Electronic Manufacturing Services & Original Design Manufacturing

Transcription

1 Electronic Manufacturing Services & Original Design Manufacturing SICS #TC0101 Prepared by the Sustainability Accounting Standards Board October 2013 Exposure Draft for Public Comment 2013 SASB

2 Electronic Manufacturing Services & Original Design Manufacturing Sustainability Accounting Standard About SASB The Sustainability Accounting Standards Board (SASB) provides sustainability accounting standards for use by publicly-listed corporations in the U.S. in disclosing material sustainability issues for the benefit of investors and the public. SASB standards are designed for disclosure in mandatory filings to the Securities and Exchange Commission (SEC), such as the Form 10-K and 20-F. SASB is an independent 501(c)3 non-profit organization and is accredited to set standards by the American National Standards Institute (ANSI). SASB is developing standards for more than 80 industries in 10 sectors. SASB s standards-setting process includes evidence-based analysis with in-depth industry research and engagement with a broad range of stakeholders. The end result of this process is the creation of a complete, industry-specific accounting standard which accurately reflects the material issues for each industry. About this Standard This Standard is an exposure draft presented for public review and comment. This version is not intended for implementation. The public comment period lasts for 90 days beginning Wednesday, October 2, 2013 and ending Thursday, January 2, This Standard is subject to change thereafter. For instructions on providing comments to SASB please click here. For an introduction to SASB Standards please click here. Sustainability Accounting Standards Board 75 Broadway, Suite 202 San Francisco, CA info@sasb.org SASB Legal Publications Disclaimer: The content made available in this publication is copyrighted by the Sustainability Accounting Standards Board. All rights reserved. You agree to only use the content made available to you for non-commercial, informational or scholarly use within the organization you indicated you represent and to keep intact all copyright and other proprietary notices related to the content. The content made available to you may not be further disseminated, distributed, republished or reproduced, in any form or in any way, outside your organization without the prior written permission of the Sustainability Accounting Standards Board. To request permission, please contact us at info@sasb.org SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 1

3 SASB Sustainability Accounting Standard Electronic Manufacturing Services & Original Design Manufacturing (TC0101) Industry Description The Electronics Manufacturing Services (EMS) & Original Design Manufacturing (ODM) industry consists of two main segments. EMS companies provide assembly, logistics, and after-market services for original equipment manufacturers. The ODM segment of the industry provides engineering and design services for original equipment manufacturers, and may own significant intellectual property. Although EMS & ODM companies produce equipment for a variety of sectors, the industry is closely associated with the technology Hardware industry. Table 1. Material Sustainability Topics & Accounting Metrics Topic Code Accounting Metric Energy Management in Manufacturing TC Total annual energy consumed (gigajoules); percentage from purchased grid electricity. Percentage of non-grid energy from fossil fuels and renewables (e.g., wind, biomass, solar). Water and Waste Management in Manufacturing TC TC Total water withdrawn (m^3), returned to watershed (m^3), internally recycled (m^3); and for each indicate the percentage in water-stressed regions, defined as High or Extremely High Baseline Water Stress as defined by the WRI Water Risk Atlas. Amount of waste (tons) broken down by the following waste types: (1) Hazardous; (2) Nonhazardous; (3) Electronic waste (e-waste). For each waste type, indicate the percentage that is recycled, treated, incinerated, and landfilled; and the weighted average cost ($) per ton for each disposal method. TC Percentage of facilities with third-party certification of health and safety systems to the OHSAS Standard or equivalent. Fair Labor Practices TC Description of legal and regulatory fines and settlements associated with unfair labor practices and health and safety violations. Include dollar amount of fines and settlements and a description of corrective actions implemented in response to events. TC Percent of facilities with third-party certification of fair labor conditions (socially acceptable workplace practices), such as SA8000 certification or equivalent TC Percentage of products (by revenue) that meet the requirements of the European Union s Restriction of Hazardous Substances (RoHS) Directive. Product Lifecycle Management TC Discussion of usage of Registration, Evaluation, Authorisation and Restriction of Chemical (REACH) substances of very high concern (SVHC) and chemicals listed in Joint Industry Guide (JIG) 101 ed. 4.1., Table A. Declarable Substance List. TC Percentage of eligible products (by revenue) certified to a recognized voluntary, environmentally-focused certification standard SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 2

