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Management of the supply chain

Telefónica is conscious of its responsibility within the supply chain, both due to its international presence, and the impact and volume of its suppliers. For that reason, our commitment to sustainability is present through the entire process in relation to our suppliers.

General information

The identification and management of risks associated with the supply chain is an inherent responsibility for each company, which at Telefónica we assumed, publicly and actively, in 2010 through our Commitment to sustainability in the supply chain. Since then our efforts have been focused on: 

Efficient production

We continually strive to improve our purchasing processes using electronic tools which help us to be more efficient, agile, and transparent. 

  • Electronic catalogues, in addition to increasing efficiency in the supply chain, ensure that we meet the conditions of negotiation, providing agility and transparency in the management of orders, deliveries and invoicing, and avoiding conflicts which could lead to delays in the supply process.
  • In 2014 over 32,000 million euros were negotiated electronically.
  • Orders, assignment letters and contracts for a value of  close to 22,000 million euros were issued electronically.
  • 794,559 invoices were issued electronically; some 33% more than in 2013.
  • Advances were made in the interconnection of systems of Group companies with those of our suppliers, surpassing 13,783 orders.
  • More than 8,800 suppliers were trained in the management of electronic negotiations, orders and invoices, compared with over 2,000 suppliers trained in the previous year.

Culture of sustainability

We are demonstrating our commitment to a sustainable business model through various aspects:

a) We are committed to being an engine for development in countries where Telefónica is present. 

  • 85% of the volume of purchases is allocated to local suppliers.  

b) We make an effort to understand the perceptions and priorities of our suppliers.

We have carried out a survey of our main suppliers in order to understand their levels of satisfaction and identify those aspects which are valued positively, and those which show room for improvement.

In order to prepare this process, before launching the survey, two focus groups were set up with key suppliers, with the aim of understanding what their priorities were in their relationship with Telefónica. These meetings allowed us to obtain feedback in order to improve the survey and thus facilitate the development of possible action plans for those aspects showing room for improvement.

  • We launched a survey aimed at over 4,000 suppliers, and obtained a participation level of around 30%. 
  • The ratings (on a scale of 0 to 5) barely showed a change with respect to the previous survey carried out in 2012, with the corporate responsibility aspect once more being the most highly rated.

Within the positively rated aspects are: the principles of the Telefónica purchasing model; the policy of responsibility in the supply chain; the honest and transparent behaviour of the purchasers; the electronic formalisation of commitments and electronic invoicing; and support for users of e-commerce tools.

The suppliers identified the following aspects as having room for improvement: the need for single channels of communication to resolve doubts and better coordination between the technical and purchasing areas.

c) We are encouraging the commitment of our suppliers to our Business Principles.

To promote the culture of sustainability within our value chain is one of the foundations of our way of doing business. We believe that only by being more and more demanding with regard to compliance by our suppliers with our essential values, such as our Business Principles, will we be able not only to identify and manage possible risks, but also to encourage a culture which promotes the social and environmental commitment of all our partners. 

To do this, we require 100% of our suppliers to develop their businesses applying similar ethical standards which ensure compliance with basic human and employment rights, together with respect for the environment.

Therefore, to be a Telefónica Group supplier, the corresponding company must declare and guarantee that they do not employ child labour, that no situations of forced labour exist within their company, nor working conditions which endanger the lives of their workers, and that they comply with environmental legislation which is applicable to their business activities. 

In addition, suppliers must assume specific higher commitments in relation to the type of product or service they offer. In contracts with suppliers and in the basic purchasing conditions we include a link to the most recent version of each of our policies, which are available to everyone on the Supplier Portal.

In this way, through the Policy of Responsibility in the Supply Chain we set out the attitudes and standards that we expect from our suppliers in the area of sustainability.

