IPC-1401 EN Supply Chain Social Responsibility Management System Guidance Final Draft for Industry Review October 2016 Deadline for comments: November 25, 2016 Email comments to JeanneCooney@ipc.org. 1
IPC-1401 EN Supply Chain Social Responsibility Management System Guidance 1 Scope 1.1 Purpose This standard specifies the requirements and guidance for a supply chain social responsibility management system that an enterprise can use to integrate social responsibility into products and its life cycle and manage social responsibility risks and opportunities through implementation of sustainable procurement in a cascading approach so as to enhance the competitive advantages of the enterprise and its supply chain. This standard helps an enterprise achieve the intended outcomes of its supply chain social responsibility management system, which creates values for the enterprise itself, its customers, its suppliers and other stakeholders. The intended outcomes include: a) enhancement of working conditions, environmental performance and ethics level of the supply chain; b) fulfillment of compliance obligations and reduced risks and costs of the supply chain; c) achievement of social responsibility objectives including improvement of customer satisfaction and competitive advantages of the enterprise and its supply chain. This standard is developed for and intended to be applicable to electronics manufacturing enterprises, any other enterprise can use it as a reference. This standard applies to the social responsibility risks and opportunities (6.1.1) that the enterprise determines it can either control or influence considering a life cycle perspective. This standard does not state specific criteria of social responsibility performance, does not add or change the responsibility or obligation the enterprise has before it use this standard. This standard can be used in whole or in part to systemically improve social responsibility management. This standard adopts the high level structure of ISO management system standard, it is compatible with the management systems of quality, environmental, health and safety, information security and cyber security, etc. 2 Normative References The following listed documents, norms or standards are referred or applied in this standard. 2.1 ISO 26000 Guidance on social responsibility 2.2 ISO 20400 Sustainable procurement - Guidance 2.3 ISO 9001 Quality management systems - Requirements 2.4 ISO 14001 Environmental management systems - Requirements with guidance for use 2
2.5 EICC Electronic Industry Code of Conduct 2.6 JAC supply chain sustainability guidelines 2.7 UNGC supply chain sustainability-a practical guide for continuous improvement 2.8 UNGC A practical guide to help prevent corruption in the supply chain 2.9 UNEP Sustainable procurement guidelines for office IT equipment 2.10 UNEP Guidelines for social life cycle assessment of products 3 Terms and Definitions 3.1 Enterprise A business organization which usually designs products according to its customer requirements, purchases materials, parts or services from suppliers, provides the products to customers in a competitive market after production, manufacturing or assembling with necessary after-sales services so as to obtain the profits for sustainable operations. 3.2 Social Responsibility Responsibility of an enterprise for the impacts of its decisions and activities on society and the environment through transparent and ethical behavior. ISO 26000 standard specifies 37 social responsibility issues, from an enterprise perspective all these issues can be classified into below two categories: a) Product related issues such as prohibited or restricted substances, product energy efficiency, product energy consumption, product carbon footprint, product safety and product ethical impact, etc; b) Production process related issues such as labor rights, health and safety, environmental impact, resource efficiency and anti-corruption, etc. 3.3 Management System Set of interrelated or interacting elements of an enterprise (3.1) to establish policies, objectives and processes to achieve these objectives. Note 1: a management system can address one discipline or several disciplines (e.g. quality, environmental, health and safety, energy and financial management). Note 2: the system elements include the enterprise s organizational structure, roles and responsibilities, planning and operation, performance evaluation and improvement. Note 3: The scope of a management system can include the whole of the enterprise, specific functions of the enterprise, specific sections of the enterprise or one or more functions cross a group of enterprises. Note 4: Social responsibility management system is a part of the management system used to manage the social responsibility needs and expectations of stakeholders, fulfill the 3
compliance obligations (3.8) and address risks (3.9) and opportunities. 3.4 Social Responsibility Policy Intentions and direction of an enterprise (3.1) related to social responsibility performance as formally expressed by its top management. It is a set of principles stated as commitments at least including fulfilling compliance obligations (3.8), meeting customer requirements, controlling risks and improving business competitiveness, in which top management outlines the intentions of the enterprise to support and enhance social responsibility performance and set social responsibility objectives (3.5), take actions to achieve the intended outcomes (1.1)of the social responsibility management system. 3.5 Social Responsibility Objective Objective set by the enterprise (3.1) consistent with its social responsibility policy (3.4). Top management may establish social responsibility objectives at the strategic level, the tactical level or the operational level. The strategic level includes the highest level of the enterprises and its objectives can be applicable to the whole enterprise. The tactical and operational levels can include social responsibility objectives for specific units or functions of the enterprise and should be compatible with its strategic direction. 3.6 Customer Satisfaction Internal or external customer s perception of the degree to which the customer s expectations have been fulfilled. Note 1: It can be that the customer s expectation is not known to the enterprise (3.1), or even to the customer in question, until the product or service is delivered. It can be necessary for achieving high customer satisfaction to fulfill an expectation of a customer even if it is neither stated nor generally implied or obligatory. Note 2: Complaints are a common indicator of low customer satisfaction but their absence does not necessarily imply high customer satisfaction. Note 3: Even when customer requirements have been agreed with the customer and fulfilled, this does not necessarily ensure high customer satisfaction. [SOURCE: ISO 9000:2015, 3.9.2] 3.7 Requirement Need or expectation that is stated, generally implied or obligatory. Note 1: Generally implied means that it is custom or common practice for the enterprise (3.1) and stakeholders that the need or expectation under consideration is implied. Note 2: A specified requirement is one that is stated, for example in documented information. 4