4 Topic Code Accounting Metric TC Percentage of products (by revenue) with environmentally focused principles incorporated into the designs, including a description of the design principles or criteria. TC Amount (weight) of products recovered through take-back programs. Percentage of recovered products (by weight) that are (a) reused, (b) remanufactured, (c) recycled, and (d) landfilled. Percent of total classified as electronic waste (e-waste), percentage of e-waste recycled though entities with Basel e-stewards certification. Supply Chain Management and Materials Sourcing TC TC TC Discuss existing or projected constraints with obtaining raw materials (or components), including those related to political situations, local labor conditions, natural disasters, climate change, geography, regulations, or restricted/limited availability. Discuss any production shortfall resulting from materials supply; indicate the cause and the relative impact on production. Number of sole-source Tier 1 suppliers, and percentage of critical supply base for which suppliers are sole-source. Percentage of Tier I suppliers who are EICC members and have implemented the EICC Code of Conduct. Percentage of Tier I suppliers in full compliance with the registrant's environmental and social/labor requirements. Discuss the process for managing environmental and social risks within the supply chain including screening, codes of conduct, audits, and certifications. Indicate if audits are first party, second party, or third party SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 3

5 Energy Management in Manufacturing Description Energy production and consumption contributes to significant environmental impacts, including climate change and pollution that have the potential to indirectly, yet materially, impact the results of operation of EMS & ODM companies that are highly reliant on energy as an input for value creation, due to energy -intensive manufacturing operations. The way in which a company manages its overall energy efficiency or intensity, its reliance on different types of energy, and associated sustainability risks, and ability to access alternative source of energy, will have an increasingly material impact on costs and energy supply, due to the global regulatory focus on climate change including incentives for energy efficiency and renewable energy, the rising cost from the pricing of GHGs emissions, and risks associated with reliance on nuclear energy and its increasingly limited license to operate. Accounting Metrics TC Total annual energy consumed (gigajoules); percentage from purchased grid electricity. Percentage of non-grid energy from fossil fuels and renewables (e.g., wind, biomass, solar)..01 The registrant shall convert the amount of electricity it consumed from kilowatt hours (kwh) to gigajoules (GJ)..02 The registrant shall disclose fossil fuel consumption in terms of its energy content, using higher heating values (HHV), also known as gross calorific values (GCV), and which are directly measured or taken from the Intergovernmental Panel on Climate Change (IPCC), the U.S. Department of Energy (DOE), or the U.S. Energy Information Administration (EIA)..03 The registrant shall disclose renewable energy consumption as a percentage of its overall energy consumption, in terms of its energy content. For biofuels, the registrant shall use HHVs from the sources mentioned above. For solar or wind energy consumption, the registrant shall convert from electricity production (kwh) to gigajoules (GJ)..04 The registrant shall disclose renewable energy data for renewable energy it directly produces, or which it purchases through renewable energy certificates (RECs) that are certified (i.e., through Green-e), or renewable power purchase agreements (PPAs). It shall not disclose the renewable portion of the energy drawn from electricity grids. Notes Definitions Additional References 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 4

6 Water and Waste Management in Manufacturing Description The manufacturing of computers, computer components, and other electronics is both water and waste intensive. As state, federal, and foreign environmental laws continue to emphasize resource conservation, and with increasing customer demand for stringent environmental standards in production, EMS & ODM companies that are able to manage this issue and reduce the associated costs will be well positioned to protect shareholder value. Accounting Metrics TC Total water withdrawn (m^3), returned to watershed (m^3), internally recycled (m^3); and for each indicate the percentage in water-stressed regions, defined as High or Extremely High Baseline Water Stress as defined by the WRI Water Risk Atlas..05 Water withdrawn is the total amount of water removed from freshwater sources for use in operations. Water withdrawals shall be disclosed in terms of cubic meters (m 3 )..06 The registrant shall disclose the total amount of water by volume (m 3 ) that was returned to the watershed during the fiscal year. This figure shall include the amount discharged directly to the environment or by way of a local wastewater treatment plant..07 The registrant shall disclose the total amount of water by volume (m 3 ) that was recycled during the fiscal year. This figure shall include the amount recycled in closed-loop and open-loop systems. Water recycled for purposes other than manufacturing operations (e.g., grey water reuse) shall not be included in this figure..08 Using the World Resources Institute s (WRI) Water Risk Atlas tool, Aqueduct (publicly available online here), the registrant shall analyze all of its manufacturing facilities for water risks and identify facilities that are in a location with High (40 80%) or Extremely High (>80%) Baseline Water Stress. Water withdrawn, returned, or recycled in locations with High or Extremely High Baseline Water Risk shall be indicated as a percentage of the total water withdrawn, returned, or recycled, respectively. TC Amount of waste (tons) broken down by the following waste types: (1) Hazardous; (2) Non-hazardous; (3) Electronic waste (e-waste). For each waste type, indicate the percentage that is recycled, treated, incinerated, and landfilled; and the weighted average cost ($) per ton for each disposal method. Hazardous Non-Hazardous E-waste Total Waste tons tons tons Recycled (%)($) (%)($) (%)(Basel)($) Treated (%)($) (%)($) (%)($) Incinerated (%)($) (%)($) (%)($) Landfilled (%)($) (%)($) (%)($).09 The registrant shall disclose the total amount of waste, measured in tons, for each of the following waste types: (1) hazardous waste, (2) non-hazardous waste, and (3) electronic waste from manufacturing processes..10 The registrant shall indicate the percent of each waste type handled by each of the following end-of-life disposal methods: recycling, treating, incinerating, or landfilling..11 For each waste type and method of waste disposal, the registrant shall indicate the weighted average cost for disposal..12 For electronic waste from manufacturing processes, indicate the amount (weight) of electronic waste recycled though entities with Basel e-stewards certification; amount (weight) of electronic waste disposed of through other entities. This disclosure excludes products returned through take-back programs. Notes Definitions 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 5

