 1 manufacturing suppliers consume small amounts of water, primarily for employee drinking purposes or other general office uses. Tier 2 component suppliers use larger amounts of water for production of semiconductors or printed circuit boards.

Water reporting and goal-setting

Cisco continues to promote reporting and transparency to better understand our global supply chain water footprint. For the last two years, we asked suppliers to complete the CDP water security survey. We saw greater participation in fiscal 2022 than fiscal 2021. One hundred percent of our manufacturing partners and 94 percent of our top 80 components suppliers by spend completed the 2021 CDP water survey in fiscal 2022.

Additionally, during fiscal 2022 we saw the following CDP results:

• A CDP water survey security response of 80 percent, an increase of 11 percent compared to the previous year's response rate for Cisco
• 68 percent of suppliers reported having water-related policies, compared to 59 percent in fiscal 2021
• 86 percent of suppliers reported active water targets or goals, compared to 76 percent in fiscal 2021

We continue to work with CDP to identify high-water-consumption suppliers with little to no disclosure on water use. In fiscal 2022, Cisco conducted several meetings to discuss data disclosure around water use, including with two suppliers near Lake Taihu and the Pearl River basins. Using the fiscal 2021 CDP reporting results as a base year, Cisco set about and achieved improvements to the suppliers' reporting mechanisms. Beyond providing us with valuable information, we expect that this reporting will improve transparency and also help suppliers gain understanding of their own water risks and opportunities.

Building our suppliers' capabilities to conserve water resources

During fiscal 2022, we continued to advance water stewardship within key river basins where our supply chain operates. Cisco assessed global supplier sites' water risk through the WRI Aqueduct Risk Mapping tool using three main water risk factors, including quantity risk, quality risk, and regulatory and reputational risk. The assessment was based on Cisco supplier sites' location coordinates. Combined with specific site spend data and water consumption estimates, Cisco identified the top three high-water-risk basins: Lake Taihu, the Pearl River in Mainland China, and the Taan/Tachia/Tsengwen RiverWest of Taiwan. Cisco selected eight supplier sites from these three basins to engage in a water stewardship program in fiscal 2022.

Cisco's water stewardship program is based on an ICT water checklist Cisco developed from International Water Standard through working with Water Stewardship Asia Pacific and peer companies in fiscal 2021. The AWS Standard is publicly recognized as the most comprehensive water stewardship standard in the ICT industry. However, suppliers needed help to get started with applying the AWS Standard. Therefore, Cisco and several peer companies worked with Water Stewardship Asia Pacific to develop a checklist to help suppliers begin their AWS implementation journeys. The checklist was divided into 45 indicators with three levels to evaluate supplier performance from five dimensions, which include: water management systems, water measurement and performance, stakeholder engagement, climate change adaptation and mitigation, and communication and disclosure.

The selected suppliers complete self-assessments for each indicator with supporting evidence, then a reviewer assesses and assigns a level for each indicator that reflects their current progress. For example, a Level 1 designation meets basic requirements, a Level 2 means the supplier meets advanced requirements, and a Level 3 meets sector best practice. Once suppliers meet Level 3, Cisco believes they are ready to proceed with seeking AWS certification, demonstrating progress along their water stewardship journey.

In fiscal 2022, eight supplier sites completed the ICT water checklist through the online assessment tool developed by the China-based AWS team. Through several rounds of online review and discussion with environmental colleagues in targeted supplier sites, Cisco obtained initial assessment results and progress reports on each indicator for the eight supplier sites. The results were as follows:

• 29 percent of the indicators were below Level 1 (basic requirements)
• 27 percent of the indicators met Level 1 but did not reach Level 2 (advanced requirements)

The top five areas Cisco identified were:

• Water resource and water conservation
• Supply chain engagement
• Water pollution prevention and wastewater treatment
• Safe drinking water, sanitation, and hygiene (WASH)
• Stakeholder analysis

Our target is to see meaningful improvement across indicators through 2022 via the ICT water stewardship action plan project. By the end of fiscal 2022, six supplier sites had submitted their action plans, with deadlines, for 123 indicators.

Onsite water capacity-building is targeted at Cisco suppliers that consume large amounts of water despite being in water-stressed regions. Cisco launched two onsite water capability-building activities at two supplier sites located in Taihu Basin in fiscal 2021. Due to COVID-19, we were unable to complete these activities during fiscal 2022. Onsite water stewardship activities remain on track for fiscal 2023 despite the prospect of disruptions related to the pandemic.