Note 3: Requirements other than legal requirements become obligatory when the enterprise decides to comply with them. [SOURCE: ISO 14001:2015] 3.8 Compliance Obligations Legal requirements (3.7) that an enterprise (3.1) has to comply with and other requirements that an enterprise has to or chooses to comply with. Note 1: Compliance obligations are related to the social responsibility management system (3.3). Note 2: Compliance obligations can arise from mandatory requirements, such as applicable laws and regulations, or voluntary commitments, such as enterprise and industry standards, contractual relationships, codes of practice and agreements with community groups or non-governmental organizations. [SOURCE: ISO 14001:2015] 3.9 Risk Effect of uncertainty. Note 1: An effect is a deviation from the expected positive or negative. Note 2: Uncertainty is the state, even partial, of deficiency of information related to, understanding or knowledge of, an event, its consequence, or likelihood. Note 3: Risk is often characterized by reference to potential events (as defined in ISO Guide 73:2009,3.5.1.3) and consequences (as defined in ISO Guide 73:2009, 3.6.1.3), or a combination of these. Note 4: Risk is often expressed in terms of a combination of the consequences of an event (including changes in circumstances) and the associated likelihood (as defined in ISO Guide 73:2009, 3.6.1.1) of occurrence. [SOURCE: ISO 14001:2015] 3.10 Life Cycle Consecutive and interlinked stages of a product (or service) system, from raw material acquisition or generation from natural resources to final disposal. Note: The life cycle stages include acquisition of raw materials, design, production, transportation/delivery, use, end-of-life treatment and final disposal. [SOURCE: ISO 14001:2015] 4 Context of the Enterprise 4.1 Understanding the Enterprise and Its Context 5
The enterprise should determine the external and internal issues that are relevant to its purpose and strategic direction and that affect its ability to achieve the intended outcomes (1.1) of its social responsibility management system, so as to understand the impact of products and its life cycle on the society and environment, including the positive and negative impact. The purpose of an enterprise is creating customer values, the strategic direction of an enterprise is enhancing competitive advantages, the foundational competitive strategies are cost leadership and differentiation. The enterprise should understand the connections between its purpose and strategy and external and internal issues, the external issues are related to external cultural, social, political, legal, regulatory, financial, technological, economic, natural and competitive circumstances, whether international, national, regional or local; the internal issues are related to internal characteristics or conditions of the enterprise, such as its activities, products and services, strategic direction, culture and capabilities (i.e. people, knowledge, processes, systems). 4.2 Understanding the Needs and Expectations of Stakeholders The enterprise should determine: a) the stakeholders that are relevant to the social responsibility management system; b) the relevant needs and expectations (i.e. requirements) of the stakeholders; c) which of these needs and expectations become its compliance obligations. The enterprise should pay more attention to: a) direct customers and final users; b) employees and workers in the supply chain; c) direct suppliers and its sub-suppliers; d) competitors and industry associations; e) governmental agencies; f) community; g) non-governmental organizations concerning about social responsibility issues. The enterprise should identify key stakeholders base on the impact to and/or by the enterprise, determine relevant needs and expectations and compliance obligations with reference to ISO 26000 Social Responsibility Guidance and industry standards of Electronics Industry Code of Conduct or JAC Supply Chain Sustainability Guidelines. 4.3 Determining the Scope of the Social Responsibility Management System The enterprise should determine the boundaries and applicability of the social responsibility management system to establish its scope. 6
When determining this scope, the enterprise should consider: a) the external and internal issues referred to in 4.1; b) the compliance obligations referred to in 4.2; c) its organizational functions and physical boundaries; d) its activities, products and its life cycle; e) its authority and ability to exercise control and influence. Once the scope is defined, all activities, products and services of the enterprise within that scope need to be included in the social responsibility management system. The supply chain social responsibility management system should include at least the procurement function and all suppliers, including direct and indirect suppliers. 