We have various tools to promote and evaluate our suppliers' compliance with the requirements derived from these Principles and Policy:

  • Minimum requirements clauses.
  • 360º evaluations by independent organisations.
  • Monitoring of the levels of compliance through risk audits for suppliers, and development of the corresponding improvement plans.
  • Training and awareness programmes on sustainability criteria.

If a supplier does not reach the required level, or is incapable of providing the information required, then an internal process begins with the ultimate aim of getting the supplier to guarantee compliance with our standards.

In extreme cases, when this is not possible, based on the initial agreement signed by both parties, the relationship with the supplier is suspended until it can demonstrate that it has rectified the situation and reached the required levels. 

Risk Management

Telefónica is working on the prevention and reduction of possible negative impacts generated by its business. In 2014 we continued with the implementation of our risk control and monitoring methods for our suppliers' activities -for their business activity and/or for the volume of allocation-

  • We have evaluated 120 key suppliers throught the external, independent evaluation organisation EcoVadis, based on 21 sustainability criteria.
    • Little more than 30% showed any weakness (medium risk) in their management of corporate responsibility, and above all in the sustainable management of their own supply chains, thus identifying possible areas of improvement for the supplier.
    • Among key suppliers, 21 of them have active corrective action plans, which amount to 257 corrective actions in total. 
  • It is worth pointing out other relevant indicators which reflect how our supply chain has integrated more and more sustainability aspects within its management.
    • 41% have OHSAS 18001 or equivalent certification, thus demonstrating the capacity of the organisation to meet the requirements of legislation regarding safety and health.
    • 73% of our suppliers have complaints procedures in place.
    • 66% of the suppliers evaluated have the ISO 14001 certification in environmental management.
    • 73% report on the use of energy or GHG emissions.

  • We have implemented an Annual Audit Plan, defined in accordance with the risks of each region/country and the type of supplier.    

Spain​

To guarantee greater control over activities with an environmental risk, at Telefónica we carried out in 2014 the first 'end-to-end' audit of the main supplier of the 'renew and recycle' service for mobile phones in Spain. 

The service's systems of operation were checked from drop-off in the shop to the the recovery and servicing plant, as well as the systems for the parts sent to the recycling plant, with on-site audits by an independent third party of all the facilities to verify compliance with the applicable regulations and the Telefónica Group Business Principles. The audits were carried out without detecting any non-conformity, and they highlighted as one of the strong points the monitoring and traceability of mobile phones by the supplier.

Latin America​

The efforts in Latin America focused once again on the management of risks associated with partner and third party companies via the 'Aliados' programme, through which:

  • We carried out over 15,700 administrative audits and over 1300 in situ audits of risk suppliers dealing with, in both cases, matters critical at a local level. The results obtained in the latter led to the proposal for improvement plans for over 520 suppliers.
  • We carried out 70 corporate audits applying homogeneous sustainability criteria at a regional level, based on a four pillar model: Business Principles, HR, (with special emphasis on compliance with employment obligations), Health and Safety, and the Environment. On this occasion the audits were of global suppliers, which has allowed us to obtain a transverse vision of their management in the region, while at the same time analysing the risks in each country. 

During this year's audits variations of little significance have been detected in the degree of compliance in the various disciplines, with those variations being somewhat greater in the Environment, Health and Safety, and Business Principles (the graph on the following page shows the evolution in the levels of compliance recorded in recent years).

Despite these slight variations, in general we can highlight the fact that, in the last two years, the compliance levels for suppliers have become consolidated in the high performance area. In particular, the 85% compliance recorded within HR stands out, reflecting the effort made by our partners to guarantee compliance with employment regulations.

In the case of detected non-compliances, improvement plans have been implemented for each supplier in order to remedy the situation, with the implementation of 70 plans in 2014.

The distribution of risk is similar to that of 2013. Some of the more common risks have been detected in:

  • The areas of Industrial Health and Safety, Occupational Health, Preventive Medicine at Work and Emergency Brigade (Health and Safety).
  • The process of Attachment and Administration of Personnel and the Induction Process (HR).
  • The areas of Recyclable and Non-recyclable Waste Handling, Energy and Water Management (Environment).

