We strive to ensure that our suppliers uphold high standards for responsible business practices and ethical treatment of employees.
Microsoft sets high standards for responsible business practices among our suppliers. We work hard to help our suppliers meet them.
Microsoft has relationships with thousands of suppliers around the globe, spanning both hardware and packaging suppliers that manufacture our devices and their components, and indirect suppliers that provide everything from advertising services to building construction and maintenance. We expect all suppliers who do business with Microsoft to uphold the human rights, labor, health and safety, environmental, and business ethic practices prescribed in our Microsoft Supplier Code of Conduct. This code aligns with, and in certain cases exceeds, the Responsible Business Alliance (formerly EICC) Code of Conduct. The Microsoft Supplier Code of Conduct and additional social and environmental-related specifications are incorporated into our supplier contracts.
We advance our responsible sourcing commitments through:
- Analysis of risks and opportunities
- Assurance and accountability
- Capability building
- Creating shared value
We carefully manage our supplier relationships across Microsoft to advance our responsible sourcing goals. Since 2005, our Social and Environmental Accountability (SEA) programs have ensured that our hardware and packaging suppliers in the Devices and Cloud Supply Chain conform to our Supplier Code of Conduct and additional specifications in a mode of continuous improvement. Microsoft Procurement oversees the indirect supply chain programs through a formal responsible sourcing function established in 2013. Microsoft Devices also operates the Microsoft Devices Environmental Management System (EMS) certified to ISO 14001 that applies to all activities, processes, products, and services associated with Microsoft device sourcing, manufacturing and packaging, supply chain, and quality organizations, and Microsoft Operations Puerto Rico processes associated with physical media, and data center operations.
Microsoft also recognizes our important role in enabling and empowering people to achieve the UN Sustainable Development Goals (SDGs) including, but not limited to, mitigating the impacts of our operations. In the downloadable Devices Sustainability at Microsoft: Fiscal Year 2018 report, we outline what we have done to join in the global efforts of individuals, NGOs, governments and enterprises to meet the SDGs, improve people’s quality of life, protect the environment, and foster equitable growth.
Microsoft seeks to hold our suppliers to high standards for responsible sourcing.
All suppliers who do business with Microsoft must uphold responsible practices.
Learn about our actions to prevent modern slavery and human trafficking in our business and supply chain.
We evaluate efforts to source responsibly based on the social and environmental, health and safety opportunities and risks identified in our supply chain. This risk-based approach considers, among other factors:
- Suppliers’ social and environmental risks
- Amount spent with supplier and ability to influence
- Suppliers connection to our products and services
To monitor and evaluate the social and environmental performance of our suppliers we use an Audit Management System (AMS) built with Microsoft technologies and tools including Visual Studio, Visual Studio Team Services, the Microsoft .NET Framework, Azure SQL Database, Azure Blob Storage, and hosted on Microsoft Azure. Combining the AMS with Power BI gives Safety, Compliance and Sustainability, Manufacturing, and Strategic Sourcing teams access to greater data insights through modern visualizations and simple report authoring. The AMS enables our Social and Environmental Accountability (SEA) program to address supplier complexity across hundreds of factories through quick access to business intelligence regarding current and historical audit information. Users have the flexibility to upload, manage, and extract data about multiple suppliers from “one source of truth” and initiate workflows to manage follow up and resolve corrective actions.
Recognizing the vast number of raw materials and the complexity of our supply chain, Microsoft uses a risk-based approach to assess our raw material sourcing. The framework we use is aligned to the UN Framework for identifying salient human rights issues and we conduct due diligence aligned to the OECD Due Diligence Guidelines on raw materials. This considers the following dimensions: risk to our supply chain, material-specific social and environmental risks, and our ability to influence and impact production of those materials to assess and prioritize addressing the social and environmental risks associated with raw materials.
We invest in worker and community learning opportunities to improve the lives of people in our supply chain and help advance the UN Sustainable Development Goals. One way we contribute is by leveraging our supplier relationships to promote greater access to education and technology skills.
We also work closely with our Tier 1 hardware factories to ensure workers have access to a broad range of onsite and online career development and life skills classes. These include the HER Women Health project, Migrant Parenting training, and YouthSpark computer training.
More information can be found in the SEA Academy section of the downloadable Devices sustainability report (PDF).
