(NasdaqGS:NVDA) 17 of 40 (2018)
NVIDIA Corp. (NVIDIA), a semiconductor company supplying to companies such as Hewlett Packard Enterprise, HP, and Microsoft, ranks 17th out of 40 companies. It discloses about the same amount of information on its forced labor policies and practices as its peers. Additional steps the company could take to address forced labor risks in its supply chains include strengthening its disclosure and practices on the themes of purchasing practices, recruitment, and worker voice.DOWNLOAD SCORECARD
2018 Ranking: 17 of 40
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The average score for the sector was 32/100, compared to 39/100 in 2016. The drop in score is due in part to the increase in number of small and mid cap companies from 20 to 40, as well as the changes made to the methodology that strengthened it. The 20 companies benchmarked in both 2016 and 2018 saw their average score improve from 39/100 to 40/100, which is notable given the changes to the methodology.METHODOLOGY
Commitment and Governance
NVIDIA discloses that it has a program to combat people human trafficking, for which the Senior Manager of HR Operations is responsible. The company states that all employees are required to complete training on its Code of Conduct (which includes reference to forced labor). It discloses that 'relevant employees took several RBA [Responsible Business Alliance] Learning Academy courses', and that it assigned RBA Learning Academy courses to its suppliers, including those on forced labor, hiring and working with migrant workers, working hours, and wages. NVIDIA also discloses that it is a full member of the RBA.
Traceability and Risk Assessment
NVIDIA discloses some information on its suppliers, noting that its manufacturers of semiconductor wafers are Taiwan Semiconductor Manufacturing Company and Samsung and that its two main contract manufacturers are Foxconn and BYD. The company discloses a list of its smelters and refiners of 3TG (tin, tungsten, tantalum, gold), as well as the countries of origin of 3TG in its supply chains. In addition, NVIDIA states that it has integrated RBA risk assessment tools into its supplier management practices, and that it has conducted a risk assessment on its strategic suppliers.
NVIDIA states that it has "reviewed eight VAP [Validated Audit Process of the RBA] audits of strategic suppliers" and that its "two main contract manufacturers completed VAP or customer-managed audits". The VAP includes a review of relevant documents, such as working hour records and payroll, formal and informal interviews with workers which are conducted privately, and visits to production facilities and related worker housing. NVIDIA states that one of the common findings of their audits included non-compliance with working hour standards.
To enable the company to enforce its expectations with its suppliers, the company may consider integrating its supply chain standards addressing forced labor and human trafficking into contracts with its suppliers. Further, the company is encouraged to assess risks of forced labor at potential suppliers before entering into contracts with them.
The company may consider requiring employment recruitment agencies - and where relevant employment agencies - in its supply chains to uphold workers' fundamental rights and freedoms, and to disclose information on the recruitment agencies used by its suppliers. To avoid the exploitation of migrant workers in its supply chains, the company is encouraged to ensure that employment and/or recruitment agencies used in its supply chains are monitored, and to provide details of how it supports ethical recruitment in its supply chains (for example, by using ethical recruitment agencies or supporting the development of ethical recruitment schemes).
To prevent and address forced labor and human trafficking risks in its supply chains, the company is encouraged to take steps to ensure that workers in its supply chains are educated on their rights and can exercise their right to freedom of association. Further, the company may consider ensuring that the grievance mechanisms it requires its suppliers to have in place are effective (i.e. are communicated to, trusted and used by suppliers' workers).
The benchmark methodology has seven themes, selected to capture the key areas where companies need to take action to eradicate forced labor from their supply chains. There are a total of 23 indicators across the seven themes. For each theme, a company can score a total of 100 points.
This theme evaluates a company's commitment to addressing forced labor, supply chain standards, management processes and board oversight, training programs, and engagement with stakeholders.
This theme measures the extent to which a company demonstrates an understanding of its suppliers and their workforce by disclosing relevant information, and assesses and discloses forced labor risks across its supply chains.
This theme assesses to what extent a company adopts responsible purchasing practices and integrates supply chain standards into supplier selection and supplier contracts. It also assesses the degree to which a company cascades their standards down its supply chains.
This theme measures a company's approach to reducing the risk of exploitation of supply chain workers by recruitment agencies, eliminating workers' payment of fees during recruitment processes throughout its supply chains, and protecting the rights of migrant workers.
This theme measures the extent to which a company engages with workers in its supply chains, enables freedom of association, and ensures access to effective and trusted grievance mechanisms.
This theme evaluates a company's process for auditing suppliers (including whether it performs non-scheduled visits, reviews relevant documents such as wage slips or contracts, interviews workers, and audits lower-tier suppliers) and providing disclosure on the outcomes of supplier audits.
This theme measures the extent to which a company has corrective action plan processes for non-compliant suppliers and ensures remedy is provided to workers in its supply chains who are victims of forced labor. Publicly available allegations of forced labor in a company's supply chains which occurred in the past three years, and how a company has responded to and addressed those allegations, are also assessed as part of this theme.
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