Lenovo ESG

Supply Chain

Our Approach

Lenovo is committed to sound Environmental, Social and Governance (ESG) management across its end-to-end supply chain process. Along with demanding high-quality materials, parts, and products from our suppliers, we have ESG-specific systems in place, supported by contractual requirements to help ensure our suppliers meet or exceed applicable labor, environmental, health and safety, and ethics standards.

We recognize there is no end to this journey and there will be opportunities for improvement continually. Our approach includes:

Aspiring to have all workers in our supply chain be treated with dignity and respect

Managing all operations consistent with the spirit and intent of the U.N. Universal Declaration of Human Rights and the International Labor Organization (ILO) Declaration on Fundamental Principles and Rights at Work

Expecting our suppliers to continually reduce the environmental impacts of their operations

Obligating our suppliers to always conduct their business ethically

Working tirelessly to develop and maintain our supplier relationships

Our Supply Chain at a Glance

As an approximate percentage of production spend:

98%

of our procurement is with fewer than 130 large suppliers who typically have robust sustainability programs

95%

of our suppliers are independently audited and covered in our direct validation efforts

96%

of our suppliers have ISO 9001 and ISO 14001 certifications

94%

of our suppliers issue formal public sustainability reports

73%

of our suppliers are formal Responsible Business Alliance members

* Data as of July 2023 Key Supplier Base Report

Lenovo Supplier Code of Conduct

Key Elements:

Procurement Values and Ethical Dealings
Conflicts of Interest and Business Integrity
Supply Chain Security
Human Rights
Responsible Business Alliance
Employment Agencies
Climate Change
Environmental Aspects
Responsible Sourcing of Raw Materials
Non-Discrimination and Non-Retaliation
Supplier Diversity
Sustainability Reports, Assessments and Product Certifications
Supply Chain Due Diligence
Reporting Concerns

Human Rights, Environmental Impacts, Integrity

We expect our suppliers to meet the highest standards of responsible and ethical conduct regarding how they treat their workers and the environment, and how they do business. This expectation is supported by contractual requirements.

Lenovo’s standard purchase order (PO), PO Terms and Conditions, and contracts stipulate supplier compliance with our comprehensive Supplier Code of Conduct. This code upholds our values and includes provisions that prohibit human trafficking, discrimination, retaliation to worker complaints, bribery, and corruption. It also requires our suppliers to have formal grievance mechanisms in place. We will assess conformance to these requirements in making procurement decisions.

Lenovo works with the electronics industry on supply chain issues through our Responsible Business Alliance (RBA) (formerly the Electronics Industry Citizenship Coalition (EICC)) membership. Lenovo contractually applies the RBA Code of Conduct and associated audit requirements.

Support of RBA programs and Validated Audit Process (VAP) audits

Lenovo requires suppliers to adhere to the RBA Code of Conduct. Regardless of their RBA self-assessment risk level, Lenovo requires 95 percent of suppliers by spend to conduct an RBA audit (including both Validated Audit Program (VAP) and equivalent independent, third-party audit (non-VAP audit) by RBA-approved auditors) every two years. Lenovo started an effort to require its suppliers to commit to achieving RBA VAP) Recognition and Factory of Choice (FOC) designations to demonstrate leadership in ESG.

In FY 2022/23, 83 percent of Lenovo’s suppliers by spend achieved VAP Recognition, and almost 17 percent of the spend was designated FOC. The table below provides an overview of Lenovo’s suppliers’ annual RBA audit performance.

Historical average scores¹

Suppliers
	Labor Score	Health & Safety Score	Environment Score	Ethics Score	Management Score	Total Score	# of Priority findings²	# of Major findings²
2019	157	174	184	197	187	153	0.4	5.0
2020	157	173	189	199	190	155	0.3	5.4
2021	159	182	193	198	195	164	0.1	4.7
2022	160	182	190	199	196	164	0.2	4.4
ODM Partners
2019	156	175	182	197	188	156	0.2	5.6
2020	166	188	196	200	197	172	0.2	3.3
2021	167	182	195	195	195	170	0.0	4.0
2022	165	191	187	198	194	172	0.0	3.8

*Data as in Lenovo FY 2022/23 ESG Report

¹Scores are based on calendar year.

