2011 Changes. Jocelyn Cascio, Keith Dompier, Steve Viera. 1 1 Copyright Intel Corporation, All rights reserved

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1 Supplier Report Card 2011 Changes Supplier Version January 2011 Jocelyn Cascio, Keith Dompier, Steve Viera 1 1 Copyright Intel Corporation, All rights reserved

2 Objective/Target Audience Objective: Provide information to our suppliers on the changes to Intel s Supplier Report Card (SRC) effective January 2011 Target Audience: Primary Supplier Account Managers for Intel at Suppliers with which Intel uses the Intel Supplier Report Card If Intel does not use this with your company, you do not need to attend this Audiocast 2 Copyright Intel Corporation, All rights reserved

3 Why This is Important 3 Source: EICC Supply Chain Mgr Training Copyright Intel Corporation, All rights reserved

4 Why Intel Includes Sustainability in the SRC We are working as part of the electronics industry to lead positive changes in Sustainability, also known as Environmental, Social and Governance (ESG) and Corporate Social Responsibility (CSR) and We are asked by our customers, investors and Non- Governmental Organizations (NGOs) to provide data on our supply base We need to better understand our suppliers ESG/CSR efforts and current baseline Corporate responsibility is about doing the right things right. Throughout Intel s history, we have focused on building an ethical culture, reducing our environmental impact, investing in our employees and engaging with our communities. Our approach has created value not only for our stakeholders and society, but also for Intel. We have reduced d costs through h energy conservation investments, minimized risk by proactively working with our communities and supply chain, and enhanced our reputation as a leading corporate citizen by building trusted relationships with the world. - Paul Otellini, President & CEO 4 Copyright Intel Corporation, All rights reserved

5 Background and Scope SRC is one of Intel s supplier management tools that helps provide quantifiable feedback to our suppliers Sustainability category updated in all Intel 2011 SRCs Maintaining the overall scope and intention while setting the stage for continuous improvement There are no additions to the sub-categories or changes to the scoring weight for 2011 There are no changes to Financial Sustainability section There are changes in the Code of Conduct Risk Assessment and Environmental Sustainability sections 5 Copyright Intel Corporation, All rights reserved

6 Refresher on Overall SRC UNCHANGED from 2010 Five categories for the SRC will consist of the following combinations: Required 1. Availability 2. Cost 3. Quality 4. Sustainability Select one: 5. Technology or -Customer Satisfaction* Weighting for the categories Sustainability category is fixed at 10 points Max weight for a category is 35 points (min weight is still 10 pts) Point ranges per category: 1. Availability (10-35 pts) 2. Cost (10 35 pts) 3. Quality (10 35 pts) 4. Sustainability (10 pts) 5. Technology or -Customer Satisfaction (10 35 pts) Total SRC = 100 pts * If needed, customer satisfaction can be embedded into one of the other 4 required categories 6 Copyright Intel Corporation, All rights reserved

7 Overview of Changes in Sustainability Effective Jan 2011 Code of Conduct Risk Assessment section Minimal changes (described on slides 10-13) Environmental Sustainability Section New requirement to Provide baseline usage and historical trend data of carbon, water and waste including any applicable goals supplier has established (details on slides 15-18) * If needed, customer satisfaction can be embedded into one of the other 4 required categories 7 Copyright Intel Corporation, All rights reserved

8 Overview of Sustainability Category Available points for the sustainability category is fixed at 10 points again for 2011 Within the sustainability category, the following areas will be the focus in 2011: Area Pts Metric Information Source Code of Conduct 2 Risk assessment results Intel Commodity Team and Risk Analysis (EICC tools) Supplier (as necessary) Environmental Sustainability Financial Sustainability 3 Publicly published program in place with metrics / goals and performance over time NEW: Provide baseline usage and historical trend data of carbon, water and waste including any applicable goals supplier has established 5 Altman Z or a derivation Operating Cash Flow Supplier provides Intel Commodity Team a link to publicly published information for review Supplier provides Intel Commodity Team additional relevant data, if needed Intel Finance group and Intel Commodity Team/Supplier, if needed EICC = Electronic Industry Citizenship Coalition 8 Copyright Intel Corporation, All rights reserved

9 Code of Conduct Risk Analysis Expectations, Metrics and Scoring Criteria Details 9 9 Copyright Intel Corporation, All rights reserved

10 0 Overall Flow for Risk Assessment RA2 completed in rolling 12 month window? Y Done N 1 2 Risk Assessment #1 (slide 11) Decision Criteria Y N Risk Assessment #2 (slide 12) Done 3 Y Decision Criteria Risk Assessment #3 (slide 13) N Done N Decision Cit Criteriai Y Gap Closure Plan Additional details will be shared by Intel Commodity Managers in the EICC Training for Suppliers starting in February 10 Copyright Intel Corporation, All rights reserved

