Siemens Fulfilling our responsibility
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1 Siemens Fulfilling our responsibility Suppliers chpter Excerpt from the Siemens Sustinbility Report
2 Suppliers To Siemens, sustinbility in the supply chin mens using excellent nd innovtive suppliers to generte long-term dded vlue nd cting with cler economicl, ecologicl nd socil responsibility. We cn chieve this only by working even more closely with our suppliers nd integrting our sustinbility principles into ll relevnt business processes. Supply Chin Mngement t Siemens In the course of fiscl 2009, we sourced goods nd services worth bout 37 billion in 177 countries. This mkes Siemens one of the lrgest purchsers in the world. In period of worldwide economic nd finncil crisis, we fce the chllenge of securing stble supplier bse while t the sme time tpping dditionl procurement potentil. To chieve this, we will more intensively pool our purchsing volumes, reduce the number of suppliers, nd work more intensively with suppliers in emerging countries s prt of our Globl Vlue Sourcing Progrm. We re wre tht we hve considerble influence on the societies nd environment in our procurement mrkets. To mintin sustinble supplier bse in the future, we re continuously improving the relevnt procurement methods, processes nd systems compny-wide. In this wy, we ctively minimize risks in prticulr complince nd insolvency risks while shring our knowhow with suppliers to implement sustinble business prctices in our supply chin. Number of Corporte Responsibility Self Assessments by Region in 2009 Outcomes of Corporte Responsibility Self Assessments by ctegory in 2009 Europe, C.I.S. 1, Afric, Middle Est 95 (36.2%) Ctegory green (no devitions) 100 Ctegory yellow (slight devitions) 1 49 b including Germny 28 b Ctegory red (suspicion of mjor devitions) Eliminted for business 0 c Americs 57 (21.8%) In process 2 96 d Asi, Austrli 110 (42.0%) 1 Commonwelth of Independent Sttes. d c 1 Clrifiction of sitution by responsible buyer nd greement on corrective mesures within defined timefrme (grce period), or sustinbility udit by independent uditor. 2 Corporte Responsibility Self Assessments initited towrd the end of fiscl 2009 nd therefore not completed by the end of the reporting period Introduction 7 Profile 19 Sustinbility 39 A globl tour 56 The Siemens Environmentl Portfolio 64 Innovtion 68 Customers nd portfolio 72 Complince 76 Environmentl protection 80 Product responsibility
3 Find out more bout the Code of Conduct for Siemens Suppliers t: code-of-conduct Sustinbility s mndtory requirement for supplier selection Siemens requires ll its suppliers to comply with the principles of the Code of Conduct for Siemens Suppliers nd to support its implementtion in their own supply chins s well. As of this reporting yer, our mndtory compny-wide reporting nd monitoring processes ensure tht ll our suppliers fulfill this obligtion. Our supplier-specific qulifiction process is fundmentl prt of supplier selection. We use it to ensure tht supplier meets certin minimum environmentl nd socil performnce stndrds in ddition to economic criteri. We continued to stndrdize nd implement the process throughout the compny during the fiscl yer. Supplier evlution We regulrly review nd evlute the performnce of our suppliers to ensure effective implementtion of our sustinbility requirements in the course of our business reltionship. During risk evlution, suppliers re ssessed ccording to uniform compny-wide set of sustinbility criteri. The criteri cover legl complince, socil nd ethicl responsibility, environment, occuptionl helth nd sfety, s well s sustinbility in the supplier s own supply chin. We pln to present sustinbility wrd to our suppliers in 2010 for the first time, bsed on this evlution. Verifying supplier complince with our sustinbility requirements Prllel to the evlution, we use four methods (see lso the grph on pge 121) to determine whether the requirements of the Code of Conduct for Siemens Suppliers re being implemented in the supply chin nd observed over the long term. These detection modules follow risk-bsed pproch nd include the following: Corporte Responsibility Self Assessments, Supplier Qulity Audits with Corporte Responsibility Module, Incident Driven Inspections, Externl Sustinbility Audits. Number of Supplier Qulity Audits with Corporte Responsibility Module by Region in 2009 Agreed-upon improvement mesures within Supplier Qulity Audits with Corporte Responsibility Module by ctegory in 2009 Europe, C.I.S. 1, Afric, Middle Est 98 (28.6%) Legl complince nd corruption/bribery 349 (28.8%) b including Germny 22 b b Humn rights 111 (9.1%) c Child lbor 3 (0.2%) f c Americs 35 (10.2%) 343 c d Occuptionl helth nd sfety 286 (23.6%) 1,214 b d Asi, Austrli 210 (61.2%) d e Environmentl protection 293 (24.1%) f Supply chin 172 (14.2%) e c d 1 Commonwelth of Independent Sttes. 63 Mngement 103 Fcts nd figures 128 Independent Assurnce Report 131 Indices 144 Disclimer Occuptionl helth nd sfety mngement 88 Employees 94 Suppliers 98 Corporte citizenship
