Lenovo Sustainability

Supply Chain

Our Approach

Lenovo is committed to corporate social responsibility and sustainability across our end-to-end supply chain process. Along with demanding high-quality materials, parts, and products from our suppliers, we have systems in place to help ensure our suppliers comply with all 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 100 large suppliers who typically have robust sustainability programs

95%

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

95%

of our suppliers have ISO 9001 and 14001 and OHSAS 18001 certifications

90%

of our suppliers issue formal public sustainability reports

75%

of our suppliers are formal Responsible Business Alliance members

Lenovo Supplier Code of Conduct

Key Elements:

Human Rights
Supply Chain Working Conditions
Grievance Notifications
Non-Discrimination and Non-Retaliation
Supply Chain Due Diligence
Supplier Diversity
Procurement Values and Ethical Dealings
Conflicts of Interest and Business Integrity
Climate Change
Environmental Impact
Conflict Minerals
Public Sustainability Reports and Policies

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) 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.

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.

Key Pillars of the RBA Code of Conduct include:

Overall supplier sustainability performance is tracked and reported via an extensive report card program. Performance is assessed against over 25 metrics across quality, delivery, technology, cost, and service. Program status, including open assessments, audits, action plans, and closure of action items are comprehensively reported monthly to senior management.

The program’s key goals are to increase our business with suppliers who perform the best and improve areas of weakness with underperforming suppliers. Supplier performance is applied as an overall penalty/credit multiplier in the calculations. In the event a supplier does not adequately meet our expectations, business activity is discontinued. Furthermore, we track the financial and business stability of over 250 suppliers with a real-time risk-monitoring tool. Business stability is a strong leading indicator of sustainability programs.

Suplliers are also engage through events and meetings, including an annual supplier conference to build relationships and discuss overall performance and key initiatives for the next year. In addition, strategic and key suppliers participate in quarterly meetings.

We directly validate several tiers of our suppliers’ compliance with the RBA program and independent audits. Three types of audits can be used: customer driven, auditee driven, and RBA driven, also known as Validated Audit Program (VAP) audits.

Lenovo practice and key statistics are as follows:

95% of our suppliers by spending are covered in the audit program, which also includes approximately:
- 60% of Tier 2 suppliers by spending.
- 30% of Tier 3 suppliers by spending.
All suppliers must conduct self-assessments annually and an audit every 24 months, regardless of their self-assessment risk level.
We drive for the most rigorous VAP audits — about 75% of our supplier audits are VAP audits.
Program status (open assessments, audits, action plans, and closure of action items) is comprehensively reported monthly as formal key performance indicators.
Overall compliance performance of audit scores and supplier details is reported quarterly.
Our suppliers must require their own suppliers to comply with the RBA Code of Conduct.

When there are critical issues with excessive working hours and insufficient time off, we request supplier employee data until compliance is initially achieved and demonstrated during the two subsequent quarters. In addition, we conduct quarterly deep-dives and internal reporting on these two topics.

Audit Compliance Results

Our overall average audit performance is noted below. Each year represents approximately 50 percent coverage of our overall procurement spend. Scores are based on a weighted 200-point system where priority and major findings have significant weighting. Our quantitative targets are to achieve audit scores greater than 170 and zero priority findings in every audit.

All Suppliers						Outsourced Manufacturing
Section	2015	2016	2017	2018	2019	2018	2019
Total	147	177	156	170	167	153	174
Labor	149.5	173	164	167	166	157	169
Health & Safety	160	186	172	186	187	174	189
Environment	183	200	185	200	200	182	200
Ethics	200	200	200	200	200	198	200
Management System	188	200	200	200	200	189	200
Priority	0	0	0	0	0	0	0
Major	6	3	4	3	3	6	3

TRAINING AND CAPABILITY BUILDING

We conduct several training and communication activities throughout the year with our global supply chain personnel. In addition, education packages and subject matter experts are available on demand.

Our internal training and awareness programs include:

Monthly newsletters

Semi-annual sustainability training

Semi-annual training on supplier report card penalties and credits

Annual environmental impact training

Annual conflict minerals training

Annual employee communications on ethical, anti-bribery and anti-corruption expectations

As most of our suppliers are large national and international suppliers with their own corporate social responsibility programs, the need for direct capability training is minimal. Our efforts are aligned with capability attainment via communication of objectives and tracking the attainment. Furthermore, the RBA has a comprehensive Learning Academy readily available with modules on all programs, guidance, and tools.

We do, however, provide:

Ad-hoc education, as necessary

Semi-annual communications on the RBA, environmental impact, conflict minerals, and Supplier Code of Conduct expectations.

SUPPLIER DIVERSITY

Lenovo is dedicated to diversity and believes in providing equal opportunity for all suppliers while developing and advocating a diversified supplier base. We seek to provide the maximum practical opportunities for diverse suppliers to provide goods and services while also creating a sustainable, mutually beneficial relationship.

