Samsung Electronics Renews Commitment to Improve Working Conditions for Workers at Supplier Companies



I. Our Commitment

As a global company that holds itself and its supplier companies (“Suppliers”) to the highest standards, Samsung Electronics Co., Ltd. (“Samsung”) takes working conditions at our Suppliers very seriously. We continue to audit and investigate working conditions at our Suppliers, informed by concerns raised by third-party NGOs and other stakeholders. And, in this spirit, Samsung is sharing the progress we’ve made over the past year in improving working environments at Suppliers, disclosing third-party supplier audit results and revealing our future plans to ensure we continue to exceed global operating standards for working conditions throughout our supply chains in China and around the world.

Our priority has been, and will always remain, the health and safety of the employees within the Samsung community – those who work at Samsung-operated facilities (who help manufacture 90 percent of our products in 28 facilities in 13 countries around the world), as well as those who are employed by our Suppliers.

We require our Suppliers to meet our high standards of working conditions as outlined in our Supplier Code of Conduct, and we continually carry out supplier trainings to ensure strict compliance. Further, we work to regularly monitor and assess our Suppliers through third-party audits. Over the past year, we have particularly focused our efforts on working with select suppliers who need support with compliance management and implementation in Chinese facilities.

II. Putting our Commitments to Work: 2013 Progress Update

Samsung Code of Conduct

In March 2005, in line with Samsung’s management principles, we established the Samsung Code of Conduct. This Code of Conduct serves as a guiding principle for all Samsung employees, outlining standards of conduct in all business activities.

  1. Compliance with laws and ethical standards: Fair competition and privacy protection, in accordance with laws and business ethics
  2. Clean organizational culture: Protection and respect for intellectual property of both Samsung Electronics’ and other stakeholders.
  3. Respect for customers, shareholders, employees: The pursuit of consumer and customer satisfaction, as well as shareholder value creation
  4. Care for the environment, health and safety: Environmentally-friendly management, and procedures to ensure the health and safety of consumers, customers and employees alike
  5. Socially-responsible corporate citizen: Relationship build-up for co-existence and co-prosperity with business partners, customers, partners and employees around the world



Samsung shares such principles with all business partners, requiring compliance with the Code as a global corporate citizen. Further, we take care to listen to our employees, customers, consumers and other stakeholders with an open mind to determine areas of improvement within our company. In particular, issues raised by stakeholders and NGOs are reviewed through a systematic process and, in 2013, Samsung took concrete steps to improve issues and is working to incorporate additional measures and solutions into our supplier compliance management policy.



  1. Provided Comprehensive Support for Compliance and Implementation of Corrective Actions
    • Company-Wide Supplier Compliance Team
      Encouraged consistent, systematic support for Suppliers from different countries and diverse cultures to implement corrective actions
    • Company-Wide Cooperative System
      Strengthened organizational structure and personnel aimed at improvement of working conditions in Suppliers in China
    • Compliance Trainings
      Held total of eight compliance trainings for 1,108 Human Resources and Environmental Health and Safety managers at Supplier facilities in China
  2. Enforced Zero-Tolerance Policy for Child Labor
    • Mandated use of ID card reader terminals by all Suppliers in China
      Strengthened recruiting processes to verify the authenticity of ID cards of candidate workers
    • Introduced face-recognition system
      
Implemented a face-recognition system in all recruitment processes in China to prevent identity theft and fraud
    • Mandated face-to-face interviews
      Face-to-face interviews were held to check ID cards of 94,236 new workers at 138 Supplier facilities in China
  3. Raised Awareness and Created Consensus for Compliance
    • Executive Level and Working Staff Compliance Trainings
      Held regular compliance trainings for CEOs of Suppliers and working level staff; trainings to be expanded in 2014 and beyond
    • Worker Health and Safety Consulting Program
      Samsung experts provided consulting services to 227 Suppliers in China in 2013 regarding worker health and safety procedures and best practices
  4. Worked to Increase Transparency on All Policies and Activities
    • Third-Party Audits and Self-Assessment
      In 2013, Samsung collaborated with the Electronic Industry Citizenship Coalition (EICC) to conduct third-party audits of 100 Suppliers in China who needed corrective measures.
    • On-Site Hot-Line Support (Human Rights Protection Center)
      To avoid violation of human rights such as child labor, which may occur in Suppliers’ facilities, Samsung set up hot-lines to report violations. Moreover, posters with hot-line numbers and e-mail address were affixed in places easily-accessible to workers. We aim to completely resolve the reported issues within a month from the date of notice.