 

'Engagement'. Continuous communication 

We promote continuous communication with our suppliers, with the aim of maintaining a close relationship with them.

  • We produce bulletins, online platforms such as the Supplier Portal or the Partner Portal and satisfaction surveys, with the aim of creating a sustainable relationship with this group of stakeholders. 
  • We organise face-to-face meetings with suppliers, where we share good practices and create a culture of sustainability which, progressively, has an impact on the various links in the value chain.

Workshop with partners in critical activities, held in Colombia

The workshop took place on 7 and 8 April 2014 in Colombia, and allowed us to share concepts and practices of health and safety at work with our partners who perform critical activities (Ericsson, Huawei, ZTE, Cobra, Icotec, FSCR, Opegin, Emcomunitel, Incopsa, Emsertelbuen, Servicios y Comunicaciones, Hombresolo and Centro Aseo), which allowed the identification of opportunities for improvement. Based on this we were able to draw up action plans and set up adequate standards for the development of tasks under the best safety conditions.

Second Sustainability Forum for suppliers in the United Kingdom​

In November 2014 the second Sustainability Forum for Telefónica suppliers took place in the United Kingdom. During the event we shared what we had learned in the area of sustainability with our suppliers, and we launched new initiatives. As a result, a new requirement for our suppliers was proposed, through which they promised that a percentage of their annual staff recruitment would be interns and/or apprentices, thus attempting to contribute towards boosting youth employment in the country.

In order to further encourage our partners, we presented the 1st edition of the Sustainability Awards for Telefónica UK suppliers, recognising the best supplier in terms of support for our sustainability requirements. This year the CEO of Telefónica UK, Ronan Dunne, gave the award to ISS, our installations management partner, for its commitment to multiple areas of sustainability. 

Aliados Programme

After six years operating in Latin America, the Aliados Programme has become a benchmark initiative in the management of partner companies and third parties in the region. With the ultimate aim of making these stakeholders strategic partners, Telefónica is working every year to strengthen its model to promote sustainable management with them.

In this way, at Telefónica we are working to boost a sustainable culture among our partners, promoting compliance with minimum standards in line with our Business Principles, enabling us to reduce possible risks on the value chain.

Management model and courses of action​

In each of the main countries in the region, the Company has a Committee of Partners, which is the body responsible for the implementation and development of the model on a local level.

To do so, they take as a basis the global tools which facilitate a homogeneity of operation (policy of minimums, risk detection and management model, and audits), while at the same time focusing each year on courses of action, both internal and external, determined by the needs identified in each one of the countries.

Last year we continued to work on the implementation of the Distribution Model on a regional level, the objectives of which are focused mainly on:

1. Having contracts which govern all aspects of the relationship, with achievable objectives, which allow for the minimisation of risk. 

2. Constructing shared management criteria, which guarantee sustainable, predictable relationships.

3. Generating alignment with Telefónica's policies in matters of the environment, integrated employment safety, and Business Principles.

4. Having clear agreements which allow for the optimum dimensioning of the service, and facilitate the monitoring of activities.

This model, which began as good practice in Ecuador, is being gradually deployed in the main countries of the region, and thus moving towards a sustainable, secure model. The effort made in 2014 allowed most of the main aspects of the initiative highlighted for the last period to be covered. 

Furthermore, within the framework of the programme various lines of work specific to each country have been developed, at all times respecting the local framework. In general they have all focused on ensuring compliance with the objectives indicated in audits, communication and training initiatives, together with the identification of synergies between the various partners to share good management practice in order to boost those areas identified as opportunities for improvement.

