OUR AUDIT PROGRAM AND SUPPLIER PERFORMANCE.
Having audited our suppliers over several years, we are now of the view that a “beyond audit “approach needs be applied if we are to increase the momentum of positive change as well as ensure a more sustainable result.
Our accreditation with child labor free increased our knowledge around risks and remediation and was positively received by our customers. However, we believe any certification needs to be more extensive than this and to be inclusive of all our Codes of Conduct. For this reason in 2018 we took the view to participate in another global programme - The Amfori Business Social Compliance Initiative (BSCI) - which closely aligns to our principles and we believe will support us in this next stage of our ethical strategy.
With over 2000 members from 40 countries the Amfori mission is :
"To enable each of our members to enhance human prosperity, use natural resources responsibly and drive open trade globally. These are significant challenges, and we need to work collaboratively to tackle them. Together we can influence and drive positive change at scale”.
Their holistic approach to human rights issues and environmental sustainability will enable us to build on the work we have already started and importantly will offer greater learning opportunities for both suppliers and ourselves.
We believe a more collaborative approach is needed to increase our leverage with suppliers as well as to tackle the more complex issues, which most brands struggle to resolve on their own. Through the Amfori membership network and the Amfori support teams, we believe we will have more significant exposure to best practices, increased local knowledge and guidance, which will ultimately deliver better solutions for us all.
13 AREAS ASSESSED IN THE AMFORI BSCI AUDIT:
1. Social Management System and Cascade Effect
2. Workers Involvement and Protection
3. The Rights of Freedom of Association and Collective Bargaining
4. No Discrimination
5. Fair Remuneration
6. Decent Working Hours
7. Occupational Health and Safety (OHS)
8. No Child Labour
9. Special Protection for Young Workers
10. No Precarious Employment
11. No Bonded Labour
12. Protection of the Environments
13. Ethical Business Behaviour
OUR AUDIT CYCLE AND RATINGS.
The overall rating of a BSCI audit reflects the extent to which the factory has integrated the BSCI Code of Conduct into its daily business culture and operations. It is not calculated by the auditor, but generated automatically by the BSCI IT system based on the combination of ratings across the 13 Performance Areas (PAs). Auditors do not know the final rating until they have submitted their audit into the Amfori BSCI platform. As a consequence, at the audit’s closing meeting, the auditor focuses on the good practices and the findings but does not present a rating.
The final rating ranges from A to E:
A to B being a very good / good level of maturity that allows the factory to maintain its continuous improvement process without a professional follow-up audit.
C to E being acceptable/ insufficient or unacceptable level of maturity which requires the factory to develop a related remediation plan within 60 days of the audit date. A professional follow-up audit is envisaged to assess continuous improvement.
The Amfori BSCI audit cycle is a two-year period for producers that obtain an A or B rating. For producers that receive an overall grade of ‘C’, ‘D’, or ‘E’, a follow-up audit, which will address not all PAs but only those with findings, is required between 2 and 12 months after another audit. They then return to the 2-year cycle from the date of the initial audit.
Further information is available on the Amfori site here.
OUR SUPPLIER PERFOMANCE.
The average rating of our factories is a C rating, which is defined as an acceptable level of maturity. The majority are on a 12-month audit cycle.
However, an average A rating is been achieved for :
I. The Rights of Freedom of Association and Collective Bargaining
II. No Child Labour
III. Special Protection for Young Workers
IV. No Precarious Employment
V. No Bonded labour.
VI. Ethical Business Behaviour
VII. Protection of the Environment
Despite these A ratings, there remain many areas for improvement which are clearly documented in our detailed audit reports. E.g., Whilst, 100% of our factories have worker committees, these all operate to varying degrees of effectiveness, and therefore we need to continue to monitor and drive further improvements which are a particular goal of our responsible sourcing strategy.
Protection of the environment is another area where their performance is highly rated particularly in China where the government is being extremely active in enforcing positive change. However, the BSCI approach is one of continuous improvement, and therefore the momentum will need to continue if these scores are to be retained.
The key objective of the audit questions is to verify that the legal minimum wage, (or industry standard wage approved through collective bargaining), is respected by our factories. The debate over the minimum wage versus a living wage is a global and political issue as relevant in NZ as in developing countries, and one that AS Colour unilaterally will not be able to resolve. For this reason, we continue to review and develop our strategy and goals around Fair Remuneration and are taking the following courses of action :
I. PROMOTING EFFECTIVE WORKER PARTICIPATION GROUPS.
We believe the ultimate goal must be to ensure freedom of association and effective worker participation groups to enable their own collaborative bargaining. Our strategy is therefore to provide continuous improvement across these platforms. Currently, 100% of our first tier factories have some form of worker participation group with grievance mechanisms. Our focus is on making these groups more effective.
II. GATHERING INFORMATION ON REGIONAL SPECIFIC LIVING WAGES.
Whilst there is no universal guidance on how to calculate a living wage, our research has lead us to the Anker Methodology as recommended by a number of advocacy groups including Amfori . We are now requesting all our factories calculate their workforces’ decent standard of living. To date, 50% of our factories have submitted this information as part of their continuous improvement program. Our goal for 2019 is to achieve 100%.
This information is then used to understand current efforts to provide workers with a fair remuneration and the gaps that need to be overcome in order to do so. The information is also used to identify any significant risks in the supply chain which will then be used to shape our ongoing order placement and sourcing strategy.
III. OPENING SUPPLIER DIALOGUE.
Through encouraging an open dialogue with our producers we have been able to have our first discussions around open book costings and root cause analysis If we understanding factory cost breakdowns we can Firstly ensure that price negotiations do not negatively impact labour costs, but Secondly it raises awareness of the impact of increased labour costs on final costings.
These discussions have also brought us to a collaborative assessment of the root causes of costs and blockers to increasing salaries. We have asked our suppliers to evaluate our working practices to ensure we are operating as a responsible business enterprise.
IV. COLLABORATING WITH INDUSTRY AND ADVOCACY GROUPS.
AS Colour has recently joined the global Amfori organization which we believe will assist in guiding us through such complex issues as living wage as well as allow us the opportunity to connect and collaborate with other international brands working with our supply base.
V. DEVEOPLING INTERNAL TRAINING.
In September we had our first internal training around the significance of understanding Living Wage and the risks to our business if suppliers systematically fail to provide fair remuneration to their workforce.
Following the suppliers review of our business practices, we will be further developing our training programs.