Supply chain environmental stewardship

As part of our Purpose to Power an Inclusive Future for All, we work with our global network of component, manufacturing, and logistics suppliers to promote climate action and healthy ecosystems in the communities where they operate. We engage suppliers to use natural resources efficiently, reduce pollution, and drive action on climate change. We believe it is a human right for workers and communities to be able to live on a planet that can support their livelihoods.

Greenhouse gas (GHG) emissions

Cisco has set a goal to reach net zero across our value chain by 2040, and near-term targets. Today, more than 20 percent of Cisco’s total GHG emissions are generated in the supply chain. Reducing supply chain emissions to help advance our ambitious goals requires collaboration with our supply chain, industry peers, and others. Cisco works to reduce partners’ energy and fuel consumption, GHG emissions, and promote clean energy to power partners’ operations. We also drive increased transparency through data collection and reporting to better understand current and future supply chain emissions.

Goal-setting and reporting

As part of our net zero goal, Cisco has a near-term target to reduce absolute Scope 3 emissions from purchased goods and services, upstream transportation and distribution, and use of sold products by 30 percent by fiscal 2030 (fiscal 2019 base year) (to learn more about this goal, click here). Cisco requires suppliers to set absolute GHG reduction targets. This is the best way for suppliers to establish accountability toward GHG emissions reductions. We also set a goal that 80 percent of Cisco component, manufacturing, and logistics suppliers by spend have a public, absolute GHG emissions reduction target by fiscal 2025. In fiscal 2023, 92 percent of our suppliers have a public, absolute GHG reduction goal.

Supplier adoption of absolute GHG reduction goals

	FY19	FY20	FY21	FY22	FY23
Suppliers, by spend, with a public, absolute GHG reduction target Goal: 80 percent of Cisco component, manufacturing, and logistics suppliers by spend will have a public, absolute GHG emissions reduction target by FY25.1	FY19: 23%	FY20: 33%	FY21: 38%	FY22: 78%	FY23: 92%

1 Suppliers are expected to set absolute GHG emissions reduction targets or intensity targets that produce an absolute emissions reduction during the target period. Cisco encourages suppliers to set targets in line with an approved science-based methodology. Progress toward this goal is quantified using Cisco’s supply chain spend which can vary annually. Cisco will continue to work with suppliers to set their own absolute GHG emissions reduction targets, and to report progress toward this goal annually through fiscal 2025.​

To support Cisco in advancing this goal, suppliers are expected to report GHG emissions and energy consumption to CDP (formerly Carbon Disclosure Project) on an annual basis. Our expectations for supplier reporting are laid out below:

• Provide a complete and accurate inventory of corporatewide Scope 1 and 2 GHG emissions
• Make the response publicly available via CDP
• Demonstrate verification (third-party review) of reported GHG emissions
• Set a public absolute GHG emissions reduction goal and publicly report annual progress against that goal
• Request that their suppliers and business partners also report to CDP using the same process as above

In fiscal 2023, Cisco and CDP partnered to support suppliers throughout the reporting process. We organized two webinars to review reporting expectations, walk through the CDP questionnaire, and answer any questions.

Reducing emissions through energy efficiency and mode shift

Cisco collaborates with suppliers to reduce their energy use during the manufacturing and transport of products and components. For example, in fiscal 2022 more than 90 percent of Cisco’s supply chain logistics-related emissions came from air shipments. Cisco has a Mode Shift initiative that optimizes global factory-to-factory shipments, with a focus on changing transportation methods from air to ocean, which reduces emissions.

Enabling renewable energy in the supply chain

Use of renewable energy throughout our global supply chain is crucial in advancing our net zero ambitions. Cisco suppliers are already identifying opportunities to utilize renewable energy at their facilities. We are working to better track implementation, understand suppliers’ procurement challenges, and remove barriers to fulfillment. As a founding member of the Asia Clean Energy Coalition, Cisco advocates for increased availability of renewable energy where many of our suppliers operate.

