Human rights in the supply chain

We strive to identify and quantify our human rights impacts, mitigate risks, and maximize opportunity for people and communities. Our dedication to human rights is embedded in our due diligence system, which is consistent with our Global Human Rights Policy, the United Nations Guiding Principles on Business and Human Rights (UNGPs), and the OECD Due Diligence Guidelines for Responsible Business Conduct.

Cisco requires that suppliers comply with the Responsible Business Alliance (RBA) Code of Conduct in order to do business with us. Among other provisions, the Code prohibits the use of forced labor and requires suppliers to cascade these requirements to next-tier suppliers and within their own supply chains.

Cisco outlines our due diligence processes on the Supply chain sustainability page in this ESG Reporting Hub and our Global Statement on the Prevention of Modern Slavery and Human Trafficking, and annually publishes results of our actions to identify, mitigate, and remedy nonconformances to our Code, including forced labor nonconformances, in our Supplier Audit Results. When we become aware of a potential violation of our Supplier Code of Conduct or Supplier Ethics Policy, we take action to investigate, assess, mitigate, and remedy human rights impacts. Some concrete examples of actions we have taken are described below. If we are not able to satisfactorily address an issue with a supplier, we may terminate the supplier relationship.

In addition to exercising leverage directly with our suppliers, we also collaborate with industry peers through the RBA and its Responsible Labor Initiative (RLI) and Responsible Minerals Initiative (RMI), which are multi-industry, multistakeholder initiatives promoting the rights of vulnerable workers in global supply chains. Our participation in these industry initiatives helps drive consistent expectations for due diligence and remediation across the industry, as appropriate.

Cisco also takes steps to educate our supply chain employees about the importance of human rights via a mandatory training module that raises awareness and educates them on how they can play a role in helping Cisco to follow through on our human rights commitments. These trainings are part of Cisco’s internal Education Management System and are required to be taken every two years by employees of Cisco’s Supply Chain Operations and other Cisco employees around the world who are most likely to encounter human rights issues in day-to-day supply chain operations. This training covers how to detect warning signs of serious risks such as forced labor and child labor, how to report concerns if they suspect violations of Cisco’s standards and policies, and how they can support work to help hold suppliers accountable. In fiscal 2022, 100% of Supply Chain Operations employees completed this training.

During fiscal 2023, Cisco ranked 3rd out of 60 Information and Communication Technologies (ICT) companies on KnowTheChain’s benchmark, which assesses companies’ abilities to manage human rights risks in the supply chain.

For further detail, our Global Human Rights Policy, Code of Business Conduct, and Responsible Minerals Policy guide how Cisco operates, while our Supplier Ethics Policy, Supplier Code of Conduct, and Respecting the Rights of Vulnerable Groups Policy reflect our pledge to uphold the human rights of people who work in our supply chain. Additional policies can be found here.

Prohibition of forced labor and modern slavery

Upholding workers' rights to be free from forced labor of any kind is embedded within our Supplier Code of Conduct. Our Supplier Code of Conduct aligns with the International Labour Organization (ILO) Indicators of Forced Labour so that when supplier sites are assessed for Code conformance, indicators such as deception during recruitment, identity document retention, wage withholding, debt bondage, abusive conditions, and restriction of movement are examined. To minimize the risk of forced labor through debt bondage, we uphold the RBA Definition of Fees policy in the geographies where we operate. The Definition of Fees requires that workers do not pay fees to obtain, maintain, or leave employment, even if permissible by local law. Aligned to the UNGPs, Cisco requires suppliers to mitigate risks that could potentially lead to forced labor conditions and remediate impacts to affected workers. Read an overview of Cisco's process for addressing forced labor risks in our Statement on the Prevention of Modern Slavery and Human Trafficking.

Each year, we use audits as a tool to engage suppliers to assess their conformance to the Supplier Code of Conduct to identify and address any gaps in its implementation. During fiscal 2023, we continued to see supplier audits uncover nonconformities to our Supplier Code of Conduct expectation for the prohibition of forced labor. These nonconformities indicated risks for forced labor or bonded labor. These nonconformities ranged in severity.

The most common nonconformities we identified related to workers paying small fees pertaining to the recruitment process, such as small one-time fees for health examinations, deposits, or transportation fees often amounting to less than five percent of the worker’s monthly salary. These fees were sometimes reimbursed after commencement of employment. Our teams continue to work with suppliers to develop models in which employers pay healthcare providers directly for health examinations, eliminating the need for workers to be reimbursed.

