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.

Reducing greenhouse gas (GHG) emissions

Cisco has set a goal to reach net zero across our value chain by 2040. 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% by fiscal 2030 (fiscal 2019 base year). To learn more about this goal, click here.

Today, more than 20% 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 suppliers’ energy and fuel consumption and GHG emissions and to promote clean energy to power suppliers’ operations. We also drive increased transparency through data collection and reporting to better understand current and future supply chain emissions.

Cisco requires suppliers to set absolute GHG emissions-reduction targets. This is the best way for suppliers to establish accountability toward GHG emissions reductions. We also set a goal that 80% of Cisco component, manufacturing, and logistics suppliers by spend have a public, absolute GHG emissions-reduction target by fiscal 2025. In fiscal 2024, 90% of our suppliers have a public, absolute GHG reduction goal.

Supplier adoption of absolute GHG reduction goals

	FY19	FY24
Suppliers, by spend, with a public, absolute GHG reduction target Goal: 80% of Cisco component, manufacturing, and logistics suppliers by spend will have a public, absolute GHG emissions-reduction target by FY25.1	FY19: 24%	FY24: 90%

1 Suppliers are expected to set public 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 an absolute GHG emissions-reduction goal and report annual progress against that goal
• Report Scope 3 emissions from material categories
• Request that their suppliers and business partners also report to CDP using the same process as above (recommended)

In fiscal 2024, Cisco and CDP partnered to support suppliers throughout the reporting process. We hosted two webinars to review the CDP questionnaire, our reporting expectations, and answer supplier questions.

In fiscal 2024, Cisco collected annual energy consumption data from our manufacturing partners to enhance the monitoring of energy usage and GHG emissions within Cisco’s manufacturing footprint. Understanding our current manufacturing energy use provides us with comprehensive insights into opportunities for reduction in the future as well as identifying opportunities to support suppliers in their transition to renewable energy. This information will serve as a baseline for tracking progress in energy use and GHG emissions from Cisco’s production lines in future years.

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. In fiscal 2024, more than 90% 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. Many of our transportation carrier suppliers offer various low-carbon and carbon neutral shipping options that vary by geography and reduction mechanisms. We often engage on mode shift and alternative fuel initiatives as part of our reduction strategy. Cisco is continuously improving the data we collect from these carriers to improve the accuracy of reported emissions in transportation and distribution.

Enabling renewable energy in the supply chain

The use of renewable energy throughout our global supply chain is crucial in advancing our net-zero ambitions, but it also comes with challenges. Renewable energy infrastructure is still developing in many parts of the world, and our suppliers often face hurdles with sourcing renewables in the countries where they operate, due to limited availability, prohibitive costs, and regulatory limitations. To address these challenges, we are engaged in cross-industry groups to accelerate the clean energy transition in key manufacturing countries. For example, as a founding member of the Asia Clean Energy Coalition, Cisco partners with other stakeholders to strategically shift energy policy in key Asian markets. In fiscal 2024, we also became a sponsor of the Catalyze program, which aims to accelerate access to renewable energy across the global information and communication technology (ICT) supply chain. We are also in discussions with key suppliers to understand how we can best support high-impact renewable energy projects at specific sites in our supply chain network.

Reducing material waste

Cisco has set a goal that 70% of our component and manufacturing suppliers by spend achieve a zero-waste diversion rate at one or more sites by fiscal 2025. To measure progress, Cisco works with our manufacturing partners to collect waste diversion data and monitors progress toward a zero-waste diversion rate at each site. Manufacturing and component suppliers can certify zero-waste diversion with TRUE Zero Waste or UL zero waste to landfill (ZWTL) audits. We also look for our suppliers to report a zero-waste diversion rate at their production sites that are also certified to the International Organization for Standardization (ISO) 14001:2015 environmental management. We continue to make strides towards this fiscal 2025 goal. However, like other companies with ambitious targets, we are facing headwinds. Regardless, we will continue to drive meaningful action and innovate toward our goals.

Progress toward supplier zero-waste diversion goal

	FY20	FY24
Performance toward supplier zero waste goalSuppliers achieving zero-waste diversion at one or more sites Goal: 70% of Cisco component and manufacturing suppliers by spend achieve a zero-waste diversion rate at one or more sites by FY25.1,2	FY20: 23%	FY24: 64%

1 According to current standard definitions used in certification protocols, “zero-waste” diversion is defined as a 90% 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 composting.

2 We continue to make strides towards this fiscal 2025 goal. However, like other companies with ambitious targets, we are facing headwinds. Regardless, we will continue to drive meaningful action and innovate toward our goals.

Improving water security

Cisco recognizes that water is a vital resource that we share with the communities where we operate. Water challenges are projected to grow more acute as the impacts of climate change—like droughts, extreme weather, flooding, degraded water quality, and water scarcity—intensify and become more widespread. 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 2024 reporting cycle:

• 97% of Cisco key suppliers^* disclosed to CDP
• 76% of Cisco key suppliers^* had set water-related targets in CDP
• 16 supplier sites engaged in the 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, regulatory risk, and reputational risk. Based on this global risk assessment, we focus on three river basins for water stewardship engagement: Lake Taihu and the Pearl River basin in Mainland China and the Sa Keo River basin in Thailand. We aim to use our influence to promote responsible water management.

