2017 Sustainability Report

Business Performance

Supply Chain

As a company focused on sustainability, we strive to ensure that our suppliers share our values of respect, responsibility, integrity and creativity.

Suppliers aren’t simply delivering components, raw materials and other resources; they are a reflection of our organization. The major categories for which we depend on suppliers are motors, castings, fabrications, electronics, polymerics and machining. These products are composed of plastics and metals such as nickel, copper and aluminum, and we take care to ensure that these materials come from reputable sources.

~11,700
Suppliers
worldwide
$2.5
billion
spent with suppliers

Where possible, our operations rely on local suppliers to optimize material flow and reduce cost without losing the benefits of scale. Our local spend is 71 percent of the total supplier spend. Non-local suppliers are requested to provide local supply chain solutions — such as on-site support teams and local warehouse solutions — wherever necessary and applicable. In 2017, Xylem’s global procurement group led and supported various initiatives to localize sourcing and manufacturing. These efforts were focused on sites in Calamba, Philippines; Vadodara, India; and Shenyang, China. Through more than 42 separate projects, we moved more than $7.96 million in spending to local sources.

A newly established relationship with a global travel provider and preferred transportation supply base provides us with a platform to optimize our spend, streamline tools and processes, and greatly improve the customer experience.

The most significant environmental impacts of our supply chain are the result of goods transportation and travel. A newly established relationship with a global travel provider and preferred transportation supply base provides us with a platform to optimize our spend, streamline tools and processes and greatly improve the customer experience. Beyond our localization efforts, the following sourcing programs — all implemented in 2017 — are helping reduce Xylem’s environmental impact:

  • ECOVA energy management program consolidates utilities billing and allows Xylem to negotiate extended terms, and reduce or eliminate late payments, fees and disconnect notifications.
  • Green energy goals coincide with our ECOVA energy management program in Xylem’s goal of attaining 100 percent green/renewable energy use at each of our major facilities. In regulated environments where the goal is not directly achievable, Xylem is purchasing renewable energy credits to apply as offsets.
  • Integrated Facilities Management (IFM) assesses best practices in outsourced facilities management to consolidate our supply base while improving service quality and facility maintenance programs.
  • National account agreements that increase safety and equipment familiarity and allow transfers of equipment among locations to optimize utilization across Xylem’s material handling fleet.

We are also working to help our suppliers become more sustainable. Our green belt training program, offered at Xylem’s expense, enables suppliers to learn ways to implement environmentally friendly practices alongside Xylem colleagues. The only prerequisite for joining the program is to identify one project that provides joint benefits to both Xylem and the supplier. In addition, we offer a water footprint calculation tool to help critical suppliers identify ways to limit water consumption.

2017 Spending by Region

SUPPLIER CONDUCT

Our standard procurement Terms and Conditions require our suppliers to comply with Xylem’s technical and commercial requirements, as well as all applicable legal regulations, human and labor rights, and with our Supplier Code of Conduct. In turn, we expect suppliers to hold their sub-tier suppliers to these same standards. Our Supplier Code of Conduct covers expectations of suppliers in the following areas:

  • General contracting ethics
  • Child labor
  • Forced labor
  • Hiring and employment practices
  • Compensation and working hours
  • Health and safety
  • Environment
  • Conflict minerals and chemical substances
  • Improper payments
  • Confidential information
  • Supply chain transparency
  • Compliance monitoring
  • Supplier diversity
  • Harassment
  • Communication
  • Human rights

We want our suppliers to feel comfortable speaking up when they believe we are acting in a manner inconsistent with our values. As part of our new IFM sourcing initiative, for example, we are encouraging suppliers to submit improvement opportunities for Xylem’s efforts to reduce energy, emissions, water or waste, and ideas for assisting us with our stated goal of solving water.

SUPPLIER AUDITS

We expect all suppliers to adhere to our global sustainability standards. As part of our procurement process, any new Xylem supplier is required to align with our business standards in terms of product quality, process capabilities and sustainable actions. We have started implementing an audit process that prioritizes suppliers located in countries where human and labor rights issues could be a concern, and those located in water-stressed areas. Following an in-depth initial audit with a new supplier, we conduct selected and targeted follow-up audits, as well as random audits.

Audit questionnaires focus on the following areas:

  • Environment
  • Health and safety practices
  • Human rights and labor rights
  • Conflict minerals
  • Business continuity planning
  • Facility security

CONFLICT MINERALS

As a manufacturer of heavy industrial goods, we use tin, tungsten, tantalum and gold (3TG) in many of our products. For example, we produce seals that contain tungsten and electronics that contain tin and gold. We have worked diligently over the past three years to comply with U.S. SEC requirements regarding the sourcing of these materials. In 2017, we continued utilizing a third-party service provider to assist us in reviewing our supply chain. We surveyed more than 3,350 in-scope suppliers and received a 46 percent response rate.