Less often, we identified risks of bonded labor, a type of forced labor. Workers become bonded by debt when they are forced to work in order to repay loans or excessive fees to labor brokers. These nonconformities involved foreign migrant workers paying excessive recruitment fees equivalent to a month of their gross wages or more. As part of our normal processes, we take two main corrective actions to address bonded labor risks: drive suppliers to absorb recruitment fees previously passed onto workers and remediate and facilitate reimbursement of affected workers, irrespective of whether the charging of such fees is legal in the relevant jurisdiction. An overview of the number of RBA nonconformances found related to forced labor can be seen in our published audit data with their geographic distribution.

In addition to supplier audits to drive conformance to the Supplier Code of Conduct, we conduct, as needed, additional targeted surveys of suppliers who are identified as having risks of forced labor, such as suppliers hiring migrant or young workers in high-risk geographic locations. We recently strengthened our human rights due diligence processes during acquisitions in an effort to focus this analysis at the earliest stages. Our survey assesses the suppliers’ recruitment policies and practices and awareness of forced labor due diligence. Even if the practice of charging recruitment fees is permitted under local law, we make it clear to suppliers that we expect them to have processes to implement "no fees" policies, conduct due diligence on their labor agents, and ensure freedom of movement for workers.

Upon discovery of the practice of charging prohibited recruitment fees, we work to address these issues. We do so by working with the supplier to stop the practice and investigate further. This includes identifying fees workers may have paid to labor agents, pre-departure and upon arrival, accounting for recurring fees deducted from their paychecks, and pushing suppliers to engage in dialogue with workers regarding fees that may have been paid to other intermediaries or for travel. A thorough investigation is important in helping the supplier determine the actual cost of recruitment moving forward and the amounts to be reimbursed to workers as remediation. We use, and plan to continue using, RBA Advisory Services to conduct some aspects of these investigations. RBA Advisory Services include conducting interviews with relevant labor agencies in both origin and destination countries, as well as with onsite human resources management teams, and with affected workers. These interviews help determine how much and at what point during the migration journey workers paid fees, in addition to uncovering conditions that workers were subjected to during the recruitment process. Suppliers work with RBA personnel to develop and implement a reimbursement plan. As part of corrective actions, Cisco requires suppliers to adopt comprehensive "no fees" policies and procedures to prevent future workers from paying fees during the recruitment process. When these policies are adjusted, workers are trained and informed about the "no fee" policies in a language they can understand. This training is also integrated into the recruitment process for future workers. At the end of this process, a third-party audit is conducted to validate that the affected workers were adequately remediated. During fiscal 2023, we drove more than US$2.2 million in fee reimbursements to 1865 workers for recruitment fees occurring in these five countries: India, Taiwan, Malaysia, China, and Japan.

In terms of additional actions taken upon discovering the practice of charging prohibited recruitment fees, we engage in knowledge sharing on this topic by promoting training among our peers and supply base in Taiwan on how to identify forced labor risks within the local context. In fiscal 2023, 36 participants from 23 suppliers attended these training sessions.

Protecting young workers

Our standards for protecting workers between the ages of 16 and 18, in jurisdictions where individuals are legally permitted to work under the age of 18, include the types of work they cannot perform and are outlined in the Juvenile Labor Policy and Expectations. In fiscal 2023, Cisco did not observe cases of underage child labor (workers aged 15 and below). Where nonconformances were identified, suppliers had incomplete policies on child labor avoidance; interns were being paid lower wages than legally required; and student workers’ contracts were incorrectly managed. We opened Corrective Action Plans for those nonconformances, which are currently in progress.

Giving workers a voice and stakeholder engagement

Putting rightsholders at the center of our human rights programs and strategy is an important way we drive positive impact for the workers and communities in our supply chain.

During fiscal 2023, we crafted the Respecting the Rights of Vulnerable Groups Policy as an extension of our human rights commitments. This policy acts as a north star to help us achieve our goal of protecting those most vulnerable within our supply chain and guiding our suppliers and partners to do the same.

We conducted a human rights impact assessment that included interviews with hundreds of supply chain workers across two sourcing geographies. The objective of the assessment was to identify human rights risks and concerns from their perspectives. In fiscal 2024, we will incorporate insights from this assessment into our human rights strategy, programming, and due diligence processes.

Another aspect of protecting worker well-being is giving them ways to address issues that are not being addressed by their employers. During fiscal 2023, we worked to address two human rights concerns reported by supply chain workers, one to our Cisco EthicsLine and one through RBA’s Grievance processes (see case study on recruitment fee remediation). With both concerns, we worked alongside RBA to investigate, address, and meet workers’ needs.

