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Tuesday, April 25, 2006 

Developing a supplier’s Code of Conduct: Hewlett-Packard

Hewlett-Packard, headquartered in Palo Alto, California, is a technology solutions provider to consumers, businesses, and institutions. It operates in 178 countries and employs approximately 160,000 people across the globe.

This case study describes how a technology company developed a Human Rights and Labor Policy within their Global Citizenship strategy, and is engaged in the complex and unclearly defined issues of human rights within their business. The case also describes ongoing development and challenges, and examines how the company has been implementing the United Nations Global Compact, specifically the principles that deal with human rights.

The company contractually obliges its top 40 suppliers to commit to HP's supply chain code of conduct. This includes 100 sites and accounts for 80% of HP’s spent dollars. HP is in the process of increasing the number of suppliers it requires making this commitment and strengthening the means by which it ensures compliance with the obligation.

Eventually, this code of conduct will be explicit in all new supplier contracts, so compliance will be a necessity to do business.

In developing its supply chain code of conduct, HP did its own extensive benchmarking and research, and worked with Business for Social Responsibility, a think tank and consultancy around CSR based in San Francisco, California. The Director of Supply Chain Services stated that HP scoured the landscape of supplier codes of conduct, looked at the various international standards, even looked at the UN Global Compact- but none were satisfactory or entirely relevant to HP. So it developed its own code.

The "HP Supplier Code of Conduct" professes to focus on compliance with local laws in the areas of environment, worker health and safety, and labor and employment practices, and in intended to work in conjunction with management systems to measure, improve and communicate progress in these areas. The treatment of labor issues is fairly comprehensive and, despite the use of headings that refer to compliance with local laws, contains standards, for example, in relation to non-discrimination and prison labor, which may or may not be covered by local legislation.

The focus on these issues is positive and its effectiveness will be greatly enhanced by the planned improvements in compliance monitoring. To meet HP's human rights obligations, the supplier code of conduct should be expanded to cover human rights matters beyond labor issues, matters such as:

° Performance and monitoring of security guards by suppliers;
° The impact on the local community of supplier operations;
° The penalization of suppliers for corrupt or human rights-abusive regimes.

Currently, HP monitors its supply chain using a self-assessment questionnaire completed by HP's top 40 suppliers. HP then works collaboratively with suppliers to achieve the required standards in any area that is identified as falling below HP requirements. HP's Director of Supply Chain Services reports that HP's suppliers take this process very seriously given the importance to them of their relationship and business with HP. HP is moving to expand and strengthen their supply chain monitoring.

They are extending self-assessment beyond the top 40 suppliers to the suppliers HP regards as "high risk".

At the same time it is strengthening the monitoring of the top 40 suppliers by utilizing HP's own procurement auditing capacity to conduct site assessments of supplier performance, moving beyond the self-assessment model. In time, this model will also be extended to the high-risk suppliers. Finally, HP is currently researching appropriate entities to conduct third-party assessment of supplier performance. Selective third party assessment will be the final stage in the evolution of supply chain monitoring at HP.

This case study is part of Raising the Bar: Creating Value with the United Nations Global Compact. Designed to help companies understand the Global Compact framework and its principles, Raising the Bar is the only publication that provides a catalog of available tools and implementation guidelines that companies can use to implement the Compact’s principles.

Further information

° Hewlett-Packard
° United Nations Global Compact

© 1997-2006 World Business Council for Sustainable Development (WBCSD). All rights reserved.

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