4.4 Social Responsibility Management System The enterprise should establish, implement, maintain and continually improve the supply chain social responsibility management system, including the processes needed and their interactions, in accordance with the requirements of this standard to achieve the intended outcomes (1.1). The enterprise should consider the following principles besides the knowledge gained in 4.1 and 4.2 when establishing and maintaining the social responsibility management system: a) Integrate social responsibility into enterprise strategy to enhance competitive advantages through social responsibility innovation; b) Integrate social responsibility into products and its life cycle to manage social responsibility risks and opportunities (6.1.1); c) Establish the processes needed to integrate the planned social responsibility actions into business process (8 and 9) and daily operation; d) Establish necessary governance, accountability and incentive mechanism to ensure the effectiveness of the social responsibility management system. 5 Leadership 5.1 Leadership and Commitment Top management should take the following actions to demonstrate leadership and commitment with respect to the social responsibility management system. a) take overall responsibility and accountability for the intended outcomes (1.1) and for the effectiveness of the social responsibility management system; b) ensure that the social responsibility policy (5.2) and objectives (6.2) are established and 7
are compatible with the strategic direction and the context of the enterprise; c) ensure customers focus and integrate the social responsibility management system requirements into business processes, products and its life cycle; d) define the management roles, responsibilities and authority (5.3) at all functions and levels and support them to demonstrate leadership; e) provide necessary resources (7.1) and support all employees to contribute to the effectiveness of the social responsibility management system. Top management can appoint appropriate management representative or chief sustainability officer (CSO) as the leader of social responsibility strategy, to establish, maintain and continually improve the social responsibility management system, in accordance with the requirements of this standard, to advocate proactive management model, to drive relevant management roles to implement the social responsibility management system in their own areas of responsibility, to organize internal audit (9.2) and management review (9.3) and report to top management. Top management should establish appropriate governance mechanism to integrate social responsibility requirements into business decision-making, top management may establish a separate social responsibility committee to involve more internal or external stakeholders. 5.2 Social Responsibility Policy Top management should establish, implement and maintain a social responsibility policy that within the defined scope of its social responsibility management system: a) is appropriate to the purpose, strategic direction and context of the enterprise (4.1) and to the nature of its social responsibility risks and opportunities (6.1); b) provides a framework for setting social responsibility objectives (6.2); c)includes a commitment to fulfill its compliance obligations (4.2); d) includes a commitment to continual improvement of the social responsibility management system; e) includes a commitment to customer focus, management accountability and participation of all employees. The enterprise should maintain documented information of the social responsibility policy for internal and external communication (7.4). 5.3 Organizational Roles, Responsibilities and Authorities Top management should ensure that the responsibilities and authorities for relevant management roles are assigned and communicated at all functions and levels within the enterprise and added in their job description and performance evaluation. Top management should assign the responsibility and authority for: 8
a) ensuring that the social responsibility management system conforms to the requirements of this standard; b) reporting on the performance of the social responsibility management system to top management. Top management should ensure that senior management and business leaders are accountable for the social responsibility performance in their own areas of responsibility, senior management of procurement is accountable for the supply chain social responsibility management system and its performance. Top management should ensure that procurement managers are responsible for the social responsibility performance of the suppliers under their control, integrate social responsibility into product qualification and selection, supplier qualification and selection and performance management, and drive suppliers to continually improve its social responsibility performance through procurement business. Top management can extend the functions of human resource, legal, environmental, safety and health to suppliers or even the whole supply chain, top management can also appoint qualified social responsibility expert(s) help top management and procurement managers to fulfill their social responsibility management responsibilities. 6 Planning 6.1 Actions to Address Risks and Opportunities 6.1.1 Determining Social Responsibility Risks and Opportunities The enterprise should establish, implement and maintain the processes needed to determine the social responsibility risks and opportunities related to product and its life cycle, considering the issues determined in 4.1 and the requirements and compliance obligations determined in 4.2. The enterprise should periodically conduct life cycle analysis to identify the positive and negative effects and the possibilities related to social responsibility at the stages of design, procurement, manufacturing, sales, logistics, use and recycling, and conduct economic evaluation when necessary, so as to determine the major social responsibility risks and opportunities. The enterprise should periodically conduct due diligence with consideration of supply chain structure and its distribution features to map the major social responsibility risks and opportunities and relevant supplier category and supplier list. The enterprise should maintain documented information of social responsibility risks and opportunities. 9
