Audits set a baseline and we conduct audits of existing and incoming suppliers to admit them to the PCH supplier network.
We cannot audit every supplier as this would require substantial resources. We follow industry best practice, and our compliance team conducts audits based on the projected value of business with the supplier, level of risk and the type of service to be received from the supplier.
How Audits Work
Audits cover supplier’s quality, sustainability and chemical management practices. Audits are conducted by at least two PCH auditors who spend at least one day with the supplier. Our audits are prearranged and we do not conduct surprise visits to supplier factories.
The audit is comprised of three assessments:
- Supplier’s quality management systems
- Security and environmental substances management
- Sustainability practices (labor and environment, health and safety management practices)
Sustainability Practices Audit
Our sustainability audit program was developed using Electronic Industry Citizenship Coalition guidance and client & industry standards.
The health and safety portion of the audit assesses: General EHS Management, Environment, Emergency Protection, Hazardous Materials (Chemical Materials) Management, Occupational Health and Safety, Electrical Facilities Usage Safety, Dormitory and Canteen, Medical Emergency, Special Operation/Hazardous Area, Ergonomics.
The Labor audit assesses: Child Labor and Youth Workers, Forced Labor, Disciplinary Practices, Working Hours, Wages and Benefits, Freedom of Association, Discrimination, Ethics and Management System.
Supplier labor and environmental health & safety practices are graded in accordance with the following criteria:
- Zero Tolerance (ZT): Serious breach of laws, regulations and PCH requirements, resulting in a severe impact to individual rights, life, safety and/or PCH’s corporate reputation
- Immediate Action (IA): Breach of laws, regulations and PCH requirements that result in negative impact to individual rights and life safety and/or PCH’s corporate reputation
- Continuous Improvement (CI): Labor, health & safety, and environmental issues that can be improved in the factory for the wellbeing of workers and/or betterment of its reputation or management practice
- Compliance: Full compliance to requirements, laws and regulations (EICC standard and local regulation)
If a zero tolerance practice is identified, the supplier automatically fails their audit. An accumulation of immediate action and continuous improvement practices can also result in a failed audit.
Zero tolerance practices include child labor. Child workers refer to workers under the age of 16. Youth workers refer to workers between the ages of 16 and 18. Youth workers are not allowed to perform hazardous work and may be restricted from night work with consideration given to educational needs.
Other practices that are not tolerated include: fines or restrictions that would prevent a worker from leaving employment, falsification of time or pay records, underpayment of wages, or any type of mental or physical punishment.
The quality portion of the audit carries the most weight (50%) while 35% comes from the Sustainability audit and 15% from chemical management. Suppliers are allocated a grade based on the result of their audits, the higher the grade, the more likely they are to receive business from PCH. Suppliers who wish to maintain their relationship with PCH are audited annually thereafter. Those who are not audited annually are restricted in terms of the type of business they can conduct with PCH.
What happens after the audit?
Following the audit, findings are reviewed with the supplier and PCH identifies areas that require immediate action. If an existing supplier is found to have engaged in any ‘zero tolerance’ practices, or if their overall score does not reach the minimum required, they have up to three months to rectify the situation. PCH tailors management strategies to each supplier depending on their contribution to our business. This includes specific supplier development programs which are coordinated by PCH Sustainability.
Terminating Supplier Relationships
We terminate relationships only when it is absolutely necessary. Our preference is to work with a supplier to help them reach an adequate standard to work with PCH.
We offer supplier development programs including workforce and resource management support from our Operations and Sustainability teams to ensure suppliers meet our minimum requirements.