Supply Chain Responsibilities
Huawei manages our sustainability in line with industry best practices and globally recognized standards. Sustainability plays a vital role in our procurement strategy and is a key part of our supplier management process, from supplier qualification and selection to performance appraisals and day-to-day management. We regularly appraise suppliers' sustainability and facilitate their ongoing improvement by working closely with customers, suppliers, industry organizations, and other stakeholders.
As part of our efforts to fight COVID-19, in 2020 we incorporated pandemic prevention into our CSR requirements for procurement, and helped suppliers purchase necessary supplies.
Procurement CSR Management System
Huawei developed our comprehensive procurement CSR management system and our Supplier CSR Agreement based on the United Nations Guiding Principles on Business and Human Rights; the OECD Guidelines for Multinational Enterprises; the International Labour Organization's Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy; the Responsible Business Alliance's Code of Conduct; the Joint Audit Cooperation's Supply Chain Sustainability Guidelines; and the IPC-1401 Supply Chain Social Responsibility Management System Guidance.
Huawei requires that all suppliers sign and abide by the Supplier CSR Agreement. This agreement covers areas like labor standards, safety and health, and environmental protection, business ethics, and management systems. Huawei sees the use of child labor or forced labor as a red line issue, and regards compliance in this respect as a prerequisite for supplier qualification. We have zero tolerance for violations of CSR red lines, and will immediately terminate relationships with any supplier that breaches these rules.
In furtherance of our goal of sustainable procurement, we regularly deliver CSR training to all procurement staff. This training covers procurement CSR agreements, red lines, processes, and audit practices. CSR requirements are incorporated into the performance indicators of all teams in our procurement department.
Supplier Risk Rating and Auditing
Huawei adopts a risk-based approach to supplier audits. Every year, we audit all major suppliers. Combined, these suppliers represent 90% or more of our procurement spending. We assign each supplier one of three risk ratings (high, medium, or low) after a comprehensive assessment of indicators such as procurement amount, material category, supplier locations, severity of CSR risks, and CSR score from the previous year. We develop an annual sustainability audit plan to deal with suppliers that are assessed as posing a medium or high risk.
We perform onsite assessments on all potential suppliers to examine their sustainability systems, their capacity to comply with applicable laws, regulations, and the Supplier CSR Agreement, and their actual level of compliance. No company that fails the assessment is eligible for consideration to become a Huawei supplier.
We have developed our Supplier CSR Audit Checklist which references industry best practices and is adapted to the specific features of our suppliers. This checklist is regularly reviewed and updated. The CSR audit covers issues including prohibition of child labor, modern slavery, and forced labor; protection for underage workers; prevention of discrimination and punishment of employees; freedom of association; working hours; wages and benefits; fire control; safety and health; environmental protection; carbon emissions reduction; business ethics; and management of the CSR practices of tier-2 suppliers.
We conduct supplier CSR audits using internationally recognized methods, such as onsite inspections, employee interviews, management interviews, documentation reviews, and online searches. We use the Blue Map developed by the Institute of Public and Environmental Affairs (IPE) to assess suppliers' compliance with environmental requirements. Prior to audits, we provide suppliers with coaching on CSR self-assessments. During audits, we arrange for experts to work onsite with suppliers so that they can identify problems and suggest improvements.
In 2020, we assigned CSR risk ratings to more than 1,600 major suppliers, and conducted onsite audits on 319 suppliers, including new suppliers and current suppliers that posed medium or high risk. 116 of these suppliers were audited by third-party auditors.
Number of suppliers on which Huawei conducted CSR audits (2016–2020)
If we discover a problem during an onsite audit, we help the supplier resolve the issue using the CRCPE methodology (check, root cause analysis, correct, prevent, evaluate). This methodology helps suppliers to identify common problems and develop targeted solutions.
Issues discovered during 2020 supplier CSR audits
Supplier Performance Management
Every year, Huawei appraises suppliers' overall performance based on their sustainability performance, onsite audit results, and improvements made. When we appraise the sustainability performance of our suppliers, we take into account how they manage their suppliers' sustainability. We encourage our suppliers to develop a CSR management system based on the IPC-1401 Supply Chain Social Responsibility Management System Guidance. Suppliers are classified into four grades (A, B, C, and D) based on their sustainability performance.
The amount of business we do with each supplier depends partly on their sustainability performance, which is also a factor considered in our tendering, supplier selection, portfolio management, and other processes. Where other factors are equal, suppliers that perform well in sustainability are given a larger share of business or more business opportunities. The reverse is true for low-performing suppliers. Depending on the situation, we may instruct suppliers with poor sustainability performance to resolve existing issues within a specified timeframe; or we may reduce their share of business or offer them fewer business opportunities; or we may even terminate our business relationships with those that display exceptionally poor performance.