6.1.2 Planning to Take Actions The enterprise should plan appropriate actions to address the social responsibility risks and opportunities determined in 6.1.1, including emergency preparedness and response actions (8.9), integrate above actions into the processes (6.2, 7, 8 and 9.1) of the social responsibility management system and relevant business processes, and evaluate the effectiveness of those actions (9.1). The actions planned may include establishing social responsibility objectives (6.2) or may be incorporated into other social responsibility management system processes, either individually or in combination. Some actions may be addressed through other management systems, such as those related to health and safety or business continuity, or through other business processes related to risk, financial or human resource management. The enterprise should conduct root cause analysis to identify the root causes of social responsibility risks and opportunities, and take corrective and preventive actions accordingly. The enterprise may benchmark with industry best practices and business cases. The enterprise should conduct cost-benefit analysis to select cost-effective actions. When considering its technological options, the enterprise should consider the use of bestavailable techniques, where economically viable, cost-effective and judged appropriate. The enterprise should maintain documented information for planned actions including the root causes, corrective and preventive actions and estimated costs and benefits, related products and processes against the major social responsibility risks and opportunities determined in 6.1.1. 6.2 Social Responsibility Objectives and Planning to Achieve Them 6.2.1 Social Responsibility Objectives The enterprise should establish the social responsibility objectives at relevant functions and levels, the social responsibility objectives should be: a) consistent with the social responsibility policy (5.2) and its commitment; b) consistent with the social responsibility compliance obligations (4.2); c) consistent with the major social responsibility risks and opportunities (6.1.1); d) Measurable. The enterprises can establish the social responsibility objectives at strategic, tactical and operational level with priority in the aspects of customer satisfaction, risk control, efficiency improvement and business innovation. The enterprise may establish customer satisfaction objectives against customer requirements, risk control objectives against compliance obligations, efficiency improvement objectives against industry leadership practices and business innovation objectives against long-term cost and benefit analysis to support cost leadership or differentiation competitive strategy. 10
The enterprise should retain documented information of social responsibility objectives. 6.2.2 Planning to Achieve Social Responsibility Objectives When planning how to achieve its social responsibility objectives, the enterprise should determine: a) what actions (6.1.2) will be done; b) what resources (7.1) will be required; c) who will be responsible; d) when it will be completed; e) how the results will be evaluated (9.1). The enterprise should consider how actions to achieve its social responsibility objectives can be integrated into its business processes (8 and 9). 7 Support 7.1 Resources The enterprise should determine and provide the resources needed for the establishment, implementation, maintenance and continual improvement of the social responsibility management system, including but not limited to the infrastructures of plant and equipment, the production and working conditions, the technical and human resources, the financial resources and natural resources. 7.2 Competence The enterprise should: a) determine the necessary competence of employees that affects its social responsibility performance and its ability to fulfill its compliance obligations; b) ensure these employees are competent on the basis of appropriate education, training or experience; c) determine training needs associated with its social responsibility risks and opportunities (6.1.1) and its social responsibility management system; d) take appropriate actions to acquire the necessary competence, and periodically evaluate the effectiveness of the actions taken. Top management should understand the business logic and business values of social responsibility and how to improve customer satisfaction and competitive advantages through social responsibility innovation; The procurement managers should understand how to integrate social responsibility into procurement business and drive suppliers continual improvement of social responsibility performance; human resources, environmental, health and safety and other functions and social responsibility experts should understand how to support procurement managers and suppliers to fulfill their 11
responsibilities. The enterprise should retain appropriate documented information of competence as evidence. 7.3 Awareness The enterprise should ensure that employees are aware of: a) social responsibility policy (5.2) and objectives (6.2.1); b) social responsibility issues (4.1), risks and opportunities (6.1.1) and compliance obligations (4.2) associated with their work; c) their roles and responsibilities (5.3) in the social responsibility management system and possible contribution; d) the implications of not conforming with the social responsibility management system requirements, including not fulfilling the compliance obligations (4.2); e) the benefits to individuals and enterprise of establishing and maintaining the social responsibility management system. The enterprise should recognize the possible social responsibility risks and opportunities (6.1.1) at various stages of the product life cycle and understand the needs of customers and other stakeholders and its potential opportunities. Lower social responsibility performance often leads to lower efficiency, increased cost, delayed supply and even interruption of business. Higher social responsibility performance can improve customer satisfaction, mitigate risks, improve efficiency and promote business innovation. The proactive management of social responsibility risks and opportunities can enhance the competitive advantages. 7.4 Communication 7.4.1 General The enterprise should establish, implement and maintain the processes needed for internal and external communication relevant to the social responsibility management system, including: a) on what it will communicate; b) when to communicate; c) with whom to communicate; d) how to communicate; e) how to release social responsibility information. When establishing its communication processes, the enterprise should: a) pay more attention to the needs and expectations of key stakeholders and relevant compliance obligations (4.2); 12