III. Supplier On-Site Audit Findings

Supplier On-Site Audit Overview

All Suppliers of Samsung are required to be in compliance with the rigorous standards outlined in our Supplier Code of Conduct. Samsung conducts additional on-site audits, mindful of the level of risks such as conditions in the country in which Suppliers are located or the Supplier’s past audit results. Audits led by Samsung are divided into two types – internal audits and third-party audits.

Internal audits are led by Samsung internal expert employees in the area of HR, Procurement, and Environment, etc. Each expert is trained to understand detailed inspection protocols and then assess the requirement as specified in the Supplier Code of Conduct. Samsung experts review the records submitted by suppliers and conduct physical inspections of manufacturing facilities, including worker dormitories and cafeterias. Also, experts conduct face-to-face interviews with workers to listen to their voices on the ground. Issues raised during the audits are recorded in the Samsung database management system so that they can be tracked and monitored for improvement.

Third-party audits are led by professional auditing firms certified by the EICC (Electronic Industry Citizenship Coalition). Samsung only selects Suppliers to be audited by considering the size of the company and does not engage in the process of inspection. An external auditing firm conducts audits based on five categories – 1) labor and human rights, 2) health and safety, 3) environment, 4) ethics and 5) management systems. After completing audits, the results are reviewed with senior management of each Supplier.

When violations are uncovered, we not only require Suppliers to take corrective action, but also establish a plan for improvement in their management system to prevent future recurrences. Further, we monitor the corrective actions based on the premise that all issues raised will be resolved as quickly as possible.



Third-Party Audit Findings Recap



  • In 2013, Samsung conducted third-party audits of 100 Suppliers in China (who employ an aggregate of 108,439 workers) through the EICC’s VAP (Validated Audit Process)-licensed external auditing firms who led the audits and inspected suppliers based on the EICC checklist.
  • As a result, we found 80 percent compliance in the area of labor and human rights. We have established corrective action plans for violations for each Supplier, and we are currently in the process of undertaking such corrective actions to effect changes as soon as possible.
  • n terms of working hours, third-party audits of small- and medium-sized Suppliers in China found noncompliance in 46 percent of Suppliers audited to certain Chinese labor laws, by exceeding the monthly overtime limit of 36 hours. This nonconformance was due to an irregular occurrence of overtime due to a rapid increase of production in the short term.
  • Therefore, Samsung is concentrating our efforts to make improvements in this area by providing practical support to our Suppliers - such as factory automation support and pre-order allocation - to fundamentally reduce need for overtime. We plan to proactively manage compliance with China’s legal overtime standard through monthly monitoring of overtime hours.


