TI's strategic procurement plan enables us to purchase intelligently and to coordinate our buying power globally. Our worldwide procurement teams oversee various categories of goods and services, set specific procurement strategies, and identify qualified suppliers and the best methods of fulfillment.
The majority of the services and products we buy are procured locally, from communities near our operations, which drives local business development and employment. Currently, more than half of our procurement occurs outside the United States.
We continue to more consciously consider sustainability in our purchasing decisions, and have guidelines in place for purchasing and using specific natural resources.
Labor
TI, including our National Semiconductor subsidiary, is committed to protecting its employees and have established standards for safe and humane labor practices in our supply chains as described below. The California Transparency in Supply Chains Act of 2010 requires companies to report their efforts to eradicate human trafficking.
Evaluating risks
TI has more than 10,000 suppliers globally. Our practice for initiating a relationship with each and every supplier begins with education on TI standards. We communicate our policies and expectations, which address the humane treatment of workers, through various channels, such as the TI Supplier Quality Expectation Document and in our open letter to suppliers, which includes TI Values and Ethics Statement and Code of Business Conduct. These principles are also a part of purchase orders, supplier contracts, and other documentation where responding suppliers certify compliance with applicable laws and affirm that products will not be manufactured with the use of forced, prison, or indentured labor, or child labor. Compliance is a condition of doing business with TI.
Monitoring
TI performs targeted risk assessments and monitors key suppliers, including those operating in high-risk regions, to verify the integrity of product chains. This verification includes an evaluation of the suppliers' labor practices. These announced audits are conducted by TI rather than a third party.
Key suppliers are evaluated in various ways to assess their ethical risk. For instance, TI may perform an in-depth evaluation of such supplier's ethics practices, including a review of the supplier's documented ethics and compliance program. Specific supplier sites are scored, taking into account data such as the Corruptions Perceptions Index ranking of the countries where the supplier operates.
Suppliers identified as low risk may be requested to sign a letter of commitment to support TI's Values and Ethics Statement and business practices statement. Key suppliers identified as high risk are subjected to further review, which may include on-site audits handled by TI.
Standards and compliance
TI expects excellence and encourages our suppliers to achieve and maintain benchmark levels of performance and comply with all laws regarding slavery and human trafficking. Our standards are clearly communicated in the TI Supplier Quality Expectation Document and in our open letter to suppliers, which includes TI Values and Ethics Statement and Code of Business Conduct. These documents, as well as TI's Business Practices Statement, evidence our commitment to safe and humane treatment of all employees. They are shared with new suppliers and also made available publicly through our website. We also regularly engage with our suppliers and accept feedback through a variety of forums.
We support compliance by annually recognizing suppliers with top performance based on cost, environmental responsibility, technology, responsiveness, assurance of supply and quality.
Suppliers and employees are encouraged to share any questions or concerns directly with a TI buyer or procurement representative. TI also maintains an Ethics Office that enables suspicious activity to be reported anonymously. A formal "open door" policy provides another venue for employees to initiate investigation of a potential ethical/compliance issue, involving other individuals within the company beyond the employee's direct supervisor.
Suppliers who fail to meet TI standards are subjected to review and may be selected for on-site audits. Continued failure to meet our standards may result in contract termination. Similarly, TI employees are held to the same principles outlined above, and personnel misconduct is promptly addressed.
TI provides training for supply chain management employees on how to identify and address supply chain issues that are inconsistent with TI's ethics and values. We may broaden training as new regulatory requirements evolve.
Metals
Requirements of the new U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act will require publicly traded companies to publicly disclose the extent to which their products contain so-called conflict minerals sourced from mines in the Democratic Republic of the Congo (DRC) or adjoining countries. This includes tantalum, tungsten, gold and tin, which are integral to the manufacture of our products.
TI sources tantalum, tungsten, gold and tin from suppliers in the U.S. and Asia. We have received written assurances from our major suppliers that these minerals were not mined in conflict regions, specifically the eastern region of the DRC. We are engaged in ongoing efforts to obtain written assurances from all suppliers. Additionally, TI will continue working with industry associations to ensure a responsible supply chain for the minerals we use. We included this requirement in our Business Practices Statement.
In 2010, China stopped exporting rare earth metals to the U.S. and other countries. TI uses a very small amount of cerium and lanthanum in our manufacturing processes. The metals are not sourced directly by TI but are included in other materials, such as chemicals, that we purchase from suppliers. We identified alternative supply options and expect no impact as a result.
Chemicals
TI complies with chemical standards and regulations and uses benign chemicals where possible in our manufacturing processes. We screen all chemicals to ensure compliance with customer requirements and regulatory standards and also ensure that any necessary environmental, safety and health controls are in place.
Paper
In the past decade, our procurement of eco-friendly paper has evolved from excluding old-growth forest products in our purchases to purchasing more print and paper goods from Forest Stewardship Council (FSC)- and Sustainable Forestry Initiative (SFI)-certified distributors.
Today, paper used at TI contains at least 30 percent postconsumer waste. In 2010, a total of 30 percent of our U.S. expenditures on print and paper goods were with FSC- or SFI-certified suppliers.
TI continues the development and implementation of purchasing policies that expand our use of these types of suppliers. From increasing our from FSC- or SFI-certified supplier purchases to include other types of paper, like file folders and storage boxes, and by encouraging our global teams to do the same, TI continues to improve our environmentally sustainable procurement practices.