4 After identifying potentil for improvement, we greed with suppliers on pproprite binding mesures. These primrily involve structurl improvements in mngement systems, prticulrly in the res of legl complince nd corruption / bribery, s well s occuptionl helth nd sfety nd environmentl protection. We did not hve to terminte ny supplier reltionships bsed on the results of the Corporte Responsibility detection modules during the reporting yer. We lso begn to hve independent uditors conduct Externl Sustinbility Audits during fiscl Following the worldwide pilot phse, these udits will concentrte on suppliers from non-oecd countries. This will ensure more focused nd independent udits nd help spred our sustinbility requirements within our supply chin. Dilogue nd shring our expertise We mintin n ongoing dilogue with our suppliers nd lso hold lively exchnges with vrious externl stkeholders. For exmple, the independent uditors piloting our externl sustinbility udits encourged us to mke further improvements to our processes, which we re now implementing. We re lso ctively contributing our expertise in the re of supply chin sustinbility to the work of leding Germn industril ssocitions. We consider it prticulrly importnt to enhnce the skills of our suppliers over the long term. Tht s why we re lso conducting Energy Helth Checks in our supply chin bsed on the model used in our own Energy Efficiency Progrm (EEP 4 Suppliers) (see Environmentl protection on pge 79). This helps us work with our suppliers to identify ny potentil for reducing the consumption of energy nd resources (see pge on the right). Lesson lerned Sustinbility in our supply chin cn be further developed nd implemented throughout Siemens only with even more intensive cross-functionl coopertion within the compny. To this end, we re working closely with other compny functions including Qulity Mngement, Environmentl Protection, Occuptionl Sfety, Legl nd Complince, nd Humn Resources to specify the requirements for Supply Chin Mngement nd our suppliers nd then implementing those requirements cross functions. Supplier gols 1 Trget Trget dte Externl uditors conduct 200 sustinbility udits t suppliers in non-oecd countries. 9/2010 Revise the contents of our detection modules nd udit protocols nd specify more detiled requirements for using them in guidelines for the entire compny. Bsed on findings from our four detection modules, ddress pproprite res for potentil improvement by our suppliers nd ensure ongoing implementtion of improvements by enhncing supplier skills. Develop online trining for our suppliers to support our sustinbility requirements. We will offer this trining to ll suppliers. Integrte 50 suppliers with energy-intensive production processes in the Energy Efficiency Progrm by use of tool for supplier self-ssessment. 9/2010 9/ /2010 9/ See pges for progress mde in implementing current objectives Introduction 7 Profile 19 Sustinbility 39 A globl tour 56 The Siemens Environmentl Portfolio 64 Innovtion 68 Customers nd portfolio 72 Complince 76 Environmentl protection 80 Product responsibility
5 Projekt // EEP 4 Suppliers IMPROvING THE ENERGY EFFICIENCY OF OUR SUPPLIERS Consistent conservtion nd tcticl use of resources is vitl for reducing emissions nd cutting costs. This pplies to the processes of our supplier prtners s well s to our own production processes. SCHMOLZ + BICKENBACH GUSS GmbH, one of our suppliers, provides Siemens with cst steel prts, including for gs nd stem turbines, nd ws one of the first compnies to prticipte in our Energy Efficiency Progrm (EEP 4 Suppliers), originlly developed for our own production processes (see pge 79). Our experts conducted this progrm t our supplier s site. Evlution ccording to ecologicl spects It is generlly possible to reduce the energy consumption nd costs of energy-intensive production processes such s used by SCHMOLZ + BICKENBACH in Krefeld, Germny. The Group s mngement grees. We re very receptive to coopertion with Siemens in this re. Such test is quite informtive for them nd for us, nd it is lso vluble for the future. We lso believe their pproch of including ecologicl spects in their supplier ssessment mkes gret del of sense, confirms CEO Mtthis Pmpus-Meder. He is even considering getting his own suppliers involved in this effort. Birgit Heftrich, responsible for the progrm t Siemens, explins the bckground of EEP 4 Suppliers: The supply chins of compny tht opertes worldwide re highly interlinked interntionlly. Getting these chins to use resources more economiclly nd tcticlly is key mtter tht cn t be limited to our own production processes but must include our prtners s well. The concept of EEP 4 Suppliers ws introduced t the first Siemens Supplier Forum, jointly held with selected strtegic suppliers, in September Prticipnts unnimously welcomed