Our customers and investors frequently request information about our corporate social responsibility (CSR) engagement with Microsoft suppliers. Understanding our supplier’s capacity to manage CSR issues and working with suppliers with strong sustainability performance allows us to respond to these requests, increase the resiliency of our operations, and enhance our business. To enable our indirect suppliers to meet these expectations we’ve engaged external stakeholders and have established requirements that leverage existing reports, frameworks, risk and performance disclosure tools, and assessment systems for CSR. In addition to meeting our stakeholder expectations, our approach is efficient and promotes convergence towards best-in-class sustainability products. We’ve adopted the CDP Supply Chain Program which provides our suppliers with a platform to understand the risks and opportunities of climate change and water scarcity.
We engage our contracted hardware packaging suppliers and our indirect suppliers directly in our accountability process. Our goal for hardware and packaging suppliers is to increase their capabilities according to a three-step model of maturity, we call “SEA Stages”. Microsoft SEA experts design and offer capability building programs according to this model of maturity, including compliance and self-management programs. This helps suppliers to cultivated and foster their own social and environmental accountability culture.
Each of our suppliers is expected to demonstrate compliance with all applicable laws, regulations, and our specifications. To ensure continuous performance, suppliers must evolve their focus from reactive risk management to strong management systems and a preventive mindset. This transformation allows them to proactively mitigate risks, monitor performance, and continuously improve.
Ultimately, we want our suppliers to integrate social and environmental accountability into their overall business management and culture. This involves engagement at all levels of the supplier organization.
Our engagement extends beyond assessments, we systematically and proactively engage with our hardware and packaging suppliers to communicate our requirements and expectations. Our four-step supplier engagement approach includes an initial assessment and audit as well as ongoing engagement and monitoring.
- Supplier Code of Conduct
- Social and Environmental Accountability (SEA) specifications
- Third-party auditors and Microsoft assessors
- Responsible Business Alliance (RBA) requirements with additional Microsoft requirements
- Root cause identification
- Corrective and preventive action
- Labor, environmental, safety, and high-risk management system guidance
- Worker hotline
- Training, coaching, and best practice sharing
This approach spans multiple tiers of our directly contracted suppliers:
- Tier 1 suppliers: Manufacturing partners with whom Microsoft has a direct contractual relationship to manufacture Microsoft hardware components and products.
- Tier 2 suppliers: Suppliers with whom Microsoft has a direct contractual relationship to provide components or materials to our Tier 1 suppliers.
- We also require contracted suppliers to ensure that their direct suppliers further upstream conform to our specifications. This allows Microsoft to indirectly push its principles to suppliers with whom we do not have contractual relationships.
The Microsoft Devices Strategic Sourcing and Manufacturing, and Responsible Sourcing teams work with our suppliers to ensure that the corrective action plans to remedy audit and assessment findings address the identified risks and root causes and implement fixes in a timely manner. Follow-up audits are conducted to ensure that corrective actions are implemented and closed.
We provide incentives to suppliers who show the willingness to build their capabilities and proactively improve their management systems. These incentives include less frequent audits, recognition at supplier events and consideration for future business awards.
Our primary motivation is to push for continuous improvement of the supplier social and environmental accountability program and performance. Where improvement is not possible, we may restrict further business to the supplier and phase them out from our active supplier list.
Microsoft is dedicated to achieving extended, responsible sourcing strategies by partnering with and investing in NGOs, the electronics sector, and other industry sectors. We believe collaboration is essential to establish global and industry-wide responsible sourcing practices. In addition, these groups offer us diverse points of view that expand our thinking.
In addition to broad sustainability activities, we have sustainability programs within other key procurement categories. The following are a few highlights from these programs:
Reducing emissions with company cars
Part of the Microsoft Procurement Fleet Team mission is to reduce the emissions associated with company cars. The team started by implementing carbon dioxide (CO2) emissions upper limits in local car policies. The team has also worked with car manufacturers, dealerships, and leasing companies to secure the highest possible discounts on their lowest emission engines by model range. This has resulted in the average CO2 value of our company cars in Europe dropping from 172 g/km in FY10 to 112 g/km in June 2017—approximately 6,200 vehicles are included in this number and it accounts for the majority of our fleet. Over the last few years, we have also reduced the harmful emissions of company cars by 35 percent while simultaneously keeping employee satisfaction high.