11 Code of Conduct Risk Analysis (max 2 pts) RA1 (Basic Risk) Risk Assessment Expectations 0. ZERO Significant incident Criteria and Scoring 0 point 1 point 2 points Significant incident No Significant incident 1. RA1 completed for all applicable supplier facilities by Intel team Intel does not complete the RA1 for all facilities Intel does business with. A. Suppliers within SCQI / PQS / Cert Award Program B. Suppliers not within SCQI / PQS / Cert Award Program Score of HIGH or MEDIUM Risk and supplier does not complete SAQ / RA2 Score of HIGH Risk and supplier does not complete SAQ / RA2 Score of LOW Risk Score of LOW or Medium Risk If supplier scores HIGH risk (non-award Program supplier) or MEDIUM / HIGH risk (Award Program supplier) and does complete a Self-Assessment Questionnaire / RA2, move onto RA2 (Slide 12) for scoring RA2 = Risk Assessment 2 11 Copyright Intel Corporation, All rights reserved

12 Code of Conduct Risk Analysis (max 2 pts) SAQ / RA2 Risk Assessment Expectations 2. SAQ / RA2 completed by supplier and validated by Intel team A. Suppliers within SCQI / PQS / Cert Award Program with no sub-category scores below 75% B. Suppliers not within SCQI / PQS / Cert Award Program, with no sub-category scores below 65% Criteria and Scoring 0 point 1 point 2 points High risk areas per Acceptable GCP in Overall RA2 show low or EICC expectations are place for any SAQ / medium risk, no not worked via an RA2 elements below substantiated excursion acceptable Gap Closure the EICC and all elements are at Plan (GCP) expectations their expected levels If RA2 is a high risk or there are significant element scores below EICC expectations (5 or more factory areas have high risk score), move to On-Site Audit / RA3 (Slide 13) for scoring 12 GCP = gap closure plan SAQ = self assessment questionnaire RA2 = Risk Assessment 2 Copyright Intel Corporation, All rights reserved

13 Code of Conduct Risk Analysis (max 2 pts) On-Site Audit / RA3 Risk Assessment Expectations 3. On-site audit / RA3 completed Criteria and Scoring 0 point 1 point 2 points RA3 comes back with major compliance issues and no acceptable GCP Acceptable GCP in place that responds to audit defined issues. Acceptable GCP in place with all major and minor issues closed from on-site audit / RA3 13 GCP = gap closure plan RA3 = Risk Assessment 3 Copyright Intel Corporation, All rights reserved

14 Environmental Sustainability Expectations, Metrics and Scoring Criteria Details Copyright Intel Corporation, All rights reserved

15 2011 SRC Environmental Sustainability (changes in Green) Env. Sustainability Expectations ti Supplier Publicly published: 1. Green program in place 2. Specific / actionable program objectives and metrics ti for each of fthe objectives of the stated green program OR how the metrics align / reflect the objectives of the program 3. Provide baseline usage and historical trend data of carbon, water and waste including any applicable goals supplier has established (does not have to be public) 4. Goals (multi-year) for each metric published 5. Performance Annual or Quarterly progress toward supplier stated goals (not necessarily public) Criteria and Scoring 0 point 1 point 2 points 3 points If either #1 or #2 are not completed First 2 areas completed First 2 areas completed First 3 areas completed Intel is NOT setting improvement expectations for suppliers in these focus areas in 2011 we are collecting data to determine how to drive improvements in the future Overall Negative performance on supplier stated goals AND Public, multi-year goals established for each publicly published metric AND Overall flat-topositive performance trends towards supplier stated goals AND Public, multi-year goals established for each publicly published metric AND Overall flat-topositive performance trends towards supplier stated goals 15 Copyright Intel Corporation, All rights reserved

16 Environmental Sustainability SRC FAQs Q.What is a Green program within the context of the SRC expectations? A. A Green or Environmental Sustainability program would be any plan of action or grouping that positively addresses the topic of Green or environmental sustainability. It is a voluntary effort made by the company above that of any government mandated requirements related to environmental sustainability. It is specific to the company s business, business practices and operations. It does not need to be elaborate but should explain or capture the scope of activities being addressed. Green programs are expected to be cut across product, operations, business, etc. For example, efforts in compliance with RoHS, REACH, WEEE, TSCA or other regulations are required and not part of the voluntary effort unless the supplier can demonstrate above and beyond requirements goals / performance. Q:What would be considered to be objectives within the Green program? A: Within the stated program, the objectives are those specific activities or actions that are intended to attain or accomplish something of value within the program as set out. Taken together, the objectives of the program are expected to be capable (necessary and sufficient) of accomplishing the scope of the program. The objectives specifically are the efforts aimed at improving the company s overall environmental footprint or performance. Objectives should be strategic and not tactical plans. 16 Copyright Intel Corporation, All rights reserved