The majority of Cisco suppliers need more support around engaging stakeholders, such as surrounding communities, on water stewardship. Cisco worked with GAIASCAPE Studio under Friends of Nature (FON) to launch online eco-design trainings for managers from 14 supplier sites, including the eight supplier sites in scope for the ICT water checklist. These trainings provided knowledge and tools to improve onsite water stewardship by:

• Equipping key personnel with water-friendly design concepts and skills
• Activating pilot architectural advances to decrease overall water use
• Initiating environmentally friendly landscape renovation projects within or around supplier sites
• Highlighting the implementation of nature-based solutions to address water/wastewater issues

In sum, 20 trainees from the 14 supplier sites participated in four online courses during the summer of 2022. The trainees were divided into several groups and collaborated within their cohort to apply eco-design knowledge and skill. The groups designed solutions around rainwater recycling and low-carbon greenbelts, which included CO2-absorbing plants and solar panel lighting systems.

Cisco will conduct two onsite eco-design workshops as follow-ups to the online trainings in the Lower Yangtze and Pearl River Delta. The onsite workshops will bring together community residents and NGOs to foster supplier engagement efforts with stakeholders outside their immediate site footprints. The joint event will also outline and promote stakeholder engagement opportunities.

Overall, Cisco will continue assessing suppliers' water stewardship efforts, with the goals of better managing water as a resource and nurturing greater stakeholder engagement and collaboration.

Pollution prevention

Environmental pollution and degradation affect people and their ecosystems. In line with our goal to use our supply chain to catalyze positive outcomes, Cisco not only tracks and addresses pollution issues in our supply chain but also responds to rightsholders' calls for mitigation and remediation.

This commitment to environmental sustainability and human rights extends to all tiers of our supply chain, including our sub-tier suppliers. Cisco's commitment also spans the globe, where we partner across industry and with key nonprofits.

For example, Cisco has an ongoing partnership with the Institute of Public and Environmental Affairs (IPE) and conducts a series of activities to prevent and mitigate environmental risks from supplier sites in mainland China. IPE has recognized Cisco's work on its Green Supply Chain by IPE and Cisco ranked first in the IT industry for the Corporate Information Transparency Index (CITI) at the end of fiscal 2022.

IPE Green Supply Chain Corporate Information Transparency Index (CITI) ranking, IT sector

2016	2017	2018	2019	2020	2021	2022
2016:11	2017:12	2018:7	2019:2	2020:2	2021:1	2022:1

Cisco's body of work leverages IPE's Blue Map database, which identifies existing and historical environmental violations. We work closely with suppliers to ensure they address and mitigate environmental issues and comply with local environmental laws. In addition, Cisco requires suppliers to publish their corrective action plans on the IPE website to improve environmental transparency and make clear the timeline by which these sites must fix their violations. In fiscal 2022, 17 supplier sites in mainland China remediated environmental violations and were delisted from the IPE Blue Map.

Cisco also works with its manufacturing partners to cascade corporate expectations to their suppliers as part of a program called the Green Supply Chain initiative. As with human rights issues, Cisco aims to build supplier capacity to foster better environmental performance and transparency. Since fiscal 2020, 100 percent of our manufacturing partners in mainland China have had programs to manage their direct materials suppliers' environmental performance using IPE Blue Map.

Transparency and capacity building

Environmental reporting and transparency are critical to understanding our supply chain's impacts on people and communities. Cisco's suppliers are required to publicly disclose how their operations affect their surrounding environments, including the use of chemicals and release of pollutants that can be treated or transferred for disposal. Collecting this data helps Cisco identify environmental conservation initiatives and set supply chain goals around pollution reduction.

In fiscal 2022, we extended reporting requirements for all suppliers in mainland China, encouraging them to disclose energy conservation, water, air, and waste information through the Pollution Release and Transfer Report (PRTR) reporting system on the IPE website. In fiscal 2022, 175 supplier sites completed PRTR reporting compared to 118 in fiscal 2021. A portion of the overall increase in participation came from manufacturing partners asking their direct suppliers to participate in the disclosure effort.

In fiscal 2022, Cisco continued to organize environmental training webinars for supplier sites in mainland China. Cisco again emphasized our environmental requirements and the published environmental targets. One strategic ODM supplier shared best practices on how they use artificial intelligence and Internet of Things technology for energy conservation to reduce overall GHG emissions.

In fiscal 2022, Cisco also invited suppliers and their sub-tier suppliers to participate in a series of environmental trainings organized by IPE that covered a wide range of environmental topics, including:

Pollution prevention and control	A training that discussed new environmental regulations and helped suppliers make sense of new policies and regulations around volatile organic compounds
Internal and external environmental risk management	This training covered how to use the IPE's Blue Map database and EcoChain system to manage supply chain environmental risks, as well as strategies for suppliers to measure and disclose GHG emissions data
GHG emissions and data reporting	This training offered an overview of the IPE's GHG Accounting Platform 2.0 and offered advice on setting GHG reduction targets and managing carbon assets

Cisco is seeing more of its Tier 2 suppliers manage their supply chain's environmental impacts through the IPE's Blue Map Database. Cisco is also having success encouraging sub-tier suppliers to report on their water and GHG impacts.