Ethical procurement
O2 operates its networks in Western Europe and has its headquarters in the UK. Our supply chain involves big and small companies from across the world. We spend more than £2.2 billion each year to procure the products and services we need – from network equipment, mobile phones and software to office stationery and professional and contracting services.
Unless negotiated otherwise, we aim to pay our creditors promptly within 30 working days of the invoice date, if the invoice is timely and complete. The Group had 35 days’ (2004: 34 days’) purchases outstanding at 31 March 2005, based on the average daily amount invoiced by suppliers during the year.
We want our products and services to be desirable and competitively priced. We aim to award business solely on merit, without favouritism, and look to secure products and services at the best available terms. Ethical and environmental standards are an important part of this equation.
In 2003/04 we set out to devise procurement policies that would help us engage with our suppliers to take into account the social and environmental impacts of their operations. We have developed ethical and environmental procurement policies which clearly express what we expect of our direct suppliers and of companies further down the supply chain. These policies, including labour practices and environmental protection, are communicated on a procurement website www.o2.com/procurement. In all of our contracts we aim to refer directly to O2’s Business Principles.
We look for assurance that suppliers are not relying on forced labour, do not use child workers, pay living wages, offer acceptable working hours and safe and healty working conditions, using no inhumaine practices.
Our ethical procurement policy is based on the Ethical Trading Initiative Base Code, the standards of the United Nations Universal Declaration of Human Rights and the International Labour Organisation conventions. We look for assurance that suppliers are not relying on forced labour, do not use child workers, pay living wages, offer acceptable working hours and safe and healthy working conditions, using no harsh or inhumane practices.
We use the ISO 14001 Environmental Standard to benchmark the environmental performance of our suppliers.
Both for our ethical and environmental procurement policies, we have developed self-assessment questionnaires to understand the potential ethical risks in our suppliers’ operations. In 2004/05 we issued self-assessment questionnaires to more than 20 of our key suppliers. We also carried out five ethical audits of our existing and potential handset and network manufacturers in South-East Asia and Eastern Europe. As a direct result of these visits, one of the companies has since developed their own ethical procurement policy.
Although we want to make sure high standards apply as far down our supply chain as possible, we rarely have the resources to carry out checks beyond the first tier of suppliers. We encourage our principal suppliers to spread best practice to the companies they buy from.
Our approach is to engage with suppliers to improve their practices and to meet recognised standards. In October 2004 we were short-listed in the category ‘Best Contribution to CSR’ in the Chartered Institute of Purchasing and Supplier Annual Awards, which recognises best practice and innovation in procurement. In the coming year we plan to further increase the awareness within our procurement teams. We also intend to carry out further supplier audits of our main suppliers.