STORY-Managing CSR of Tier-2 Suppliers
Our Supplier CSR Agreement requires our suppliers to extend our CSR requirements to their suppliers (tier-2 suppliers). When we appraise suppliers' sustainability performance, we also take into account the sustainability records of their suppliers.
In 2020, we helped 33 suppliers develop systems for better managing CSR in their own supply chain. Actions taken include defining management responsibilities, providing internal training, adopting industry standards, drafting CSR agreements, qualifying new suppliers, rating supply chain risks, performing audits on suppliers, linking CSR performance with business opportunities, and developing a reward and discipline system. These 33 suppliers signed CSR agreements with nearly 4,000 tier-2 suppliers, and conducted CSR audits on nearly 400 tier-2 suppliers. We conducted onsite checks on four tier-2 suppliers to confirm that our suppliers' procurement CSR management systems were effective.
CSR audit at a tier-2 supplier
Supplier Capability Improvement
Huawei regularly provides sustainability training and coaching for our suppliers. We ask our suppliers to adopt industry best practices and to embed sustainability requirements into their business strategies in order to reduce risk and boost their efficiency.
We are aware that each supplier brings unique experience and competencies to sustainability that may benefit their peers, so we encourage our suppliers to learn from each other and grow together through benchmarking. Based on our many years of experience, we have developed a cost-effective and efficient "Learning by Benchmarking" model for suppliers. This model includes the following steps:
- Setting priorities: We ask suppliers about their CSR concerns, list the most common issues, and rank them in order of priority.
- Identifying benchmarks: We identify which suppliers perform best, and analyze their best practices.
- Sharing and learning: We invite the benchmark suppliers to share their best practices, and encourage all suppliers to learn industry standards and norms.
- Implementation: We ask experts to develop templates and checklists, and help suppliers assess their own performance and introduce best practices.
STORY-Helping Suppliers Address Overtime Issues with the Six Sigma Methodology
Employees working excessive hours is one of the major concerns among our suppliers. There are many factors for this issue, including high volumes of orders, poor manufacturing planning, lack of materials, low skills, and poor working processes. Relevant stakeholders include customers and suppliers as well as company sales, manufacturing, procurement, and human resources departments.
Huawei has been working with a supplier to test how the Six Sigma methodology can help prevent excessive overtime on an ongoing basis. The supplier analyzed when and where overtime was most likely to occur, factors that led to excessive overtime, and problems in business and manufacturing processes. Then the supplier developed targeted solutions, such as identifying process bottlenecks, manufacturing automation, more training sessions, better staff retention in key positions, cross-departmental information sharing, more communications with customers and suppliers, and better manufacturing plans. All of these solutions resulted in less overtime and higher efficiency.
Huawei-led training on how a supplier should address excessive overtime issues
Huawei engages actively with all stakeholders on sustainability issues. We hold CSR-themed workshops with customers and suppliers, invite customers to visit supplier facilities, conduct joint supplier audits with customers, run supplier capability improvement programs, discuss sustainability issues with industry peers, and contribute to industry standards. All of these efforts are part of Huawei's commitment to creating a more transparent and sustainable supply chain together with all stakeholders.
STORY-Supply Chain Transparency Surveys with Customers
Supply chain transparency is one of the major concerns for our customers. In recent years, Huawei has carried out a number of surveys in partnership with our customers so that they can hear directly from the people who work in our supply chains. In 2020, Huawei and Deutsche Telekom ran an online survey through a mobile phone app. The survey process was very user-friendly: Supply chain workers scanned a QR code and then gave anonymous, confidential answers to questions of concern to Deutsche Telekom.
These surveys allow respondents to speak their mind, and provide a bridge that connects supply chain workers to customers. They are also an opportunity to assess the effectiveness of our CSR audit mechanisms. Huawei and our customers use survey results as input to help suppliers identify opportunities for improvement, and we encourage our suppliers to use similar tools to collect feedback from their own workers.
A supply chain transparency survey organized by Huawei and one of our customers
STORY-EHS for Engineering Service Suppliers
Huawei has taken a number of measures to continuously enhance engineering service suppliers' EHS management. We use digital technologies to manage EHS risks; monitor serious risks in real time; use AI to identify EHS rule violations; have automatic warnings triggered by preconfigured risk indicators; and provide videos covering all EHS scenarios.
