2016 Sustainability Report

2016 Sustainability Report

Business Performance

Supply Chain

11,000
SUPPLIERS
worldwide
$2
billion
spent with suppliers

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 machinings. 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.

Spending By Region

Where possible, our operations rely on local suppliers to optimize material flow and reduce cost without losing the benefits of scale. Our “local spend” varies between 60 to 80 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 2016, Xylem’s global procurement group led and supported various initiatives to localize sourcing and manufacturing. These efforts were focused on emerging market sites in Calamba, Philippines; Baroda, India; and Shenyang, China. Through more than 20 separate projects, we moved more than $2.5 million in spending to local sources.

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 track and manage this portion of our footprint. Beyond our localization efforts, the following procurement-led initiatives are helping reduce Xylem’s environmental impact:

  • Tracking and reducing air freight where possible, and optimizing lanes to reduce movements;
  • Launching a new fleet management program for our European service fleet operations; and
  • Sharing carbon footprint data with business travelers through our new travel platform.

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.

Conflict
Minerals

As a producer of heavy industrial goods, tin, tungsten, tantalum and gold (3TG) are used 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 2016, we retained a third-party service provider to assist us in reviewing our supply chain. We surveyed more than 2,400 in-scope suppliers and received a 65 percent response rate.

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. To that end, we have introduced the Xylem Supplier Ombudsperson Program, through which suppliers can report concerns and issues about Xylem’s ethical and compliance behavior in its business dealings.

The program employs a third-party vendor, EthicsPoint, to provide a confidential avenue for raising ethics- and compliance-related concerns. EthicsPoint representatives route information to the appropriate leadership at Xylem. Suppliers can confidentially raise potential concerns via telephone or online.

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