Microsoft’s supply chain may not be the first thing that comes to mind when one considers Microsoft’s mission to empower every person and organization to achieve more. Perhaps it should be – as a leading global technology company, we reach many people in nearly every country with our products and services, whether they help make, sell or use them. Given the size and scope of this supply chain, we believe that the changes we make in our operations and with our suppliers can have a substantial impact in improving lives and societal outcomes. We’re not alone in this belief; the United Nations (UN) Global Compact writes, “A company’s entire supply chain can make a significant impact in promoting human rights, fair labor practices, environmental progress and anti-corruption policies.”
That’s why I’m excited to share more information about our commitment, approach and progress today with the full release of our FY18 Devices Sustainability report. In it, we outline how our approach is grounded in the values described in our Responsible Sourcing of Raw Materials (RSRM) policy[i], highlight both the progress made and the work still to be done, and share how we’re expanding our impact by “learning by doing” in close coordination with our many partners, our passionate employees and nongovernmental organizations. We’re particularly pleased to share more information on our supplier requirements and work on cobalt this year, as well as the results of supplier audits and our work with key partners like Pact and RMI.
While some strategies are uniquely ours, the policy and related programs are grounded in the five-step guidance issued by Organization for Economic Cooperation and Development (OECD)[ii] and the United Nation’s Guiding Principles on Human Rights. This has been our approach for some time, but this year, we’ve organized our reporting to more closely align to each of the five steps.
There’s much more detail in the report, which we encourage you to review fully, but here are a few key highlights:
A strong system for responsible sourcing
In FY18, Microsoft expanded our efforts to improve the sustainability of our upstream supply chain. Heightened RSRM requirements for suppliers are described in our supplier manual. Directly contracted suppliers carry out new standards for additional due diligence and commit to passing them on to their sub-tier suppliers. Third-party auditors perform assessments to increase the sustainability skillsets of our suppliers and ensure they follow our requirements. Full audit results can be found in the SEA Impact Section of the FY18 Devices Sustainability Report.
Management of sustainability risks
We consistently review materials and minerals that go into our products with a goal of identifying risks so we can better address them and have shared that information in this report for several years. That has included explicit discussion of our work on conflict minerals such as tin, tantalum, tungsten and gold. This year, we included explicit mentions of other minerals, including cobalt, and described how we identify the raw material supply chains related to our products that present the most risk to people and the planet. We also share the outcome of that assessment – where we found cobalt, aluminum, gold, tin, tantalum, tungsten, magnesium and copper as product materials requiring the most focus. For each, we investigated their countries of origin and risks and established a road map to address this risk including FY18 strategy and FY19 goals.
We’ve also put our own technology to work to improve our efforts. Power BI dashboards provide a real-time, 360-degree view of our most important supply chain metrics. This visibility has enhanced how we embed compliance and sustainability into our business and is a significant component of our supply chain management. In raw materials analyses, we use Power BI data set layering to view associated risks geographically. This allows us to be more efficient and more proactive in identifying risks.
One of those is cobalt. We do not tolerate child labor in our supply chain and remain vigilant in our efforts to understand and identify any issues, so we can address them. That is why, in the past year, we’ve mapped our cobalt supply chain, including identifying cobalt refiners, and we will continue to validate this information. This process confirmed the cobalt, in battery components used in our products, is mined in Canada, the Democratic Republic of Congo (DRC), Australia, and Zambia. As we’ve done this, we have also enhanced supplier requirements and are implementing a new responsible mineral assurance process for smelters and refiners, and are pursuing new opportunities for continuous improvement in our supply chain.
We’re working to drive change not just within our own supply chain, but well beyond those narrow confines of what a single company can do. That is why we’ve worked closely with other companies and organizations to help build universal standards to spark industry-wide change from the top-down, and support on-the-ground interventions to change the conditions on the ground that may incentivize child labor or environmental degradation.
The past year saw Microsoft provide additional funding and expertise to further support the work of the Responsible Minerals Initiative (RMI). With our support and engagement, as well as that of other companies, they are mapping the complex cobalt supply chain on a global scale, defining a global standard and audit program with the Responsible Cobalt Initiative (RCI) for responsible sourcing of cobalt, and confirming the due diligence performed by cobalt refiners. This will increase transparency, improve governance and inform action plans to directly address the risks and challenges in the cobalt supply chain.
In addition to this top-down approach, we’re working to enable bottom-up change. We’ve continued to deepen and expand our relationship with a credible and experienced NGO, Pact, to expand on-the-ground interventions that address economic and social root causes that could lead to child labor in mining. This includes providing additional support, engagement and funding for this work. The results indicate to us that this type of work is effective – in mines where the project has been active, Pact has found up to a 97 percent reduction in child labor. I encourage you to see this work in a video, which you can see here.
Supply chain transparency
We know that, for all the progress made, there’s much more that still needs to be done. We believe that transparency is an important part of our responsibility and opportunity in this work, as it can provide other organizations and companies information and insights about Microsoft’s approach as we all work to improve supply chain sustainability. We are inspired to move forward in advancing positive social and environmental change and are optimistic about the enabling role of technology. I hope you feel the same as you read the full report, and I look forward to sharing more with you as our work continues.
[ii] Organization for Economic Cooperation and Development Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance)