Monitoring

Monitoring helps us identify suppliers whose practices do not align with our values and policies. It also raises awareness of our requirements and enables us to target opportunities to improve standards by taking corrective action.

We focus our monitoring program on direct-materials suppliers that pose a high risk and those with which we want to establish deeper, longer-term relationships.

We assess potential and existing suppliers for conformance with our supplier code of conduct. In addition to our assessments, we investigate reports of potential corporate responsibility issues from internal and external sources.

While monitoring is important, we believe that lasting improvements will only be achieved if suppliers have the capability to manage worker rights and environmental impacts themselves. Read about our capability building efforts.

Monitoring process

We take a risk-based approach to supplier monitoring that is modeled on the Global e-Sustainability Initiative/Electronics Industry Citizenship Coalition supplier engagement model:

• Use of self-assessment questionnaires in which suppliers provide information on their environmental and labor policies and management systems using the online tool, E-TASC. E-TASC provides customers with information and associated risks presented by suppliers, to identify areas for improvement and to target our on-site audits.
• Detailed on-site audits conducted by a third-party firm commissioned by Motorola Mobility. We decide which facilities to audit based on information collected through the self-assessment questionnaires, specific reports made to our Ethics Line and other reporting channels, along with risk factors such as activity, location and reputation. Following the audit we provide feedback to suppliers and work with them to correct the issues identified. We may use a follow-up audit, conducted by a third party or our supply chain team, to verify that suppliers have made the necessary improvements.

Categorizing findings

We have established three levels of severity for issues identified through monitoring:

• Priority Red: Severe issues that require immediate escalation to our senior management, including child labor, debt labor, illegal dumping of hazardous materials and serious sanitary, health and safety conditions
• Priority One: Legal-compliance issues or other issues that represent significant risk
• Priority Two: Non-compliance with contractual terms, our expectations or other applicable codes or standards

Responding to findings

We want our suppliers to succeed, and we prefer to work with them to correct non-conformance issues identified in on-site audits. We want to work with our suppliers to improve labor and environmental conditions, because the situation for workers can deteriorate if we simply terminate contracts. In serious cases, we will place the supplier on "new-business hold" — meaning no new business will be placed until the issue is resolved. If a supplier refuses or is unable to cooperate, we will terminate the relationship as a last resort.

For Priority Red, we require immediate containment actions to prevent the issue from worsening and to mitigate the negative impact. We ask suppliers to provide a date for completion and work with them until all issues are resolved. These deadlines are set on a case-by-case basis, and it may take several months to resolve the most complex issues.

Since implementing our supplier code of conduct in 2003, we have not terminated a contract solely because of corporate responsibility issues. However, we have refused to enter relationships with new suppliers for this reason.

Management reviews

We use management reviews to track progress and drive improvements. In 2010, we introduced corporate responsibility performance data into the supplier review process conducted by senior procurement managers each month.

This has increased visibility of corporate responsibility among senior managers and enabled them to quickly understand a supplier’s performance in this area, alongside other metrics such as financial stability and quality.

Beyond tier-one suppliers

Through our supplier agreements, we require our tier-one suppliers (suppliers from which we buy directly) to monitor the corporate responsibility performance of their suppliers. We also require them to provide a list of their suppliers (our tier-two suppliers) on request.

Tier-two suppliers are not included in our regular audit schedule, although we may take part in joint audits with our tier-one suppliers in response to specific reports of issues at their suppliers.

Read about our efforts to improve standards in the minerals supply chain.

By the end of 2010, we obtained or requested self-assessment questionnaires from the majority of our preferred suppliers. We use E-TASC, the self-assessment tool developed by the Global e-Sustainability Initiative / Electronics Industry Citizenship Coalition industry collaboration.

In 2010, we conducted 26 site audits of Motorola Mobility suppliers:

• Twenty four planned as part of our normal visits to suppliers
• One to follow-up on previous on-site audits
• One conducted in response to reports from internal or external parties

When combined with an additional 14 audits conducted for Motorola Solutions suppliers, we met our combined goal for 2010 of 40 audits.

One of Motorola Mobility’s own facilities participated in a pilot audit conducted by a group of our customers. We support a common audit approach where companies agree on common requirements for suppliers and share audit data. This approach is more efficient and transparent and reduces the burden on supplier companies.

As part of our focus on capability building, we are using the knowledge gained through auditing to develop training programs tailored to match the needs of individual countries.

Audit findings in summary

When we identify issues during an on-site audit, we require the supplier to develop a corrective action plan. We ask them to provide a date for completion and work with the supplier until all issues are resolved.

As of 31 December 2010, Motorola Mobility suppliers had resolved more than 215 issues, or 42 percent of issues identified in 2010.

Analysis of audit findings

Freely chosen employment

In 2010, we identified sixteen issues related to freely chosen employment. These mainly include inappropriate practices for managing worker contracts and personal documents and contract workers being charged improper fees by the contracting agency. We are working with the suppliers to resolve these issues.

Protection of workers ages 16-17

The 21 issues relating to protection of workers ages 16-17 primarily related to people of these ages working unrestricted hours or with hazardous materials or processes. Other issues included lack of sufficient controls to prevent the hiring of underage workers, proper documentation and completion of appropriate physicals. We continue to work with our suppliers to resolve related issues which are not yet closed.

Working hours

Similar to prior years, excessive or higher than legally permitted working hours was one of the most common findings of the onsite audits conducted in 2010, with 48 instances identified. We measure suppliers’ working hours against our supplier code, industry norms and applicable legal requirements. This means that a single supplier can have multiple working hours-related findings.

Corrective actions to reduce working hours continue to be a significant challenge for many factories in China that need to balance workers’ monetary needs, availability of labor and production requirements along with labor standards.

In 2010, Motorola continued its approach of monitoring suppliers’ progress in reducing working hours according to approved plans.

Wages/benefits

Incorrect payment of wages and benefits was a much less frequent finding in 2010, with a total of 16 instances. The most common findings were related to workers not being provided the locally required insurance. Also identified, were issues relating to fines and penalties, improper fees, and lack of proper documentation. Eleven of these findings have already been addressed. Motorola will continue to work with suppliers to resolve the outstanding issues.

Humane treatment

Five audit findings related to humane treatment. All involved the lack of procedures for disciplining employees, lack of policies forbidding inhumane treatment and lack of appropriate training. We are working with the suppliers to resolve these issues.

Non-discrimination

The two non-discrimination findings involved lack of policies and procedures prohibiting discrimination. We are working with the suppliers to resolve these issues.

Freedom of association

Two of the findings in this area involved lack of written policies and procedures permitting freedom of association. A third finding was related to a written policy indicating worker termination as a consequence for those involved in a strike. We are working with the suppliers to resolve these issues.

Occupational safety

Of the 28 occupational safety findings, most involved failure to conduct proper inspections. Other issues included improper or missing labeling and safety equipment. Suppliers have completed or are implementing corrective actions.

Emergency preparedness

There were 46 findings relating to emergency preparedness, making it the second most common finding. Deficiencies identified included the lack of exit signs, fire extinguishers, first-aid kits and eyewash stations, and evacuation drills. Suppliers with these issues either have completed, or are implementing corrective actions.

Occupational injury and illness

Of the 26 occupational injury and illness findings, most involved supplier short-comings concerning proper personal protective equipment or lack of documentation and injury investigation. Suppliers with these issues either have completed or are implementing corrective actions.

Hazardous substances

As last year, the third most common finding related to hazardous substances, with a total of 43 instances. The majority of these findings related to improper labeling, signage and storage of hazardous substances. Suppliers have completed or are implementing corrective actions.

Management accountability and responsibility

There were 29 audit findings relating to management accountability and responsibility. These involved a number of different types of findings, ranging from the failure to identify authority and accountability for ethics, labor and EHS performance, to lack of assessments on the status of management systems. We are working with the suppliers to resolve these issues.