²The average number of findings is calculated based on the total number of findings and total number of reports per calendar year.

Responding to RBA audit labor-related results

When there are audit findings, we ensure closure of supplier action plan. In FY 2022/23, there were no violations reported related to forced labor or child labor by Lenovo’s suppliers who completed the RBA VAP audits. In FY 2022/23, 56 suppliers had other major labor findings identified in their audits. The most common supplier audit findings are related to an industry-wide problem of excessive working hours and insufficient time off for their employees.

Lenovo requires its outsourced manufacturers to report their employees’ working hours and time of performance monthly via an online tool so that it can take action to resolve any issues that are identified. Agreements for improvement were reached with suppliers, as a result, no relationships were terminated due to aforementioned labor findings.

Forced Labor

To better detect and mitigate the forced labor risks, Lenovo adopts and implements preventive measures. In FY 2022/23, some of Lenovo’s actions to prevent this practice were:

Added a section covering “Employment Agencies” to the latest version of the Supplier Code of Conduct for enhancing the management of labor agents and contractors
Implemented a third-party ESG risk assessment tool (EcoVadis) to screen suppliers throughout the supply chain
Provided a live education session to buyers on forced labor and potential red flags related to forced labor
Provided a webinar to suppliers on the topic of Labor Compliance Management
Invested in a third-party supply chain risk management platform (Everstream Analytics)
Conducted verification through RBA audits and participated in regular RBA Responsible Labor Initiative and VAP workgroup engagements

Environmental Impact

Currently, we ask our suppliers to report their environmental impact data (GHG emissions, water, waste, renewable energy) formally via the RBA or the CDP reporting methodologies in addition to responding to the Institute of Public and Environmental Affairs (IPE).

The FY 2022/23 Program performance as below:

Climate Change

Lenovo’s most recent supplier engagement efforts covered 98 percent of procurement spend. The efforts identified the following results (reported by total procurement spend):

93%
Suppliers with public GHG reduction goals

84%
Suppliers who track and report renewable energy generation and purchases

89%
Suppliers with third-party verification of their GHG emissions data

72%
Suppliers with renewable energy goals

Science Based Targets for Suppliers

Lenovo is engaging and incentivizing production procurement and ODM suppliers to also commit to the Science-Based Target initiative (SBTi).

During the reporting period, 45 percent of its procurement spend included suppliers with formally recognized SBT’s which was an increase of 17 percent from the previous year. It is Lenovo’s goal to achieve 95 percent of procurement spend with suppliers that implement SBTs.

Water

During the last data collection period, 84 percent of procurement spend was with suppliers with quantified water reduction goals.

Water risks within Lenovo’s operational footprint and supply chain are assessed annually using publicly available water risk tools ( World Resources Institute’s Aqueduct and WWF’s Water Risk Filter Tool).

Waste

The waste-related information collected from suppliers includes data such as annual hazardous and nonhazardous waste volumes. During the last data collection period, 76 percent of procurement spend was with suppliers with quantified waste reduction goals

Recognition

In 2022, Lenovo achieved a CDP score of “A-” for its Supplier Engagement Rating in Climate Change, also listed on the Supplier Engagement Rating Leader Board (has maintained this honor for five consecutive years, since 2018).

Lenovo’s increasing efforts to optimize supply chain environmental impact has been recognized by the Institute of Public & Environmental Affairs (IPE) Green Supply Chain Corporate Information Transparency Index (CITI) and the Corporate Climate Action Transparency Index (CATI) and was ranked among the Top 10 in the IT industry.

