June 21, 2012 Leave a comment
Like the footwear industry, electronics manufacturers source product materials from many developing nations and manage size-able supply chains. They also share a similar amount of time in the media spotlight for sustainably suspect procurement practices. One need only jump back over recent 2012 headlines on the Apple and Foxconn debacle for proof.
However, one of the many manufacturers developing components for Apple’s products is setting a new standard for sustainable sourcing in the electronics industry – and that company is Intel.
Intel appears to be aggressively active in their efforts to reduce waste, measure their suppliers, and become more environmentally-friendly. Here are four examples that help illustrate Intel’s approach to sustainable sourcing:
Clean Energy Procurement
Intel has demonstrated a significant commitment to renewable energy and holds the #1 spot on the EPAs list of “National Top 50” organizations using green power sources. The EPA has awarded Intel with this honor as a result of the following:
- Solar Power Use. The company has installed solar electric power systems at more than nine facilities and generates almost 4M kilowatt hours per year of clean solar energy.
- Renewable Energy Certificates. Intel purchases nearly 3B kilowatt hours per year of Renewable Energy Certificates (or RECs) generated from the production of wind, solar, geothermal, low-impact hydro, and biomass sources. Though a bit complicated to understand, RECs are purchased to certify the production of 1 MWh of renewable energy. Organizations such as Intel purchase RECs to contribute a source of revenue and subsidies to renewable energy producers, who use the money to fund their operations. Clean energy suppliers track the production of each REC to measure the impact of renewable energy as the electrons generated by clean sources and fossil fuels are indistinguishable. For more information on RECs, 3Degrees (a broker of environmental commodities such as RECs) had the most comprehensible description we could find.
Conflict –Free Minerals
Intel has taken a number of measures to address concerns that several metals (cobalt, gold, tantalum, tin, and tungsten) mined from the Democratic Republic of Congo (DRC) for use in the electronics supply chain are tied to human rights offenses in that country. Though it is not the biggest user of these materials in its industry, the company has been behind several initiatives to map the electronics supply chain and take actions to verify that its microprocessors are “conflict-free,” which has proven to be a difficult task given the largesse of their supply chain. These initiatives include:
- The completion of over 40 on-site reviews of smelters in several countries
- A review of the extractives and mineral trade operations in the DRC by Intel staff
- Partnering with organizations such as the EICC (Electronic Industry Citizenship Coalition) to verify and identify six smelters that are compliant with a Conflict-Free Smelter assessment program protocol that Intel helped develop
Intel hopes to reliably certify the first conflict-free microprocessor by the end of 2012. A recent video on these efforts can be found by clicking here.
Reduction of Product Packaging Waste
Packaging and logistics teams at Intel have been redesigning the composition, form, and size of product packaging to minimize waste and drive down costs. Hundreds of tons of waste have been eliminated, primarily by reducing the use of corrugated paper and wood in shipping. These efforts have had the effect of decreasing transportation costs and the carbon emissions that go along with moving bulkier packages. Intel teams have worked successfully with subcontractors on these waste reduction programs.
Audit and Assessment Efforts
Intel serves on the board of the Electronics Industry Citizen Coalition (EICC) and has been behind the development of supplier measurement and evaluation efforts such as self-assessment questionnaires, corrective actions, and validated audit processes. The Supply Chain Management Review Committee (MRC) at Intel is responsible for the assessment of suppliers.
A risk-based approach is utilized to evaluate nearly 800 of Intel’s suppliers on a range of areas including labor, environment, health and safety. Intel publicizes the overall results of these assessments in their annual Corporate Social Responsibility Report which has been published since 2001. Beyond these assessments, Intel also relies on third-party audits conducted by organizations such as the EICC. In fact, Intel discovered issues with Foxconn through these audit efforts back in 2010 and has worked with the company since then to close audit findings – well before Apple has been forced to react this year.
So, in conclusion, what are the key take-aways from Intel’s sustainable sourcing efforts?
- It pays to be proactive in shaping the discussion. Join and help establish collaborative organizations (such as EICC for the electronics industry) that are dedicated to moving the whole industry forward on sustainable sourcing programs. Working with industry peers aids in the transferring of best practices; creates opportunities to work collectively with shared suppliers; and provides an avenue for mitigating potential issues (such as conflict mineral use).
- Culture and incentives play a role in promoting sustainable sourcing practices. Like any organizational change effort, culture plays a significant role in establishing sustainable sourcing programs. Create a culture that rewards sustainable innovation (excuse us for the buzzword) through a system of awards, pay incentives, improvement programs, and leadership involvement.
- Sustainable sourcing requires partnering with suppliers. Pushing into sustainable sourcing frequently involves moving into uncharted territory and working with suppliers that may require training, capital, and other resources. Intel approaches this issue through its significant investment in RECs that support the entire renewable energy industry; the real interest in the political climate in the DRC; and the active involvement in industry assessment efforts. By working to expand the overall market capabilities to produce sustainable materials and resources – organizations can help bring about technological innovation, reduced supply costs, and efficiencies that benefit sustainable procurement efforts.