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Michael R. Levin Building an Ethical Supply Chain November 24, 2008 Consumers, investors, business partners, regulators, and media organizations now expect a company and its entire supply chain to be ethical. The supplier-generated ethics scandal is probably one of the biggest (and least foreseen) business risks most leading companies face today. The damage can be great, and protective measures can and should be adopted immediately. 2

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DII Supply Chain Initiative Survey Results 0 Survey of signatories 0 Current supply chain requirements/tools 0 Preferred supplier programs 0 Value of current DII tools 0 Gauge interest in an industry code 0 Approximately 25% response rate 3

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Survey Results 4

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1. A set of Key Principles that suppliers are expected to follow 2. A Model Code of Conduct for suppliers 3. A guidebook for suppliers to assist in the implementation of key ethical principles 4. A mandatory Code of Conduct for all suppliers 5. A resource bank of ethical principles6. A resource bank of model codes7. A resource bank of training materials Which of the following would your organization find helpful when dealing with supply chain integrity issues? Please rank them 1-7, with 1 being the most helpful and 7 being the least. 5

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Why create a Supplier Code of Conduct? 0 Promote inter-organizational Ethics each part of the supply chain affects others 0 Set expectations for supplier behavior 0 Mitigate risk 0 Facilitate supplier collaboration and partnership 0 Reduce redundancy for suppliers 6

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Electronics Industry Citizenship Council 0 Focus areas: labor standards, health & safety, environment standards, management system, ethics 0 Total supply chain initiative, including member parties 0 Global membership 0 Any electronics company may adopt code, full members must invest in implementation 0 Includes common assessment tools EICC 7

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DII Signatories with Supplier Codes Alcoa, Inc. AT&T CNA Corporation IBM Corporation (EICC) Siemens Government Services, Inc. Day & Zimmermann, Inc. Crane Co. Sodexo Federal Services, Inc. Timken Company Wisconsin Physicians Service Insurance Corporation General Electric 8

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Benchmarking 0 Reviewed 36 codes 0 Industries included: 0 Aerospace & Defense 0 Electronics 0 Government 0 Healthcare 0 Manufacturing 0 Insurance 0 Telecommunications 9

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Content: Top Benchmarked Sections 10 Sample of 36 supplier codes

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Key Considerations 0 Appropriate content 0 Promoting the Code 0 Marketing points 0 Potential pitfalls and how to mitigate effect 0 Distribution 0 Introduction process 0 Trial-group? Volunteers? 0 Applicable population 0 Format 0 Target length 0 Standalone document or linked to references 12

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Breakout Sessions 13

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14 0 Consider options for code format 0 Explore life after the creation of a supplier code 0 Discuss organizational impact Format & Distribution Content 0 Suggest which topics are essential to a supplier code 0 Identify & explore differences of opinion on topic inclusion 0 Identify marketing points/potential pitfalls 0 Correlate ideas into major themes Business Case Breakout Topics

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Thanks and appreciation for our facilitators: 0 Roz Bliss, Northrop Grumman 0 Linda Burket, Raytheon 0 Mike Campbell, Raytheon 0 Ellen Daly, Lockheed Martin 0 Denise Drennan, Lockheed Martin 0 Lisa Gross, Lockheed Martin 0 Roxane Macgillivray, Lockheed Martin 0 Rielle Miller-Gabriel, Lockheed Martin 0 Cathy Payne, SAIC 15