7 Additional References 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 6

8 Fair Labor Practices Description EMS & ODM companies operate in a highly competitive environment based on cost, and therefore they rely heavily on securing low-cost and contract labor. Furthermore, the industry faces increased scrutiny over labor standards after numerous highly publicized examples of poor working conditions and unrest at industry facilities. Companies that manage labor issues will be better positioned to retain customers with stricter supplier standards, and therefore protect shareholder value. Companies that have historically relied on belowmarket wages could face additional costs as workers demand higher compensation. Accounting Metrics TC Percentage of facilities with third-party certification of health and safety systems to the OHSAS Standard or equivalent..13 The registrant shall disclose the percent of facilities achieving a third-party certification of health and safety systems in accordance with the OHSAS Standard, or an equivalent standard. If certifying to another standard, the registrant shall indicate which standard it is using and how it is equivalent to the OHSAS Standard..14 Third-party certification is performed by independent organizations such as registrars, certification bodies, or regulators..15 Facilities discussed shall be those recognized by the registrant as physical assets under Property, Plant, and Equipment (Topic 360). TC Description of legal and regulatory fines and settlements associated with unfair labor practices and health and safety violations. Include dollar amount of fines and settlements and a description of corrective actions implemented in response to events..16 The registrant shall briefly describe the nature and context of fines and settlements associated with unfair labor practices and health and safety violations, including civil actions (e.g., civil judgment, settlements, or regulatory penalties) and criminal actions (e.g., criminal judgment, penalties, or restitutions) taken by any entity (government, businesses, or individuals)..17 The registrant shall disclose the amount of any fine or settlement associated with each incident, not including legal fees..18 The registrant shall describe any corrective actions it has implemented as a result of each incident. This may include, but is not limited to, specific changes in operations, management, processes, products, business partners, training, or technology..19 If relevant, the registrant should discuss other implications associated with the fine or settlement, including any limitations on contracting with government or other institutional clients. TC Percent of facilities with third-party certification of fair labor conditions (socially acceptable workplace practices), such as SA8000 certification or equivalent..20 The registrant shall disclose the percent of facilities achieving a third-party certification of fair labor conditions (socially acceptable workplace practices), such as SA8000 certification, or an equivalent standard. If certifying to another standard, the registrant shall indicate which standard it is using and how it is equivalent to the SA8000 certification..21 Third-party certification is performed by independent organizations such as registrars, certification bodies, or regulators..22 Facilities discussed shall be those recognized by the registrant as physical assets under Property, Plant, and Equipment (Topic 360). Notes Definitions Additional References 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 7

