1. Ethical audit programme
We do not own or operate factories and Arcadia Group is rarely dominant in an individual factory. We have strong working relationships with our network of international suppliers, 57% of which have been with us for three years or more. Arcadia goods are currently manufactured in 1,034 factories through 679 suppliers. Our top 20 suppliers provide 45% of our goods.
This year Arcadia products were made in 53 countries worldwide, although our top ten sourcing countries accounted for 91% and the top five for 73% of the goods we sold. These top five countries were China, Turkey, Romania, India and Vietnam.
This year we have made further systems improvements to our programme, supporting the way we do business and further underpinning our ethical approach.
Under our ethical audit programme our suppliers must submit an independent third-party factory ethical audit no older than a year to receive a grading for a new factory set-up. In order to help reduce audit fatigue we accept audit reports from a small number of recognised initiatives and audit bodies as long as they are independent are non-modifiable.
Last year we simplified the system, moving to a red, orange and green model.
If the audit is graded red, we will not allow any of our brands to use this factory until the issues have been resolved, irrespective of whether it is a new or existing factory. ‘Red flags’ include serious breaches of our Code of Conduct and local laws, such as non-payment of the minimum wage or locked fire exits.
Orange rated issues are often quite complex and we provide those suppliers with up to a six-month window for remediation. However, our expectation continues that non-compliances should be resolved as quickly as possible.
Green graded factories are audited annually.
We provide tools such as our Code of Conduct Guidebook to accelerate the resolution of problems identified during audits.
We continue to work towards 100% of our factories operating with a green rating.
We have made progress against our targets and now work with no factories with out-of-date audits, 79% of our factories were graded green (low risk), 20% were graded orange (high risk) and 1% were graded red (critical risk).
Overall this year we reviewed 1,263 ethical audits for all brands.
Although this work is an important element of our ethical trading programme, we acknowledge that this is not enough to drive long-term change. This is why we work on the projects outlined under this Fashion Footprint pillar.
We continue to leverage the benefits of our internally developed, online ethical audit database, Valid8.
Valid8 is a purpose built system to accurately and efficiently store and manage our factory ethical information. The online database replaces the previous manual system of factory set-up and has been designed to be more accurate, robust and transparent. It is used to set up factories, upload, store and archive audit information, manage corrective actions and validate the supply base.
We work closely with expert audit partners, to verify factory audit reports and ensure they are logged correctly, freeing up time for our ethical trading team to focus on more complex issues, while ensuring robust data and reporting are maintained.
We continually upgrade the system to respond to our business needs, improving efficiencies and providing us with enhanced data of our supply chain.
For instance, as outlined in last year’s report, during the year we adopted an auto-disengage function that ensures no new orders can be placed with a factory if it’s audit has expired.
Suppliers also report that using Valid8 is a positive experience. Here are two quotes from suppliers:
“Valid8 has benefited us because it helps keep a track on status for all of our factories in one place. For example, what issues are open and what we need to do to remediate. It also helps to have expiry dates for approvals and automated reminders, which we can share with our suppliers and ensure that new audits/follow ups are being booked well in advance.”
“I find the Valid8 system to be very user-friendly and straightforward to use. The reminders the system sends out when audits are going to expire is the most helpful feature and I have found uploading new reports is an easy process. I think being able to see all of our factories in one place makes it easier for us as a business to stay on top of our factories and when they should be booking their next audits etc.”
2. Country risk assessments
Bangladesh remains an important sourcing country across Arcadia. We remain committed to our role in driving safety and sustainability within the Bangladesh Ready-Made Garment (RMG) industry, having signed the Accord on Fire and Building Safety in Bangladesh.
Continuing our work in this important area, we are active participants in the UK regional working group, helping to steer improvements in Bangladesh up to and beyond the dissolution of the Accord in 2018. We are the lead brand on ten factories in Bangladesh currently, meaning we are committed to providing guidance and support to these factories.
Over the past year we have carried out internal training sessions for functional teams to build understanding on regional specific issues and our Accord commitments. These training sessions are meant to ensure all teams are engaged and knowledgeable about the area in which they are sourcing and the issues facing workers in Bangladesh.