Responsible recycling - reducing hazardous waste in landfills
Microsoft extends the life of used electronic equipment by partnering with Microsoft Authorized Refurbishers to rebuild and reuse devices to help people, businesses, and communities around the world embrace sustainable technology. The Responsible Recycle Program manages removal, reuse, and disposition of Microsoft owned electronic equipment globally. In FY18, we recycled over 295,000 units, collected equipment from 75 countries and avoided contributing 4.2 million pounds of hazardous waste to landfills.
Business air travel
Although business air travel is still a significant contributor to the carbon footprint generated by Microsoft operations, we have seen a 20 percent decrease per employee and a 42 percent decrease per dollar revenue since 2007. The key to helping us reduce our travel emissions has been the widespread adoption of Skype for Business. We are empowering a modern, sustainable workplace with technology that enables employees to meet with each other, and with customers and suppliers, effectively online. Our people are increasingly choosing to use technology instead of travel to get their work done, a trend we expect to see increase in the years ahead.
To advance transparency, we also require our Tier 1 contract hardware manufacturers and customer service and call center operators to issue their own public corporate social responsibility reports based on Global Reporting Initiative requirements.
Learn more about our strategy and programs for sourcing raw materials.
Microsoft contracted supplies are responsible for ensuring their supply chains are in conformance with the Supplier Code of Conduct, Social and Environmental Accountability (SEA) and other requirements. Download our Devices sustainability report to access key audit and assessment results.
Our Social and Environmental Accountability (SEA) program is at the core of our responsible supply chain sourcing efforts. Read more about our SEA requirements in the Social and Environmental Accountability (SEA) Manual Excerpt.
Learn more about the organizations Microsoft Devices partnered with to further responsible sourcing in the last fiscal year.
Building supplier capabilities
Our auditing and assessment efforts are an important component of our due-diligence program and provide insight to risks and continuous improvement efforts of our suppliers. Related risk analysis enables us to target specific areas for building supplier expertise and management systems. Tools include training and peer-learning through sharing experiences and best practices.
Microsoft SEA Academy for hardware and packaging suppliers
The Microsoft SEA Academy was established to help ensure our supply chain has access to resources to build their necessary capabilities to meet our Social and Environmental Accountability (SEA) vision of a more sustainable and responsible supply chain. The SEA Academy provides various training programs tailored to various stages of supplier maturity to help suppliers continually advance from compliance to self-management and beyond. The target audience of SEA Academy includes supplier’s factory management and workers, Microsoft third-party audit firms, and our own internal development and design, sourcing and factory management, technical and new product introduction professionals, among others.
Other examples of capability building programs with our hardware and packaging suppliers are available int he SEA Academy section of the Devices sustainability report (PDF).
Code of conduct and ethics training
We provide supplier development and training resources including our Supplier Code of Conduct Training across our broad base of suppliers. This online training is mandatory for external staff to ensure that they understand and follow ethical business practices in accordance with our Supplier Code of Conduct.
Carbon emissions reporting
Our Carbon Disclosure Project (CDP) reports emissions associated with our direct manufacturing and, at a minimum, 80 percent of our suppliers by spend. For indirect suppliers, we engage the CDP Supply Chain Program to provide our suppliers a standardized platform to understand the risks and opportunities that climate change presents to them.
The 95 suppliers that disclosed in 2016 reported $530 million invested in emissions reduction activities -- reducing their collective footprint by 7.5 million metric tons of carbon dioxide equivalents (CO2e) and saving them $1.4 billion.
This year, 105 of our top suppliers reported an average of $530,000 invested in emissions reduction activities, reducing their collective footprint by 18.1 million metric tons of carbon dioxide equivalents (CO2e) and saving an average of $3.3 million. In addition to engaging the CDP Supply Chain program on climate, we also enage suppliers addressing water performance. We achieved a 94 percent response rate, well above CDP’s global average response rate of 58 percent.
We also have dedicated supplier training and assurance programs related to anti-corruption, privacy and security. Microsoft is committed to promoting a positive work environment we expect our suppliers and their employees, agents, and subcontractors to adhere to the same standards of conduct and behavior that we expect from our own employees. Microsoft requires all External Staff (employees of supplier companies doing business with Microsoft) to complete the Supplier Code of Conduct (SCoC) training prior to beginning any work as well as refresh trainings for those who engage with us more than 18 months.