9 Product Lifecycle Management Description EMS & ODM companies must address the environmental externalities associated with material inputs, product use efficiency, and disposal. Furthermore, these firms are exposed to the issue of planned obsolescence, which contributes to their growth, but also increases the aforementioned negative externalities. EMS & ODM companies that comply with existing regulations, while working in advance of future regulations concerning product design and lifecycle, will be better positioned to protect shareholder value. Increasing public concern over environmental issues is driving demand towards products with reduced environmental footprint, impacting industry revenues. Accounting Metrics TC Percentage of products (by revenue) that meet the requirements of the European Union s Restriction of Hazardous Substances (RoHS) Directive..23 A product shall be considered to conform to RoHS (directive 2002/95/EC) requirements if all constituent components have been tested and/or documented to conform with RoHS maximum concentration value requirements for lead, mercury, cadmium, hexavalent chromium and polybrominated flame retardants..24 The registrant shall disclose RoHS conformance with respect to all of its products, regardless of their location of manufacture, export status, and/or location of sale..25 The percentage shall be calculated as: 100%* (revenue from covered products that meet RoHS requirements / revenue from all covered products)..26 Covered products are defined as those that, as referenced in RoHS, are category 1-7 and category 10 products in Annex 1A of Waste Electrical and Electronic Equipment (WEEE) Directive (2002/96/EC): 1. Large household appliances 2. Small household appliances 3. IT and telecommunications equipment 4. Consumer equipment 5. Lighting equipment 6. Electrical and electronic tools (except large-scale stationary and industrial tools) 7. Toys, leisure and sports equipment 10. Automatic dispensers.27 Products exempt from the scope of RoHS shall be considered exempt from the scope of this disclosure calculation (e.g. mercury in certain fluorescent lights and lead in certain soldering applications). TC Discussion of usage of Registration, Evaluation, Authorisation and Restriction of Chemical (REACH) substances of very high concern (SVHC) and chemicals listed in Joint Industry Guide (JIG) 101 ed. 4.1., Table A. Declarable Substance List..28 The registrant shall discuss its approach to managing the use of substances that appear on the ECHA's Member State Committee (MSC) Candidate List of Substances of Very High Concern for Authorisation or on the Consumer Electronics Association s (CEA) Declarable Substance List..29 The registrant shall describe how its operational processes incorporate these lists and/or how it takes into consideration the chemicals on these lists..30 Relevant operational processes may include, but are not limited to, product design, materials and parts procurement, product safety testing, product labeling, and product declarations (e.g. material safety data sheets)..31 Relevant actions to discuss may include the exclusion of substances (e.g. banned substances lists), use of material substitution assessments, product labeling, or any other methods considering usage of substances from these lists..32 If the registrant assesses and manages the impact of known or potentially toxic substances with reference to other regulations, industry norms or accepted chemical lists it may identify those practices, and it shall describe the degree of overlap with REACH SVHC and JIG Declarable Substances SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 8

10 TC Percentage of eligible products (by revenue) certified to a recognized voluntary, environmentallyfocused certification standard..33 Eligible products are defined as products that are within the scope of certification of a recognized voluntary, environmentallyfocused certification program for electronics products including EPEAT, ENERGY STAR, Taiwan Green Mark, TCO Certified, Japan PC Green, EU Ecolabel ( EU Flower ), EcoLogo, and e-standby Program (Korea)..34 If the registrant s products are certified to other environmentally-focused standards or eco-labeling programs, it shall describe the basis for recognition of the standard (e.g. ratified national standard, accepted industry association standard, ISO standard, etc.)..35 The registrant shall calculate the percentage of certified products as: 100* (revenue from certified products) / (total revenue from eligible products), where revenue is US dollars..36 The registrant should identify which products or product lines are certified and to which standard(s). TC Percentage of products (by revenue) with environmentally focused principles incorporated into the designs, including a description of the design principles or criteria..37 The registrant shall calculate the revenue (in US dollars) from products designed according to environmentally focused principles or criteria as percentage of total product revenue..38 Relevant considerations to discuss include elimination of toxic substances, use of recycled materials, reduction of packaging, design for consolidated shipping, design of low energy consumption products, design for product take-back, labeling for recycling, and the elimination or replacement of materials that are subject to resource scarcity (e.g. cobalt, rare earth elements, etc.)..39 Design shall be considered to incorporate environmentally focused principles or criteria if it can be demonstrated to follow an established standard such as the criteria of Environmentally Conscious Design (IEC-62075), through participation in the U.S. EPA s Design for Environment (DfE) programs or projects, or by demonstrating at that multiple environmental considerations (e.g. from 0.38 above) are made during product design stages..40 Products shall be considered within the scope of this disclosure regardless of the date of their original design (i.e. if it originally occurred prior to the fiscal year) assuming the product continues to meet best practices used by the registrant in regards to environmentally focused design. TC Amount (weight) of products recovered through take-back programs. Percentage of recovered products (by weight) that are (a) reused, (b) remanufactured, (c) recycled, and (d) landfilled. Percent of total classified as electronic waste (e-waste), percentage of e-waste recycled though entities with Basel e-stewards certification. Total Product from Take Back Recovered Product tons E-waste tons Reused (%) (%) Remanufactured (%) (%) Recycled (%) (%)(% thru Basel) Landfilled (%) (%).41 The registrant shall disclose the total amount of product recovered through product take back programs, measured in tons..42 The registrant shall indicate the percent of product handled by each of the following end-of-life waste handling methods: reuse, remanufacture, recycling, or landfilling..43 The registrant shall indicate the amount of total recovered product that is classified as electronic waste, measured in tons..44 For electronic waste, indicate the percent of electronic waste recycled though entities with Basel e-stewards certification..45 The registrant shall include both materials physically handled by registrant and those handled by direct partners. Notes Definitions 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 9