Detailed Third-Party Audit Findings by Category



1) Labor and Human Rights



Important Findings and Corrective Actions


Freely Chosen Employment
The Samsung Code of Conduct prohibits forced, bonded (including debt bondage) or indentured labor; involuntary prison labor; and slavery or trafficking of persons. Workers must not be required to surrender any government-issued identification, passports, or work permits as a condition of employment. Workers need to be informed in writing and in their own language prior to employment of the key employment terms and conditions.
  • From the audit, forced labor was not found in any of the audited Suppliers. However, 33 Suppliers omitted required information such as working conditions in the contract or did not provide contracts to dispatched workers.
  • These Suppliers addressed the issues immediately upon Samsung’s request.
  • Samsung required the Suppliers to prevent the same issues from recurring, and asked to have trainings on workers’ rights. As per overtime labor, we encouraged Suppliers to receive agreements from workers in advance so they can work voluntarily.
Child Labor Avoidance
Samsung strictly follows a zero-tolerance policy on child labor. If a violation is found, Samsung terminates its business relationship with the supplier. When hiring new workers, Suppliers must identify the age of candidates, check ID cards, and perform an identification check. In addition, the Supplier must adhere to local laws and regulations prohibiting hazardous work to underage workers (under 18 years).
  • No instances of child labor were identified in the audit. However, there were 16 Suppliers who asked underage workers to work overtime. Forty-eight Suppliers failed to restrict hazardous work from underage workers by having them work on some parts of the manufacturing process that required handling chemicals.
  • Samsung required these Suppliers to address this issue and follow the applicable law with regard to underage workers. We also requested that these Suppliers establish a policy and outline a procedure to protect these workers.
Wages and Benefits
Compensation paid to workers shall comply with local wage laws, including those relating to minimum wages, overtime hours and legally mandated benefits. Deductions from wages as a disciplinary measure shall not be permitted. Payroll must be provided to workers and be written in a language understood by workers.
  • Thirty-three Suppliers violated local laws and regulation by not providing legally mandated benefits, such as social insurance, to some workers on the grounds of social customs and the workers’ free will (“the workers did not want her/himself”).
  • Thirty-nine Suppliers did not compensate for overtime at pay rates greater than regular hourly rates for contract workers.
  • Thirty-three Suppliers made deductions from wages as a disciplinary measure or imposed fines.
  • Samsung required these Suppliers to comply with legally mandated social benefit standards, prohibit disciplinary fines, and establish a policy and implement a procedure to prevent recurrence.
Humane Treatment

There is to be no harsh and inhumane treatment, including any sexual harassment, sexual abuse, corporal punishment, mental or physical coercion or verbal abuse of workers. Following local laws and regulation, workers should be granted sick leave or maternity leave.
  • Seven Suppliers failed to have trainings with supervisors and managers on appropriate discipline measures. Twelve Suppliers did not document discipline history.
  • Samsung required these Suppliers to conduct trainings with supervisors (including on-site supervisors and managers). They were asked to record the training participants, training materials, and training time to help inform refresher trainings in subsequent years.
  • Samsung also required these suppliers to receive confirmation or signatures from the disciplined workers about the discipline measures they received, and keep disciplinary records for at least one year.
Non-Discrimination

Suppliers shall not engage in discrimination based on race, color, age, gender, sexual orientation, ethnicity, disability, pregnancy, religion, political affiliation, union membership or marital status in hiring and employment practices.
  • From the audit, we found that 9 Suppliers included age, gender, and/or pregnancy status in job advertisements or a labor agency’s contract. This information may be used in a discriminatory way. Therefore, Samsung required these Suppliers to modify the discriminatory expressions in the advertisement and the contract. Also, we requested that each Supplier establish a policy and implement a procedure to prevent recurrence.


Core Violations and Corrective Actions




Working Hours

The EICC suggests that working hours should not exceed 60 hours per week. The Samsung Code of Conduct applies the strictest standard, between local laws and the EICC standards. In addition, workers shall be allowed at least one day off per seven-day week.
  • Many of the audited Suppliers were not in compliance with the overtime standard required by the Chinese laws and regulation. We also found that some Suppliers exceeded the maximum working hours set by the EICC.
  • Samsung required these Suppliers to comply with overtime regulations. In cooperation with Suppliers, Samsung is also taking practical steps to reduce working hours.
  • Further, Samsung monitored overtime working hours of each Supplier through internal Supplier compliance support systems. As for Suppliers that consistently failed to comply with the standard, Samsung carefully monitored these companies and required that corrective actions be taken.


Compliance Rate by Category

Category Compliance (%)
Freely Chosen Employment 84%
Child Labor Avoidance 76%
Working Hours 54%
Wages and Benefits 73%
Humane Treatment 95%
Non-Discrimination 93%
Freedom of Association 92%
Total Compliance 80%

