Supply chain

O2 aims to interact with suppliers in a fair and ethical way and promote labour standards and environmental protection deep into the supply chain

During the year, we continued to explore the social and environmental impact of our business throughout the world, via our supply chain.

Progress is tracked through assessments and audits against our ethical and environmental procurement policies, where appropriate.

Our approach includes:

• Educating and raising awareness with our buyers in the UK about the key issues that affect our sourcing.
• Implementing our ethical and environmental procurement policies.
• Carrying out ethical audits of some of our suppliers. In 2006, we intend to expand this line of work to cover all our high-risk suppliers.
• Developing joint intiatives with suppliers, under the auspices of the Global e-Sustainability Initiative (GeSI).
• Encouraging our main suppliers to spread best practice to the companies they buy from.

O2’s supply chain involves large and small companies across the world and we spend more than three billion pounds a year in buying the products and services we need. These range from network equipment, mobile phone handsets and software to office stationery, IT equipment and professional and contracting services. Our supply base stretches worldwide from local creative design services or catering firms to major manufacturers in the USA, South-East Asia and Eastern Europe.

We aim to award business solely on merit and without favouritism, and we seek to buy products and services at the best terms. Where possible, we take ethical and environmental standards into account during a tender process.

Industry co-operation

As part of our wide industry co-operation, we are members of the Global e-Sustainabilty Initiative (GeSI), an initiative established jointly by the United Nations Environmental Programme (UNEP), the International Telecommunications Union (ITU) and the information and communications industry. GeSI addresses social, environmental and ethical issues in the sector. O2 is represented on the Board of GeSI and is co-chairing its supply-chain working group with Motorola.

We continue to work with GeSI to develop common industry tools to identify and manage social, environmental and ethical risks in the supply chain, and to ensure that our suppliers comply with our ethical and environmental standards.

During the year GeSI collaborated with an established group of major North American information and communications technology (ICT) manufacturers, who had also begun to develop an industry code of practice in their supply chains.

We made progress together. We developed a common supplier self-assessment questionnaire – in English, Spanish and Mandarin - which provides a comprehensive check of labour issues, health and safety, business ethics and environmental practices.

So far, the questionnaire has been tested on one supplier and we are in the process of creating a method that scores suppliers’ responses against the severity of any risks we identify through the process.

The next phase of this collaboration will be:

• The launch in the second half of 2006 of an online tool to enable the exchange of data between companies, incorporating the common supplier self-assessment questionnaire.
• A set of risk-assessment tools to identify specific risks associated, for example, with location/geography, manufacturing and the use of raw materials for example.
• An on-site audit checklist and an industry standard for auditor qualifications.

We aim to start adopting these tools into our own processes during the second half of 2006. In preparation, we completed awareness training for the UK procurement teams during the year.