Supplier Relations

As a major organization spending approximately $5 billion per year to support our operations, we recognize an obligation to actively manage our global supplier base and ensure these critical partners meet our high social, environmental and ethical standards. As a part of the purchasing process, we assess the quality, cost, delivery and sustainability of all products and services whether we purchase from North America, Europe or Asia. We source, contract and purchase everything from transportation to raw materials and components. Our local presence in these regions leads to our direct interaction with our suppliers.

Our approach is to source from suppliers that are geographically located near our purchasing, manufacturing and distribution operations. We describe these suppliers as “local”. In the U.S. and Canada, approximately 73 percent of spend is from local suppliers; in Europe 86 percent and in Asia 48 percent.

Xerox Full Year 2017 Supplier Spend - $5.0 Billion

Xerox Full Year 2017 Supplier Spend by Region

In 2017, we sourced the vast majority of our needs from the partners listed below.

Name of Company	Sustainability Site	Sustainability Report
Fuji Xerox Co. Ltd.	Fuji Xerox Sustainability	2017 Sustainability Report
Flextronics International	Flextronics Social Responsibility	2017 Corporate Social Responsibility Report
Samsung Electronics	Samsung Sustainability	2017 Sustainability Report

Supplier Code of Conduct

Our supplier code of conduct and compliance program are the primary tools we use to instill improved social, environmental and ethical governance practices in our supply chain, as warranted.

Xerox joined the Electronic Industry Citizenship Coalition (now known as the Responsible Business Alliance or RBA) in 2008 to strengthen our approach for managing corporate social responsibility across the supply chain. Over the years as an RBA member, Xerox participated on the Board of Directors and workgroup initiatives of the RBA. All RBA members are accountable to a common code of conduct for social, environmental and governance of its operations and its suppliers. Xerox enforces the Code by including terms and conditions in purchase agreements and contracts, and requiring suppliers to represent and warrant their compliance with all applicable laws and regulations for the sale of goods/materials to Xerox. We perform risk assessments and require suppliers to participate in the Xerox Compliance Program. Annually, we remind our suppliers of their contractual requirements.

The Xerox Compliance Program includes the following components:

• An initial risk assessment is conducted to determine suppliers that pose higher corporate social responsibility risks. Suppliers classified as high-risk and those considered critical to our supply chain are required to complete a Self-Assessment Questionnaire (SAQ) annually. If significant risks are indicated on the SAQ, then Xerox will schedule an audit of that supplier. The SAQ also serves to raise suppliers' awareness about the importance of social responsibility topics, clarify Xerox’s expectations, target areas for review, and document suppliers' assessment of their performance. Annually and based on the assessments and questionnaires from the prior year, we select suppliers for compliance review or on-site audit.
• Post-audit, all suppliers are provided a written performance assessment. Corrective action plans are agreed upon for significant findings of potential risk. Closure audits are performed to validate progress.
• Xerox evaluates the number of supplier audits conducted each year based on business risk, geographic region, non-conformities and available resources.
• All audits (“on-site visits”) are conducted by trained Xerox employees that follow a standard process. Xerox utilizes the RBA audit format to evaluate key critical sustainability areas, including but not limited to, labor practices, freedom of association, child labor, forced labor, human rights, recruitment fees, passport seizure and environmental concerns.
• Since 2010, Xerox has conducted over 350 SAQs and has audited over a hundred suppliers. More than 60 percent of them showing improvement on closure of corrective actions assigned during initial audits in the categories of labor, health & safety, environmental, ethics and management systems elements of their operations.
• In 2017, Xerox conducted 15 SAQs as well as 37 announced, on-site audits of suppliers representing more than 75 percent of our direct spend. Year over year, significant findings were reduced by a minimum of 50 percent in the various categories.
• The 2017 priority non-conformances in the labor category were related to the inability to verify policies regarding recruitment fees for migrant workers. Corrective actions included implementation of policies, educating workers regarding their rights, and setting up grievance processes.
• Major non-conformances in the category of occupational health and safety were due to inadequate emergency preparedness and physically demanding work that poses risk of serious injury. Causes of workplace injuries were identified and mitigated, and adequate emergency preparedness programs were implemented.
• A priority non-conformance in the environmental category was for inadequate storm water management posing a risk of contamination to nearby water sources. Corrective actions that included operational controls and on-going analysis of impacts were implemented.
• Xerox global procurement and corporate security organizations screen all production suppliers and significant indirect suppliers to assess compliance with global anti-bribery laws and regulations, including but not limited to, the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act. If a supplier is found to have violated applicable laws or contract terms and conditions, Xerox reviews each situation on a case-by-case basis and determines the necessary course of action (e.g. terminate supplier relationship, instruct supplier to make corrective actions, etc.).

Business Performance and Reviews

We review suppliers’ performance against expectations and contractual requirements, prioritizing based on business risk and revenue impact. Suppliers with the highest business risk and potential revenue impact are considered “critical” and are required to maintain an acceptable business resumption plan. We inspect these plans on a regular basis.

