We do not own or operate factories ourselves and Arcadia Group is rarely dominant in an individual factory. We have strong working relationships with our network of international suppliers, 60% of which have been with us for three years or more. Arcadia goods are manufactured in approximately 985 factories through 766 suppliers. Our top 20 suppliers provide 44% of our goods.
This year Arcadia products were made in 49 countries worldwide, although our top ten sourcing countries accounted for 91% and the top five for 71% of the goods we sold. These top five countries were China, Turkey, Romania, India and Bangladesh.
Our ethical trading work is wide ranging, multi-layered and involves different stakeholders. We have a number of on-going areas of activity, many of which have seen progress this year.
- Country Risk Assessments
- Joint Turkey Project
- Strategic Labour Priorities
- Code of Conduct Guidebook
- HR Management Systems
- Prohibited Activities
Under our ethical audit programme our brands 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 other recognised initiatives and audit bodies as long as they are independent and non-modifiable.
Previously we had employed a colour coding system for audits with four categories: red, orange, yellow and green. This year we have simplified the system, moving to a red, orange and green model.
If the audit is graded red, we will not allow the brand 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 minimum wage or locked fire exits.
Orange rated issues are often quite complex and we have recognised that the previous timescale for remediation of three months has often resulted in multiple interventions, risking a further slowing of progress. On that basis, we have opted to align with industry good practice and provide those suppliers with a more realistic six-month window for remediation however, our expectation continues that non-compliances should be resolved as quickly as possible.
Green graded suppliers are audited annually.
Early in the next reporting year, we are due to adopt an auto-disengage function on Valid8, our online database that will ensure no new orders can be placed if the audit has expired.
We anticipate that our Code of Conduct Guidebook will continue to be useful in accelerating the resolution of concerns identified during audits.
We continue to work towards fewer factories with out-of-date audits and 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 and 85% of our factories were graded green (low risk). 13% were graded orange (high risk) and 1% were graded red (critical risk).
Overall this year we reviewed 1,269 ethical audits for all Brands.
Although this work is the foundation 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.
Following on from last year’s rollout of our new ethical audit database, Valid8, we have taken the opportunity to further enhance the system this year.
Valid8 is a smarter and more transparent system to 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. The system is used to set up factories, upload, store and archive audit information, manage corrective actions and validate the supply base.
We have also chosen to work more closely with a smaller group of audit partners, which will improve efficiencies. Having identified that the top four audit partners were already carrying out over 80% of our audits, we have taken the decision to work only with these trusted organisations, thus reducing replicated tasks and achieving the most robust data.
While Bangladesh has quite rightly been the focus of efforts to improve worker safety in recent times, this year we have scrutinised a number of other sourcing locations.
Arcadia remains committed to its 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.
As one of several retailers who have signed the Accord, we agree to establish a fire and building safety programme in Bangladesh for a period of five years. This programme will:
- scope categories that will define the level of response from suppliers, such as inspection, remediation and training;
- establish a framework for Governance, including an Advisory Board and Steering Committee and dispute resolution systems;
- appoint 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;
- define approaches to remediation, including the protection of workers’ employment relationships during any factory closures while renovations are carried out;
- enable an extensive fire and building safety programme; and
- oversee regular publicly available updates on key aspects of the programme.
Meanwhile, our team visits Bangladesh regularly as part of our standard ethical trading programme. We remain mindful of the need to carefully prioritise, monitor and respond to issues in all sourcing countries.
For many years Myanmar (formerly Burma) was on our list of banned countries for sourcing. Recent developments in that country have given us the confidence to begin sourcing trials there. We are investigating local initiatives that will further support the introduction of this country into our supply base and are working closely with a new programme run by the Business Innovation Facility (BIF), a private sector development programme funded by Department for International Development (DFID). BIF works in the garment market in Myanmar to improve worker welfare. As part of this programme, factories are receiving training using the Benefits for Business and Workers (BBW) methodology.
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 visits this year as local sourcing continues to be important to drive repeat orders on fast-moving products.
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 have visited factories in: Bangladesh, Cambodia, China, India, Italy, Mauritius, Myanmar, Portugal, Romania, Spain, Turkey, UAE, UK and Vietnam.
Arcadia is one of a group of leading retailers that has supported the Benefits for Business and Workers (BBW) project, part of the Responsible and Accountable Garment Sector (RAGS) Challenge fund established by DFID.
The project focuses on improving the management systems of garment manufacturers and for responsible and ethical production to become the norm in the garment manufacturing sector supplying the UK.
Led by industry consultants Impactt, the aim is to improve the business practices of garment manufacturers as well as the day-to-day lives of their workers.
Working with factories in Bangladesh, India and Myanmar, the project aims to demonstrate the business benefits of providing better jobs through:
- establishing a more stable and satisfied workforce;
- enhancing workers’ pay;
- avoiding excessive hours worked; and
- improving productivity and quality in the longer term.
We are able to share the tools and learnings from this project with factories and we are continuing to work with suppliers on an ad-hoc basis to build on the good progress already made by this project.
The Joint Turkey Project (JTP) is TOPSHOP and TOPMAN’s programme to move beyond the traditional auditing model while achieving compliance with retailers’ codes of compliance. Its mission is to empower factory owners, managers and workers to create a fair working environment while reducing audit fatigue.