We encourage our engineering service suppliers worldwide to build and maintain effective EHS management systems and to obtain ISO 45001 certification. To improve suppliers' EHS awareness and skills, Huawei has launched an EHS capability development program. This program helps suppliers to continually improve their own EHS performance by boosting EHS leadership, managing processes more effectively, carrying out their own EHS assessments, and creating EHS incentive programs. As of the end of 2020, the CEOs of more than 2,500 Huawei engineering service suppliers have signed the CSR and EHS commitment letter.
To support the fight against COVID-19, in 2020 Huawei and our partners continued to build networks in affected areas as requested by carriers and governments, to provide essential communication services. Huawei's Guide to Safe Construction and Protection in Affected Areas encourages partners to take effective preventive measures, to work safely, and to reduce the risk of infection by providing clear instructions to staff on how to work before, during, and after construction, and on how to handle emergencies.
EHS training and protective equipment for our engineering service suppliers
STORY-Helping Production Suppliers Resume Work Safely During the COVID-19 Pandemic
In early 2020, the COVID-19 outbreak halted the operations of many of our production suppliers, which in turn threatened our supply chain. Huawei took the following actions to help our production suppliers resume work safely:
- Risk identification: We identified suppliers that faced high risk, listed the affected materials and their codes, and explored solutions together with the suppliers and local government.
- Experience sharing: We sent a Proposal for Ensuring Effective Pandemic Prevention and Control to more than 500 suppliers, and provided a Checklist on Onsite Pandemic Prevention and Control for Production Department in four languages (Chinese, English, Japanese, and Korean). The checklist includes 94 items in 18 categories across 4 dimensions. We also shared Huawei's best practices in COVID-19 prevention and control.
- Medical supplies: We worked with medical institutions to create purchase channels for face masks, with steady supply, standardized pricing, centralized distribution routes, and demand-driven allocations.
- Workforce assurance: We collaborated with the Human Resources and Social Security Bureaus of Shenzhen and Dongguan to develop and implement transportation plans that enabled over 500 of our suppliers' key employees to safely return to work after Chinese New Year.
Through our joint efforts, we helped our major suppliers quickly resume work. This allowed us to maintain on-time delivery of customers' key projects, and support smooth communications during the COVID-19 pandemic.
Medical supplies provided by Huawei to a production supplier
Responsible Management of Minerals
Huawei is committed to responsible procurement of products containing raw materials such as tin, tantalum, tungsten, gold, and cobalt. We comply with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and the Chinese Due Diligence Guidelines for Responsible Mineral Supply Chains. In collaboration with industry peers, we encourage suppliers to take proactive steps to reduce the risk that minerals contained in their products may directly or indirectly support human rights abuses, harm the environment or personal health and safety, or breed corruption.
As a member of the Responsible Business Alliance (RBA), we work with companies around the world to address issues of conflict minerals through the Responsible Minerals Initiative (RMI). We use the RMI conflict minerals questionnaire to survey the supply chain. This enables us to trace the sources of minerals used in the products we buy from our suppliers, and identify a complete list of originating smelters. Survey results are shared with our customers.
In 2020, we shared the survey results with 20 customers. We also participated in a number of industry-wide campaigns seeking viable solutions to conflict mineral issues.
As a member of the Responsible Cobalt Initiative (RCI), Huawei has published the Huawei Statement on Responsible Mineral Supply Chain Due Diligence Management. We have drawn a cobalt supply chain map, identified supply chain risks, commissioned third-party audits, and informed customers about our cobalt due diligence.
STORY-Sharing Best Practices at the 2020 International Forum on Sustainable Mineral Supply Chains
At the Forum on Responsible Governance and Challenges of Cobalt Supply Chains, Huawei participated as a representative of customers of cobalt products, and shared our best practices in building a more sustainable supply chain. This event was held as part of the 2020 International Forum on Sustainable Mineral Supply Chains (SMISC Forum) and the Week of Sustainable Supply Chains in December 2020. The practices shared by Huawei were welcomed by the organizations in attendance.
Convened by the China Chamber of Commerce of Metals Minerals & Chemicals Importers & Exporters, the SMISC Forum had the theme of "Rule Change and Governance Improvement in New Era," and addressed a range of topics, including responsible mineral tracing, responsible governance and challenges in the cobalt supply chain, and the European Union's regulations on conflict minerals. The forum provided a platform for industry leaders and experts from international organizations, government agencies, standards bodies, businesses involved in mineral supply chains, and investors to share best practices and find better ways towards sustainable development.
2020 International Forum on Sustainable Mineral Supply Chains