Predictive risk model (Argentina)

At Telefónica, with our integrated vision of management for partners in the country, we worked in 2014 on the development and improvement of a predictive model for third party risk covering all the companies in the Group. In this we have worked on the development of checks which allow the integration of emerging agents in the operating areas covering the technical, commercial and systems areas, Fundación Telefónica, and support activities (logistics, maintenance, and cleaning). This has helped us to identify the main control activities for each one, improving the detection process for risk situations, including those associated with the social setting, where the contract leaders report in a proactive way on risk situations, allowing the development of special plans which could lead to withdrawal, in cases where it is necessary.

Direction SMEs ("Rumbo Pymes") Programme (Colombia)

The programme, designed by Transparency for Colombia ("Transparencia por Colombia"), is a self-managed tool for managers, and helps small and medium-sized enterprises bring ethics to their actions as a management model, and create value and trust in their business relationships.

In 2014 the third group of partners was formed, made up of four companies. Their employees are trained and certified in the construction and implementation of the ethics programme. In this way, together with the two previous groups of partners, 18 companies have been trained and certified in this area during the last three years.

Communication with our partners (Ecuador)

Once again communication has been promoted as a strategic axis to boost the commitment of our partners to pursuing the proposed objectives, thanks to the establishment of closer links with them. In addition to the suppliers website section launched in 2013, the Company has specialist bulletins, such as:

a) 'This week at Movistar…', publishing the most important information in the areas of commerce and operational management, so that our Authorised Distributors are kept informed regarding the most important business matters.

b) 'Movistar reports…' has become the instrument for informing the segmented public of our partners about urgent matters which could arise during the week. 

In addition, the Company has the eWay portal, which has been set up as the main consultation tool for the call centre executives regarding commercial and operational information for products and services provided by Movistar, thus enabling them to count on direct support regarding the response the customer should be given at all times.

Profiling Project (Mexico)

Within the initiatives developed, the Profiling Project, launched in Mexico, stands out. Its objective is to develop and implement a management guide or human resources manual for the specialist channel (distributors) which allows for the standardisation of the processes of recruitment, selection, training and retention of sales executives, to ensure the quality of talent, minimise turnover and support an increase in sales. In 2014 the first phase was implemented, which consisted of a benchmark for human resource practices in relation to other similar companies, in order to provide a market reference. They also helped to obtain grants and benefits for various suppliers to offer as added value to their workforce.

Follow-up model for discrepancies (Peru)

In its second year of life, this has become a follow-up tool for the regional audits carried out in the country. With it, the auditors have been able to follow up the action plans required of suppliers with respect to the discrepancies identified in the audits carried out in the previous period. Its online character allows for an improvement in efficiency in the processes of validation of the evidence that the supplier presents at the request of the auditor, in order to eliminate the discrepancies.

Policy of Industrial Safety and Occupational Health (Venezuela)

In 2014 the Industrial Safety and Occupational Health Policy was created for contracted service and construction providers, with the aim of reporting on the minimum requirements demanded in matters of occupational Health and Safety for this type of company, in accordance with that provided in the Organic Law on Prevention, Conditions and Working Environment, and the Occupational Health and Safety at Work Programme.

We remain focused on the eradication of child labour

The Convention on the Rights of the Child guarantees all children and teenagers the right to be protected against labour exploitation. Despite this, the existence of 168 million boys and girls aged between 5 and 17 working in the world, according to the International Labour Organisation (ILO), demonstrates that it is not being adhered to. In this sense the prevention and eradication of child labour is an international objective, present in the development agendas set out by the various countries.

Furthermore, in various countries such as Colombia or Ecuador we have actively participated in some of the main initiatives launched in this area of action:

Colombian Network against Child Labour

Last December saw the official launch of the 'Colombian Network against Child Labour' public-private initiative led by the Ministry of Employment, and supported by the ILO, Global Compact Colombia, and various strategic partners, among them, Telefónica. Its objective is to decentralise the national strategy for preventing and eradicating the worst forms of child labour, and to protect the young worker.

In total, 14 companies formally committed themselves through the signing of an agreement that makes us members of the Network. The aim is to promote internally in our organisations and in our value chains and areas of influence the inclusion of strategies, programmes or projects for the prevention and eradication of child labour as part of our policy of Corporate Social Responsibility.

