SUPPLY CHAIN

Digital represents the new collective progress factor, offering new opportunities that impact the economy and society in different ways. Suppliers have a direct influence on the communities and in the areas within which they go about their activities and, last but not least, the involvement of the organisations that monitor the related social and environmental aspects, must be considered. The procurement process adopted by Telecom Italia is based on the competitive comparison of the technical and economic characteristics of the offers that are presented by the suppliers selected, based on corporate procedures founded on business ethics. The selection of the Group’s suppliers involves a pre-contractual qualification stage in which the economic/financial and technical/ organisational characteristics are assessed. If the result of this assessment - which also includes consideration of the business ethics and respect for human rights and the environment - is positive, the suppliers are registered on the Group Supplier Database (the Database).

Products and services are acquired at the best market conditions possible and must meet specific requirements of functionality, quality, safety and respect for the environment, in complete compliance with current laws and legislation.

[G4-HR1a] In all the contracts signed, there is a specific clause which makes it mandatory for the supplier to accept the principles expressed in the Group’s Code of Ethics and Conduct1.

[G4-HR1a], [G4-HR1b] As regards the domestic operations, the Italian suppliers on the Database with considerable yearly

purchase order value (the threshold is just 3,000 euros cumulative per year) receive2 initial screening in relation to respect for the principles of the Code of Ethics and are subject to regular assessment. The action taken by Telecom Italia to verify suppliers varies according to the supplier risk level and the amount of the purchase: it varies from simple questionnaires to increasingly complex ones and document checks to inspections at the supplier premises and specific audits on sustainability matters.  [G4-HR10] Specifically, in 2015 100% of new suppliers enrolled in the Database signed a specific questionnaire in which they undertook for themselves and for any authorised subcontractors, collaborators and employees to observe the principles of behaviour contained in the Group’s Code of Ethics and Conduct3.

While the supply is taking place, enrolled companies which have received purchase orders normally undergo incoming quality control checks (a requirement for the acceptance and use of the purchased goods) and monitoring of the vendor rating. Environmental and social checks are also carried out4.

The purchasing departments focus on specific sectors, so as to provide accurate responses to the requirements of internal customers and stakeholders. These expectations are constantly monitored through surveys of both internal customers and suppliers in order to verify the quality of the services delivered (see Involvement initiatives).

[G4-12] Telecom Italia’s purchases are made principally in the two geographical area where the Group’s major operations are sited, that are Italy and Brazil, and are directed for the most part towards the following categories of products/services:

  • Telecommunications networks
  • Telecommunications products
  • Information Technology
  • Technical and professional services
  • Power systems
  • Other

[G4-12] In total, in 2015 there were 6,595 suppliers which had purchase orders with the Group5, (-2% compared with 2014 and -11% compared with 2013), of which 3,641 were for the domestic BU (+4% compared with 2014 and +6% compared with 2013), 1,865 for Brazil (-12% compared with 2014 and -19% compared with 2013) and 442 for the Media BU (+5% compared with 2014 and -48% compared with 2013).

[G4-12] For some sectors, the Group also measures and monitors subcontracting suppliers; in particular, for network works, there were 819 subcontracting businesses (+9% compared with 2014 and -6% compared with 2013). In this sector, therefore, the estimated total number of suppliers involved in the supply chain is 8396.

[G4-13] In the last three years no significant changes have occurred in the structure of the Group’s supply chain, excluding those caused by the changes in the Group’s perimeter through the sale of assets in Argentina and television assets.

     

[G4-DMA Investment] The Group Code of Ethics (CE) reads: “Compliance with the Code must also be guaranteed by external collaborators and, where envisaged in the company procedural system, by third parties that do business with the Group”. In particular, the internal procedures require suppliers to accept the principles laid down by the CE and contracts for temporary consortia or corporate investments to contain clauses for safeguarding the 231 Organisational Model (which is based on the CE). The UN Global Compact is, on the matter of human rights, the point of reference of the Group’s CE, which reads: “Telecom Italia has signed up to the United Nations’ Global Compact on human rights, work standards, environmental protection and the fight against corruption, and ensures that this institutional commitment is fully implemented by undertaking regular initiatives on environmental and social issues”. Moreover, the CE contains specific clauses on the prohibition of discrimination, intimidation, corruption and the protection of health and safety. Moreover, the Group policy on respect for Human Rights specifies that “Fundamental Human Rights (e.g. working hours, fair remuneration, minimum age for starting work, workplace conditions, accessibility to the disabled, protection of maternity, prohibition of harassment, forced/compulsory/restricted labour)” and “rights regarding health and safety (we consider the high standards of health and safety as a milestone of our success and our aim is to minimise injuries and occupational illnesses)” must be guaranteed for both the people of the Group and the human resources of suppliers.

2 Excluding local government offices.

3 In 2015, in Brazil, such percentage was 98%.

[G4-DMA Supplier Human Rights Assessment] In particular, checks are envisaged on health and safety and the environment, the result of which goes towards forming the supplier rating, to which the system of penalties/incentives is connected.  [G4-DMA Employment] Checks are also envisaged in relation to respect for employment legislation.

5 In this section, the data on Olivetti is included in the Group but not in Domestic.

6 In the Brazilian BU, at present there is no systematic monitoring of level two suppliers. Assessments are currently underway on how to carry out this monitoring in the future