*Compliance (%) : The sum of compliance item by sector/Total audit items *100





2) Health and Safety



Important Findings and Corrective Actions



Occupational Injury Prevention
Worker exposure to potential safety hazards (e.g., electrical and other energy sources, fire, vehicles, and fall hazards) is to be controlled through proper design, engineering and safe work procedures, personal protective equipment, and ongoing safety training.
  • Fifty-nine suppliers did not provide sufficient number of personal protective equipment such as safety shoes, gloves, earplugs, protective goggles and masks, or did not pay enough attention to control whether workers wore protective equipment properly at all times.
  • Samsung required these Suppliers to control the proper use of personal protective equipment and to hold regular trainings.
  • Furthermore, Samsung urged Suppliers to set up systematic risk management procedures. In particular, Samsung provided Suppliers with training materials through internal Supplier compliance support systems. The materials contain guidance on local laws and regulation so that they can fulfill mandatory safety training (24 hours per year) required by Chinese laws and regulations.
Emergency Preparedness
Potential emergency situations and events such as fire, windstorm and chemical spills are to be identified and assessed. Their impact is to be further minimized by the implementation of emergency plans and response procedures, including: emergency reporting, worker notification and evacuation procedures, worker training and drills, appropriate fire detection and suppression equipment, adequate exit facilities and recovery plans.
  • It was found that some of the Suppliers did not have proper emergency exits or fire/smoke detectors. Forty Suppliers did not implement fire drills and/or excluded some of its workers from the drill due to night shifts. Fifty Suppliers failed to establish adequate emergency response and business recovery processes.
  • Samsung addressed the emergency exit issue immediately on-site. In addition, Samsung required Suppliers to place fire detection and suppression equipment on-site and post an evacuation map and emergency exit signs. These notices are subject to check on a monthly basis. Also, it is required that all workers participate in the drill and relevant information should be recorded in written format. Suppliers should also implement training every year on emergency preparedness. Additionally, Samsung urged Suppliers to establish management systems to both prevent and effectively respond to emergency situations.
Occupational Safety

Procedures and systems are to be in place to prevent, manage, track and report occupational injury and illness.
  • Fifty-seven Suppliers did not properly provide medical checkups to workers handling chemicals. Fifty-four suppliers did not have first-aid providers on-site or failed to provide adequate medical kits. Forty-five Suppliers did not provide records regarding cases of workers’ occupational injury and illness, causal analyses, corrective actions and other relevant records.
  • Samsung required these Suppliers to provide regular medical checkups to workers handling hazardous substances both prior to employment and after resignation/termination. Moreover, Samsung required Suppliers to provide regular medical checkups every year free of charge. Also, we asked Suppliers to place first aid providers on-site who have training from external agencies and valid certification to practice.
  • Samsung requires these Suppliers to have provisions to encourage worker reporting on occupational injury and illness and mandates that these records should be documented and maintained for 3 years regardless of the status of the issue.
Industrial Hygiene

Worker exposure to hazardous factors* is to be identified, evaluated, and controlled.

*Chemicals, and biological factors (e.g., viruses) and physical agents (e.g., radiation)
  • Three Suppliers exceeded the legal limits of working environment requirements, such as requirements with regard to dust and noise.
  • In compliance with local laws and regulations, Samsung required Suppliers to identify, evaluate and control hazardous factors in facilities. This includes provision of personal protective equipment and management of control programs for protecting the safety of workers.
Sanitation, Food, and Housing

Worker dormitories provided by the Suppliers or a labor agent are to be maintained as a clean, safe and reasonable personal space. Cafeterias should have separate spaces for food handling and dining.
  • Fifty-eight Suppliers needed more fire detection and suppression equipment, as well as evacuation facilities. Forty-eight Suppliers received low grades on food storage, sterilization of dishes and drinking water.
  • Samsung required Suppliers to equip fire detection and suppression equipment, as well as post an evacuation map and emergency exit signs on each floor. In addition, Samsung required Suppliers to obtain approval on facility health inspections and health certificates for food service workers.


