We require all factories we use to have a valid third-party ethical audit conducted using the SMETA methodology (Sedex Members Ethical Trade Audit). SMETA helps suppliers to share one audit with multiple customers, reducing duplication in ethical auditing.
100% of audits of tier one factories are carried out on a semi-announced or unannounced basis. To help reduce audit fatigue, we accept SMETA audits from Arcadia-approved audit firms, produced for us or any other retailer. We also accept audits carried out by other retailers with recognised ethical trade programmes. We grade factories using a simple traffic light system: red, orange or green.
If we find a red issue at a factory, we will not allow any orders to be placed until the issue has been resolved. Red issues include serious breaches of our Code of Conduct and local laws, such as not paying the minimum wage or locked fire exits.
Issues at orange-graded factories are often complex and we allow factories a maximum of six months to resolve them. However, our expectation remains that non-compliances should be resolved as quickly as possible and each non-compliance has its own specific timescale for remediation. Issues at green graded factories are lower risk and therefore only require annual audits to ensure standards are improving.
The table below shows factory grades for 924 factories who submitted an audit to us between 1 September 2017 and 31 August 2018. During this period 61 factories submitted audits with red graded non-compliances all of which were resolved before we raised any further orders. These factories were subsequently graded orange or green. We believe we have a responsibility towards workers in our supply chain to help factories resolve critical issues rather than walk away and leave problems unaddressed and workers potentially at risk.
To assist both suppliers and factories in improving their standards we have produced the Arcadia Code of Conduct Guidebook, which provides practical advice based for meeting our standards. The guidebook includes training slides, policy statements and template contracts and handbooks, and is available in English, Chinese, Hindi and Turkish (four languages which cover 80% of our factories). We will review and update this document in 2019.
Alongside the Arcadia Code of Conduct Guidebook, our Ethical Trade team provide on-the-ground advice and support in finding the root cause of any issues uncovered and help with implementing subsequent remedial strategies.
Ethical Audit System
In 2018 we made a number of improvements to our ethical audit system, Valid8, which we use to manage audits, correct actions, communicate with our suppliers and monitor animal welfare and environmental standards at factories.
Currently we have over 1,000 users on the Valid8 platform - ranging from Arcadia commercial teams to product technologists, auditing bodies and suppliers. It acts as a powerful communication tool, enabling us to send messages to all users or to targeted groups of suppliers to help increase their levels of engagement.
As of 2018, we also require all factories to add their GPS coordinates to Valid8, to help improve the transparency of our first-tier supply chain.