The Accord features include:
- Legally enforceable agreement – IndustriAll, UNI-Global, 220 global companies, 4 witnesses
- Independent, credible safety inspections
- Public reports and information disclosure
- Mandatory safety remediation
- Mandatory safety committees
- Right to refuse dangerous work
- Occupational safety and health (OSH) complaint mechanism
- Equal status and responsibilities of signatories
We continued our work this year as a signatory of the Bangladesh Accord. This five-year programme ensures a safe and sustainable Bangladeshi garment industry by:
- defining the level of response from suppliers, such as inspection, remediation and training;
- providing a framework for Governance, including an Advisory Board and Steering Committee and dispute resolution systems;
- appointing an independent, qualified Safety Inspector who will oversee safety inspections with all factories covered by the Accord to be inspected within the first two years of the agreement;
- defining approaches to remediation, including the protection of workers’ employment relationships during any factory closures while renovations are carried out;
- enabling an extensive fire and building safety programme;
- overseeing regular publicly available updates on key aspects of the programme;
- guaranteeing all tier 1 and 2 factories will undergo a full fire, electrical and structural inspection- these factories are requested to allow access to training teams, as well as ensuring that any necessary remediation work is carried out; and
- coordinating with the Better Work Bangladesh (BWB) and the Ethical Trading Initiative (ETI) to identify Accord-listed factories participating in their programmes- they could then be encouraged to participate in newly developed worker safety committee training programmes.
We are involved in a programme in Myanmar run by the Business Innovation Facility (BIF), a private sector development programme funded by Department for International Development (DFID).
BIF is a five-year initiative, which also works on similar projects in Malawi and Nigeria. It employs a ‘market systems approach’, aiming for large scale, sustainable economic impact, and works by helping companies to innovate.
A specific area for such innovation in Myanmar sees BIF working with factories to improve productivity and human resource management systems and to evaluate the impact of training to establish the link between productivity and worker welfare.
While we focus efforts on distant sourcing locations, we must also remember that UK factories are not without risk. While obviously much closer to home, we are mindful of the need to monitor factory conditions locally. We have carried out many UK factory visits this year as local sourcing continues to be important for speed to market.
We carefully prioritise, monitor and respond to issues in all sourcing countries. Our team visits high-risk and important sourcing locations regularly as part of standard ethical trading factory visits and we also work locally to help bring greater protection for textile workers. Over this reporting year, the ethical trading team travelled to Bangladesh, Cambodia, China, Guatemala, India, Lithuania, Romania, Spain, Turkey, USA and Vietnam.
3. Joint Turkey Project
The Joint Turkey Programme (JTP) is TOPSHOP and TOPMAN’s long-term programme to move beyond the traditional auditing model while achieving compliance with retailers’ ethical codes of conduct. Its mission is to ‘develop and implement a strategic and holistic programme that will improve factory productivity, workers’ conditions, working hours, earnings and worker management dialogue. This will utilise proven processes of communication, training and industrial and other forms of engineering. The programme will benefit the workers, suppliers, factories, and retailers.'
In essence its aim is to empower factory owners, managers and workers to create a fair working environment while reducing audit fatigue.
The JTP was established in partnership with another high street retailer who jointly shares the common goal of establishing mature systems of industrial relations and building the factories’ productivity to support a wage ladder.
We have made significant progress in recent years and the last 12 months is no exception.
Work on management systems has been completed this year and the factories now have an employee handbook, which was partly developed by the workers themselves. It is used in worker representative meetings as a guide to set expectations on both sides
An incentive scheme is in place to ensure workers are rewarded when productivity improves. In addition, profit from improved productivity has resulted in increased worker wages. We will continue to monitor its success.
A full impact assessment of the JTP was scheduled to take place in spring 2016. Although the impact assessment has been delayed, the implementation stage of the programme continues. The revised schedule is for winter 2016 and we have already put in place plans to create an assurance mechanism that will enable us to measure success beyond the impact assessment.
4. Strategic labour projects
a. Living wage (ACT)
b. Freedom of association
c. Modern Slavery Act
d. Purchasing practices
e. Vulnerable workers
a) LIVING WAGE
We are part of the multi-retailer initiative ACT (Action, Collaboration, Transformation), which has been formed specifically to address the issue of living wages in the textile and garment supply chain.
