Supply chain sustainability

Our supply chain

Cisco operates a global, diverse, and resilient supply chain. Through our network of specialist suppliers and partners, Cisco works to manufacture goods in a sustainable and responsible manner. For the second consecutive year, Cisco secured second place in Gartner's Supply Chain Top 25 for our 2024 report, after previously holding the top spot for three years.

About our supply chain

Our due diligence system

Cisco uses the Organisation for Economic Co-operation and Development Due Diligence Guidance for Responsible Business Conduct (OECD Guidance) and the UN Guiding Principles on Business and Human Rights as the basis for our supply chain due diligence system. Below is an overview of how we drive due diligence, with additional detail by program on the Supplier Code of Conduct, Human rights in the supply chain, and Supply chain environmental stewardship pages.

Embedding responsible business conduct into policies and management systems

Engaging our suppliers is foundational to driving positive outcomes for rightsholders and the environment. To promote consistent standards across our supply base, we work to communicate and hold suppliers accountable to our policies during the life cycle of our relationship with them. Suppliers acknowledge and affirm that they will abide by the following Cisco policies:

• Supplier Ethics Policy
• Supplier Code of Conduct
• Global Human Rights Policy
• Respecting the Rights of Vulnerable Groups Policy
• Responsible Minerals Policy
• Juvenile Labor Policy and Expectations
• Chemical Management Expectations for Suppliers

Establishing strong policies demonstrates our commitment, sets expectations for our suppliers, and helps guide how we and our suppliers operate. Cisco communicates relevant supply chain policies to suppliers through documents such as its Supplier Guide, and requires acknowledgement of those policies. Cisco's policies are also embedded in our standard master purchasing agreements with suppliers.

Our Supply Chain Operations (SCO) ESG Steering Committee maintains executive oversight of our environmental and human rights risks and opportunities. It regularly reviews our progress and results and drives integration of ESG into business operations. The committee is chaired by the SCO Senior Vice President and includes other executives representing Global Manufacturing Operations, Services and Logistics, Global Supplier Management, Product and Component Operations, Technology and Quality, Supply Chain Transformation, and Legal. In addition, SCO employees are trained in environmental and human rights issues in the supply chain and are regularly briefed on supplier ESG requirements and their importance to the business.

Identifying and assessing actual and potential adverse impacts

Cisco annually conducts social and environmental risk assessments of existing supplier sites. These risk assessments incorporate geographic risk indicators from reputable sources (such as the UN Human Development Index and UNICEF’s Children’s Rights in the Workplace Index), indicators for forced labor, risks from supplier operations and production, and the supplier’s relationship to Cisco. We also incorporate suppliers’ previous audit performances and repeated nonconformances in our overall methodology.

The results of these assessments inform the supplier sites at which Cisco will conduct deeper investigation through onsite audits or surveys. If suppliers are found to be nonconformant to our policies, we engage them to correct issues through Corrective Action Plans (CAPs). Cisco also analyzes the nonconformances from audits and other assessments and uses this analysis to inform the development of training programs to help suppliers prevent or mitigate the most likely or frequent risks.

In addition to our annual risk assessment of sites, we assess new suppliers or new supplier sites. Suppliers are required to complete an ESG questionnaire during the onboarding process, which helps us to identify potential social and environmental risks. If risks are identified, we follow up to determine if these need to be addressed prior to launching or scaling business with the supplier. Examples of the types of risk that the questionnaire can identify include:

• Foreign migrant workers paying recruitment fees
• Student workers employed in positions not related to their field of study
• Critical Responsible Business Alliance (RBA) Code of Conduct nonconformances in the suppliers’ most recent RBA audit that remain open
• Existing pollution violations

Ceasing, preventing, and mitigating adverse impacts

Cisco uses multiple strategies to prevent, cease, or mitigate supply chain risks. There are five main levers Cisco employs—some on their own, some in concert with others—when dealing with human rights or environmental nonconformances.

• Supplier capability-building: We aim to promote best practices and give suppliers and site management a baseline set of skills to address social and environmental risks. For example, in fiscal 2024, we delivered trainings on forced labor risks, health and safety, chemical management, worker engagement, mandatory Human Rights Due Diligence, water conservation, greenhouse gas (GHG) reporting, clean energy procurement, and updates to the RBA Code of Conduct, among others.
• Supplier accountability: If a supplier is found to be nonconformant with our policies, we work with suppliers to develop, implement, and monitor CAPs to closure as a requirement to do business with us. Supply chain management is routinely informed of suppliers’ performance on these plans and holds suppliers accountable to make progress. When we lack leverage to drive resolution, Cisco collaborates with industry peers to foster collective action. If a supplier fails to make efforts to improve, we may stop awarding new business and, when necessary, terminate the relationship.
  
