Philips

RATING

SECTOR

Health Care Equipment & Services
 

WEBSITE

CONTACT

Philips Research Eindhoven
High Tech Campus 34
5656 AE Eindhoven
The Netherlands

Phone: +31 40 279 111, +31 (0) 40 230 5500
e-mail: info@hightechcampus.com

STOCK EXCHANGE

LISTING

  • 2020 Dow Jones Sustainability Index (DJSI). Philips scored 81 out of 100 points in the DJSI Health Care Equipment & Services industry group, continuing its #2 ranking. 
  • CDP Climate Change A List, making this the seventh consecutive year it has achieved a CDP A-list ranking for its leadership in corporate climate action. 
  • 2019 Dow Jones Sustainability Indices – #2 ranking
  • 2019 Philips ranks #1 on Fortune’s Change the World Sustainability All Stars list 
  • 2018 Philips IntelliSpace Portal named KLAS 2018 Category Leader for Advanced Visualization
  • 2018 Philips wins two awards at EUREKA Innovation Days for its impact on minimally invasive surgery
  • 2017 Philips leads the world in filing patents at the European Patent Office for second consecutive year
  • 2017 Frost and Sullivan Product Leadership Award: General Acute Care Area for Philips IntelliVue Guardian Solution

EMPLOYEES

80,495

CHIEF SUSTAINABILITY OFFICER

Robert Metzke

AWARDS

  • 2019 Red Dot Design Awards: Brands & Communication Design
  • 2019 Clarivate Analytics’ Top 100 Global Innovators
  • 2018 Dutch ‘Crystal Prize’, for ‘Chain Transparency’ by the Dutch Ministry of Economic Affairs in conjunction with the Netherlands Institute of Chartered Accountants 
  • 2018 Supplier Engagement Award by the Sustainable Purchasing Leadership Council
  • 2018 Philips wins UX Design award for Stroke Communication tool
  • 2018 “Best of Service” award for PET imaging by IMV ServiceTrak during 2018 SNMMI Annual Meeting

CONTENT SOURCE

FURTHER READING

Report created by Kavita Kripalani

Company Title

SECTIONS :  Sustainability    Evaluation  •  Progress  •  Watch  •  Overview

Company Activity

Philips is a technology company, which engages in the healthcare, lighting, and consumer well-being markets. It operates through the following segments: Personal Health, Diagnosis & Treatment, Connected Care & Health Informatics, and Other. 

The Personal Health segment focuses on healthy living and preventative care. This segment comprises the Personal Care, Domestic Appliances, Oral Healthcare, and Mother & Child Care businesses. 

The Diagnosis & Treatment segment unites the businesses related to the promise of precision diagnosis and disease pathway selection, and the businesses related to image-guided, minimally invasive treatments. This segment comprises the Diagnostic Imaging, Ultrasound, Healthcare Informatics and Image-Guided Therapy businesses. 

The Connected Care & Health Informatics segment focuses on patient care solutions, advanced analytics and patient and workflow optimization inside and outside the hospital, and aims to unlock synergies from integrating and optimizing patient care pathways and leveraging provider-payer-patient business models. This segment comprises the Monitoring & Analytics, Therapeutic Care, Population Health Management, and Sleep & Respiratory Care businesses. 

The Other segment reports on the items Innovation & Strategy, IP Royalties, Central costs, and other small items. 

The company was founded by Anton Frederik Philips and Gerard Leonard Frederik Philips in 1891 and is headquartered in Amsterdam, the Netherlands.

Company Sustainability Activity

As a leading health technology company, the company’s purpose is to improve people’s health and well-being through meaningful innovation, positively impacting 2 billion lives per year by 2025.

They aim to grow Philips responsibly and sustainably, and therefore continuously set themselves challenging environmental and social targets, and live up to the highest standards of governance.

The company says that citing responsibility towards the planet and society is part of is central to their company, and is the best way for them to create superior, long-term value for Philips’ multiple stakeholders.

Highlights

  • They take a fully integrated approach to doing business responsibly and sustainably.
  • They have adopted a comprehensive set of key commitments across all the Environmental, Social and Corporate Governance (ESG) dimensions that guide the execution of their company strategy.
  • Their approach to the environmental and social dimensions is reflected in their commitment to the United Nations Sustainable Development Goals 3, 12 and 13
    • SDG 3: Ensure healthy lives and promote well-being for all at all ages
    • SDG 12: Ensure sustainable consumption and production patterns
    • SDG 13: Take urgent action to combat climate change and its impacts
  • Philips has committed to become carbon-neutral in its operations by 2020 and made good progress on this in 2019. 