ACT is the first global framework on living wages in the garment sector that brings together all relevant stakeholders; identifying what each stakeholder’s role and responsibility is, and how, if taken together, this can support living wages in a scaled up, sustainable, industry-wide approach.
The initiative aims to improve wages by establishing industry collective bargaining in key garment and textile sourcing countries, supported by world class manufacturing standards and responsible purchasing practices.
ACT intends to establish agreements to negotiate and agree wages and conditions that will apply to a whole industrial sector within a country. These agreements will set a benchmark that applies to all manufacturers, while still allowing for individual manufacturers to offer higher pay and conditions.
Arcadia supports the position that all workers in our supply chain, including piece rate, subcontracted, informal, home and migrant workers, should always receive sufficient wages to meet their needs for nutritious food, clean water and other needs as well as a discretionary income, which is now a generally well accepted definition of a living wage.
b) FREEDOM OF ASSOCIATION
We believe worker representation and dialogue with management is fundamental to empowering workers to improve their working conditions.
Ensuring freedom of association is guaranteed continues to be a significant challenge. Only a small percentage of the factories our suppliers use are known to have trade union presence.
However, we continue to communicate with suppliers and factories about the benefits of freedom of association and as a minimum we expect our suppliers to ensure that factories give workers the right to organise.
We have produced a ‘Right to Organise Guarantee’ (RTO) template, drafted with the help of the International Textiles Garment and Leather Workers’ Federation (ITGLWF), now IndustriALL. This is included in our Code of Conduct Guidebook (Part 4, pages 258-9: http://www.arcadiagroup.co.uk/fashionfootprint/code-of-conduct-and-guidebook/Guidebook-part-4.pdf)
To date, we have had the RTO document translated into Vietnamese and Arabic, adding to the versions in Chinese, Bangla, Hindi, Romanian, Turkish and Urdu. We continue to distribute it in these languages. These are also made available on our website and the extranet that we use to communicate with suppliers.
We have renewed requests with suppliers for the RTO to be posted on notice boards, explained and given to all workers twice yearly with pay slips. When visiting factories we request to see this and when speaking with workers we ask them if they have had this guarantee communicated to them.
Freedom of Association is an important part of worker/management communications within the Human Resources (HR) Management Systems Portfolio we have produced (see our section on Management Systems) and of the Joint Turkey Project (see previous section).
c) MODERN SLAVERY
We published our first Modern Slavery Statement in February 2017, you can view it here.
d) PURCHASING PRACTICES
We believe that by improving the way we design and buy goods and by raising awareness amongst our teams of the potential effects on factory workers, we can have a positive impact on how suppliers’ factories manage their people, their production and their working environments.
We continue to be committed to ensuring our product teams are acutely aware of the buying impacts from a supplier and factory worker perspective and ethical training is always part of our overall learning and development agenda.
We continue training on our Internet-Based Fit Log (IBFL), an online tool used by our product teams to record the fitting and sealing of all products supplied. The website records each stage in the product fitting and approval process from first submission to production approval or rejection. It is proving effective in terms of efficiency and speed while it is also reducing sampling and, therefore, waste.
e) VULNERABLE WORKERS
Our work in this area comprises:
(i) home workers;
(ii) migrant workers;
(iii) Syrian workers/Turkey; and
(iv) contract workers.
(i) Home workers
Home working involves carrying out tasks on products at home. When managed properly this provides a way for individuals to balance their work and home life and we support factories that provide this option.
However, the lack of visibility of home workers, combined with their complicated employment status, has made them a vulnerable worker group. This is why we have been working on improving our understanding of the incidence of, and conditions for, home workers in our supply chain.
We have found that the most effective way of engaging with the contractors has been to arrange face-to-face sessions to communicate our and our suppliers’ responsibilities. We continue to use the toolkit and guidelines we have developed for this purpose and these will evolve as the project progresses.
We continually map the supply chain and have a consultant working at a local level to monitor the situation.
(ii) Migrant workers
In recent years Arcadia Group has been active in the area of improving the recruitment and working conditions of migrant workers who travel from one country to another for employment. This migration is generally beneficial but the people involved can be in a vulnerable situation, and can be exploited by unscrupulous agents, for example.