Reducing material waste

Cisco has set a goal that 70 percent of our component and manufacturing suppliers by spend achieve a zero-waste diversion rate at one or more sites by fiscal 2025. We are on track to meet this goal. To measure progress, manufacturing partners report waste diversion data twice annually, and Cisco monitors their progress toward zero-waste diversion rate at each site. Manufacturing and component suppliers can certify zero-waste diversion with TRUE Zero Waste or UL ZWTL audits. For component suppliers, Cisco looks for them to report a zero-waste diversion rate at their production sites that is also certified to ISO 14001 environmental management.

Progress toward supplier zero-waste diversion goal

	FY20	FY21	FY22	FY23
Performance toward supplier zero waste goalSuppliers achieving zero-waste diversion at one or more sites Goal: 70 percent of Cisco component and manufacturing suppliers by spend achieve a zero-waste diversion rate at one or more sites by FY25.1	FY20: 23%	FY21: 23%	FY22: 51%	FY23: 60%

1 According to current standard definitions used in certification protocols, “zero-waste” diversion is defined as a 90 percent or greater overall diversion of solid, nonhazardous wastes from landfill, incineration (waste-to-energy), and the environment. Diversion methods can include reduction, reuse, recycling, and/or compost.

Improving water security

Water is an environmental and a human rights issue. Companies operating in areas of drought should balance their water use with the needs of surrounding communities. Since 2020, Cisco has asked our top suppliers to complete the CDP water disclosure and set a target to reduce water consumption. In the CDP Water 2023 reporting cycle:

• 98 percent of Cisco key suppliers^* disclosed to CDP
• 76 percent of Cisco key suppliers^* had set water related target in CDP
• 16 supplier sites engaged in Information and Communications Technologies (ICT) water stewardship program

As part of our due diligence, Cisco works to understand potential risks and opportunities at supplier sites. Overall, Cisco's manufacturing partners consume small amounts of water, primarily for employee drinking purposes or other general office uses. Certain component suppliers use large amounts of water, such as those involved in the production of semiconductors and printed circuit boards.

Cisco assesses global supplier sites' water risk through the WWF Water Risk Filter, which looks at three main water risk factors: physical risk, regulation risk, and reputational risk. Based on this global risk assessment, we focus on two river basins for water stewardship engagement: Lake Taihu and the Pearl River basin in mainland China. We aim to use our influence to promote responsible water management.

* Key suppliers means Cisco Contract Manufacturers, Strategic Original Design Manufacturers & Hardware Suppliers in the top 80 percent of spend in fiscal 2023.

Building our suppliers' capabilities for better water stewardship

Since fiscal 2021, Cisco has used an industry-specific water checklist, developed in partnership with industry peers and Water Stewardship Asia Pacific, to help suppliers support the Alliance for Water Stewardship (AWS) Standard. The checklist evaluates 45 indicators across water management systems, water measurement and performance, stakeholder engagement, climate change adaptation and mitigation, communication, and disclosure.

After a supplier completes the checklist questionnaire, each indicator is reviewed and assigned a level that reflects their current water stewardship performance. A Level 1 designation meets basic requirements, a Level 2 means the supplier meets advanced requirements, and a Level 3 meets sector best practice. Once suppliers meet Level 3 across indicators, Cisco believes they are ready to proceed with seeking AWS certification, demonstrating progress along their water stewardship journey.

In fiscal 2023, Cisco selected six supplier sites to complete the ICT water checklist as the new suppliers in scope for the water stewardship program. These suppliers went through several rounds of review and discussion around the 45 indicators of the ICT water checklist. Cisco then obtained the initial assessment results and progress reports for each indicator at the six supplier sites. A total of 270 indicators from these six supplier sites were assessed with the following results:

• 16 percent of indicators were below Level 1
• 57 percent of indicators met Level 1 but did not reach Level 2
• 20 percent of indicators met level 2 but did not reach level 3
• Only 7 percent of indicators reach level 3

Top five areas identified for improvement:

• Water pollution prevention and wastewater treatment
• Water resource and water conservation
• Supply chain engagement
• Safe drinking water, sanitation, and hygiene (WASH)
• Stakeholder analysis

Cisco decided to target those indicators below Level 1 or 2 as the basis for a new round of ICT water checklist Corrective Action Plan (CAP) review programs in fiscal 2023. Cisco created action plans for a total of 160 indicators based on the above findings, with 81 of them closing during fiscal 2023. We will continue to track the open findings in fiscal 2024.