* Key suppliers means Cisco Contract Manufacturers, Strategic Original Design Manufacturers, and Hardware Suppliers in the top 80% of spend in fiscal 2024.

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 align to 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, communications, 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 2024, our ICT water checklist program worked with 12 supplier sites—all of which are high-water consuming operations in high-water-stress locations. One site, located in the Sa Keo River basin in Thailand, was newly added to the program in fiscal 2024 while 11 sites worked with us in fiscal 2023, but had not achieved the targeted improvement in water stewardship. Cisco developed a risk model to prioritize and manage these sites’ improvement, based on their basin water risk, daily water use volume, and ICT water checklist score. This model prioritized 238 indicators across all sites. We allocated resources, such as online water reviews and onsite capability building, to support the suppliers’ improvement. By the end of fiscal 2024, approximately 89% of the indicators improved. Nine of the 12 sites achieved leader status in the ICT water checklist, indicating their eligibility to graduate from the program. Cisco will continue to collect water balance map data from those nine sites to track water-related KPIs over time.

Top five indicators were tracked and improved in fiscal 2024:

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

In fiscal 2024, we also supported Phase 1 of the AWS Impact Accelerator in the Wusong River basin in China. Along with other AWS members and a total of nine facilities in this basin, we worked together to empower our suppliers and their stakeholders by providing them with the knowledge, skills, and networks they need to understand their water usage and impacts. Our collective goal is to address the shared water challenges in this river basin. 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.

Preventing pollution

Cisco strives to track and address 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 IPE's Green Supply Chain, and Cisco once again ranked first in the 2024 IT industry for the Corporate Information Transparency Index.

Cisco leverages IPE's Blue Map database, which identifies existing and historical environmental violations. We work closely with suppliers to help make sure environmental issues are addressed and mitigated. In addition, Cisco requires suppliers to publish their Corrective Action Plans (CAPs) on the IPE website to improve environmental transparency and define a mitigation timeline. 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% of our manufacturing partners in Mainland China have had programs to manage their direct materials suppliers' environmental performance using IPE Blue Map.

In fiscal 2024, only one of Cisco's directly managed supplier sites was identified with environmental violations through the IPE Blue Map database in Mainland China. However, within our green supply chain network with Tier 1 suppliers, we identified 14 sub-tier supplier sites (supplier sites of our directly managed suppliers) with environmental violations. All these environmental issues were addressed and remediated with an action plan by the end of fiscal 2024 through the Green Supply Chain program.

In fiscal 2024, Cisco also expanded the Green Supply Chain initiative to include Taiwan. During this period, we collaborated with our Tier 1 suppliers to ensure that their upstream supplier sites in Taiwan are incorporated into the quarterly environmental screening report. This mirrors the efforts previously undertaken in Mainland China, aiming to replicate the same level of environmental responsibility in Taiwan. In fiscal 2024, over 40 supplier sites in Taiwan were integrated into the Green Supply Chain initiative. Of these, we have worked closely with seven to provide detailed explanations on the IPE website and assisted five others in removing their environmental violations from the IPE website. Concurrently, eight of these suppliers successfully completed the 2023 Pollutant Release and Transfer Register (PRTR), and nine submitted their 2023 GHG emission data on the IPE website.

Looking ahead, Cisco strives to sustain and expand the Green Supply Chain efforts with our Tier 1 suppliers, with a focus on broadening the scope beyond Mainland China in the coming years.

Building transparency and capacity

In fiscal 2024, Cisco continued to invite suppliers and their sub-tier suppliers to participate in a series of environmental trainings organized by IPE that covered a wide range of environmental topics, including:

Blue EcoChain for Supply Chain Management	Chinese and international supply chain environmental, climate, and biodiversity management requirements IPE environmental and carbon management tools based on big data, AI, and other technologies (Blue EcoChain) Biodiversity risk management based on ecological big data
Corporate Environmental Information Disclosure	Implementation of Disclosure of Enterprise Environmental Information IPE PRTR data reporting system updates and operational guide
Carbon Data Accounting and Disclosure and Carbon Target Setting	Carbon data accounting and reporting system updates and frequently asked questions Carbon Target Setting Tool, applications and examples
Compliance in Pollutant Discharge Permit Management	Development of Pollutant Discharge Permit Management Interpretation of Pollutant Discharge Permit Management Regulations and Measures Practical Case Studies in Pollutant Discharge Permit Management

In fiscal 2024, we continued to require suppliers in Mainland China to disclose carbon data, energy conservation, water, air, and waste information through the IPE Carbon disclosure and PRTR reporting system and extend this requirement to cover Taiwan. We worked to guide more supplier sites to complete carbon data to increase the carbon footprint transparency in our supply chain. A total of 153 supplier sites completed carbon reporting in fiscal 2024 compared to only 50 in fiscal 2023, and we still upheld a high participation rate in the PRTR reporting, with a total of 167 supplier sites completing their submissions in fiscal 2024.

Case studies

Review our case studies to see how Cisco's supply chain auditing, corrective action, and supplier engagement processes work in practice as part of our overall due diligence process.