To that end, Lenovo is committed to maximizing the inclusion of Minority-, Women-, Veteran-, Service Disabled Veteran-, Disabled-, and Lesbian, Gay, Bisexual, and Transgender (LGBT) - owned businesses, as well as businesses located in Historically Underutilized Business Zones (HUBZones) and Small Businesses within our procurement activities.

For more information, please visit our Supplier Diversity webpage.

Supplier Environmental Performance

Each year, we ask our suppliers to report their environmental impact data (GHG emissions, water usage, waste generation, renewable energy) formally via the RBA or the CDP (formerly Carbon Disclosure Project).

Lenovo’s standard purchase contract and purchase order terms and conditions stipulate supplier’s compliance with environmental specifications, hazardous material avoidance, ozone-depleting substance elimination, product safety, personal data privacy, liability insurance, and full compliance with all applicable laws, including export and import and product safety. Suppliers must also implement and certify the documented quality and environmental management systems.

Additionally, suppliers must comply with the Supplier Code of Conduct. There are multiple code elements under Supplier Code of Conduct and the element of Non-Discrimination and Non-Retaliation require that suppliers cannot discriminate against employees based on race, color, gender, religion, age, nationality, social or ethnic origin, or any other legally protected class. Any deviation to the terms requires approval from our Legal Department, and specific high-risk terms require additional senior procurement and business unit management approvals.

Finally, compliance with our comprehensive Supplier Code of Conduct could be executed either in separate and unique Supplier Code of Conduct Agreement, standard purchase agreements or standard purchase orders.

ENVIRONMENTAL RISK MANAGEMENT

Our procurement team identifies areas of overall environmental risk based on specific criteria and then takes action to ensure that any risk is mitigated. Suppliers are classified by the following risk categories:

Category 1

From whom Lenovo purchases off-the-shelf goods or uses processes or services produced or offered commercially that are consistent with the supplier’s normal business activities. In other words, Lenovo does not increase environmental impact due to any special requirements. Most of our suppliers are in this category.

Category 2

Those contracted by Lenovo to handle materials or processes that are outside of their usual business activities. In these cases, a comprehensive and focused environmental audit may be required. These suppliers are few and receive environmental audits via RBA program audits.

Category 3

Those who handle hazardous or special waste or provide product end-of-life management services. In these cases, approval of the Corporate Environmental Compliance organization and on-site environmental audits are required. These suppliers are subject to additional contractual terms and conditions and semiannual activity reporting.

In 2019/20, all the required audits for Category 1 and 2 suppliers were conducted on time and as required, with no events of noncompliance noted. For Category 3 suppliers, supplier classification and audit status are verified quarterly.

CONFLICT MINERALS

Lenovo recognizes the importance of responsible sourcing of minerals, such as tin, tantalum, tungsten and gold (known as 3TG). Sourced from regions experiencing political and social conflict, for example, the Democratic Republic of the Congo (DRC) and surrounding countries, these materials are generally referred to as "conflict minerals" because they can serve to prolong the conflicts.

While some companies have engaged in boycotting minerals from the DRC and other areas, we feel that this does not improve the situation on the ground. Rather than boycotts, Lenovo believes in responsible sourcing. That is why we fully support the efforts of the RBA and governmental and nongovernmental bodies to help companies make more informed choices about sustainable mineral sourcing in their supply chains.

Since 2012, we have been direct participants in the RBA’s Responsible Minerals Initiative (RMI) programs. More recently, we commenced a formal Cobalt due diligence effort that uses the RMI Cobalt Reporting Template (CRT) within our supply chain. This has enhanced our understanding of the chain of cobalt custody, as well as identifying smelters, which has led to the introduction of our new Cobalt mineral policy.

We also have a due diligence program in place to better understand conflict minerals in our supply chain. This program complies with the requirements of the U.S. Securities and Exchange Commission’s Dodd-Frank ruling and the OECD guidance. The main components of this program include:

Having a comprehensive public conflict minerals policy.
Engaging suppliers through formal contracts and directly validating their due diligence efforts via independent third-party RBA audits, where conflict minerals are part of the code.
Holding regular education sessions for internal employees, publishing monthly newsletters, and providing supplier training as needed.
Utilizing the RBA Conflict Minerals Reporting Template (CMRT) for Reasonable Country of Origin Inquiry (RCOI) efforts across 95% of our procurement spend and supply chain.
Participating in the RMI Smelter Engagement Team (SET) to identify smelters and their status.
Auditing smelters using the RBA Responsible Minerals Assurance Process (RMAP).
Reporting the program status to Lenovo’s Chief Corporate Responsibility Officer.
Publicly reporting both a formal Conflict Minerals Report (CMR) and a list of the smelters in our supply chain.

97%

Overall conflict-free status improved to 97% from 89%.

100%

Tantalum maintained 100% conflict-free status.

98%

Tin improved to 98% from 95% conflict-free status.

96%

Tungsten improved to 96% from 92% conflict-free status.

95%

Gold improved to 95% from 82% conflict-free status.

Full details and statistics on our reasonable country of origin inquiry, due diligence, and smelters can be found in our most recent Conflict Minerals Update report

For more information, please visit the Lenovo Responsible Sourcing webpage.

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