Core Violations and Corrective Actions




N/A


Compliance Rate by Category


Category Compliance (%)
Occupational Safety 66%
Emergency Preparedness 59%
Occupational Injury and Illness 57%
Industrial Hygiene 79%
Physically Demanding Work 95%
Machine Safeguarding 67%
Sanitation, Food, and Housing 61%
Total Compliance 65%


3) Environment



Important Findings and Corrective Actions


Environmental Permits and Reporting
All required environmental permits (e.g. discharge monitoring), approvals and registrations are to be obtained, maintained and kept current. Further, their operational and reporting requirements are to be followed
  • Fifty Suppliers failed to conduct environmental impact assessments adequately or did not obtain an assessment statement.
  • Samsung required these Suppliers to implement environment impact assessments immediately and obtain environmental permits required by local laws and regulation.
Hazardous Substances
Chemicals and other materials posing a hazard if released into the environment are to be identified and managed to ensure their safe handling, movement, storage, use, recycling or reuse and disposal. Suppliers must adhere to local laws and regulation prohibiting or restricting the use or handling of specific chemicals.
  • Seventy Suppliers did not provide separate containers for chemicals and waste oil or failed to store hazardous chemicals in anti-leakage devices.
  • Samsung required these Suppliers to establish management systems and procedures to ensure safe storage, movement, and disposal as required by local laws and regulation. In addition, Samsung required workers handling hazardous chemicals to receive specialized training.
Wastewater and Solid Waste

Wastewater and solid waste generated from operations, industrial processes and sanitation facilities are to be characterized, monitored, controlled and treated as required prior to discharge or disposal.
  • Thirty-three Suppliers did not properly monitor wastewater from their operations.
  • Samsung required these Suppliers to establish management systems and procedures to prevent recurrence and to strengthen monitoring systems to comply with local laws and regulations.
Air Emissions

Air emissions of volatile organic chemicals, aerosols, corrosives, particulates, ozone depleting chemicals and combustion by-products generated from operations are to be characterized, monitored, controlled and treated as required prior to discharge.
  • Thirty-five Suppliers failed to control air emissions from their operations, kitchens, and power generators.
  • Samsung required these Suppliers to establish management systems and define procedures on air emissions.


Core violations and corrective action




N/A


Compliance Rate by Category


Category Compliance (%)
Environmental Permits and Reporting 65%
Pollution Prevention and Resource Reduction 74%
Hazardous Substances 72%
Wastewater and Solid Waste 68%
Air Emissions 71%
Product Content Restrictions 97%
Total Compliance 75%


4) Ethics



Important Findings and Corrective Actions


Business Integrity
The highest standards of integrity are to be upheld in all business interactions. Suppliers must have a zero-tolerance policy prohibiting any and all forms of bribery, corruption, extortion and embezzlement.
  • Fifty-one suppliers failed to adequately monitor bribery, improper advantage or did not have documented code of conduct. Samsung required these Suppliers to establish a worker code of conduct to effectively prevent ethics issues, and to train sales, procurement and development personnel who are likely to be exposed to noncompliance with ethics guidelines.
Privacy

Privacy of all stakeholders (suppliers, customers, consumers and workers) related to corporate management should be protected at a reasonable level.
  • Sixty-four Suppliers did not establish documentation protection policies nor had sufficient procedures regarding document protection.
  • Samsung required these Suppliers to establish information security protection policies and procedures compliant with local laws and regulations with regard to personal information storage, processing and transmission, and to provide related trainings for workers.


Core violations and corrective action



N/A


Compliance Rate by Category


Category Compliance (%)
Business Integrity 56%
Disclosure of Information 89%
Intellectual Property 46%
Fair Business, Advertising, and Competition 79%
Protection of Whistelblowers 68%
Protection of Privacy 36%
Total Compliance 72%


5) Management System



Important Findings and Corrective Actions


Risk Assessment and Risk Management
Suppliers are required to identify and control risks associated with labor, human rights, health and safety, the environment and ethics, and also regularly monitor compliance with the Supplier Code of Conduct.
  • Seventy-one suppliers lacked internal audits or did not perform adequate internal audits by sector.
  • Samsung required these Suppliers to designate personnel in charge by sector, establish clear goals and assess performance regularly to comply with local regulations and the Supplier Code of Conduct.


Core violations and corrective action




N/A


Compliance Rate by Category


Category Compliance (%)
Company Commitment 69%
Risk Assessment and Risk Management 59%
Training and Communication 86%
Worker Feedback and Participation 88%
Corrective Action Process 88%
Documentation and Records 67%
Total Compliance 64%