Revenue risk criteria include:

• Revenue at risk
• Annual supplier spend and total contracted value
• Impact to product lifecycle management
• Extent of the impact to related subsystems and product portfolio

Business risk criteria include:

• Whether a supplier is a single source
• Length of time to resume to business after an adverse event
• Percent of revenue that Xerox represents to the supplier
• Financial stability of the industry and the supplier
• Probability and severity regarding natural disasters, climate change impacts and/or political turmoil

Conflict Minerals

We are committed to improving mining conditions associated with sourcing goods and materials containing conflict minerals (e.g. tin, tantalum, tungsten, gold, etc).

• Xerox has an extensive Conflict Minerals Policy.
• We publish our Due Diligence activities in our yearly Conflict Minerals Policy.
• Our internal processes incorporate the Organisation for Economic Co-operation and Development (OECD) framework for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas.
• We are an active member of the RBA and the Responsible Minerals Initiative, formerly known as the Conflict-Free Sourcing Initiative (CFSI).
• We use the Responsible Mineral Initiative (RMI) Conflict Mineral Reporting Template (CMRT) to survey our supplier base regarding conflict-free mineral usage.
• We support the Responsible Mineral Audit Program (RMAP), which independently audits smelters and refiners to determine if they have a system in place to assure compliant sourcing of conflict-free minerals.
• Our supplier contract template includes a specific reference to conflict-free minerals to ensure responsible sourcing in our supply chain.
• We filed Form SD with the SEC for 2017 on May 15, 2018.

Supply Chain Security

The Xerox brand is known worldwide for delivering industry-leading document technology, services and solutions. Counterfeit parts and supplies misrepresent the quality of our products and pose a serious threat to our reputation.

• We have rigorous processes to identify and eliminate counterfeit supplies and components from our supply chain. Read our Anti-Counterfeiting Statement. Xerox genuine supplies also are microchip (CRUM) protected for use with Xerox products.
• We source from a base of trusted and established suppliers (and their authorized distributors) who have been through our comprehensive vetting system.
• We seek warranties guaranteeing authenticity and quality; among other benefits, this practice mitigates obsolescence.
• Suppliers wanting to substitute an item different than originally agreed upon, are required to seek approval from our Global Procurement and Engineering groups.
• We’ve built security controls into our supply chain to help ensure the uninterrupted flow of products from the point of manufacture to the customer.
• We continuously monitor 100 percent of our direct and critical indirect suppliers to ensure compliance with global anti-bribery laws and regulations, including but not limited to, the U.S. Foreign Corrupt Practices Act (FCPA) and the U.K. Bribery Act.
• We are a certified participant of the U.S. Customs and Border Protection Customs-Trade Partnership Against Terrorism (C-TPAT) and the E.U. Authorized Economic Operator (AEO) program in the Netherlands and Ireland. As part of these memberships, we’ve adopted specific criteria for both our Supplier Security Requirements and internal security policies and standards.
• We have an ongoing assessment program to monitor compliance of high-risk suppliers as well as internal locations. We belong to the Transported Asset Protection Association (TAPA).

Xerox global procurement operations is platinum-certified to the Chartered Institute of Procurement and Supply (CIPS) in the area of procurement excellence through processes and procedures. In 2012, Xerox was the first organization globally to achieve CIP gold certification. The Platinum Certification signifies world-class levels in all aspects of ethical, sustainable and strategic procurement when measured against CIPS’ internationally respected standards structured around leadership and organization, strategy, people, processes and systems, and performance measurement and management.

In 2017, CIPS completed a periodic reassessment of Xerox’s strategic procurement program against the standards set forth in the Platinum Certification and concurred that Xerox continues to display world-class procurement practices required to maintain this advanced CIPS certification.

Through the certification process, Xerox global procurement identified and validated best practices, areas for improvement, and gained an unbiased measure of organizational performance against benchmark industry criteria.

Supplier Diversity

We proactively identify and seek to work with certified small and diverse businesses. A diverse supplier pool is a competitive advantage and a powerful business tool. We are committed to:

• Actively seeking certified diverse suppliers that can provide competitive, high-quality goods and services and whose business models align with our business strategy
• Ensuring the inclusion of diverse suppliers as a part of our strategic sourcing and procurement process
• Communicating the value of supplier diversity both internally and externally to all stakeholders
• Leveraging our supplier diversity results to meet our clients’ supplier diversity requirements

Several independent groups have recognized Xerox as having outstanding supplier diversity.

Learn more about the awards we have received.

Supplier Diversity adds value to the supply chain and increases our competitive position. Xerox is rich in culture from our global workforce, customers, shareholders and suppliers. We know that these initiatives give us our competitive advantage and help us to maintain our leadership position.

See our CEO Supplier Diversity Commitment Letter. We take part in several efforts with the goal of increasing diversity and inclusion in different business areas:

• We are an active member of the New York/New Jersey National Minority Supplier Development Council (NMSDC) and the Women’s Business Enterprise National Council. We participate in various national and regional conferences, matchmaker events and forums, which promote business with small and diverse businesses.
• The Inclusion Initiative is committed to identifying and increasing opportunities for minority-and women-owned (MWBE) law firms. Since joining the Initiative in 2011, we have continuously exceeded and increased our annual goals for spend with MWBE firms.
• More information is available at www.xerox.com/supplierdiversity.

Current and potential vendors can learn more about supplier diversity, supplier quality assurance and supplier ethics by visiting our Supplier Relations page.