The JTP established a collaborative project in partnership with other high street retailers. Together we share the common goals of establishing mature systems of industrial relations and building the factories’ productivity to support a wage ladder.
The JTP is defined as follows:
‘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.'
Our latest work in this area has been to build on the assessment and implementation phases and to develop systems to ensure workers are rewarded when productivity improves. Last year the factories involved signed an agreement to see profit from improved productivity shared equally between increased worker wages and the factory.
This year we have been working on an incentive system to help bring this agreement to life. We have completed the initial analysis required and in March a trial to share profits began. We are continuing to analyse progress and this first stage is expected to be complete at the end of this reporting year. One of the biggest challenges is to work out a sustainable formula for the factory to drive on-going incentives.
Once we have the formula finalised, the next step is to build on it to establish a wage ladder, one of the key goals of the project.
Meanwhile, work on management systems has been advanced and the factories now have an employee handbook, which was launched to workers at a special ceremony during the year. The workers themselves have been involved in its development and it is used in worker representative meetings as a guide to set expectations on both sides.
We are in touch with a third party consultant to complete a full impact assessment of the JTP with the result expected around spring 2016. Meanwhile, the JTP itself continues to roll on and many of the learnings will inform our involvement in a new living wage project in partnership with ACT (see section 5).
a. Living wage
b. Freedom of association
c. Purchasing practices
d. Vulnerable workers
a) LIVING WAGE
We have joined 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 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
We have had the RTO document translated into Vietnamese and Arabic this year, 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) 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 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.
d) VULNERABLE WORKERS
Our work in this area comprises:
(i) home workers;
(ii) migrant workers; and
(iii) 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.
A significant part of our homeworking takes place in India’s Uttar Pradesh region, in places such as Bareily, Sikandrabad and Shajahanpur. Earlier in the year, our team visited some of our home working units to further understand the intricacies, bandwidth, skill and nature of the home worker supply chain, along with the many veins of distribution.
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 supplier’s responsibilities. The toolkit and guidelines we have developed for this purpose will continue to evolve as the project progresses and we will continually map the supply chain.
(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 may be in a vulnerable situation, and can be exploited by unscrupulous agents, for example.
We continue to 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.
This year in-depth assessments took place at two of our key suppliers in Mauritius. The suppliers were selected due to the high percentage of migrant workers they employ. Some improvements were identified and immediate corrective action plans were put in place.
The assessments confirmed that our Migrant Worker guidelines are still relevant and essential guidance for suppliers employing migrant workers in their supplier chains.
The recruitment practices of agents continue to remain challenging. Often suppliers have little influence over the agents due to the number of workers recruited versus other industries and larger employers. We are investigating a number of options with one of our key suppliers to ensure the recruitment workers adhere to our Code of Conduct and Migrant Worker Guidelines.
We also intend to review the Guidelines to ensure they are suitable for use in the UK and start to work with our suppliers and factories here.
iii) Contract Workers
Work in this area has halted this year as we have focused on production mapping within our other projects.
Our Code of Conduct Guidebook extends practical guidance to suppliers and factories on how to improve labour standards based on our Code of Conduct.
This year it has been updated with new audit requirements - changes to grading and timescales and accepted audit partners. It also outlines changes to factory set-up procedures and the use of our online audit monitoring system, Valid8.
Key suppliers producing in the UK and China have been issued with a copy in either English and/or Chinese. We have further extended the language options this year to include Turkish and Romanian alongside the updated Hindi Guidebook.
These five languages cover close to 600 factories in our top sourcing countries.
Work to update our Code of Conduct Guidebook in line with new guidance from the Ethical Trading Initiative (ETI) is now complete, bringing our document in line with other industry peers.
Our Code of Conduct Guidebook can be found at: www.arcadiagroup.co.uk/fashionfootprint/code-ofconduct- and-guidebook
This year we have diverged the Human Resources (HR) Management Systems element from our Code of Conduct Guidebook and created a new standalone document.
The standalone HR Management Systems Guidebook is now being trialled in Turkey and the UK, to explore the most effective ways for rolling out the tools with varying factory size and location. This should provide us with the context for further development.
- The link between worker engagement and a successful business;
- How to achieve these benefits;
- The role of the HR department; and
- Examples and templates of practical tools and how to implement them.
Management systems are often in place for production but can be inadequate for areas such as employment and worker welfare. A simple example is a proper contract for employees. The new Guidebook includes examples of practical tools such as training slides and trainer notes, policy statements and template contracts and handbooks, so that factories can use these as a guide to creating their own versions.
Underpinning all areas are the following fundamental drivers of worker engagement, which all organisations should develop:
- Leadership that clearly transmits vision and values – this means being transparent and including workers in leadership’s goals;
- ‘Engaging managers’, i.e. managers who facilitate and empower rather than control and restrict their staff, showing appreciation, respect and commitment to developing and rewarding capabilities;
- Workers’ voices: an effective way for workers to voice their views and concerns; and
- Behaviour throughout the organisation that is consistent with stated values leading to trust and integrity.
There are a number of activities that Arcadia prohibits. This list includes policies to protect animal welfare, the sandblasting technique, use of Uzbek cotton and mulesing of sheep. All these bans remain in place and our new ethical audit database (Valid8) will improve our verification process to ensure that suppliers 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.