11 Additional References Registration, Evaluation, Authorisation and Restriction of Chemical (REACH) Regulation (EC) No 1907/2006 Candidate List of Substances of Very High Concern (SVHC) for Authorisation is published in accordance with Article 59(10) of the REACH Regulation). Joint Industry Guide - Material Composition Declaration for Electrotechnical Products Joint Industry Guide (JIG) 101 ed. 4.1., Declarable Substance List is Table A. of JIG 101 ed SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 10

12 Supply Chain Management and Materials Sourcing Description The EMS & ODM industry s reliance on scarce or rare minerals and metals has become a focus of attention due to the concentration of deposits in only a few countries and their low substitution ratio. Furthermore, companies face regulations related to their use of conflict minerals, which can lead to increased costs associated with new reporting requirements. Companies that establish strong supply chain management related to scarce, rare, and conflict minerals and metals will be better positioned to protect shareholder value in light of scarcity related to physical availability and to economic and geopolitical supply risks, which can create the need for reconfiguring existing supply chains and increasing regulatory and public concerns. Accounting Metrics TC Discuss existing or projected constraints with obtaining raw materials (or components), including those related to political situations, local labor conditions, natural disasters, climate change, geography, regulations, or restricted/limited availability. Discuss any production shortfall resulting from materials supply; indicate the cause and the relative impact on production..46 The registrant shall discuss existing constraints or risks of future constraints (both actual and potential) that directly affect its access to raw materials or components or that indirectly affect it through impacts on its suppliers..47 Actual constraints include those that affected the registrant during the fiscal year, are currently affecting the registrant, or have a very high likelihood of affecting the registrant in the near term (e.g., those for which the registrant currently has inventoried material but has already enacted a contingency plan)..48 Potential constraints include, but are not limited to, physical limits to natural resources globally, constraints due to regulatory efforts such as the Dodd-Frank Section 1502, requirements related to conflict minerals, rare earth minerals, supply chain disruptions due to increased frequency and severity of natural disasters and other effects of climate change, and labor risks particular to geographic areas in which the registrant conducts business..49 The registrant shall discuss shortfalls in production that were caused by constraints in the supply chain. This includes any deviation of actual production versus planned production that directly resulted from materials constraints..50 The registrant shall indicate the cause for the shortfall, and the relative impact of the reduced production capacity as a percent of total annual production. TC Number of sole-source Tier 1 suppliers, and percentage of critical supply base for which suppliers are sole-source. Percentage of Tier I suppliers who are EICC members and have implemented the EICC Code of Conduct. Percentage of Tier I suppliers in full compliance with the registrant's environmental and social/labor requirements..51 The registrant shall indicate the number of Tier 1 suppliers that are based on a sole-source supplier relationship..52 Tier 1 suppliers are those that transact directly with the registrant..53 The registrant shall indicate the percentage of the critical supply base that is based on a sole-source supplier relationship..54 Sole-source suppliers refers to a situation where there is only one supplier for a specific material or product..55 Critical supply base refers to materials or equipment and software products that are essential to primary business operations, including the design process, or hardware manufacturing (where the registrant is not fully vertically integrated)..56 The registrant shall disclose the percentage of its Tier I suppliers who are EICC members and have implemented the EICC Code of Conduct. The registrant may limit its disclosure to those suppliers that in aggregate account for greater than or equal to 90% of its supplier spending (in dollars). TC Discuss the process for managing environmental and social risks within the supply chain including screening, codes of conduct, audits, and certifications. Indicate if audits are first party, second party, or third party..57 The registrant shall discuss management approach to identifying and reducing supply chain risk. The management approach may include screening, codes of conduct, audits, and/or certifications..58 The registrant shall indicate whether supply chain audits are first-party, second-party, or third-party, where: 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 11

13 First-party audits are internal audits used by organizations to audit themselves; these are generally intended to confirm or improve the effectiveness of management systems. First-party audits can be used to declare that an organization complies with an ISO standard; this is called a self-declaration. Second-party audits are external audits performed by any external party that has a formal interest in the audited organization. Second-party audits are generally performed by an organization s customers or by others on their behalf. Third-party audits are external audits performed by independent organizations such as registrars, certification bodies, or regulators. Notes Definitions Additional References 2013 SASB TM SUSTAINABILITY ACCOUNTING STANDARD EXPOSURE DRAFT 12