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Auditing Our Suppliers
Third-party social responsibility audits provide suppliers with feedback about how well they are meeting both legal requirements and Ford’s expectations. They also help identify specific areas for improvement necessary to drive sustained supplier improvement.
A New Protocol
Ford has been conducting third-party external supplier audits since 2003. We have conducted over 1,075 supplier audits and more than 1,400 follow-up assessments around the world and across commodities.
Recognizing the value in cross-industry collaboration and adoption of best practices, in 2016 we became the first automaker to join the Responsible Business Alliance (RBA) (formerly the Electronics Industry Citizenship Coalition). As part of our membership, we adopted the Validated Audit Protocol (VAP). This audit protocol provides an expanded scope, with 90 questions covering labor, health and safety, management systems, ethics and the environment. Validated audits are conducted utilizing independent external auditors and include third-party quality control and validation to ensure credibility. Our audits are generally announced and agreed with the supplier in advance.
In 2017, we conducted 27 new audits using the VAP methodology, 100 percent of which were externally validated and certified by the RBA. The audits covered a broad range of commodity groupings from all regions of the world and were identified according to our risk assessment process.
Both Ford and our suppliers have experienced a learning curve associated with the elevated standards and process discipline required by the RBA audit protocol. To assist in process adherence, we implemented a number of improvements to our supplier engagement approach between 2016 and 2017:
- All audits were conducted according to the latest VAP audit protocol (V5.1.1)
- To prepare for the audit, suppliers completed the RBA SAQ in advance of the audit
- Supplier subject matter experts (Health and Safety, Plant Manager, HR Manager) were asked to participate in an RBA-facilitated, targeted onboarding meeting
- Suppliers were assigned three RBA Learning Academy e-learning modules to prepare them for the audit
- Suppliers interfaced directly with the third-party Audit Quality Manager to ensure direct feedback on priority non-conformance corrective action plans according to the RBA timeline
Through this direct engagement, our 2016 auditees (the most recent data available) improved their raw audit score by an average of 45 points between the initial and the closure audits, reinforcing supplier commitment to improving working conditions.
Recognizing Our Commitment
The RBA has established the VAP recognition program to recognize a factory’s commitment to social and environmental responsibility. Five of our suppliers from the Asia Pacific region are eligible for recognition through the VAP recognition program: two at the platinum level and three at the silver level.
Third-Party RBA Social Responsibility Audits: Assessment Results1
| 2016 | 2017 | Total to Date2 | |
|---|---|---|---|
| Initial assessments | 31 | 27 | 58 |
| 2016 | 2017 | |
|---|---|---|
| Follow-up assessments | NA | 24 |
Data notes and analysis:
- Audits conducted using the Responsible Business Alliance VAP Audit.
- Program Total represents cumulative data from 2016 to 2017.
Taking Corrective Action
For identified non-conformances, we expect all of our suppliers to develop a corrective action plan detailing root causes, planned remediation actions and timings for resolution. Such plans are regularly reviewed with in-region supply chain sustainability personnel to ensure compliance aligned with Ford’s expectations. We also review the overall status of supplier compliance with our commodity purchasing teams.
The most serious non-conformances identified are termed priority non-conformances. For these items, the supplier is required to prepare immediate containment plans and longer-term corrective action plans, which are reviewed and monitored by Ford regional sustainability leads.
Should a supplier be unable or unwilling to address certain audit findings within our expected timeframe, we first engage with our regional and global purchasing communities to attempt to resolve the issue. However, we reserve the right to end our relationship with any supplier that fails to comply with our Global Terms, which include compliance with local laws, or fails to address an agreed compliance plan within an agreed timeframe.
We had one instance in 2017 of a supplier being placed on sourcing hold as a result of 2016 audit results that uncovered fees being charged to foreign workers. While the fees being charged were allowed by local law, they were not aligned with our newly launched expectations regarding “no fees.” The supplier is in the process of implementing corrective actions. We will continue to follow up and ensure that the situation has been remediated prior to new business being awarded to that supplier.