Responsible Sourcing of Raw Materials

Lenovo is committed to ensuring that minerals used to manufacture products do not contribute to human rights abuse and environmental degradation, and requires its production procurement and ODM suppliers to do the same. Lenovo supports the efforts of the RBA Responsible Minerals Initiative (RMI) to address materials beyond the conflict minerals of tin, tantalum, tungsten and gold (3TG). In FY 2022/23, Lenovo conducted extensive due diligence for its supply chain using the RMI program’s Conflict Minerals Reporting Template (CMRT) and Extended Minerals Reporting Template (EMRT) and the RMI Responsible Minerals Assurance Process (RMAP). Lenovo will coordinate with the RMI as RMI performs risk profiles on other materials, assess the content in its products, and further develop due diligence efforts to mitigate supply chain risk. For more information, please visit the Lenovo Responsible Sourcing webpage.
FY 2022/23 Program Performance (% of Procurement Spend)


100%	Conformant or active 3TG smelters & refiners
96%	Suppliers with public conflict mineral policy
79%	Suppliers who are formal RMI members
76%	Suppliers with public conflict minerals report

EcoVadis

Lenovo strategically expanded the scope of ESG assessments to suppliers across all categories by launching the EcoVadis tools. In FY 2022/23, it expanded the scope of ESG assessments from key Tier 1 suppliers to strategic Tier N and indirect procurement suppliers.

Lenovo has implemented the EcoVadis IQ tool to screen suppliers’ ESG risk, based on their inherent Corporate Social Responsibility (CSR) risks and procurement information. In FY 2022/23, approximately 1,000 suppliers were processed in the EcoVadis IQ tool, and 285 suppliers were invited to conduct an EcoVadis ESG assessment.

Lenovo continues to ensure that all strategically important suppliers participate in the EcoVadis program and achieve at least 45 of 100 points or a comparable audit result. Suppliers scoring less than 45 out of 100 points must implement a corrective action plan (CAP) and the progress will be tracked within 90 days.

In 2023, Lenovo has been recognized for its exceptional commitment to sustainability by receiving the Outstanding Leadership Program award at the 2023 EcoVadis Sustainable Procurement Awards. This prestigious accolade is a testament to Lenovo’s dedication to advancing sustainable practices throughout its procurement processes. The award recognizes the efforts of Lenovo’s employees and partners who have worked to embed sustainable practices into its supply chain.

Supplier ESG Performance Evaluation

ESG performance with our top suppliers (typically 95 percent of our procurement spend) is quantified with 32 key indicators across RBA, Environmental Impact, Responsible Sourcing of Raw Materials, EcoVadis and Sustainability Reporting factors. For suppliers belonging in the remaining procurement spend, their ESG performance evaluation is based on their EcoVadis rating. ESG is then applied as an overall penalty/credit multiplier across the approximately 200 supplier report cards issued each quarter. Furthermore, we track the financial and business stability of over 300+ suppliers with two real-time risk-monitoring tools-D&B and CRM. Business stability is a strong leading indicator of sustainability programs.

Supplier Engagements

Lenovo offers and provides the following training programs to suppliers, in order to facilitate supplier capability building:

Semi-annual communications on the RBA, environmental impact, responsible sourcing of raw materials, key ISO certifications, ESG Reporting and Supplier Code of Conduct expectations.
Lenovo created education material for suppliers to learn its ESG requirements while providing an education session to 1,200 supplier attendees at 2022 Lenovo Standards and Certification Supplier Conference.
In FY 2022/23, Lenovo’s GSC ESG attended the procurement team’s quarterly business review (QBR) with 15 suppliers for one-on-one ESG guidance and education.
In FY 2022/23, five webinars for suppliers were held (including one with CDP, two with EcoVadis), covering topics including Lenovo Supplier ESG Requirements for Suppliers, CDP Disclosure Training, EcoVadis CSR Rating, and EcoVadis Post Assessment, and RBA Compliance. Total attendee numbers were 1,529.
For the specific Supplier Emission Reduction Program, Lenovo also held four webinars on the topics of energy and cost savings, renewable energy trading in China, Science Based Targets, and carbon credits.

Supplier ESG Awards

Five suppliers received the ESG award at the 2023 Supplier Conference. This is the second year that Lenovo awarded suppliers based on their ESG performance. The 5 suppliers are BOE, Celxpert, Darfon, LGES, and Simplo. Winners are supportive of Lenovo Procurement ESG Initiatives and are leading in ESG performance.