b) consider the value of planned social responsibility information to the enterprise, customers and relevant suppliers; c) ensure that social responsibility information communicated is reliable and consistent with the information generated within the social responsibility management system; d) consider the differences of language, culture, geographical location, etc with communication audience. The enterprise should identify potential or emerging risks or opportunities and respond to relevant communications on its social responsibility management system. The enterprise should retain appropriate documented information as evidence of its communications. 7.4.2 Internal Communication The enterprise should: a) internally communicate the information relevant to the social responsibility management system among the various levels and functions of the enterprise; b) ensure its communication processes enable employees to contribute continual improvement. The enterprise should integrate the social responsibility information into business communication processes, when appropriate to communicate among the functions of product design, procurement, manufacturing, sales and after-sales, human resources and finance to take concerted actions to address social responsibility risks and opportunities. The enterprise should provide necessary opportunities and resources to enable employees at all levels to participate in determining social responsibility risks and opportunities (6.1.1) and planning to take actions (6.1.2 and 6.2.2), establishing and continually improving the social responsibility management system and its processes (8 and 9). 7.4.3 External Communication The enterprise should externally communicate information relevant to the social responsibility management system as established by the enterprise communication processes and as required by its compliance obligations (4.2). The enterprise should periodically communicate with downstream customers and upstream suppliers on the social responsibility policies, commitments, requirements and actions and seek opportunities for continual improvement. The enterprise should communicate with relevant industry associations, government, non-governmental organizations and other stakeholders as needed to listen to their suggestions and advices. The enterprise should gradually improve social responsibility transparency, including publishing social responsibility reports and supporting suppliers to publish their social responsibility reports. The enterprise should adopt proper approach to respond to the possible complaints or questions arise from stakeholders. 13
7.5 Documented Information 7.5.1 General The social responsibility management system should include: a) documented information required by this Standard; b) documented information determined by the enterprise as being necessary for the effectiveness of the social responsibility management system. Documented information of the social responsibility management system can be classified into several levels of management manual, procedures, operating instructions and records, its complexity of the information depends on: a) the size of enterprise and its type of activities, processes, products and services; b) the need to demonstrate fulfillment of its compliance obligations (4.2); c) the complexity of supply chain structure, process and interaction; d) the competence of employees and other persons. 7.5.2 Creating and Updating When creating and updating documented information, the enterprise should ensure appropriate: a) identification and description (e.g. a title, date, author, or reference number); b) format (e.g. language, software version, graphics) and media (e.g. paper, electronic); c) review and approval for suitability and adequacy. 7.5.3 Control of Documented Information The enterprise should control the documented information required by the social responsibility management system and by this standard to ensure: a) it is available and suitable for use, where and when it is needed; b) it is adequately protected (e.g. from loss of confidentiality, improper use, or loss of integrity). For the control of documented information, the enterprise should address the following activities as applicable: a) distribution, access, retrieval and use; b) storage and preservation, including preservation of legibility; c) control of changes (e.g. version control); d) retention and disposition. 8 Operation 14
8.1 Operational Planning and Control The enterprise should take following actions to establish, implement, control and maintain the processes needed, to address the social responsibility risks and opportunities determined in 6.1 and actions to achieve social responsibility objectives determined in 6.2. a) establish the social responsibility requirements and criteria of product qualification including but not limited to prohibited or restricted substances, product energy efficiency, product energy consumption, product carbon footprint, product safety and product ethical impact, etc; b) establish the social responsibility requirements and criteria of supplier qualification, including but not limited to labor rights, health and safety, environmental impact, resource efficiency and anti-corruption, etc; c) establish the anti-corruption requirements and criteria of procurement practices including but not limited to offering bribery, accepting bribery and unfair competition; d) establish the processes and principles of sustainable procurement including but not limited to incentives or priority for products and suppliers with better social responsibility performance, veto for poor social responsibility performance, incentive mechanism of rewarding good and punishing bad; e) Implement control of the processes in accordance with the requirements and criteria to integrate social responsibility into product qualification and selection, supplier qualification, supplier performance management and other procurement operations. Consistent with a life cycle perspective, the enterprise may: a) establish appropriate controls to ensure that its social responsibility requirements (especially the social responsibility risks and opportunities determined in 6.1) are addressed in the design and development process for the product, considering each stage of its life cycle; b) consider to provide appropriate information about potential significant social responsibility impacts associated with the transportation or delivery, use, end-of-life treatment and final disposal of its products. The enterprise should maintain documented information to the extent necessary to have confidence that the processes have been carried out as planned. 