its prgmtic pproch. We conducted Energy Helth Checks of the production fcilities of nine suppliers in SCHMOLZ + BICKENBACH GUSS GmbH in Krefeld, Germny, is one of the first of Siemens suppliers to prticipte in the EEP 4 Suppliers energy efficiency inititive. Improvements in dilogue To enble us to conduct future Energy Helth Checks on lrge scle, we will initilly focus on suppliers with energy-intensive production processes nd relevnt purchsing volume, since the gretest impct on the environment cn be chieved here. We will hold dilogue with representtive suppliers to develop n pproch tht is suitble for integrting the entire relevnt supplier bse in the EEP 4 Suppliers progrm. Possibilities rnge from suppliers implementing their own energy-efficiency progrms or ssigning Siemens dvisors, to conducting their own self-ssessments; n initil drft of tool for self-ssessment is lredy vilble. Our objective is for some 50 suppliers with differing degrees of energy-intensive production processes to pilot this progrm in fiscl Further informtion on the Enery Efficiency Progrm for Siemens suppliers t: 63 Mngement 103 Fcts nd figures 84 Occuptionl helth nd sfety mngement 128 Independent Assurnce Report 131 Indices 144 Disclimer 88 Employees 94 Suppliers 98 Corporte citizenship 97
6 Suppliers With purchsing volume of round 37 billion during the reporting period, Siemens is one of the lrgest purchsers in the world. The procurement of highly diverse products nd services from mny different procurement mrkets for use throughout the world poses prticulr chllenges for our procurement orgniztion. Purchsing volume In the course of fiscl 2009, we sourced goods nd services worth bout 37 billion in 177 countries. Forty-four percent of this volume ws Siemens-wide mnged spend (pooled Direct nd Indirect Mteril), while Sector-mnged Direct Mteril ccounted for the remining 56 percent. The significnt reduction in externl spend of roughly 3 billion compred to 2008 ws driven by Supply Chin Mngement svings, strict inventory mngement, our progrm to reduce sles, generl nd dministrtive costs, nd the decline in revenue. Externl purchsing volume in fiscl (in billions of euros) Siemens-wide mnged spend (pooled Direct nd Indirect Mteril) 44% 37 Purchsing volume covered by the Code of Conduct for Siemens Suppliers We hve required our suppliers to comply with our Code of Conduct for Siemens Suppliers since My This is mjor help in spreding our sustinbility principles nd requirements primrily bsed on the principles of the United Ntions Globl Compct throughout our supply chin. Compny-wide, we hve mde the Code of Conduct for Siemens Suppliers requirements binding prt of our procurement contrcts, our conditions of purchse, nd our Supplier Qulifiction Process. In this mnner, we cn ensure tht ll suppliers re committed to the Code of Conduct for Siemens Suppliers nd we re proud of tht. We hve worked with the Sectors nd our Risk Mngement to define reporting process tht will be incorported into the next version of our internl control system in fiscl Recognition of supplier nd ssocition codes of conduct We recognize nd ccept supplier nd industry codes of conduct, when their requirements re t lest equivlent to our own. We review these in compny-wide mndtory process in the responsibility of Corporte Supply Chin Mngement. To dte, we hve ccepted nd qulified more thn one hundred such codes of conduct from suppliers nd industry ssocitions. b Sector-mnged Direct Mteril 56% b Trining our procurement stff Mnging suppliers cross ll compny functions lso increses the demnds on the competencies nd skills of our 1 Excluding investments. people involved in Supply Chin Mngement. We qulify our procurement stff for the current nd future chllenges in Supply Chin Mngement. To this end, we hve worked with our Lerning Cmpus, the Sectors nd the responsible corporte units to updte nd substntilly stremline our procurement trining. The principle of sustinbility, bsed on our vlues, hs now been integrted into the relevnt courses nd online trining. We hve considerbly incresed the shre of online trining, enbling us to mke timely, uni Introduction 7 Profile 19 Sustinbility 39 A globl tour 104 Complince 107 Environmentl protection 114 Occuptionl helth nd sfety mngement 56 The Siemens Environmentl Portfolio 116 Employees 120 Suppliers