In this way we can achieve the idea of articulating the efforts of the companies which are members of the Global Comact and participants in the tabling of Principle 5 (Declaration of Rio), with the policy of the Ministry of Employment in Colombia, and the backing of the International Labour Organisation.

For this, the Ministry set the trend by proposing the Ecuador model as a reference in order to guarantee the commitment of companies to manage this risk in the value chain, together with accountability from the business sphere, not the philanthropic.

Meanwhile, the companies jointly put forward the six commitments we are prepared to take on, and the indicators which we will use to measure the progress. The six commitments are:

1. Actively participate in the Network.

2. Identify and manage the risks and impact of child labour, and promote respect for the rights of boys, girls and teenagers, both inside the company and in the supply chain.

3. Comply with national legal regulations and international conventions to prevent and eradicate all forms of child labour, and promote respect for the rights of boys, girls and teenagers, both inside the company, in the supply chain, and in areas of influence.

4. Periodically sensitise and train direct and indirect collaborators regarding the commitment to prevent and eradicate all types of child labour, both inside the company and in the supply chain.

5. Promote a culture of zero tolerance for child labour in its areas of influence.

6. Report on the implementation of these commitments and action plans to stakeholders.

With the creation of this Network, Telefónica achieved its commitment of taking as far as possible the Tabling of Principle 5 and the tools developed by Fundación Telefónica within the framework of the same. 

In this way, we managed to include the tool 'Aquí Estoy y Actúo' ("I'm here and I'm doing something") as one of the tools suggested to carry out the commitment of identifying risks in the supply chain.

'Aquí Estoy y Actúo' is an initiative which helps companies to eradicate child labour from its value chain, both within its own operations and within those of its suppliers.

During 2014 development has continued on the four lines of support for companies:

1. Make workers aware of the responsibilities of entrepreneurs and professionals regarding the eradication of child labour, and particularly the course of action to take if they become aware of one of these cases. 

2. Create internal teams within companies which are responsible for the execution of a voluntary plan of continuous improvement in this area. 

3. Provide tools and guides to obtain the prevention of child labour throughout the entire operation (including suppliers and supply chains). 

4. Evaluate companies using a model which allows classification of their activities and promotes their advancement through their commitment to adequate improvement.

At the end of 2014 the tool 'Aquí Estoy y Actúo' was being used by more than 105 companies in 11 countries of Latin America, which means it has reached over 206,000 employees. Of these companies, 57 have completed a self-diagnosis and have committed to developing a plan of action with tasks and deadlines.

The initiative will continue to be promoted in 2015, for which purpose work is being done on the platform, and companies will continue to be sensitised and mobilised. 

Network of Companies for an Ecuador Free of Child Labour

Telefónica Ecuador, as an active member of the Network of Companies for an Ecuador Free of Child Labour since 2012, will continue to promote these policies in our supply chain, and share experiences which promote a corporate culture. Its aim is to boost, through public-private partnerships, actions and strategies oriented towards the elimination, prevention and avoidance of child labour in the productive chains.

The Network of Companies for an Ecuador Free of Child Labour has presented its management report, following various years of activity in the country. This network came about as an initiative by the Ministry of Labour Relations and brings together, currently, 28 of the largest companies in the country , which influence over 5,000 suppliers on a national level, in order to guarantee the elimination of all types of child labour contracts in the supply chain.

Minerals in conflict

In the Telefónica Group, despite not having direct commercial relationships with foundries or refineries (SOR), we are actively working to include sustainability criteria in the entire value chain.

In this matter, the OECD established a series of directives in its report 'Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas'. Telefónica is governed by a series of measures which follow this report.

  • Commitment to the OECD guidelines.
  • 3TG mineral traceability.
  • Supplier evaluation.
  • Commitment initiatives.
  • Complaints.
  • Information.

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