17 Environmental Sustainability SRC FAQs Q: What are the goals referred to relative to the Green Program? A: Goals are the result of the specified actions or efforts detailed in the objectives. Here, goals are expected to be applied against the key metrics that have been established to better understand the performance expectations that the organization has set for itself. The Goals are the markers or milestones of performance that the company has set. Expectation for goals is that they are set for each key metric, that they are forward looking with stated deliverables, and that they are multi-year (e.g., a goal set for 2015 in 2010 with intermediate goals to assure performance trending). Q: If supplier data on water, waste, and carbon (new expectation #3) is not in the publically ll published Green Program metrics and these have negative trends, will this impact the overall trend required in expectation #5? A: Negative trend data on water, waste & carbon are not counted nor do they have an impact on expectation#5 unless they are in the existing, publically published metrics that the supplier is already using to determine performance as stated in expectation#2. 17 Copyright Intel Corporation, All rights reserved

18 Environmental Sustainability SRC FAQs Q: How do we determine whether metrics have an overall negative or positive trend? A: This requirement is meant to realize that not all metrics will be positive at all times. In any yprogram there are going gto be stages where a trend may turn negative for a time even though the supplier is working hard on the program. If this occurs in one or two places, that should not impact the supplier s performance score unless those are the only metrics that were used. However, the question of performance to goals is raised when more than ½ of the performance trends are in a negative direction. While this will be somewhat subjective, an overall negative trend is one where most of the metrics are headed in a negative direction and an overall positive trend is when most of the metrics indicate flat to positive performance. The 50% rule is a good rule of thumb. 18 Copyright Intel Corporation, All rights reserved

19 Environmental Sustainability SRC FAQs Q:Are there particular standards or measurement scales required for the data provided (Expectations #2 & #3)? A:There are no consistent industry standards for these measurements so Intel does not require this data in particular format. However, the current recommendation is: For water use, measurements may include the following: Total water use Water saved Water recycled Source availability Water reclaimed For carbon, some options are to: Measure in MMtCO2e,which is Metric Tonne Carbon Dioxide Equivalent (equates to pounds of CO2). This is a standard measure of amount of CO2 emissions reduced or sequestered. (Note: Carbon is not the same as Carbon Dioxide. Sequestering 3.67 tons of CO2 is equivalent to sequester one ton of carbon.) Measure the following using the Carbon Disclosure Project, which is the EICC standard: Total energy usage Energy conserved Energy saved Measure in KwH or other energy usage standard For waste, there is no recommendation. Any waste measurement is acceptable. Measurements will vary depending on the type of supplier. Utility bill data is the simplest way to gather and provide this information if you are not tracking these metrics already. 19 Copyright Intel Corporation, All rights reserved

20 Next Steps You can get a copy of this presentation material from your Intel Commodity Manager This Audiocast will be available via Archive, linked from Supplier.Intel.com, from approximately January 17 February 28 Additional details about Code of Conduct Risk Assessment will be shared by Intel Commodity Managers in the EICC Training for Suppliers starting in February Overall, longer term Intel Supply Chain ESG information will be shared in April 20 Copyright Intel Corporation, All rights reserved

21 Reference Materials Copyright Intel Corporation, All rights reserved

22 Risk Definitions Significant incident: Documented case(s) of Intel and/or EICC Code of Conduct violations (e.g., suicides, use of conflict metals, environmental law violations, bribery) Substantiated: Communicated with supplier and supplier confirms excursion has occurred Acceptable Gap Closure Plan [GCP]: requirement of a GCP has been communicated between Intel and supplier and the areas to be addressed are understood. Issue(s) are being addressed with a root cause solution and the timeline for closure is agreed to by Intel & Supplier. EICC WG member to assist. Sub-category risks: Risk scores that are shown for Corporate and Site facility sub-scores (8 for Corporate and 27 for facility) and overall in the areas of Environment, Health & Safety, Ethics, and Labor (top 12 summary scores) GCP = gap closure plan 22 Copyright Intel Corporation, All rights reserved

23 Glossary Acronyms Term EICC Electronic Industry Citizenship Coalition GCP Gap Closure Plan RA2 Risk Assessment 2 RA3 Risk Assessment 3 SAQ Self Assessment Questionnaire (part of RA2 process) SCQI Supplier Continuous Quality Improvement SRC Supplier Report Card WG Working Group 23 Copyright Intel Corporation, All rights reserved

24 Additional Information Intel s Ethics Homepage: Intel Corporate Social Responsibility: g_about+intel_gcr EICC website: info/ 24 Copyright Intel Corporation, All rights reserved

25 Copyright 2011, Intel Corporation. All rights reserved Intel, Intel logo Intel Inside logo, and Intel Leap Ahead. logo are trademarks or registered trademarks of Intel Corporation or its subsidiaries in the United States and other countries All products, platforms, dates, and figures specified are preliminary based on current expectations, and are subject to change without notice 25 Copyright Intel Corporation, All rights reserved