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Baker Hughes is establishing strong company management systems of control and transparency over our supply chain due diligence to facilitate:
Baker Hughes has established a cross-functional team to address the challenge of conflict minerals in the supply chain. This Baker Hughes enterprise team is led by Global Supply Chain and is supported by the members of Corporate Finance, Materials, Engineering, Quality Assurance, Investor Relations, Internal Audit and Legal teams. A clear target has been established for supplier due diligence reporting. This team is responsible for working with suppliers as well as tracking progress, reporting and achieving the target.
In 2013, we formulated and published the Baker Hughes Conflict Minerals Policy. We expressly encourage our suppliers to adopt and enforce a similar code of practice and to have their subcontractors do so, and will incorporate appropriate language into our standard terms and conditions. We also plan to provide guidance on supply chain due diligence and sourcing from conflict-affected areas in our Supplier Conflict Minerals Web Site. Our engagement with suppliers may include:
In addition to encouraging our suppliers to adopt and enforce a code of practice similar to the Baker Hughes Conflict Minerals Policy, we plan to include explicit terms in all of our contracts with suppliers which require compliance with our stated policies, full responses to all requests for supply chain information and flowdown of all requirements to their suppliers. We may engage with our suppliers on the topics of policy and management systems through our strategic supplier framework. Our ongoing work with these suppliers includes the development or enhancement of supply chain sustainability management.
Baker Hughes has begun identifying and assessing risk in the supply chain by:
Our process for identifying suppliers for which the Act does not apply includes the categorical exclusion of Baker Hughes offerings not affected by the legislation, including chemicals, services only, rental equipment, and packaging used in the shipment of products. By doing so, we limit our focus to relevant suppliers.
Beginning in 2013, we will ask that relevant global production supply base to identify the use of tantalum, tin, tungsten, gold and their derivatives and report that use into a central database. We plan to utilize the internationally recognized standard survey, commonly referred to as the “EICC/GeSI template”. Based on responses to the survey, we will then assess risk in the supply base for the use of the materials and prioritize follow-up with suppliers for further information. Our expectation for 2013 is that suppliers continue to track and improve material content reporting for conflict minerals compliance requirements while also gathering relevant information from their suppliers, as well. A red flag system will be applied based on materials reporting (or lack thereof), and the system will evolve as the scope of information collected from suppliers grows.
In assessing smelter/refiner due diligence processes for sourcing materials from conflict areas, we plan to use leverage information gathered through internationally recognized certification and monitoring programs.
Baker Hughes will design and implement a strategy to respond to identified risks, to include:
We understand our assessment of risk will be a continuous and evolving process as more information is made available to us by our suppliers and from all parties involved in internal validation along our supply chain routes that may ultimately lead to our finished products. Therefore, our strategy is purposely dynamic, to allow for continued development and improvement. Given the scope and complexity of the issue, it is also a balanced strategy that relies on both Baker Hughes and collective industry action to maximize impact. Additionally, Baker Hughes will look to outside initiatives – such as The Public-Private Alliance for Responsible Minerals Trade, the Conflict-Free Smelter Program, and industry groups – as they work toward building a process for sustained responsible mineral sourcing throughout the supply chain. These combined activities will appropriately address identified and anticipated risks.
Our risk assessment efforts may include:
Baker Hughes anticipates leveraging independent third-party audits of supply chain due diligence at the smelter/refiner level in the supply chain.
To fully understand the possible presence of conflict minerals in products and processes, it is critical to identify upstream and downstream portions of the supply chain from the central “pinch point” – the smelter or processor. The OECD conflict minerals due diligence framework recommends that downstream companies such as Baker Hughes be responsible for identifying the smelters used in the supply chain and ensuring that those smelters are appropriately certified as sourcing minerals that have not financially supported conflict. Baker Hughes supports programs and initiatives, which identify, audit and certify smelters that process mineral ores that do not directly or indirectly benefit armed groups in the Conflict Area. It is our intention to encourage suppliers to use only metals that have been procured through a conflict-free mineral supply chain.
Report on supply chain due diligence efforts to responsibly source minerals from conflict-affected and high-risk areas, by:
We will continue to refine and improve our processes for implementing the necessary due diligence on conflict minerals. As we work with our suppliers and other key stakeholders on this issue, we will continue to implement the Five-Step process. The final step in our due diligence process is reporting annually on our due diligence.
Baker Hughes anticipates that performing this due diligence process may result in the determination that suppliers sourced minerals that are not conflict-free. We plan to encourage those suppliers, utilizing the measures outlined above, to comply with our stated conflict minerals policy. We also anticipate that we may identify smelters/refiners who are not certified as processing only conflict-free minerals. To the extent possible, we plan to directly, or indirectly through our supply chain, encourage those smelters/refiners to seek certification through one or more of the programs or initiatives identified above; alternatively, we plan to discourage the sourcing of smelted or refined minerals from these smelters/refiners within our supply chain.