Many Cisco suppliers need more support around engaging stakeholders on water stewardship. Cisco worked with GAIASCAPE Studio under Friends of Nature (FON) to launch online eco-design trainings for managers from 14 supplier sites since fiscal 2022. These trainings helped improve site water stewardship by:

• Equipping key personnel with water-friendly design concepts and skills
• Activating pilot architectural advances to decrease overall water use
• Initiating environmentally friendly landscape renovation projects within or around supplier sites
• Highlighting the implementation of nature-based solutions to address water/wastewater issues

As a follow-up to the training on nature-based solutions, Cisco organized two workshops in fiscal 2023 for supplier sites in the Pearl and Taihu basins. In the Pearl River basin, Cisco held an onsite ecodesign workshop at Nankun Moutain National Forest Park with 15 representatives from eight Cisco supplier sites and industry peers located in Guangdong. The workshop resulted in two compost bins that support filtration throughout the Pearl River basin. In the Taihu Basin, Cisco invited 17 representatives from nine Cisco supplier sites and industry peers located in Jiangsu to build a rainwater garden at an environmental education center in Wuxi. We also co-hosted a “water field trip” with another industry peer for suppliers to learn about the importance of wetland protection on China’s Qiandao Lake.

Pollution prevention

Cisco strives to track and addresses pollution issues in our supply chain and respond to rightsholders' calls for mitigation and remediation.

For example, Cisco has an ongoing partnership with the Institute of Public and Environmental Affairs (IPE) to prevent and mitigate environmental risks from supplier sites in mainland China. IPE has recognized Cisco's work on its Green Supply Chain, and Cisco once again ranked first in the IT industry for the Corporate Information Transparency Index (CITI) during 2023.

Cisco leverages IPE's Blue Map database, which identifies existing and historical environmental violations. We work closely with suppliers to make sure they address and mitigate environmental issues and comply with local environmental laws. In addition, Cisco requires suppliers to publish their CAPs on the IPE website to improve environmental transparency and define a mitigation timeline. In fiscal 2023, 12 supplier sites in mainland China remediated environmental violations and were delisted from the IPE Blue Map.

Cisco also works with its manufacturing partners to cascade corporate expectations to their suppliers as part of a program called the Green Supply Chain initiative. As with human rights issues, Cisco aims to build supplier capacity to foster better environmental performance and transparency. Since fiscal 2020, 100 percent of our manufacturing partners in mainland China have had programs to manage their direct materials suppliers' environmental performance using IPE Blue Map.

During fiscal 2023, Cisco continued to organize environmental training webinars for supplier sites in mainland China. In fiscal 2024 we are planning to include Cisco suppliers in Taiwan in the Green Supply Chain Initiative. We organized a webinar to inform Taiwan-based suppliers about our green supply chain requirements. A total of 51 attendees from 19 suppliers attended the webinar.

Transparency and capacity building

In fiscal 2023, Cisco invited suppliers and their subtier suppliers to participate in a series of environmental trainings organized by IPE that covered a wide range of environmental topics, including:

Blue Map and Blue EcoChain Operation Guide	Corporate carbon data calculation, disclosure and analysis, and Pollution Release and Transfer Report (PRTR) data disclosure Legally required disclosure of corporate environmental information, information disclosure, and record removal on Blue Map Green Choice Audit (GCA) Audit and Common Findings
Environmental Protection	Environmental compliance and common noncompliance How to increase water usage and solid waste reuse rates Hazardous chemicals, new chemicals, and new pollutants
Emissions and Data Reporting	Setting science-based carbon targets Product-level carbon data calculation, disclosure, and utilization Calculating Scope 3 Category 1: purchased goods and services How to improve energy efficiency

In fiscal 2023, we extended reporting requirements for suppliers in mainland China, encouraging them to disclose energy conservation, water, air, and waste information through the PRTR reporting system on the IPE website. In fiscal 2023, 211 supplier sites completed PRTR reporting compared to 175 in fiscal 2022. A portion of the overall increase in participation came from manufacturing partners asking their direct suppliers to participate in the disclosure effort.