Corporate Responsibility and Nokias Supply Chain

This booklet is intended to provide Nokia suppliers around the world with a brief introduction to the background and content of the environmental and social elements of Nokias newly updated Supplier Requirements. The full set of requirements, scheduled for formal release later in 2006, reflect the increasing importance of environmental issues, ethics, health and safety and labor conditions in the supply-chain. The creation of this booklet also coincides with the launch of Nokias new Corporate Responsibility Report. We have therefore included a brief overview of Nokias own progress and achievements in some important environmental and social areas during 2005.

Message from Olli-Pekka Kallasvuo, CEO Nokia Corporation

At Nokia, we see sound environmental and social principles as an important part of sustaining a successful and responsible business. We expect the companies in our supplier network to take a similar ethical business approach and we take this into account when selecting our suppliers and developing longer-term relationships with them. In recent years, our suppliers have asked us for clearer specifications on the standards we expect. This document broadly introduces select environmental and social elements of our new Nokia Supplier Requirements. These requirements, scheduled to be introduced in full later in 2006, reflect the increasing importance to our customers and the wider public of environmental issues, ethics, health and safety and labor conditions. Our aim has been to frame our new requirements in terms of mainstream business practices. For example, we talk more pragmatically about recruitment practices and waste management rather than using emotive labels such as child labor and pollution. We have also revisited our environmental criteria and introduced an entirely new section focusing on making Human Resources issues more explicit. I am convinced that high social and environmental standards are good for your business and for ours. Effective environmental management, for example, cuts waste and reduces costs. Responsible labor practices can result in lower absenteeism and labor turnover as well as higher productivity, creativity and quality. We are constantly aiming to improve Nokias social and environmental performance. During 2005, thanks to our suppliers, we were able to launch the industrys first mobile phone and network product fully compliant with the European Unions new RoHS directive restricting the use of certain hazardous substances in electrical and electronic equipment. In other areas, highlights include rolling out a new code of conduct for all employees, staging a successful global stakeholder event and initiating a mobile phone microfinancing project in Africa.
Find more details on Nokias 2005 performance on page 11 of this document or in our CR report at www.nokia.com/CRreport.

Nokia and our suppliers

At Nokia, we see our suppliers as an extension of our own business and in a very real sense they are. In our relationships with suppliers, we seek to be very active, encouraging regular communications, conducting supplier assessments and driving mutual improvements. At Nokia, we work hard to anticipate risk, demonstrate company values, enhance our governance practices, increase employee satisfaction and look after the communities where we do business. We expect the companies in our supplier network to take a similar ethical business approach and to demonstrate progress and achievements in these areas as well as in educating and overseeing the practices of their own suppliers. We see sound environmental and social performance as the way we should go about our business, and not as a separate add-on feature assigned to a CR department. We also take ethical performance into account when selecting our suppliers and developing longer-term relationships with them. At industry-level, Nokia is actively participating in the supply-chain working group of the Global e-sustainability initiative (GeSi). Together with other ICT companies, the aim of this workgroup is to promote good conduct and develop tools, management practices, processes and systems to assist members in dealing with Corporate Responsibility related supply-chain issues. During 2005/6 the supply chain working group, together with the Electronics Industry Code of Conduct implementation group finalized a supplier self-assessment questionnaire and risk assessment tool.
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 Main supplier locations Nokia factories

You can find more details on our Supply Chain activities at www.nokia.com.

Please note, the map is not depicting an exact number and/or location of suppliers but is an indication.

Our approach

In revisiting the environmental and ethical elements of Nokias supplier requirements, the aim has been to link them more closely with mainstream business practices as well as present a clear correlation between upholding these principles and building long-term business value. Based on feedback from our suppliers, we have fully updated our environmental and health and safety requirements as well as introduced some entirely new requirements, including a section focused on making Human Resource issues more explicit. Nokias supplier requirements communicate our expectations for our suppliers and their business. They provide a basis for supplier qualification and are linked to contracts, supplier assessments and development and improvement.

We set requirements and then let our suppliers decide how they can best meet them in terms of their existing culture and way of working. Nokia at the same time calls upon them to demonstrate progress and achievements in these areas as well as overall accountability in conducting responsible business and in educating and overseeing the practices of our suppliers own suppliers. We take these requirements seriously and expect them to be met in full. However, we do not see them merely as a set of rules. In many cases they become tools for increased cooperation that make good business sense and help build mutual trust.

Environmental and social elements

Following is a broad synopsis of selected environmental and social elements from Nokias new supplier requirements, scheduled to be communicated in full later in 2006. These reflect examples of the SOCIAL

principles of sustainable business that Nokia also works to uphold and cover a range of topics such as management responsibility, human resource management, environmental management,

Guiding policy, values and business conduct For long-term business success it is important that our suppliers share similar values. Nokia suppliers are therefore expected to have a company policy or framework that demonstrates their commitment to ethical conduct, appropriate business behaviour and respect for human rights.