Stakeholder engagement continues to support our ability to identify and develop approaches to address salient human rights issues and emerging issues. Cisco also participates in initiatives and collaborates with organizations to support systems change. View examples of initiatives and organizations Cisco participates in for addressing human rights in the supply chain.

Protecting workers' health and safety

Our work to hold suppliers accountable to the RBA Code of Conduct continues to act as a mechanism for identifying and mitigating health and safety risks to workers in supplier facilities. Meanwhile, we recognize the important role that workers play in identifying and addressing risks that they may encounter at work (see case study on the TenSquared program below).

We also continued a targeted approach to mitigating chemical exposure risks to workers aligned with our Chemical Management Expectations for Suppliers policy. This policy states Cisco's commitment to worker safety and defines the guiding principles, expectations of suppliers, and requirements to demonstrate conformance.

As a member of the Clean Electronics Production Network (CEPN) and the RBA's Chemical Management Workgroup, Cisco’s policy and due diligence approach are aligned with the CEPN Priority Chemicals list and the RBA Industry Focus Process List.

In cases of chemical use in the supply chain, Cisco suppliers are expected to adhere to the hierarchy of controls as a framework for protecting workers from exposure to workplace health and safety hazards. While reducing exposure to the hazard is important, elimination and substitution are the most effective controls that reduce hazards.

Leveraging a risk-based approach, Cisco selects suppliers to complete the Process Chemical Data Collection (PCDC) tool and engage in deeper chemical exposure assessments. Using this tool, suppliers identify the chemicals used to produce Cisco products. During fiscal 2023, Cisco continued to examine supplier sites’ handling of hazardous chemicals. Cisco had 24 additional supplier sites complete PCDC surveys. These surveys ask suppliers to identify chemicals used to manufacture components for inclusion in Cisco products and over 600 chemicals were identified. As part of this process, Cisco and a third-party chemical consulting company work with suppliers to eliminate or substitute unsafe chemicals with safer alternatives. The PCDC survey confirmed that 19 suppliers were not using the nine Priority Chemicals outlined in Cisco’s Chemical Management Expectations for Suppliers policy.

There were a total of five suppliers identified as using Priority Chemicals. Cisco worked with the first two suppliers to implement safer alternatives and stop using chemical -Methyl alcohol (67-56-1) in their production, cleaning, and maintenance processes. The next two suppliers are still working to address their use of the priority chemicals. Cisco worked with the last supplier to review substitution opportunities and confirmed there are currently no safer viable alternatives to the chemical in use. The supplier confirmed it has robust control processes in place to minimize exposure risk to employees.

In fiscal 2023, Cisco conducted Chemical Management Assessments at two supplier facilities to better understand the processes and procedures in place to protect worker wellbeing associated with chemical management. Findings were related to:

• Engineering control program
• Maintenance, inspection, and testing records for engineering controls
• Occupational health management documentation
• Medical testing records

When major findings were uncovered in the assessment, suppliers worked with Cisco to create a Corrective Action Plan that addressed the root cause and identified immediate and long-term corrective actions. The majority of findings are closed, while one remaining finding is on track toward closure.

Sourcing minerals ethically

Sourcing minerals involves risks on many fronts, including health and safety, forced labor and child labor, environmental degradation, and influence on regional conflicts. Cisco is aware of those risks and has put a robust due diligence process into place to source minerals, such as tantalum, tin, tungsten, gold (3TG), and cobalt, without contributing to armed conflict and human rights abuses.

Our goal is to work collaboratively with suppliers to source minerals consistent with our values around human rights, business ethics, labor, health and safety practices, and environmental responsibility. This approach includes sourcing responsibly from conflict-affected and high-risk areas (CAHRAs). Cisco does not directly procure minerals from mines, or the smelters or refiners that process them, and therefore we rely on third-party standards such as the Responsible Minerals Assurance Process (RMAP) or other cross-recognized standards to source minerals ethically and responsibly. Cisco uses this determination as part of our risk-based assessment to determine whether sources are low-risk (previously referred to by the industry as conflict-free).

Our commitment, informed by the United Nations Guiding Principles on Business and Human Rights (UNGPs), is captured in our Responsible Minerals Policy. Our calendar year 2022 Conflict Minerals Report, published in May 2023, describes in detail how our due diligence activities align to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. The report also provides details of our 2022 results.¹

1 Conflict minerals are defined by the United States Securities and Exchange Commission in Section 1502 of the Dodd-Frank Act as cassiterite, columbite-tantalite, gold, wolframite, or their derivatives, or any other minerals or their derivatives determined by the Secretary of State to be financing conflict in the Covered Countries, which include the Democratic Republic of the Congo (DRC) or an adjoining country.