8.2 Supplier Code of Conduct The enterprise should establish, implement and maintain the processes needed to determine the social responsibility requirements and criteria of product qualification and supplier qualification, which is usually so called supplier code of conduct referring to industry standards of EICC code or JAC guidelines in accordance with the compliance obligations determined in 4.2 and the risks and opportunities and actions determined in 6.1 and 6.2. 15
The enterprise should integrate the supplier code of conduct as a part of procurement contract, require all suppliers to sign and communicate to their employees (especially in sales and marketing function), require suppliers to integrate the code of conduct as the customer requirements into its products and value chain activities, and cascade to sub-tier suppliers. The enterprise should communicate the requirements of the supplier code of conduct to all procurement managers and relevant employees, and ensure that they understand and implement appropriately. 8.3 Product Qualification and Selection The enterprise should establish, implement and maintain the processes needed to qualify and select products base on its social responsibility performance, the enterprise may consider to accept the product qualification results of a third party certification program, such as product energy efficiency certification, green product certification, green packaging certification, or the qualification results of other enterprises. When introducing a new product, the enterprise should evaluate if the product conforms with relevant social responsibility requirements and at least meets the set minimum standard as a condition to be qualified and added in the qualified product list. Those products failed to meet the minimum standard should be disqualified, further requalification is required within agreed timeline after appropriate corrective actions. The enterprise should select new products from the qualified product list with priority to those products with better social responsibility performance. The enterprise should periodically evaluate the product s social responsibility performance with appropriate intervals and set priority to those products with major risks and opportunities determined in 6.1.1. Those disqualified products are subject to requalification within agreed timeline after appropriate corrective and/or remedial actions. 8.4 Supplier Qualification and Selection The enterprise should establish, implement and maintain the processes needed to qualify and select suppliers base on its social responsibility performance, the enterprise may consider to accept the qualification results of a third-party certification program such as ISO14001 environmental management system, OHSAS18001 health and safety management system, SA8000 social accountability, or industry joint audit results of EICC or JAC, or the audit results of other enterprises. When introducing a new supplier, the enterprise should evaluate if the supplier conforms to the supplier code of conduct and at least meets the set minimum standard as a condition 16
to be qualified and added in the approved supplier list. Those potential suppliers failed to meet the minimum standard should be disqualified, further re-qualification is required within agreed timeline after appropriate corrective action. The enterprise should select new suppliers from the approved supplier list with priority to those suppliers with better social responsibility performance. The enterprise should periodically evaluate suppliers social responsibility performance with set intervals and set priority to those suppliers with major risks and opportunities determined in 6.1.1. Those disqualified suppliers are subjected to re-qualification within agreed timeline after appropriate corrective and/or remedial actions. 8.5 Supplier Performance Management The enterprise should establish, implement and maintain the processes needed to integrate the social responsibility performance determined in 8.3 and 8.4 into supplier overall performance with appropriate weighting and take adequate incentive actions in accordance with the social responsibility performance. The enterprise should make procurement decisions base on supplier s overall performance with considering the whole life cost and benefit and set priority to those products and suppliers with better social responsibility performance, the enterprise should provide appropriate recognitions and awards, such as more business opportunities or more orders. For those suppliers disqualified or failed to meet the agreed social responsibility performance, the enterprise should reduce orders, restrict tendering, or even phase out. The enterprise should recognize that customer orders usually affect a supplier s social responsibility performance, for example short delivery time often cause overtime work, and take appropriate actions to consider supplier capacity and other ability flexibility when placing orders. The enterprise should timely communicate social responsibility performance and relevant incentives or restriction actions to suppliers, follow up the corrective and remedial actions in routine business communication. 8.6 Anti-corruption The enterprise should establish, implement and maintain the processes needed to determine the anti-corruption requirements and criteria in procurement practices, which is usually so called business conduct guidance as a part of supplier code of conduct, referring to the industry standards of EICC code or JAC guidelines in accordance with the compliance obligations determined in 4.2 and the risks and opportunities and actions determined in 6.1 and 6.2. 17
