EPI SUPPLIER DEVELOPMENT PROGRAM CASE STUDY WITH SWISSCOM
Overview
In today’s business landscape, companies of all sizes and across industries are embedding sustainability considerations into their daily operations and strategic roadmaps.
In light of the growing global demand for connectivity, reliable and efficient network infrastructure, and IT hardware built from critical raw materials, the ICT industry faces a unique set of challenges on its journey towards sustainable and fair supply chains. Today, the sustainability reports of leading actors in the ICT industry already reflect diligent climate action in the form of ambitious net zero strategies and circular economy initiatives. However, along with such climate initiatives grows the realisation that adverse impacts via the ICT global supply chains extend beyond the environmental dimension of ESG; they also affect workers, local communities, vulnerable populations such as children, migrant workers, and ethnic minorities. Such human rights risks often manifest in the lower layers of the upstream supply chain, and are hidden within complex mining, smelting, manufacturing and assembly processes that are almost impossible to trace back to their source.
While these challenges are substantial, equally vast is the untapped potential to enact positive change and transform current production practices for the better. A critical realisation has emerged: ensuring fair and sustainable supply chains requires multi-stakeholder collaboration across the numerous actors that are influencing and contributing to the value chain.
The Joint Alliance for Corporate Social Responsibility (JAC) has been founded on the premise that industry practices and positive change in the ICT supply chain can helpfully be realised if leading ICT companies speak with a common voice towards its suppliers and manufacturers.
The 27 members, which now represents 50-60% of the ICT industry, jointly audit their common supply chains, sharing expertise, resources and a common mission for CSR purposes. In this way, ICT companies are collectively on a learning journey to understand, address, and report on ESG-related risks, many of which extend beyond their immediate scope of influence.
With its ambitious goal to achieve net zero emissions by 2035 while fostering a best-practice supply chain, Swisscom, the leading telecommunications and IT services provider in Switzerland, has embedded ESG missions into its corporate identity and group goals, along with its commitment to being a sustainability pioneer. As a member of JAC, Swisscom conducts comprehensive audits of its supply chains, identifies high-risk suppliers and implements Corrective Actions to minimise any adverse impacts on workers and local communities. However, to better support and enable suppliers in lower tiers of its own product supply chain, Swisscom has decided to move beyond auditing practices. With the initiation of its Supplier Development Program in 2019, Swisscom aims to reach deeper into the supply chain, offering comprehensive support, tools and know-how to its suppliers and sub-suppliers, ultimately empowering and enabling them to reduce negative and strengthen positive business impacts on their workforce and the environment.
The challenge
One of the key challenges the telecoms industry faces is the high complexity and limited transparency within supply chains, making it almost impossible to trace the value creation of products beyond Tier 2 Suppliers. As a result, identifying adverse impacts on people and the environment in the supply chain and carrying out effective measures to mitigate those risks remains a big challenge for ICT companies.
But even where such risks are identified via factory audits and supplier risk assessment measures, the cultural and geographic distance to suppliers often complicates the fruitful collaboration in identifying and implementing corrective action plans. In Asian countries where ICT products are typically manufactured, production processes are aligned with the systemic dynamics of the industry, as well as the socio-economic context of the country. This shapes suppliers’ scope for action concerning aspects such as, for example, their energy sources and transport options that impact emissions, standard labour practices, such working hours, wage levels and availability of skilled labour, as well as access to advanced technologies.
Furthermore, smaller manufacturers in Asian geographies are often just at the beginning of their sustainability journeys. Being subject to different national regulation and ESG reporting standards, those companies may lack strong incentives to initiate the implementation of sustainable and fair business practices, as well as the necessary experience and best practices needed to carry out such measures swiftly and effectively.
The solution
To address these challenges and foster a long-term, transformative approach to supply chain development, Swisscom launched the Supplier Development Program (SDP) in collaboration with its partner epi Consulting in 2019. The SDP is a two-year program designed to help Swisscom assess, verify, and improve the supply chains behind its own products, such as its TV Box, Router, or Internet Box. While its partner epi Consulting supports in the operational and administrative facilitation of the program, Swisscom works closely with its sub-suppliers to jointly identify suitable development roadmaps and strategic focus areas, while sharing best practices.
Where Swisscom`s sustainable procurement team identifies gaps in ESG practices via the audits carried out in these supply chains, sub-suppliers are on-boarded into the program. In a first step, they then undergo a baseline assessment based on a comprehensive 10-category assessment model that aligns with the UN’s 2015 Sustainable Development Goals. Across key areas such as Environmental Management, Resource Management, Human Rights, and Life Cycle Thinking, the program sets clear KPIs and benchmarks to ensure that targets are achievable and motivate suppliers to collect quick wins while simultaneously initiating long-term projects. Throughout the process, consultants from epi, as well as Swisscom colleagues, provide continuous support and guidance via regular check-in sessions.
However, the facilitation of effective communication and collaboration with lower-tier suppliers, has proven a critical success factor. Furthermore, suppliers are incentivised to fully realise the potential of the program as it is designed to build on the synergies between business and ESG benefits. By implementing sustainable practices, suppliers can achieve more efficient production processes, reduce costs, lower staff turnover, and ultimately improve their overall business performance. This dual focus on business and ESG benefits has been key to driving successful and lasting improvements in the supply chain.
For instance, as part of the SDP program, a supplier in the connector components supply chain installed a solar power system in July 2023, leading to a 20.7% reduction in purchased electricity. Between 2022 and 2023, this initiative contributed to a total emissions reduction of 15.3% across all three scopes. By demonstrating that these measures can drive efficiency and profitability, Swisscom makes it advantageous for businesses to participate in the SDP, ultimately leading to a more sustainable and resilient supply chain.
The Result
As a direct result of the SDP Program, all of Swisscom’s suppliers significantly improved from their baseline scores. From 2020 to 2023, Participants have made progress on climate and energy related performance indicators, but specifically in the area of human rights, working conditions and health & safety. This included: a 20% reduction in overtime work, a 25% decrease in occupational accidents, a 10% productivity rate increase, and a 5% reduction in quality defects rate. This led to a 15% decrease in worker turnover and a 10% boost in staff satisfaction.
For Swisscom, the SDP has been a proof of concept that driving positive change in their supply chain, beyond Tier 1, is possible despite the numerous challenges along the way. So far, the program has shown to enhance awareness, expertise and know-how among their suppliers, who have in turn set-up ESG programs for their suppliers. Via this trickle down effect in the supply chain, best practice solutions to ESG challenges can gradually be scaled to ever-lower supply chain tiers, and trigger positive change where risks to workers and local communities in the value creation process are the highest. While this positive impact so far remains very punctual in scope and highly targeted, to key suppliers, the program is crucial for supply chain development and for strengthening relationships between Swisscom and its suppliers.
Future plans
Following the initial success of the Sustainable Development Program (SDP), Swisscom is continuously collecting feedback from its participants and adapting the program accordingly. Furthermore, Swisscom is exploring ways to extend these initiatives across more of its supplier base, focusing on commodity groups and value chains that are known for their inherent ESG risks. As a co-lead in the Supply Chain Due Diligence Workstream of JAC, Swisscom’s sustainable procurement team additionally remains committed to share its learnings with industry peers and develop joint supplier-engagement projects.
Sustainability remains a pivotal business goal for Swisscom, and it is committed to advancing these initiatives for a more sustainable future.