Audit Findings
2017 Non-Conformances Identified in RBA Audit
% of total
| Environment | 11 |
|---|---|
| Ethics | 8 |
| Health and Safety | 25 |
| Labor | 33 |
| Management Systems | 23 |
The majority of non-conformances identified in our 2017 RBA audits were in the labor and health and safety sections. The weighting of issues in 2017 is aligned with 2016 audit data. There was an overall decrease of 17 percent in the total number of non-conformances between 2016 and 2017.
Approximately 5 percent of the non-conformances uncovered required immediate containment actions. Of these:
- 39 percent were attributable to working hours and consecutive days of work
- 47 percent were health and safety issues
- 3 percent were environmental issues
The remaining non-conformances were labor items, including pregnancy testing as a condition of employment, nighttime work for young workers and applicant-paid health checks.
Beginning in 2017, we began to direct all of our suppliers with identified priority non-conformances to targeted e-learning modules offered by the RBA. These specific modules are intended to provide additional capability building within the supply base.
Frequent Non-Conformances in 2017
Labor
Non-conformances related to working hour requirements – including inadequate time off and lack of policies and systems to record and manage working hours – continue to be frequently identified in supplier audits.
Our audits did not reveal any instances of child labor or forced or involuntary labor, although a number of our suppliers’ policies/procedures lacked the required robustness to ensure compliance.
Our audits also found that many suppliers lack the policies and procedures to ensure reasonable accommodation for all religious practices.
We continue to expand our training efforts and capacity building to equip suppliers with the knowledge, skills and processes to ensure employees’ rights are protected.
Health and Safety
The most frequent health and safety non-conformances identified in 2017 audits were related to emergency preparedness. Many of these non-conformances can be quickly resolved through minor actions such as more frequent fire drills and updated emergency indicators and signage. Some, though, require more complex planning to resolve them.
A number of audits revealed that some suppliers do not keep all required permits, licenses and test reports as required by local law. It was also uncovered in some instances that further discipline is required to ensure adequate personnel training on first aid equipment and more regular certification of first aid equipment. These issues are generally resolved quickly upon discovery.
Environment
Improper chemical container labeling and lack of secondary chemical containment are easily remediated non-conformances with hazardous substances. Identified gaps in management processes and lack of adequate worker training may require additional time to resolve.
A number of supplier sites were found to lack proper storm-water management processes, which are necessary to protect local waterways from contamination. These suppliers have been asked to develop corrective action plans to prevent discharges and spills from entering storm drains. As the RBA expectations are cascaded through our supply chain, we expect non-conformances in storm-water management to decrease.
Incomplete energy or greenhouse gas emissions data are flagged as non-conformances to the RBA audit protocol. For these, we continue to work with our suppliers through the CDP Supply Chain and Ford PACE programs, providing technical support and best-practice ideas to improve supplier reporting transparency and performance in energy management.
Ethics
Ethics non-conformances represent the smallest number of non-conformances identified in our supplier audits. Most identified items relate to the lack of effective policies and procedures to combat these issues. No instances of retaliation or bribery or corruption were found. Ethics compliance has gained greater visibility in the automotive industry, resulting in enhanced language in the Automotive Industry Guiding Principles to Enhance Sustainability Performance in the Supply Chain and the associated newly established Industry Practical Guidance. Industry training sessions will be updated to reflect this added emphasis.
Management Systems
Many of our suppliers lack mature and comprehensive management systems to proactively identify Labor, Health and Safety, Environment and Ethics risks. Specific items found include improperly defined roles regarding social compliance issues and lack of routine review of managements’ handling of these issues. Many of our supplier facilities do not conduct regular self-audits to assess conformance with social compliance standards and regulations.
We have found that our Aligned Business Framework (ABF) suppliers have performed consistently better in this area than our non-ABF suppliers. Ford is exploring ways to extend the ABF approach to a broader section of the supply base.