Case study: How Microsoft helps its suppliers create and maintain safe working environments

What are the material issues the company has identified?

In its 2015 Citizenship Report Microsoft identified a range of material issues, such as climate change and energy, data privacy and security, device lifecycle impacts, environmental/social applications of technology, ethical business practices, talent management and development, human rights. Among these, helping its suppliers – across a supply chain that spans 25 countries around the world – create and maintain safe working environments stands out as a key material issue for Microsoft.

Stakeholder engagement in accordance with the GRI Standards

The Global Reporting Initiative (GRI) defines the Principle of Stakeholder Inclusiveness when identifying material issues (or a company’s most important impacts) as follows:

“The organization should identify its stakeholders, and explain how it has responded to their reasonable expectations.”

Stakeholders must be consulted in the process of identifying a company’s most important impacts and their reasonable expectations and interests must be taken into account. This is an important cornerstone for CSR / sustainability reporting done responsibly.

Key stakeholder groups Microsoft engages with:

How stakeholder engagement was made to identify material issues

To inform its decisions, Microsoft regularly communicates with thousands of stakeholders globally ranging from parents concerned about their child’s online safety to international human rights experts. These engagements take many forms. Employees from Microsoft’s business and operational groups regularly identify and engage with stake­holders in the course of their daily work activities. Microsoft’s Citizenship and Public Affairs team also manages a number of stakeholder relationships and ongoing dialogues to help inform and guide the company’s strategies. Microsoft connects with leading thinkers on corporate responsibility and societal challenges in groups such as Business for Social Responsibility, CSR Europe and the World Economic Forum. Microsoft learns from them and other advocacy groups, socially responsible investors, corporate responsi­bility rating agencies, other external stakeholders and its own employees to identify new and emerging citizenship issues. Microsoft also bases its work on international frameworks such as the United Nations Global Compact, the UN Guiding Principles on Business and Human Rights and the Global Reporting Initiative’s Sustainability Reporting Guidelines.

As regards customers, Microsoft gains insights from online feedback, support communities, product satisfaction surveys, usability studies, research forums, business account manag­ers and the company’s customer service representatives. Regarding investors, beyond traditional investor communications such as earnings calls and Microsoft’s annual meeting, Microsoft seeks to proactively provide investors with corporate gover­nance information through diverse communications, including a director video interview series and direct communications from independent members of its board to shareholders. Microsoft proactively reaches out to institutional investors—including public pension funds and socially responsible investors—about governance and citizenship-related topics and delivers a summary of their feedback to the board. In FY15, these engagements reached investors holding over 40 percent of Microsoft’s outstanding shares. Microsoft seeks to transparently provide information sought by socially responsible investors and corporate responsibility rating agencies and seeks their insights to identify new and emerging citizenship issues.

Microsoft asks for – and acts on – employee feedback in multiple ways, including conducting an annual online anonymous poll of all its employees around the world. The poll, with a nearly 85 percent response rate, asks employees to share feedback about the Microsoft work experience, including how they feel about their workgroups, organization and company as a whole. Microsoft engages with suppliers through capacity-building workshops and trainings, supplier advisory boards, hosting an annual supplier summit and participation in industry coalitions, such as the Electronics Industry Citizenship Coalition. Microsoft also conducts anonymous Voice of the Supplier Surveys, which include questions on citizenship issues.

Microsoft’s local citizenship teams work directly with community groups and in partnerships with local non­profits. They share views and insights from local com­munities with Microsoft’s global Citizenship and Public Affairs team in direct communications, through regular conference calls and at an annual global summit. Also, across the breadth of its business, Microsoft engages with thousands of NGOs working on issues ranging from environmental sustainability to employee diversity to child safety.

What actions were taken by Microsoft to help its suppliers create and maintain safe working environments?

In its 2015 Citizenship Report Microsoft set the following targets for helping its suppliers create and maintain safe working environments, based on the company’s approach to materiality – on taking action on what matters, where it matters:

• Providing training resources

Microsoft created a training platform called SEA (Social and Environmental Accountability) Academy that includes labor, ethics, environ­mental, health and safety (EH&S) training course modules for suppliers. In FY15, Microsoft also conducted trainings for 504 trainees from its high-risk sup­pliers. The courses are also designed as a “train the trainer” with project management training to complement the expert content and provide tools on how to successfully improve their factories.

• Working with factory management to build a culture of health and safety

Microsoft worked with factory management to emphasize the need to use competent and experienced EH&S professionals to define and implement the programs necessary to build a culture of health and safety. To address this, Microsoft piloted a number of training modules in its Tier 1 and high-risk Tier 2 suppliers, including: Safety Culture, EH&S Professionals and Senior Management Capability Improvement, EH&S Employee Participation, Risk Behavior Change, EH&S Standardization, Risk Assessment, Chemical Safety and Management, Line Manager EH&S Skills Improvement, Safety Officer Certification for EH&S Staff, Prevention of Occupational Disease, Effective Water Management. In FY15, 528 SEA (Social and Environmental Accountability) professionals from the Microsoft Device Supply Chain attended the company’s SEA in-house training, representing factories with more than 32,000 workers.

• Tracking key health and safety performance indicators

Microsoft tracks key health and safety performance indicators for its Tier 1 factories using standard OSHA metrics. In FY15, Microsoft’s Tier 1 suppliers aver­aged a work-related injuries and illness rate of 0.045 versus an industry benchmark of 1.4 and a lost working-hour accident rate of 0.031 versus an industry benchmark of 0.7.

• Implementing a new supplier improvement program

In FY14, to address the growing need for additional capacity building among some Tier 2 suppliers, Microsoft launched a new program to provide targeted component suppliers with onsite consulting from the SEA program team. Microsoft also continued its program to target its lowest performing compo­nent suppliers with special additional inspections that include Microsoft executives as well as SEA and Sourcing team members. This subset of suppliers face an additional compliance scorecard and must improve their performance within a quarter. Additional time may be given in certain occasions that are justified and approved by the SEA team. As a result of the close engagement and collaboration with suppliers to make improvements identified during these audits and assessments, factory and worker conditions have advanced at many of Microsoft’s suppliers. Suppliers who failed to meet the requirements are subject to phase-out and termination of business with Microsoft.

Which GRI indicators/Standards have been addressed?

The GRI indicators/Standards addressed in this case are:

1) G4-12: Describe the organization’s supply chain – the updated GRI Standard is: Disclosure 102-9 Supply chain

2) G4-LA14: Percentage of new suppliers that were screened using labor practices criteria – the updated GRI Standard is:  Disclosure 414-1 New suppliers that were screened using social criteria

3) G4-LA15: Significant actual and potential negative impacts for labor practices in the supply chain and actions taken – the updated GRI Standard is: Disclosure 414 -2 Negative social impacts in the supply chain and actions taken

References:

1) This case study is based on published information by Microsoft, located at the links below. For the sake of readability, we did not use brackets or ellipses. However, we made sure that the extra or missing words did not change the report’s meaning. If you would like to quote these written sources from the original, please revert to the following links:

http://database.globalreporting.org/

https://www.microsoft.com/about/csr/responsible-supply-chain/ (June 2016)

2) http://www.fbrh.co.uk/en/global-reporting-initiative-gri-g4-guidelines-download-page

3) https://g4.globalreporting.org/Pages/default.aspx

4) https://www.globalreporting.org/standards/gri-standards-download-center/

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