Supplier Relationships

We have formalized our Supplier Social Responsibility program in our “Guide to Supplier Social Responsibility.” The guide provides suppliers with an understanding of TE’s expectations for business conduct, decision-making and business interaction. It outlines key principles and behaviors based on our core values, and it emphasizes what we require of our suppliers. We expect our suppliers to embrace these tenets and promote them with their own employees and external business associates:

• Labor Issues, such as freely chosen employment, child labor avoidance, restricted maximum working hours, fair wages and benefits, humane treatment and non-discrimination. We also believe that open communication and direct engagement between workers and management are the most effective ways to resolve workplace and compensation issues.
• Health and Safety Issues, such as occupational safety, emergency preparedness, management of occupational injury and illness, industrial hygiene, and physically demanding work.
• Environmental Issues, such as environmental permits and reporting, pollution prevention, resource reduction, hazardous substances, wastewater, solid waste, and air emissions.
• Ethics, such as business integrity and fair business, protection of information disclosure, intellectual property, fair business and protection of identity, and prevention of bribes.

We recently communicated our supplier social responsibility expectations to 33,000 companies through our supplier portal. A key measurement we have for our suppliers is their response to our online questionnaire where we ask them to certify agreement with our SSR Guide. Our goal for fiscal 2011 is to gain 80 percent certification with existing direct suppliers and 100 percent with all new suppliers.

We also reserve the right to conduct a formal audit of our suppliers on issues of social responsibility. High risk suppliers may be referred to an outside audit firm. We began conducting formal social responsibility audits with our direct material suppliers in 2010 and have a goal to complete audits with 10 percent of these suppliers by the end of fiscal 2011.

When compliance issues are identified, TE collaborates with the supplier to foster improvement and share best practices. Often suppliers go on to implement their own policies that reduce waste, create safer workplaces and increase employee morale.

We believe we can have a positive impact on the environment and local communities we do business in by buying locally to reduce transportation cost and bolster the economic development in the community.

Our goal is to achieve localized spending of between 85 percent and 95 percent of our total direct material and to maintain that as we grow our production and expand into new regions.

Diversity

TE promotes and encourages supplier diversity within our supply base; this effort is formally labeled our Supplier Diversity Program. The concept behind this program is to embrace diversity suppliers, or businesses owned by groups traditionally underrepresented in business, such as certain ethnic groups or women. In particular for businesses with operations in the USA, the concept of Supplier Diversity, formerly known as Minority and Women-Owned Business Enterprises (MWBE), is a formalized program. The goal of the program is to increase the number and variety of diverse suppliers with whom we do business. We are constantly engaged in expanding the integration of these suppliers into our supply base, providing these businesses with opportunities for growth.

At TE, we take very seriously the possibility that “conflict minerals” may find their way into our supply chain. “Conflict minerals” or “conflict metals” are defined as gold (Au), tantalum (Ta), tungsten (W), and tin (SN) sourced from mines in conflict areas controlled by either nongovernment military groups or armed groups, including but not limited to the Eastern region of Democratic Republic of Congo (DRC). Accordingly, we support the goal of Sec. 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to discourage companies from using “conflict minerals.” We understand that those responsible for human rights abuses in this region are obtaining funding from the minerals trade. By identifying the mines funding these activities, companies can help stop a devastating humanitarian crisis by sourcing elsewhere.

Avoidance of sourcing from “conflict mines” is a very serious issue, and we have been actively working with industry groups and our suppliers to increase supply chain transparency toward that goal. However, supply chains in the electronics Industry are extremely complex. Metals are procured in many different ways, through a number of suppliers, and are often mixed with recycled materials of indiscernible origin. Currently, there is also no way to know with certainty if a mine in the DRC is considered a “conflict mine.” As a result, the pressure on smelters and suppliers to certify minerals as DRC conflict free is creating a de facto embargo on all minerals exported from Africa. Some companies see it is as a necessity, due to fear of non-compliance with future Securities & Exchange Commission (SEC) rules, that their suppliers avoid minerals sourced from Central Africa entirely. Such unintended consequences can serve to escalate violence in the DRC region, having the exact opposite effect that Sec. 1502 was meant to have.

In order to avoid an adverse impact to African economies, we are encouraging the SEC to adopt transition rules that will allow for construction of the proper infrastructure within the DRC region to trace “conflict minerals” back to the mines. We are also asking U.S. government officials to help identify the “conflict mines,” which would then allow certain mines to be certified as conflict free. Such visibility will help achieve the objectives of Sec.1502 by enabling companies to comply with requirements in a meaningful way.

We are in active dialog with our suppliers on what can reasonably be done to increase supply chain transparency despite these challenges. As information in the industry becomes more freely available, and mine origin more discernable, we will expand our due diligence and tighten our compliance requirements accordingly. As with all products we source, TE holds its suppliers to the company’s high standards of integrity and responsibility.

For additional details on these requirements, and for copies of the TE Guide to Supplier Social Responsibility, please visit https://supplierportal.tycoelectronics.com/portal/server.pt?sLocale=en-us.

Sincerely

Michael K. Stockton
Global Commodity Director, Metals

Kenzie Ferguson
Director, Corporate Responsibility