The enterprise should publicly announce the business conduct guidance including statement of zero-tolerance of corruption to all employees, suppliers and customers, and establish communication channels and follow-up mechanisms for reporting concerns. The enterprise should require all employees (especially in procurement function) to sign anti-corruption commitment, provide communication and training to them and conduct regular self-assessment. The enterprise should require all suppliers to sign anti-corruption commitment, provide communication and training to them and request them conduct regular self-assessment. The enterprise should develop and implement the processes needed such as appropriate decentralization, collective decision-making, improved transparency and integrate anticorruption requirements and criteria into procurement process, especially in product qualification, supplier qualification and bidding to prevent corruption. The enterprise should implement effective incentive and penalty actions against identified anti-corruption behaviors, integrate into performance evaluation of employees and suppliers and take zero tolerance penalty to corruption behaviors. 8.7 Supplier Capability Building The enterprise should consider to take following actions as needed to assess the social responsibility risk and opportunities with suppliers, identify systemic failures, share the industry best practices and business cases, and seek systemic solutions. a) provide communication and training to help suppliers to understand the business logic and business values of social responsibility, and integrate social responsibility into cost leadership or differentiation competitive strategy. b) provide communication and training to help suppliers to improve self-management capability, establish effective social responsibility management system, and integrate social responsibility into business processes and daily operation. c) establish a peer to peer learning platform and support suppliers to benchmark with industry best practices, promote awareness and capability, and realize the values and objectives of social responsibility. 8.8 Industry Collaboration The enterprise should consider to take the following actions needed to initiate or participate in industry collaboration programs through industry associations together with peer enterprises: a) industry social responsibility working group to collectively review the industry social responsibility challenges and opportunities, establish the industry social responsibility 18
standard and best practices guidance, and/or take concerted actions. b) industry social responsibility certification scheme to develop unified certification criteria, methodologies, scoring and grading system and establish certification resources and mutual recognition system with other certification schemes. c) peer to peer learning platform to support benchmarking mutually and against industry best practices, and spread best practices and business cases in the industry. d) supply chain dialogue between the upstream and downstream enterprises, to promote cross-industry or cross-regional collaboration, and gradually establish or improve supply chain governance mechanism. 8.9 Emergency Preparedness and Response The enterprise should establish, implement and maintain the processes needed to prepare for and respond to potential emergency situations identified in 6.1.1, such as fire or explosion incident, collective labor dispute or strike, consumer or shareholder boycott, lawsuits or other crisis incident, etc. The enterprise should: a) prepare to respond by planning actions to prevent or mitigate adverse impact from emergency situations; b) respond to actual emergency situations as planned; c) take appropriate actions to prevent, remedy or mitigate the consequence of emergency situations; d) periodically test the planned response actions where practicable; e) periodically review and revise the processes and planned response actions, in particular after emergency situation or tests. The enterprise should maintain documented information of emergency preparedness and response. 9 Performance Evaluation 9.1 Monitoring, Measurement, Analysis and Evaluation The enterprise should establish, implement and maintain the processes needed to monitor, measure, analyze and evaluate its social responsibility performance and fulfillment of its compliance obligations (4.2). The enterprise should determine: a) what needs to be monitored and measured; b) the methods for monitoring, measurement, analysis and evaluation; c) the criteria and indicators its social responsibility performance; 19
d) when the monitoring and measuring should be performed; e) when the results from monitoring and measurement should be analyzed and evaluated. The enterprise should ensure that calibrated or verified monitoring and measurement equipment is used and maintained, as appropriate. The enterprise should evaluate its social responsibility performance and the effectiveness of the social responsibility management system. The enterprise should retain appropriate documented information as evidence of the monitoring, measurement, analysis and evaluation results. 9.2 Internal Audit The enterprise should conduct internal audits as planned interval to determine whether the social responsibility management system conforms to the requirements of social responsibility management system and the requirements of this standard and is effectively implemented and maintained. The enterprise should establish, implement and maintain an internal audit program, including the frequency, methods, responsibilities, planning requirements and reporting of its internal audits. When establishing the internal audit program, the enterprise should take into consideration the social responsibility risks and opportunities (6.1.1), changes affecting the enterprise and the results of previous audits. The enterprise should define the audit criteria and scope for each audit, select auditors and conduct audits to ensure objectivity and the impartiality of the audit process and ensure that the results of the audits are reported to relevant management. The enterprise should retain documented information as evidence of the implementation of the audit program and the audit results. 9.3 Management Review Top management should review the social responsibility management system at planned interval to ensure its continuing suitability, adequacy and effectiveness. The management review should include consideration of: a) the status of actions from previous management reviews; b) changes in: 1) external and internal issues that are relevant to the social responsibility 20