Targets

  • Committed to becoming 100% carbon-neutral in their operations and sourcing all their electricity usage from 100% renewable sources by 2020.
  • Committed to sourcing over 75% of their total energy consumption from renewable sources by 2025, and to reducing CO2e emissions in their entire value chain in line with a 1.5 °C global warming scenario.
  • Improving the lives of 3 billion people a year by 2030, including 400 million in underserved healthcare communities.
  • 2020 goal of 25% gender diversity in leadership positions.
 

Progress

  • In 2019, 44 suppliers were added to the Supplier Sustainability Performance Program (SSP). Out of the population of suppliers that entered the program in the years before 2019, 208 suppliers were still active in 2019.
  • Inclusion of additional suppliers annually into the award-winning SSP program.
  • Philips is actively working to make the SSP program more efficient and effective through its research consortium with Eindhoven University of Technology and the Jheronimus Academy of Data Science (JADS). The focus of this consortium is on applying the latest insights in data science and machine learning methods in order to make the SSP program more efficient in determining the sustainability maturity of suppliers, while also increasing the effectiveness of their supplier improvement approach.
  • In 2019, a machine learning tool was developed that is able to predict the sustainability performance of suppliers, based on a set of generic indicators. 
  • Philips ramped up its cross-industry engagement again in 2019, advocating further adoption of the SSP approach. The program design enables various codes of conduct to be included. Philips is making the methodology available to other companies that want to make a sustainable impact in their supply chain.
  • Each year, Philips works with their suppliers on the quality of their due diligence reporting by setting minimum criteria for the Conflict Minerals Reporting Templates (CMRT). They also strive to reduce the number of unidentified smelters. In 2019, they were able to further improve the response rate. The quality of the CMRTs improved by 3 percentage points and the number of non-listed smelters continued to decline, to 3 (2018: 5).
  • Since the launch of the Philips Foundation, over 160 projects have been completed or are in progress throughout the world, with a reach of over 15 million people – engaging employees, connecting with patients and providing access to healthcare for medically underserved communities. A total of 38 new projects were approved in 2019 across the world, spanning many phases of the health continuum: from youth education and awareness on healthy living and prevention, to diagnosis and treatment, as well as capacity building in the healthcare workforce. 
  • Overall gender diversity remained stable at 38% in 2019 whilst gender diversity among Executives increased from 19% to 22% female executives. Measured against their 2020 goal of 25% gender diversity in leadership positions, they increased from 21% in 2018 to 24% in 2019.
  • In 2019, 80% of reporting manufacturing sites were certified, compared to 83% in 2018. The decrease is caused by new reporting sites that are not yet ISO 14001-certified. The integration of newly acquired companies is in progress; smaller sites are required to maintain robust environmental management systems while external certification is not mandatory.
  • ISO 45001/OHSAS are in place for 23 out of 35 manufacturing locations in scope, with the remaining certifications scheduled before the end of Q2 2020. In addition, three Market organizations are certified to ISO 45001, with further certifications in other Markets planned in 2020.
  • 2019: Recorded a 12% decrease in emissions in their overall logistics operations compared to 2018
  • 2019: Reduced overall emissions from air freight by 21% and from ocean freight by 8%
  • 2019: Emissions from parcel shipments increased by 22% and from road transport by 8%.

Certificates

United Nations Sustainable Development Goals

United Nations SDGs Compliance

SDG 3

  • Universal Health Coverage – the company published a special report, ‘Taking Action’, which pulls in key recommendations for the private sector in helping to advance Universal Health Coverage (UHC). During the World Bank Spring Meetings in Washington DC they hosted a gathering of ministers and key opinion leaders in healthcare to discuss how to transform health systems in emerging markets, scaling successful business models to achieve UHC. In support of their partnership with UNFPA, Philips attended the ICPD conference in Nairobi and announced a commitment to work with partners to mobilize USD 100 million of investments for large scale projects focused on high quality, integrated health services in Africa.
  • Innovations such as their modular Community Life Center (CLC) solution and digital health solutions such as Mobile Obstetrics Monitoring, deliver comprehensive primary care solutions and provide for maternal observation from conception, pregnancy and the first two years of life.
  • Philips was the first private sector company to provide support to SDG Partnership Platform in Kenya – an initiative of the UN, the Government of Kenya and the private sector. The collaboration aims to “Demonstrate the power of public-private collaboration to transform primary healthcare in support of the United Nations and the broader attainment of improving the health of 46 million Kenyans.
  • At the 74th United Nations General Assembly in September 2019, the UN Secretary-General convened a Climate Summit and held a one-day high-level meeting on “Universal Health Coverage: Moving Together to Build a Healthier World”. Philips reiterated its commitment to Universal Health Coverage and advocates for digital health technology. As an active private-sector constituent member or the UHC2030, they supported the statement on the seven ways private sector can contribute to achieve UHC.

