Abstract
The important presence of TIM all along the supply chain allows the company to generate a significant impact in terms of improvement, in the sustainability area, of each supplier
Inherent risks of some activities in the ICT sector, accompanied by outsourcing and delocalization processes, increased the need to check the working conditions practiced in remote areas and pushed the company to adopt a systemic approach toward sustainable procurement practices.
The Experience
TIM S.p.A. is the largest Italian telecommunication company in terms of revenues and among the first 500 around the world. With its networks, products and IT solutions, is one of the main actors in the evolution towards a digital economy and, aware of this strategic role, TIM works constantly to manage and innovate its infrastructures and technologies.
The Group built its competitive advantage based on fair business practices and responsible purchasing, promoting principles of legality, transparency, fairness and loyalty all along the value chain. Its commitment towards the respect for the environment, the protection of human rights and labour standards and the fight against corruption, aimed at reaching an equilibrium between the economic, social and environmental dimension, is set out in the Code of Ethics and in the Business Model itself.
As expressed in the Sustainability Report of 2017 by Arnaud de Puyfontaine - at that time president of the company and now council member -, if, on the one hand, TIM’s infrastructural and services offer is the main driving force for the company’s development, on the other, an ethical and sustainable behaviour in all the daily activities is just as important. There cannot be a sustainable future, neither for the Group nor for the society, without a clear ethical root in all the actions.
Moving more in detail to the implemented procurement policies, the sustainability of the Group’s supply chain is monitored investigating and evaluating both the methods used to produce goods and services and their global impact throughout the entire life cycle. In accordance with this assumption and in line with the sustainability principles adopted by the Group, a policy has been defined that regulates the relations with suppliers structured around the following main themes: ethics of the negotiations, commitment to sustainability and green procurement that provides the required environmental requisites of the products and services acquired.
The intrinsic riskiness of some activities strictly related to the ICT sector, increased by the use of outsourcing and the delocalization of production plants in areas difficult to monitor, has driven the adoption of tools for the assessment of supply chain sustainability. This analysis is integrated at each stage of the suppliers’ evaluation process. Notably, in order to be admitted in the TIM’s Supplier Registry, suppliers have to pass a pre-qualification phase in which economic-financial and technical-organizational features are assessed. This step includes investigation on business ethics and respect for human rights, workers' rights and environmental impacts. For example, about this last aspect, the possession of certifications such as ISO 14001 or EMAS (EU Eco-Management and Audit Scheme), is one of the requirement that help companies to access the Register. The same occurs for aspects related to the use of optimized production processes with respect to the type of energy used, the use of natural resources, soil’s alteration/contamination/depletion, atmospheric emissions – particularly CO2 -, waste reduction, reuse and recycling.
This methodology, supported by the use of Key Risk Indicators (KRI), allows both a classification and prioritization of the procurement markets and related suppliers. Indeed, for the assessment of the so-called "ESG risks" (Environmental, Social and Governance), TIM adopts a dual approach that considers the intrinsic risks of the industrial sector of each supplier (called the "purchasing market") and the risk of individual suppliers based on the results of questionnaires and sustainability audits.
According to the TIM’s ESG risk management model, the purchasing markets’ analysis is based on the identification and evaluation of the specific ESG risk and the subsequent partition into four main risk classes -defined on the basis of ESG risk and "spending" (TIM’s expenditure for purchases in a given market): AA = high ESG risk, high spending, AB = high ESG risk, low spending, BA = low ESG risk, high spending, BB = low ESG risk, low spending.
Regarding the process of risk assessment for suppliers, since March 2014, suppliers are asked to fill in specific self-assessment questionnaires on their socio-environmental risks which constitute the starting point for the qualification process. Those who do not pass the minimum established threshold re directly excluded.
As mentioned above, in addition to the use of questionnaires TIM conducts on-site verification among the selected suppliers every year. They are aimed at minimizing non-compliance with basic principles of Corporate Social Responsibility (CSR). In order to regularly carry out these on site audits, often in distant and risky areas, TIM joined forces with other international telecommunication (ICT) operators facing the same challenge and founded an association called Joint Audit Cooperation (JAC). The JAC was born in 2010 by the TIM, Deutsche Telekom and France Telecom’s will (today Orange). Its main purpose is to verify, evaluate and promote the implementation of CSR practices at the production sites of the most important members’ suppliers. Moreover, it offers the advantage of sharing the audits results with all the other members of the initiative.
The significance of the initiative is also proved by the number of members that, from its launch, has increased overtime. From the three initial founders, the initiative today counts sixteen member companies representing the most important ICT operators worldwide.
Notably, members developed a common methodology of production sites verification through on-site audits conducted following a checklist defined on the basis of international standards and requirements. The main areas of interest of the audits are: child labour, forced labour, health and safety, freedom of association, discrimination, disciplinary practices, working hours, wages, environment and ethics. Moreover, in order to formalize and further detail the JAC’s expectations and requests towards suppliers regarding the issues of interest, specific guidelines have been drawn up (JAC Guidelines) together with the identification of appropriate Key Performance Indicators. The process engaged several relevant stakeholders, in the setting and in the subsequent phase of monitoring of the adherence of suppliers to the Guidelines themselves.
This methodology allows a clear classification of all the suppliers and sub-suppliers involved into four progressive evaluation bands, from D (poor) to A (excellent). Those aspects recognized as “non-compliant” with requirement are recorded by auditors and subject to corrective action plans which define in detail actions and times for their settlement.
In the period 2010-2017, 366 audits have been conducted- 89 only in 2017 – at production sites (of suppliers and sub-suppliers) located in Asia, Central and South America, North Africa and Eastern Europe. The checks have been carried out by specialized international companies, selected by tender, and have involved a total of about 816,000 workers.
As one of the most influent companies of the ICT sector, TIM has a huge potential in triggering and fostering a wave of positive sustainable impact among companies of the same industry and related value chain. With the manifested specific focus on supply chain, TIM is in the position to give a substantial contribution to the Sustainable Development Goals (SDGs). From the “#SystemTransformation” study published in 2016 by the Global e-Sustainability Initiative (GeSI) in partnership with Accenture, it emerged that even if, at global level, companies in each sector face significant gaps in the achievement of the SDGs, the ICT sector could really play a critical role since the digital solutions it can develop spread up to 23 times faster than the traditional approaches.
Since 2016, TIM has conducted an analysis on the contribution it can make to achieving the SDGs through its activities and projects. In 2017, 11 SDGs and 46 related targets were identified (see the sustainability report from pages 32 to 35). In particular as far as the supply chain is concerned, the policies and activities promoted and implemented by TIM have generated positive impacts on the following SDGs: Goal 3 "Assuring health and well-being for everyone and for all ages"; Goal 8 "Encouraging economic, lasting, inclusive and sustainable growth, full and productive employment and decent work for all"; Goal 10 "Reducing inequality within and between nations" and Goal 12 "Ensuring sustainable patterns of production and consumption".
