Philips launches second annual sustainability report and asks for involvement of its 50,000 suppliers

Source: Philips, 22 March 2004

Royal Philips Electronics (NYSE: PHG, AEX: PHI) today released the companys second annual Sustainability Report. The Report shows the progress made against goals established in the 2002 version. An important step was the extension of the sustainability principles to Philips 50,000 suppliers.
Furthermore Philips challenges itself to develop five sustainable product propositions by the end of 2004 in its strive to take sustainability to a higher level as a springboard for new business development. In the area of environmental responsibility, the report looks at Philips EcoVision 2002-2005 achievements, which include reductions in energy consumption (9%) and water usage (15%). Finally, in 2003, Philips was recognized for its efforts in the area of sustainability with the worlds number one ranking in 2003 Dow Jones Sustainability Index (DJSI) in its industry group.

Supplier engagement
Given the importance of the supplier base, counting 50,000 suppliers worldwide and a total amount of EUR 19.2 billion on purchasing products and services in 2003, Philips involved them in the challenge by means of the Supplier Declaration on Sustainability. This declaration outlines minimum expectations of behavior in the areas of environment, health and safety, and labor conditions, including child labor. Adhering to these minimum requirements will be an important factor in the companys decisions to enter into or remain business relationships. In 2004, a self-assessment tool and audit methodology will be introduced to Philips suppliers worldwide.

It is easy to see why procurement is becoming more and more important for a company like Philips. For example, purchasing accounts of 2/3 of our total sales, said Barbara Kux, Chief Procurement Officer and member of Philips Group Management Committee. But Im not only talking about costs; quality, timelines, reliability and reputation are also essential factors. It is my challenge as Chief Purchasing Officer to work closely together with our partners to become better, faster, cheaper and more sustainable. In addition to her function as Chief Procurement Officer and member of the Group Management Committee, Barbara Kux will succeed Arthur van der Poel as chairman of the companys Sustainability Board when he retires on April 1, 2004.

An exciting new business challenge
Philips main focus in recent years has been to embed sustainability throughout the organization and processes. This was the first and most essential step to get the corporate sustainability strategy successfully off the ground. But, in the long term, sustainability is a matter of business opportunities. With the companys focus on healthcare, lifestyle and enabling technologies, Philips can give a new dimension to sustainability. Therefore Philips employees are challenged to explore new business opportunities and new markets with sustainability as a driver. To provide guidance to this exploration process and to implement it company wide in a structured way, a task force was set up and this group also established the criteria for project proposals. Philips expects all of its product divisions to have each developed at least one new sustainable and profitable business project by the end of 2004.

EcoDesign drives EcoVision progress
Philips EcoVision 2002-2005 environmental action program focuses on five Green Focal Areas: weight, hazardous substances, energy consumption, recycling and disposal, and packaging. The companys top EcoDesigned products are given Green Flagship status, which means they offer better environmental performance than their predecessors or those equivalent products of our closest competitors. In 2003, products from more than half of Philips divisions, achieved this status including:
· The MASTER PL Electronic 11W lamp, which uses 53% less packaging and 62% less hazardous substances;
· The BGY284 GSM power amplifying module, which weighs 67% less, uses 25% less energy and eliminates lead, a hazardous substance;
· The Philips 30PF9975 FlatTV™, which uses 33% less energy and weighs 31% less.

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