7 form, up-to-dte nd cost-efficient courses vilble to the operting units. At the corporte level, we work closely with the Sectors nd the responsible corporte units to updte the complete procurement trining lndscpe nnully nd dpt it to the needs of the trget groups. Monitoring our sustinbility requirements for suppliers We use four methods to check whether the requirements defined in the Code of Conduct for Siemens Suppliers hve been implemented nd re permnently observed in the supply chin. The detection methods re subject to riskbsed pproch (see grph below). Reducing CO 2 emissions in the supply chin In our Sustinbility Report 2008, we described our ctivities for incresing the energy efficiency of our supply chin (see Sustinbility Report 2008, pge 90). Since then, we hve worked closely with five leding worldwide logistics service providers to crete criteri for determining the greenhouse gs emissions cused by shipping done on our behlf. The five compnies, which together provide the logistics for nerly 40 percent of our totl purchsing volume, emitted round 481,250 tons of greenhouse gs s result of shipments mde for Siemens, ccounting for bout 12.6 percent of our compny s totl emissions. This figure clerly shows tht shipping offers mjor lever for reducing greenhouse gs emissions. Corporte Responsibility detection modules Tool-bsed self-ssessment 1. Corporte Responsibility Self Assessment Opportunity for suppliers to give Siemens self-evlution of their dherence to the Code of Conduct for Siemens Suppliers. Focus: Suppliers in non-oecd countries Done by: Supplier On-site inspection 2. Supplier qulity udit with Corporte Responsibility Module Conducted during regulr process nd system udits t supplier s premises. Focus: Suppliers in non-oecd countries Done by: Siemens Qulity Mngement 3. Incident Driven Inspection Quick rection in cse of possible dmge to Siemens reputtion. Focus: Depending on suspicion of sustinbility risks Done by: Externl uditors 4. Externl Sustinbility Audit 1 Systemtic Sustinbility Audits t the supplier s premises. Focus: Suppliers in non-oecd countries Done by: Externl uditors 1 Pilot project in fiscl 2009; to be introduced in fiscl We determine non-oecd countries t the beginning of the fiscl yer bsed on the Trnsprency Interntionl Corruption Index (TI/CPI Index) nd whether the country is member of OECD. 63 Mngement 103 Fcts nd figures 124 Corporte citizenship 128 Independent Assurnce Report 131 Indices 144 Disclimer 121
8 In this regrd, Dr. Mtthis Mther, hed of environmentl protection t the Rilwy Environment Center of Deutsche Bhn AG, sid tht Siemens nd DB AG hve mde climte protection n integrl prt of their respective corporte strtegies. We re therefore quite plesed with the Siemens inititive, which cn serve s n exmple for the logistics mrket. Given our bility to crete nd operte effective, efficient logistics networks chrcterized by high cpcity utiliztion nd to integrte them into the most ecofriendly option ril we hope to be constructive, competent, nd competitive prtner. The qulity of the dt vries with regrd to how it ws collected nd the willingness of the logistics compnies to disclose the methods nd fctors they pplied. Two compnies including Deutsche Bhn hve lredy hd their methods nd the completeness of their dt certified, nd ll the others re plnning on certifiction. Since the efficient use of energy nd resources is in most cses linked to economic effects, our Sectors hve begun to optimize their supply chins from the environmentl stndpoint. As prt of two reference projects in the Industry Solutions Division, we hve crefully exmined the project logistics for pproches to the Port of Hmburg. The conclusion: by shifting trnsport from rod to ril or chnging routes to reduce distnces trveled nd reconfiguring pckging, CO 2 emissions cn be reduced by 30 to 50 percent nd shipping costs cn lso be cut while leving shipping times unchnged or within cceptbly longer limits. Externl recognition of our sustinbility mngement Our sustinbility mngement in the supply chin ws recognized outside the compny severl times during the reporting period. For exmple, we received the highest industry rting for the Stndrds for Suppliers criterion of the SAM Dow Jones Sustinbility Index. Gols reched We chieved or even exceeded the gols set for fiscl 2009, nd hve set new, more mbitious objectives for fiscl 2010 (see pge 96). Supplier gols Gol Trget dte Sttus Anlyze the possibilities of how we cn report overll on improvements in the sustinbility performnce of our suppliers, bsed on informtion from our monitoring ctivities. Approches include: The evlution of sustinbility performnce contined in the udit record of the udited suppliers, nd The totl evlutions from the Corporte Responsibility Self Assessments. Define quntified performnce gol nd dedline with which we will improve the rtio of positive feedbck from suppliers on our sustinbility mngement system. 9/2010 Since the controlling of mesures relted to the Corporte Responsibility Self Assessments hs been implemented, it is now possible for us to record findings nd greed-upon corrective mesures centrlly in our supplier dt pltform. This enbles us to mesure the extent to which the sustinbility performnce of our suppliers hs improved. We will use this informtion s the bsis for future cpcitybuilding efforts. By introducing dditionl Externl Sustinbility Audits, we will be ble to hve these uditors verify the sustinbility performnce of our suppliers even more intensively nd present the results in our next Sustinbility Report. 9/2010 Integrting the Corporte Responsibility Self Assessments into our supplier dt pltform click4suppliers esy, ccessible worldwide, will enble us to utomticlly evlute feedbck from our suppliers regrding our sustinbility mngement. Since we hve seen tht the current survey does not provide sufficient nd meningful results, we will implement n improved feedbck function for our suppliers nd report on the results in our next Sustinbility Report Introduction 7 Profile 19 Sustinbility 39 A globl tour 104 Complince 107 Environmentl protection 114 Occuptionl helth nd sfety mngement 56 The Siemens Environmentl Portfolio 116 Employees 120 Suppliers