3TG risk identification

Since Cisco does not buy 3TG directly from smelters or refiners (SORs), we collaborate with our suppliers to conduct due diligence for responsible mineral sourcing. We also work across our industry to develop tools and practices to support due diligence. We use the RMI Conflict Minerals Reporting Template (CMRT) to survey suppliers, review SORs they report, and request them to work through their supply chains to shift sourcing to SORs conformant with RMI's RMAP.

After Cisco analyzes supplier CMRTs, we address identified risks. This includes working with suppliers to remove non-RMAP-conformant SORs from the supply chain. We set the highest priority on SORs that meet Cisco's definition of “high-risk.” Through the Supply Chain ESG Governance Committee, we regularly notify Cisco's supply chain leadership of our progress. If a supplier does not attempt to comply with our Responsible Minerals Policy, we may escalate the supplier to Cisco's global supply chain management and possibly remove them from our supply chain. In calendar year 2022, 71 percent of the 3TG SORs reported by our in-scope suppliers were conformant to or active in a third-party audit program. An additional 12 percent processed 100 percent recycled content or sourced from outside the DRC and the Great Lakes Region. Additional 3TG results are included in the calendar year 2022 Conflict Minerals Report.

Industry collaboration for responsible 3TG

In fiscal 2023, Cisco continued collaborating with peer companies and other stakeholders through active participation in the RMI. The key focus of our involvement in RMI working groups was to increase SOR participation in RMAP, identify processors for new minerals and materials, and share best practices and guidance for due diligence and risk mitigation. In addition to engaging SORs to become eligible for an RMAP assessment, Cisco again contributed to the RMI's Audit Fund. This fund is an important tool for promoting entry into the RMAP program. Our intention with our contribution is to encourage a high level of SOR participation in the RMAP and to offset the due diligence cost of sourcing responsibly.

Cisco also became a member of the Public-Private Alliance for Responsible Minerals Trade (PPA). As we move into fiscal 2024, we hope to continue to work with our peers at the PPA to support innovative and effective upstream in-region projects that enable responsible sourcing for an expanding list of minerals.

We remain a member of the European Partnership for Responsible Minerals (EPRM), a multistakeholder partnership designed to increase the number of mines that adopt responsible mining practices in CAHRAs. One EPRM-funded project that Cisco has supported directly is Scalable Trade in Artisanal Gold (STAG), which aids miners in Burkina Faso and their efforts to improve their livelihoods through mineral resources. STAG aims to establish a commercially viable pathway to market for responsibly sourced artisanal gold. In addition to providing financial support, Cisco is participating in STAG's Downstream Progressive Due Diligence Lab, which promotes artisanal small-scale mining (ASM) sourcing and due diligence among midstream and downstream actors in the supply chain. We are proud to be part of this project alongside EPRM, RMI, RESOLVE, Artisanal Gold Council, and AG Sarl.

Finally, we continue to collaborate with our suppliers to improve the traceability of minerals in our supply chain. From our work in fiscal 2023, we better understand the data needed by our sub-tier suppliers to enable meaningful insights about where minerals are flowing from the upstream to the downstream supply chain. In fiscal 2024, we hope to share our learnings with peers and further demonstrate how this data can be used to drive impact.

Beyond "conflict minerals" and the DRC

There is increasing focus on accountability and transparency regarding human rights in global mineral supply chains beyond 3TG. In fiscal 2023, we continued conducting due diligence on the cobalt in our supply chain, consistent with our Responsible Minerals Policy, and found that 61 percent of the cobalt refiners reported by suppliers were in conformance or active to the RMAP standard. Cisco uses these results to monitor risks and engage upstream to increase the overall RMAP conformance rate.

Advancing transparency through the supply chain

In fiscal 2023, Cisco joined other companies to continue funding a mine monitoring program, the RCS Global Better Mining program. The Better Mining program has improved understanding of working conditions at 48 Artisanal and Small-Scale Mines (ASM) sites in the DRC and Rwanda. As of August 2023, the Better Mining program identified nearly 4000 incidents and risks at the mine sites where they operate. The types of incidents include working conditions and safety, environment, security, human rights, and legality risks. The program recommended 1004 corrective action plans that define the best actions to mitigate the identified risks, such as installation of fences, sensitization training, improved signage, and pit safety measures. These actions, which are implemented by the local stakeholders, drive direct improvements at mine sites. Over time, we hope that the data collected from this endeavor will continue to shed light on how to reduce mine site risks and better inform industry groups like the RMI on strategies for making a positive impact for mining communities.