management system (4.1); 2) the needs and expectations of stakeholders, including compliance obligations (4.2); 3) social responsibility risks and opportunities (6.1.1); c) the extent to which social responsibility objectives (6.2.1) have been achieved; d) information on the enterprise s social responsibility performance (9.1 and (9.2), including trends in: 1) nonconformities and corrective actions; 2) monitoring and measurement results; 3) fulfillment of its compliance obligations; 4) audit results. e) adequacy of resources (7.1); f) relevant communications from stakeholders, including complaints (7.4); g) opportunities for continual improvement. The outputs of the management review should include: a) conclusions on the continuing suitability, adequacy and effectiveness of the social responsibility management system; b) decisions related to continual improvement opportunities; c) decisions related to any need for changes to the social responsibility management system, including resources; d) actions, if needed, when social responsibility objectives have not been achieved; e) opportunities to improve integration of the social responsibility management system with other business processes, if needed; f) any implication for the strategic direction of the enterprise. The enterprise should retain documented information as evidence of the results of management reviews. 10 Improvement 10.1 Nonconformity and Corrective Action The enterprise should determine opportunities for improvement (9.1, 9.2 and 9.3) and implement necessary actions to achieve the intended outcomes (1.1) of its social responsibility management system. When nonconformity occurs (7, 8 and 9), the enterprise should react to the nonconformity, take actions to control and correct it, and deal with the consequences, including mitigating adverse impacts. The enterprise should take actions needed to eliminate the root causes of the nonconformity, in order that it does not recur or occur elsewhere. 21
The enterprise should review the effectiveness of the corrective actions taken and make changes to the social responsibility management system, if necessary. The enterprise should retain documented information of nonconformities and corrective actions as evidence. 10.2 Continual Improvement The enterprise should continually improve the suitability, adequacy and effectiveness of the social responsibility management system and enhance competitive advantages of the enterprise and its supply chain through social responsibility innovation. The rate, extent and timescale of actions that support continual improvement are determined by the enterprise. The enterprise can improve the social responsibility management system as a whole or improving one or more of its elements. Annex A (informative) Comparison of IPC1401:2016 and EICC code Purpose Approach Scope Content Compleme ntary IPC1401 Improve social and environmental performance of enterprise and its supply chain, beyond compliance to improve competitive advantages through CSR innovation. Drive suppliers to improve CSR performance and competitiveness through sustainable procurement. Focus on procurement function and supplier control, including product qualification, supplier selection and its performance management. No CSR performance criteria, mainly management system of sustainable procurement including identifying risks and opportunities, developing actions to integrate into operation, performance evaluation and improvement. Provide strategy and methodologies to meet or exceed EICC compliance criteria. EICC Improve the working conditions, health and safety, and ethical performance, mitigate business risk through continual compliance. Drive supplier to improve CSR performance through audits and benchmarking against compliance criteria. Focus on internal operations including HR/EHS/Ethics practices, minor concerns on supplier and product. Mainly CSR performance criteria including labor standards, health and safety, environmental, ethics and minor on general management system. Provide compliance obligations inputs for IPC1401 sustainable procurement management system. Annex B (informative) Correspondence among IPC1401:2016, 22
ISO 9001:2015 and ISO 14001:2015 IPC1401:2016 Supply Chain Social Responsibility Management System ISO9001:2015 Quality management systems Requirements ISO14001:2014 Environmental management systems Requirements with guidance for use Guidance 1 Scope 1 Scope 1 Scope 2 Normative references 2 Normative references 2 Normative references 3 Terms and definitions 3 Terms and definitions 3 Terms and definitions 4 Context of the enterprise 4 Context of the 4 Context of the organization organization 4.1 Understanding the enterprise and its context 4.1 Understanding the organization and its 4.1 Understanding the organization and its context context 4.2 Understanding the needs and expectations of stakeholders 4.2 Understanding the needs and expectations of interested parties 4.2 Understanding the needs and expectations of interested parties 4.3 Determining the scope of the social responsibility management system 4.3 Determining the scope of the quality management system 4.3 Determining the scope of the environmental management system 4.4 Social responsibility management system 4.4 Quality management system and its processes 4.4 Environmental management system 5 Leadership 5 Leadership 5 Leadership 5.1 Leadership and 5.1 Leadership and 5.1 Leadership and commitment commitment commitment 5.2 Social responsibility 5.2 Quality policy 5.2 Environmental policy policy 5.3 Organizational roles, responsibilities and 5.3 Organizational roles, responsibilities and 5.3 Organizational roles, responsibilities and authorities authorities authorities 6 Planning 6 Planning for the quality 6 Planning management system 6.1 Actions to address risks and opportunities 6.1 Actions to address risks and opportunities 6.1 Actions to address risks and opportunities 6.1.1 Determine social responsibility risks and opportunities 6.1.1 General 6.1.2 Environmental aspects 6.1.3 Compliance obligations 6.1.2 Planning to take actions 6.1.4 Planning action 23