To ensure sustainable competitiveness, LG Electronics assumes a proactive role in making healthier system through the supply chain.
LG Electronics motivates its suppliers to comply with LGE’s Supplier Code of Conduct, which is based on RBA Code, and encourages them to analyze and improve their weak points through CSR risk management.
LGE fosters win-win growth by supporting its suppliers in building CSR management systems and helping them to succeed in global competition. To provide a systematized support program, LGE joined Responsible Business Alliance (RBA), a CSR consultative group founded in 2008 with global electronic companies and actively participated in RBA’s regular meeting and its working groups from 2010. Also, we’re trying to conduct suppliers CSR risk management based on RBA Code, along with a training program to enhance supplier ability to conduct autonomous CSR risk management.
Based on RBA Code, LGE established and declared its Supplier Code of Conduct in 2010 to assist its suppliers in fulfilling social responsibilities. We are providing Supplier Code of Conduct training programs to the suppliers in Korea as the initial step to obtain voluntary agreement on compliance with the Code of Conduct, and consequently expand CSR from LGE’s internal activity to overall supply chain management. Eventually, we plan to expand our activity globally to help every supplier fulfill its social responsibility and achieve long term competence.
LGE launched a comprehensive supply chain (production facility) risk management program based on the RBA process in 2011, and strengthened CSR competence of the suppliers located in Korea and in potential risk countries. The CSR risk management program to be conducted for around 4,000 manufacturing suppliers consists of four steps. The program (i) will be promoted in order to reach LGE’s all production sites and suppliers, and obtain consent on compliance with the Supplier Code of Conduct, (ii) evaluates the suppliers’ CSR risk, (iii) conducts diagnosis to the high-risk classified suppliers, and encourages improvement, and (iv) keeps monitoring to verify if the improvement is maintained at constant level, and support the suppliers to fulfill their social responsibilities.
LG Electronics consider labor agency as one of major supplier. In 2015 for all Chinese subsidiaries there was CSR survey on labor agency. Some of them were interviewed with document review to identify potential CSR risks during dispatch worker management from hiring to resignation. With help from Chinese legal office, standard contract for labor agency to reflect CSR criteria was made in August 2015. Also, we have assessed CSR risks in major outsourced suppliers since 2014.
LG Electronics has in place a multi-dimensional process to screen suppliers who wish to conduct business with our company. In 2013, we introduced CSR aspects to our prospective supplier assessment process under the Management (M) category.
The strengthened screening process is designed to verify prospective suppliers’ compliance with key requirements in HR and ESH during the plant inspection, ensuring assessment of site conditions as well as required documentation. Through such measures, we require potential suppliers to comply with key CSR requirements, encourage them to establish a CSR framework, and strive to improve the working conditions of their employees. In 2014, We intend to introduce CSR performance indicators to our quarterly assessment of existing suppliers and to offer incentives to suppliers who have shown excellent performance in the CSR area.
New Supplier Selection Process
Respecting human rights and preserving the environment in all business activity is a core principle at LG Electronics, and issues like child labor, exposure to hazards, environmental degradation and other human rights abuses in mineral mining are of great concern to us. While we do not purchase raw ore or unrefined minerals directly from mines, metals such as gold, cobalt and copper are included in some of the materials, parts or components that LG purchases from first-tier suppliers which then end up in our products.
We are aware of serious reports of various issues that are occurring at mine sites and have recently received a number of related inquiries. Consistent with LG’s corporate social responsibility mission, we are committed to conducting business in an ethical, socially and environmentally responsible way. Because of this we are prioritizing issues of high concern with our stakeholders. This includes responding to several specific requests from civil society organizations related to allegations of child labor in cobalt mines in the Democratic Republic of the Congo (DRC) and the unsafe mercury exposure to workers in gold processing in small artisanal mines.
Following recent reports of child laborers in cobalt mining in the DRC, we immediately began investigating to better understand where cobalt is being used in our products. According to our investigation, based on 2016 data, we found 4,014 parts containing cobalt from 360 first-tier suppliers. LG Electronics’ Supplier Code of Conduct clearly states that our suppliers must not use materials obtained through any illegal form of mining. The challenge for LG, being multiple tiers removed from mining activities, is to try to assure that the practices of others in the minerals supply chain such as sub-tier suppliers, smelters and refiners, and mineral traders, are not inconsistent with our Supplier Code of Conduct.
We have also received inquiries regarding the use of mercury in gold processing in small artisanal mines. LG Electronics has a strict policy restricting the use of heavy metals, including mercury, in our products. However, we face a similar challenge as previously mentioned in assuring the practices of others who are many levels removed in our supply chain.
Complexity and lack of transparency in the supply chain are issues industry is facing as a whole. This is why LG Electronics is working together with relevant stakeholders to better understand where the materials being used in our products come from and how we can support responsible sourcing practices to prevent human rights abuses and other workplace hazards. Toward this end, LG Electronics is participating in several responsible supply chain and sourcing initiatives, including the Responsible Business Alliance (RBA), the Conflict Free Sourcing Initiative, and the Sustainable Trade Initiative’s program to support responsible tin mining practices in Indonesia.
LG Electronics recognizes the importance of government’s role in helping to end and prevent situations where abuses of workers are allowed to continue. We also raised this issue to the RBA in March 2016 and have begun participating in several related industry meetings and action committees as a next step to understand the best way to support a collaborative approach that includes industry, government and civil society for meaningful solutions to these serious and complex situations.
Meanwhile, LG Electronics’ supplier CSR risk management program continues to focus on preventing human rights abuses such as forced labor, child labor and any critical issue in terms of environment/health/safety. The results and progress of this program can be found in our sustainability report released every year. Although we’re currently focusing on first tier suppliers, we will look to take further action for responsible sourcing throughout our overall supply chain.
In 2016, LG Electronics joined RRMI (Responsible Raw Materials Initiative) launched by RBA as a new platform to address mineral issues including cobalt/tin. Through participating cobalt/tin working group under RRMI, we will contribute to solve this issue.