Responsible sourcing of raw materials
We care deeply about the sustainability of our upstream supply chain. Microsoft does not harvest or mine raw materials but we do influence upstream harvesting and mining though our policies and practices. Our approach to raw materials begins with the Microsoft Responsible Sourcing of Raw Materials (RSRM) Policy . The RSRM policy extends our Supplier Code of Conduct to the furthest reaches of our upstream supply chain in support of human rights, labor, health and safety, environmental protection, and business ethics. This policy covers all minerals and materials used in our devices and packaging, unbounded by geography.
RSRM related programs are framed by the five steps of the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Guidance) and the UN Guiding Principles on Human Rights.
Raw material supply chains have multiple levels of processing, documented and undocumented distribution channels, and diverse usages across different industries. The Microsoft span of influence is strongest with suppliers we contract directly and progressively weaker further upstream.
As our direct influence weakens, our strategies and tools must adapt to meet inherent challenges. Our primary strategy is to impact and influence global social and environmental improvements through strategic cross-sector and key partnerships and to support the use of fairly applied global standards.
Examples of our collaboration and capability building efforts include Pact, the Initiative for Responsible Mining Assurance (IRMA) and Alliance for Responsible Mining.
Pact case study
In 2014, we began a partnership with Pact to develop sustainable strategies and unique programs to address the diverse circumstances of children who work at mine sites. We believe that direct and culturally appropriate intervention is the most effective means to address this issue.
Supporting a conflict-free supply chain
Microsoft is committed to the responsible sourcing of raw minerals used in our hardware products. We will continue to advance implementation of our RSRM policy in our supply chain related to conflict minerals including tin, tantalum, tungsten and gold. The policy consists of supply chain identification and risk assessment, standardized requirements and verification, capability building, transparency, and partnerships.
For more information download our Conflict Minerals Report (CMR).
Creating shared value
Microsoft has a long-standing and strong commitment to source from diverse groups. Our procurement team is committed to increasing our spending with diverse suppliers as part of our Supplier Diversity program. In the United States in FY18, Microsoft spent more than $3 billion with diverse-owned businesses, placing us once again in the top 20 companies globally for diversity spending. We have also expanded our program to include a focus on LGBTQ-owned businesses. In addition to supplier diversity programs in US, we have supplier diversity programs in South Africa and Australia. The Broad Based Black Economic Empowerment (B-BBEE) program in South Africa contributes to economic transformation and increases the number of disadvantaged groups that manage, own, and control the economy. Our procurement team ensures compliance with South African laws and regulations and strengthen the partnership with suppliers in South Africa.
Microsoft YouthSpark Supplier Community Technology Center (CTC)
The Microsoft YouthSpark Supplier Community Technology Center (CTC) program enables us to collaborate with our suppliers to further extend the reach of our YouthSpark initiative. We provide curriculum and support to help our suppliers use their facilities to host technology skills trainings for their employees and other local community members. These trainings give participants an opportunity to receive a free Microsoft Digital Literacy certificate. To date, our suppliers have launched centres in 16 countries and trained over 70,000 participants.
We’ve continued our collaboration with the Global Impact Sourcing Coalition, sponsored by the Rockefeller Foundation, to research and promote best practices in “impact sourcing” with suppliers who proactively seek to provide work and training opportunities to disadvantaged individuals with high potential. In FY18 Microsoft supported impact sourcing projects in 16 countries including the United States, Kenya, Uganda, and India. Services provided include back office work and facilities management which enable our suppliers to hire thousands of impact sourcing employees.
Advancing disability inclusion in our supplier chain
In FY18, we sponsored the creation of the Global Impact Souring Coalition Impact Sourcing Autism Empowerment Kit to help our suppliers and other companies understand and engage individuals on the autism spectrum.
Supporting the 2018 Special Olympics USA Games
We teamed up with the 2018 Special Olympics USA Games to produce a sustainable and inclusive event and provide an open-source kit to enable sustainable events beyond the Seattle games. We contributed our sustainable supply chain experience and led groups across Microsoft to guide five sustainability impact areas: waste and recycling, food and beverage, accessibility and inclusion, transportation, and responsible sourcing.
Recognizing suppliers with our corporate social responsibility awards
We work to advance sustainable projects and create shared value with our suppliers. We encourage and recognize suppliers who make exceptional impact in social and environmental areas. As part of our Microsoft Supplier Program, we have Corporate Social Responsibility awards covering supplier diversity, climate change, and impact sourcing.
Microsoft spending with businesses owned by minorities, veterans, and women