9 Supplier gols Gol Trget dte Sttus Processes nd IT systems: Integrte corporte responsibility in the supply chin in the relevnt procurement processes nd relevnt centrl nd decentrlized IT procurement systems. We hope to chieve this by: Further developing the sustinbility-relted procurement processes prticulrly in the selection nd evlution of suppliers nd improve our relted reporting processes. Primrily with regrd to incresing trnsprency nd uditbility; Implementing nd conducting the Corporte Responsibility Self Assessments with priority in non-oecd countries; Implementing the Corporte Responsibility Module component s prt of the supplier qulity process with priority in non-oecd countries; Commission externl service providers to conduct independent sustinbility udits of ten suppliers in non- OECD countries ( pilot project which is prt of n internl, compnywide project to exmine options for the ongoing worldwide expnsion of existing detection modules); Integrting the requirement to observe the Code of Conduct for Siemens Suppliers nd the worldwide online Corporte Responsibility Self Assessment in our Supplier Qulifiction Process nd the electronic supplier dt pltform click4suppliers; Setting up monitoring system worldwide for Supplier Development. Informtion nd trining: Continue informtion nd trining ctivities to nchor corporte responsibility in the supply chin in the Siemens Procurement Network nd with the relevnt interfce prtners. Among other things, this includes employees from Legl nd Complince, s well s Qulity Mngement; Develop concept for modulr, online trining progrm. Initil worldwide pilot projects re plnned for fiscl Strting in fiscl 2010 we pln to provide online trining on corporte responsibility in the supply chin for employees from procurement nd the relevnt interfce deprtments. 9/ /2009 9/ /2009 For gols up to 9/2009 We integrted sustinbility criteri into the compny-wide risk evlution of our suppliers, nd djusted nd improved them over the pst fiscl yer. They re now directly included in the ssessment of our suppliers nd re used s bsis for mking procurement decisions. Following the pilot phse, Corporte Responsibility Self Assessments re now prt of our regulr processes nd integrted into our online supplier dt pltform click4suppliers esy, ccessible worldwide; they will primrily be conducted in high-risk countries (non-oecd countries). We qulified well-known interntionl uditors during the reporting period, nd ten Externl Sustinbility Audits were conducted for the first time. Requirements to comply with the Code of Conduct for Siemens Suppliers nd to respond to the Corporte Responsibility Self Assessment questionnire, vilble worldwide on the Internet, hve been integrted into the Supplier Qulifiction Process. For gol up to 12/2009 We hve defined uniform set of criteri tht cn be used compnywide to monitor the sustinbility-bsed development of suppliers ll over the world. As prt of the ongoing further development of our supplier dt pltform click4suppliers esy, the pltform is being expnded to include functionlities tht llow regulr monitoring t the corporte level. Gol up to 9/2009 We provided intensive trining on the use of the Corporte Responsibility Self Assessments during the pst fiscl yer. We lso continued to emphsize the topic of sustinbility during regulr procurement trining. Gol up to 10/2009 Enhnced online trining on Sustinbility in the Supply Chin is being provided in connection with the revision of the trining lndscpe. We hve provided intensive trining on the use of the Code of Conduct for Siemens Suppliers nd Corporte Responsibility Self Assessments in the course of stndrdizing the Supplier Qulifiction Process. Continuous inclusion of stkeholders: An nlysis of feedbck from our suppliers nd other stkeholders. We thus hope to further improve corporte responsibility in the supply chin. 9/2009 We re striving to optimize continuous feedbck from our suppliers by tking new pproch to feedbcks. In prticulr, we wnt to find out from our suppliers how Siemens cn better support nd integrte them in implementing sustinbility topics. Additionl informtion is vilble on pge 94 nd t our compny website t: Mngement 103 Fcts nd figures 124 Corporte citizenship 128 Independent Assurnce Report 131 Indices 144 Disclimer 123
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