Workforce planning/recruiting Efficient, effective and ethical workforce planning, recruitment and exit practices are essential for a companys performance in having the right people at the right place at the right time. Suppliers are expected to have a system to coordinate workforce activities for meeting current and future needs in a sustainable and ethical way.

Occupational health and safety To ensure employees can perform their tasks safely and efficiently, our requirements focus on the need for established occupational health and safety systems in both production and non production areas.

Competence development Effective competence analysis techniques and development opportunities are essential to ensure that employees can do their work as well as develop personally. Employees at Nokia suppliers are expected to have access to education and training appropriate for them to fulfil their tasks well. Suppliers are also required to conduct regular competence analyses and ensure that projected training plans are in line with broader company strategy and workforce development needs.

of new Nokia Supplier Requirements

quality management, risk management, security and responsible product development. Our environmental and social requirements are based on

recognised standards such as ISO14001, OHSAS18001, SA8000, ILO and UN conventions.

Time-off Rest and time off is essential for people to work efficiently, productively and innovatively. Suppliers are therefore expected to organize their schedules in such a way that employees can perform assigned roles efficiently without exceeding the maximum working hours as defined by local labor laws or relevant collective agreements. Pay and benefits Fair compensation and benefits are important for promoting employee motivation and preventing high turnover. Suppliers must therefore be in a position to ensure that all employees, whether permanent, temporary or contract workers receive fair compensation that meets or exceeds local legal and industry minimum standards, as well as receive benefits to reward contributions, skills and behavior considered vital to company success.

Fair treatment Employees at Nokia supplier facilities must be treated with respect and dignity, equal opportunity and feel safe from abuse, harassment or bullying of any kind.

Communication and feedback It is important for transparency and clarity of strategy and vision that employers and employees have effective communication channels. All Nokia suppliers should have channels in place for employees to give improvement ideas and suggestions or complain about unethical conduct, unfair treatment or practices. Nokia suppliers should also respect the right of their workers to form or join trade unions and to bargain collectively. In cases where this practice is legally restricted, a parallel means should be in place to allow concerns to be brought to management attention.

ENVIRONMENTAL
Environmental management systems and improvement programs In order to demonstrate an effective approach to environmental management, suppliers are expected to be able to identify and measure the environmental impacts associated with their operations and products/services as well as promote and run improvement programs to address these. Some suppliers are required to have certified environmental management systems. Waste management Waste is one of the key environmental concerns in the electronics industry and Nokia suppliers need to take responsibility for ensuring that all waste generated from their operations, products or customer assets in their possession is managed appropriately. Not only are suppliers expected to investigate ways to reduce reuse and recycle their waste, they also need to be able to track what happens to all waste generated.

Design for environment and raw material content To promote efficient material use in their products as well as improve their energy efficiency and recyclability, it is important for Nokia suppliers to consider environmental impacts at all phases of product development. Suppliers are also expected to be able to list the raw material content of those products supplied to Nokia and to ensure that they do not contain any restricted materials.

SUPPLIER MANAGEMENT
Improving environmental and social performance To deliver sustainable environmental and social improvements throughout the supply chain, our suppliers are expected to integrate these issues into their supply base management processes: setting clear requirements, conducting assessments and supporting supplier development activities. Using this approach we hope to gradually work down through the supply chain, ensuring that each tier fully understands and is committed to the principles of corporate responsibility.

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Highlights of the CR report

We are increasingly approached by our suppliers to engage on issues related to the environment, ethics, health and safety and labor conditions. Our corporate responsibility report is one important channel for this. Report highlights Nokias Executive Board fully updated the company Code of Conduct, rolling it out in September 2005 as a web-based learning tool, which 75% of our employees have now completed. The company staged a successful global stakeholder event, bringing together 110 participants from 28 countries representing civil society, the public sector, academia, and a range of businesses. The aim of the event was not to chair a Nokia-centric forum, but provide a level platform for participants to give frank views on broader issues important in the societies where we operate.

Nokia launched the industrys first mobile phone and network product fully compliant with new EU RoHS restrictions on hazardous substances. Nokia Human Resources management introduced a new global time-off guideline, recommending that Nokia employees dedicate one to two working days per year to the companys employee volunteer program. Last year, Nokia employees around the world volunteered for nearly 18 000 hours. In the companys community involvement work, Nokia and the Grameen Foundation USA joined forces to bring affordable mobile communications access to rural villages in developing countries through the use of microfinance. The initiative, which includes a tailor made booster antenna solution to reach villages outside regular coverage, is based on Grameens successful microfinancing model, helping mostly women, start self-sustaining businesses. The Village Phone program is now being scaled up to 3000-5000 new villages in Uganda and Rwanda.

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