Texas Instruments

Company operations

Supplier accountability

Sustainability | Compliance | Minority/women-owned business enterprises | Results | Looking ahead

TI has spent several decades building a positive reputation for being ethical and socially and environmentally responsible. In 2013, we continued this effort by using the Electronic Industry Citizenship Coalition's (EICC) Code of Conduct as a source of guidance. The EICC designed the code to ensure worker safety and fairness, environmental responsibility, and business efficiency, both within TI and our supply chain.

We spent much of the year educating our procurement specialists and major production suppliers about the EICC code, meeting the necessary requirements to attain full EICC member status, and working with our suppliers to complete EICC assessment questionnaires and various other activities.

Additionally, we continued to confirm that our suppliers comply with import/export laws and regulations. We also spent significant time preparing for compliance with the conflict minerals provisions of the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act. This provision requires companies to disclose whether their products contain "conflict minerals" - specifically tin, tungsten, tantalum or gold - sourced from conflict mines in the Democratic Republic of Congo or adjoining countries. In 2014, we will begin reporting the results of our supply-chain inquiries and due diligence to the U.S. Securities and Exchange Commission.

Our incident management and emergency response systems allowed us to deliver products across the globe without delay in 2013. Additionally, our sites and suppliers were able to mitigate and avoid significant impacts caused by earthquakes, typhoons and other natural disasters.

Sustainability

We developed a TI Supplier Code of Conduct to instill the same standards within our supply chain that we agreed to when we began using the EICC Code of Conduct. We evaluate how closely their policies and protocols adhere to the code by reviewing their responses to a self-assessment questionnaire designed by EICC members.

In addition to completing the EICC self-assessment, our critical suppliers participated in a routine risk assessment to ensure that their qualifications, financial performance and business continuity plans continued to meet our standards. We found some opportunities for improvement, but no significant infractions.

For those suppliers that need to improve, we work with them to develop and implement action plans using our internal scorecard, called CETRAQ. The process - which evaluates suppliers' costs, environmental and social responsibility, technology responsiveness, assurance of supply, and quality (CETRAQ) - allows us to monitor and rate their progress every six months. CETRAQ also helps us integrate social responsibility and environmental considerations into our bids and proposals.

During the year we also:

  • Updated TI's Supplier Environmental and Social Responsibility Policy.
  • Made minor revisions to our business practices statement to align with EICC protocols.
  • Responded to more than 460 customer inquiries about conflict minerals and 65 inquiries about our business continuity program. We saw a 15 percent increase in the number of inquiries related to our social and environmental performance in 2013.

Compliance

In addition to our ongoing compliance efforts, we began to prepare for compliance with the Dodd-Frank conflict minerals regulations, in part by participating in the EICC's Conflict-Free Sourcing Initiative. This initiative calls for an independent party to evaluate smelter and refinery procurement activities to ensure that tin, tungsten, tantalum and gold originate from conflict-free sources. The names of compliant smelters and refiners are compiled into a database.

The EICC also developed a tool for suppliers and subcontractors to confirm that minerals used in electronic products are mined from legitimate sources. TI uses EICC's conflict minerals reporting tool to track suppliers' practices.

While we are working diligently with our supply chain to ensure that our products do not contain minerals derived from conflict sources, we are not yet able to state that our products are 100 percent "conflict-free" Given the complexity of our supply chain, confirming that all products we manufacture are conflict-free is a significant undertaking.

In many cases, we are four or more steps removed from the smelter or the mine, and we depend on information from suppliers that themselves have incomplete information about the origin of the conflict minerals they supply to us. We continue to work toward identifying all the smelters in our supply chain and using only those sources that have been verified as conflict-free, but it will take time to achieve this goal.

To advance our progress in 2013, TI:

  • Created operation procedures (including disclosure controls), formalized a management structure, and leveraged specialized IT resources to prepare for conflict minerals reporting and compliance. We now have a Conflict Minerals steering team of cross-functional experts who oversee this work. Members share progress reports with the Audit Committee of TI's board of directors.
  • Commissioned a third-party assessment of our compliance-planning efforts to date, which found that our program and progress are consistent with most of our electronics industry peers.
  • Completed an initial survey of our supply chain; follow-up is underway. We will continue encouraging suppliers' participation in the Conflict-Free Smelter Program and require that they provide more complete information about their mineral sources.

Minority-/women-owned business enterprises

In 2013, TI continued its commitment to supporting minority- and women-owned businesses. Last year, we:

  • Celebrated five minority-/women-owned business enterprises (MWBEs) that graduated from our 12-month Supplier Development Initiative. This program pairs business owners with company procurement and business-unit mentors. We meet each month to share where TI is headed, explain what we desire from vendors, and expose them to TI departments that may be able to use their products and services.
  • Honored select employees as 2013 Supplier Diversity Champions based on their support of and commitment to our minority/women business development initiative globally.
  • Collaborated with Dallas-area chambers of commerce to grow minority- and women-owned enterprises.
  • Earned recognition from the Dallas/Fort Worth Minority Supplier Development Council, which awarded TI its Buy Those Who Buy Us Best Practice Award for our minority business inclusion efforts.

Results

In 2013, TI:

  • Recognized our 12 highest-performing suppliers with TI Supplier Excellence Awards for their commitment to high operating standards.
  • Received recognition for being an exceptional supplier from two automotive manufacturers.
  • Required that 150 major production suppliers - with which we do 80 percent of our business - complete self-assessments of their corporate environmental and social programs against the EICC Code of Conduct.
  • Trained 262 procurement specialists and 137 manufacturing suppliers on the EICC code and assessment process. This effort will continue in 2014.
  • Spent $185.6 million (6 percent of U.S. spend) with certified minority- and women-owned suppliers in the United States. We also enabled our prime suppliers to spend $17 million in direct sub-tier purchases from firms operated by minorities and women. Combined, this exceeded our 5.5 percent goal. (Currently, TI does not track global spending with MWBE suppliers.)

Looking ahead

TI is pursuing full membership in the EICC, which calls for us to formally report our supplier assessment results and administrative requirements by 2015. Membership requires a significant investment of financial and human resources, but it offers us access to industry-endorsed tools and methodologies that have already resulted in performance improvements both internally and throughout our supply chain.

We will continue working with suppliers to monitor their compliance with local laws, as well as both TI and EICC standards. We will monitor and address potential business interruption risks and gather additional data on the sources of conflict minerals.

Other activities that we plan to complete include:

Sustainability

  • Requiring more of our major production suppliers to complete EICC self-assessment questionnaires for their facilities.
  • Initiating EICC-facilitated audits of 25 percent of identified high-risk suppliers to evaluate their labor, ethics, occupational health and safety, and environmental practices.
  • Encouraging select suppliers to put mitigation plans in place to address weaknesses identified in the 2013 assessments.
  • Training select production suppliers on EICC Code of Conduct requirements.

Compliance

  • Filing our first conflict minerals disclosure with the U.S. Securities and Exchange Commission.
  • Gathering additional smelter information from manufacturing suppliers to help us respond more completely to customer inquiries about conflict-free minerals.

Minority and women-owned business enterprises

  • Spending at least 6 percent of U.S. procurement dollars with minority- and women-owned suppliers.
  • Identifying a new pool of minority business candidates that qualify for and will benefit the most from our Supplier Development Initiative, and continuing our informal mentoring and networking activities with minority suppliers.