SDG 12

  • CEO, Frans van Houten, co-chairs the WEF Platform for Accelerating the Circular Economy (PACE) – a collaborative effort between the public and private sectors to scale up the adoption and implementation of circular business models.

SDG 13

  • Philips has committed to become carbon-neutral in its operations by 2020 and made good progress on this in 2019. The company’s Sustainability program and targets have been evaluated and approved by the Science Based Targets initiative, making Philips the first health technology company to achieve this.
  • The Circular Economy program at Philips ran for the seventh year in 2019. It consists of five strategic pillars: 
    •  Close loops with current products through takeback, refurbishment, and recycling 
    •  Embed circular economy principles in product design and business models 
    •  Collaborate with stakeholders outside Philips 
    •  Activate and train employees 
    •  Measure and monitor with proof points and metrics
  • The Philips Biodiversity policy was issued in 2014 and progress has been made on biodiversity management, on sites (e.g. impact measurement), on natural capital valuation, and at management level. 
  • In 2016, Philips moved away from its traditional approach to audit suppliers, which it had been taking since 2004. Insights from data analysis showed this old approach was insufficient to drive sustainable improvements. Their SSP approach, first piloted in 2016, focuses on: 
    • a systematic approach to improve the sustainability of their supply chain
    • continuous improvement against a set of recognized and global references 
    • collaboration, increased transparency, clear commitments, and ensuring suppliers meet the agreed targets 
    • encouraging their suppliers, industry peers and cross-industry peers to adopt their approachThe PZT status is a temporary status and requires immediate attention and action. Depending on the categorization, suppliers are engaged in different ways to improve their sustainability performance. If a (Potential) Zero Tolerance is identified, immediate action is taken. 
  • Supplier Sustainability Declaration (SSD) – sets out the standards and behaviors Philips requires from its suppliers. The SSD is based on the Responsible Business Alliance (RBA) Code of Conduct, in alignment with the UN Guiding Principles on Business and Human Rights and key international human rights standards including the ILO Declaration on Fundamental Principles and Rights at Work and the UN Universal Declaration of Human Rights. It covers topics such as Labor, Health & Safety, Environment, Ethics, and Management Systems.
  • Regulated Substances List (RSL) – specifies the chemical substances regulated by legislation. Suppliers are required to follow all the requirements stated in the RSL. Substances are marked as restricted or declarable. All suppliers are required to commit to the SSD and RSL. Through integration of a Sustainability Agreement (SA) in their General Purchase Agreement, suppliers declare compliance to both the SSD and RSL. Upon request, they provide additional information and evidence

Secondary SDGs: 4, 5, 6, 7, 8, 10, 11, 15, 16, 17

Evaluation

Philips’ annual report outlines its sustainability initiatives, along with specific targets and progress. The company has some impressive sustainability awards and listings. 

Despite having few certificates, one of the most noteworthy points in Philips’ report is their detailed approach to maintaining a sustainable supply chain. Not only is the company prioritizing ethical practices in its supply chain, but it has also created a model of how to implement it, and is sharing the model with other companies so that they themselves may adopt it. The importance the company shows its suppliers is truly admirable.

Philips makes a decent attempt at transparency. The company sets ambitious targets and seems to be doing a good job at keeping track of its progress. However, the company has only explicitly adopted just 3 of the 17 SDGs and has the potential to be doing much more in this area. 

Most concerning is Philip’s involvement in recent scandals, including allegedly inflated prices as well as their failed contract with the Trump administration for the delayed deployment of ventilators that were critical for helping Covid-19 patients. Whether or not this was deliberate on behalf of the company, this ultimately resulted in thousands of units never being utilized and hundreds of millions of taxpayer dollars wasted.