  We use supplier scorecards to help measure and manage suppliers’ conformance with Cisco’s environmental and human rights requirements. Scorecards are discussed with suppliers during business reviews. Scorecards also factor into Cisco’s supply chain business processes for sourcing and procurement decisions. Having ESG metrics reported alongside cost, quality, and service delivery allows procurement managers to make informed decisions when awarding business to suppliers. The ESG portion of the scorecard includes information on:
  • Conflict minerals reporting and sourcing of minerals in conformance with our policy
  • RBA audit performance and timeliness of closure of CAPs
  • Protection of vulnerable workers, such as foreign migrant workers and young workers
  • GHG emissions reporting and absolute reduction goals
  • Water and waste reporting
  • Pollution prevention activities and environment, health, and safety certifications
• Industry collaboration: Cisco believes cross-industry collaboration is key to communicating clear and consistent standards to suppliers. In presenting a united front, our industry can work collectively to help suppliers make important improvements. Cisco is an active participant in the RBA, of which it was a founding member, the Responsible Minerals Initiative (RMI), the Responsible Labor Initiative (RLI), the Clean Electronics Production Network (CEPN), the Public-Private Alliance for Responsible Minerals Trade (PPA), and the European Partnership for Responsible Minerals (EPRM). Cisco also partners with the Institute of Public & Environmental Affairs (IPE), CDP (formerly Carbon Disclosure Project), Alliance for Water Stewardship (AWS), and the Asia Clean Energy Coalition (ACEC). Learn more about the stakeholders we engage with to drive impact.
• Rightsholder engagement: Cisco works to promote the voices of workers in our suppliers’ factories and people in surrounding communities. This includes programs for worker-management collaboration and communication in supplier factories. We also engage with communities surrounding our supplier sites on environmental issues and work to support mining communities through multistakeholder partnerships.
• Remediation: Where we have identified that we have contributed to an adverse human rights impact, we aim to provide access to remedy for affected individuals through legitimate processes. For example, when we find that workers are being forced to pay recruitment fees, Cisco works with involved parties, from the supplier to the affected workers, and leverages industry partnerships to help facilitate the repayment of fees to workers.

We encourage employees, workers, and other stakeholders to raise concerns and report suspected violations of our policies through one of our reporting channels, including the Cisco EthicsLine.

Tracking implementation and results; using lessons learned to improve due diligence

Cisco uses multiple KPIs to track implementation and effectiveness of our due diligence efforts. Our approach to creating and tracking KPIs focuses on: risk identification (such as through audits, surveys, or reports that assess supplier conformance to our policies), supplier performance (whether suppliers address risks and Cisco’s requirements), and change (metrics showing Cisco’s impact). For example, Cisco tracks and reports a number of due diligence program metrics including the number of audits performed as well as key nonconformances identified by country. In addition, we track suppliers’ performance on audits to determine who demonstrates strong conformance and who requires corrective actions. When corrective actions are needed, we monitor them to closure according to the RBA closure timeline. We also monitor supplier and site performance across multiple audit cycles to assess that improvements are sustained over time. We leverage this approach across our programming to assess the effectiveness of our actions and drive improvement of our programs and supplier performance.

In addition to tracking performance at the supplier level, Cisco analyzes data to inform ongoing strategic and programmatic decisions, such as capability building, engagement with stakeholders, and program strategies. This creates a positive feedback loop whereby we can continue to improve.

Communicating with key stakeholders

No due diligence effort is complete without communicating to key internal and external stakeholders about successes, challenges, and ongoing issues. Progress toward our goals and to addressing ESG risks is shared with our SCO ESG Steering Committee. Our steering committees for net zero, circularity, and human rights dive more deeply into their respective subject areas to understand the issues and adjust strategies to increase positive outcomes. Supplier conformance to our policies and standards is communicated with the supplier management teams so that they can acknowledge satisfactory performance or support driving improvement by suppliers.

We publicly report our efforts here and in our annual Purpose Report, as well as in our annual Global Statement on the Prevention of Modern Slavery and Human Trafficking, Conflict Minerals Report, Norwegian Transparency Act report, and CDP climate change and water questionnaires.