This is why we developed our Migrant Workers’ Guidelines, which are available in Part 4 of our Code of Conduct Guidebook.
We liaise with relevant suppliers to verify that the best practice standards remain in place, what challenges remain and what further work we need to do in the recruitment process as this is the first key step that migrant workers take.
An example of this liaison was our work during the year with a Mauritius-based supplier where the need to improve workplace dialogue was identified. A key challenge was to bring together workers from Bangladesh, India, Sri-Lanka and local Creole-speakers.
As part of the project we worked with management via a specialist third-party consultant to deploy a multi-language e-learning system that can track how workers develop. One of the key outputs has been free and independent elections by the workers of their own representatives who will be trained to handle reported issues, raise them with the company and report back.
Further training will focus on occupational health and safety representatives and will develop new equal opportunities committees in each factory. If successful it will be rolled out in the company’s factories in Bangladesh.
iii) Syrian workers/Turkey
We work in partnership with our suppliers in Turkey to monitor the refugee situation and provide support where needed. Following our move to all third party ethical audits being conducted on a semi or un-announced basis last year, around 180+ audits have been conducted in Turkey. To date, no unauthorised Syrian workers have been identified in the factories used by our suppliers. We continue to work closely with our audit partners in Turkey, where increased focus has been placed on ensuring auditors are trained to identify and manage any suspected unauthorised migrant workers. We have reminded our Turkish suppliers to use our migrant worker guidelines to manage the recruitment and employment of migrant workers, ensuring conditions of employment are no less favourable than those afforded to local workers. We will continue to monitor the situation closely.
iv) Contract workers
Contract Labour remains an endemic issue in sourcing countries like India which is why we monitor the use of contract workers in our factories and to engage with those that have high numbers of contracted employees. Wherever, possible we encourage the conversion of contract workers to being directly employed by the factory. We are also working to ensure contractors are fully registered.
5. Code of Conduct Guidebook
Our Code of Conduct Guidebook provides practical guidance to suppliers and factories on how to improve labour standards based on our Code of Conduct.
Our Code of Conduct Guidebook is available in English, Chinese, Hindi and Turkish. We will extend the Guidebook into new languages, prioritised by our top sourcing countries.
These four languages cover close to 80% of factories in our top ten sourcing countries.
Our Code of Conduct Guidebook can be found here.
6. Management systems
The management systems project has focused on two factories in India with the aim of creating a better environment for dialogue between the workers and the management, thus encouraging freedom of association and collective bargaining which will result in improved and developing working environment. The project will specifically look at reviewing and improving factory HR policies and procedures and providing training to the HR department. In addition the project will pilot healthcare provision as part of the Management Systems for those workplaces. Working within the local community, the programme has encouraged the factories to register workers for medical support.
We are trialling our HR Management Systems Guidebook both in the UK and with our global factory base. The Guidebook covers:
- The link between worker engagement and a successful business;
- How to reach these benefits;
- The role of the Human Resources department; and
- Examples and templates of practical tools and how to implement them.
The Guidebook includes practical tools such as training slides and notes, policy statements and template contracts and handbooks for factories to use as a guide to creating their own versions.
We are hoping to launch the HR Management Systems Guidebook to our supply base in early 2017.
7. Prohibited activities
There are a number of activities that Arcadia prohibits. Our policies include protecting animal welfare, the sandblasting technique, use of Uzbek cotton, mulesing of sheep and the live-plucking of feathers. Our ethical audit database (Valid8) improves our verification process, to ensure that factories comply.
Sandblasting – a process used to give denim a worn or faded look – was banned in 2011 due to the potential health hazards faced by workers if they breathe in the fine silica particles used. Uzbek cotton was banned in 2008 due to concerns about forced and child labour in Uzbekistan during cotton harvesting. Mulesing refers to a sheep husbandry practice used in the Australian wool industry to remove skin from sheep (often without anaesthetic) to prevent flystrike.
Arcadia banned ‘down’ for any orders placed after Autumn/Winter 2016. This followed discussions with PETA (People for the Ethical Treatment of Animals) regarding investigations on cruelty to animals to obtain down.