With everything taken into account, this company has been rated a C. 

Analyst Outlook: Positive

Philips has done a good job in aligning with the few SDGs it has explicitly adopted. Arguably, strong and focused progress toward select SDGs, which Philips has demonstrated may be more impactful than superficial progress on numerous SDGs. 

Nonetheless, the company has room to improve in its efforts in sustainability, such as garnering further certifications and identifying additional SDGs to work toward.

 

Key Points

 

  • Philips is the world’s first health technology company to have its CO2 targets approved by the Science Based Targets initiative.
  • Philips delineates a thorough strategy in their approach to upholding an ethical supply chain with specific policies. 
  • The Philips Foundation supported projects with local non-governmental organizations, across 22 countries, working with Philips employees to improve healthcare access and availability for vulnerable communities
  • Brazilian prosecutors allege Philips and other multinationals conspired with intermediaries to pay bribes for public contracts, charging Brazil’s state healthcare system inflated prices to recoup the cost of the kickbacks.
  • In 2014, the Obama Administration entered into a contract with Philips that would have supplied the nation’s stockpile with 10,000 ventilators by June 2019.  Development was initially delayed, but the Obama Administration gave Philips an extension that would have required the company to provide all of the ventilators by November 2019—in time to be deployed for this pandemic. 
  • Philips’ delays continued through 2017 and 2018, but the Trump Administration mismanaged Philips’ repeated failures to meet contractual requirements.  It gave Philips three additional extensions, the last of which allowed for final delivery of the ventilators to be delayed until June 2021. Had the Trump Administration held Philips to the terms of the Obama-era contract, the country would have had 10,000 ventilators that it needed when the coronavirus crisis struck.
  • Environmental – Renewable energy sources: Through consortium-led virtual Power Purchase Agreements, Philips is securing renewable electricity supply to power its European operations.
  • Circular economy: Philips plays a leading role in the Platform for Accelerating the Circular Economy (PACE), setting global Action Agendas and driving change to embed circular thinking and ways of working. As part of its commitment to the World Economic Forum (WEF) Capital Equipment pledge, Philips has delivered on its commitment to close the loop for large medical systems equipment by offering a trade-in for all deals that the company won around the globe, repurposing/recycling components and materials in a responsible way to improve more lives without further depleting the world’s natural resources.
  • Supply chain: Philips works with suppliers to further reduce their carbon emissions by supporting capability building and contributing to transparency and efficiency in the supply chain. This approach has improved the sustainability performance of suppliers that entered the program in 2019 by 36% compared to last year.
  • Social: Lives improved: In 2020, Philips’ products and solutions improved the lives of 1.75 billion people. This figure includes 207 million people in underserved communities. To this end, Philips is also teaming up with governments, NGOs and hospitals. For example, Philips partnered with the African Union to provide medical equipment and expertise to help meet the immediate needs of medical practitioners and COVID-19 patients.
  • Supply chain: Philips’ programs have improved the lives of 302,000 workers in its supply chain in 2020.
  • Fair and inclusive workplace: Philips’ average employee engagement score for 2020 was 79%. Philips’ employee survey consistently reports that its employee engagement is on the rise and well exceeding the global high-performance norm of 71%. Moreover, gender diversity in senior leadership positions was 27% by the end of 2020, exceeding Philips’ target of 25%.
  • Governance: Philips has a strong track record of transparency in its plans, actions and reporting. For example, all Philips’ ESG data is externally audited at the highest level. Furthermore, in addition to the company’s customary disclosures on tax contributions in its Annual Report 2020, Philips today published its first Country Activity and Tax Report 2020 detailing its tax contributions for all countries it operates in
  • Philips also published its latest Human Rights Report 2020, which contains information about the company’s progress with regard to identifying and mitigating (potential) adverse human rights impacts in Philips’ own operations and its value chain. Moreover, Philips issued new policy statements on human rights, fair employment, and inclusion and diversity, covering aspects such as equal opportunity, fair and equal pay, workplace harassment/intimidation, child labor, forced labor, and working time directives.
  • Global recognition: Philips received further recognition for its ESG performance: top positions in the Dow Jones Sustainability Index, and Sustainalytics rankings; eight consecutive years on the CDP Climate Change A-list; greenhouse gas reduction targets approved by the Science Based Targets initiative. Philips also achieved second place in 2020 on Wall Street Journal’s 100 Most Sustainably Managed Companies in the World.

 

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