APPAREL

Themes Key Findings

2016 Apparel & Footwear

The companies' average overall score across the benchmark methodology's seven themes, which were selected to capture the key areas where companies need to take action to eradicate forced labor from their supply chains: commitment and governance; traceability and risk assessment; purchasing practices; recruitment; worker voice; monitoring; and remedy. There are a total of 22 indicators across the seven themes. For each theme a company can score a total of 100 points.

46

Overall Score 2016 Apparel & Footwear
52 Theme Score

Summary of Results


Notably, 17 out of the 20 companies assess risks of forced labor at potential suppliers prior to entering into contracts with them. For example, adidas has a strict initial assessment process of potential suppliers which includes forced labor and migrant labor concerns. The company estimates that 50% of potential suppliers pass this initial assessment process. Ralph Lauren assesses conditions and policies including passport retention, wage deductions, living conditions, freedom of movement, and recruitment fees at potential suppliers. Notably, Nike's initial assessment of potential suppliers is undertaken using a Manufacturing Index which scores factories on their sustainability performance, including labor practices, equal to other considerations, such as cost, quality, and on-time delivery.
Half of the companies address risks associated with subcontracting. For example, one company aims to address undeclared subcontracting through pre-sourcing assessments of factories' corporate responsibility and production capacities. Six companies require approval of subcontractors, usually accompanied with an undeclared subcontracting policy. Notably, Under Armour's approval process of subcontractors includes the Dhaka Principles for Migration with Dignity. For Hanesbrands, subcontracting is a zero tolerance issue, which the company clearly communicates to its suppliers and, in case of a breach, will lead to termination of contract.
Fourteen companies either demonstrate awareness that purchasing practices such as short-term contracts and/or sudden changes of workload can increase the risk of forced labor or have some good purchasing practices in place (such as longer term contracts). Only five companies demonstrate they understand this link and take steps accordingly to minimize forced labor risks related to purchasing practices.
Nine companies report putting in place longer term contracts, ranging from multi-year contracts to partnerships over decades. For four of the companies, this goes in hand with consolidating their supplier base. Three companies report on training purchasing teams on their impacts and responsibilities with suppliers. Other good practices include regular discussions of production plans with suppliers, longer lead times, or smoothing out production between peak and low seasons.
Twelve companies state that they integrate supply chain standards into supplier contracts, but only two provide evidence of doing so by disclosing the contracts or the contractual language used. Four other companies do not have enforceable contracts with suppliers in place, but require suppliers to adhere to their standards or sign a commitment.
Nine companies require their first-tier suppliers to ensure that their own suppliers implement standards that are in line with the company's supply chain standards. Five companies encourage their suppliers to do so.
Notably, adidas specifies that it encourages suppliers to share the company's standards with their own suppliers, including catering and security firms, and is among a number of companies which extend their monitoring processes to sub-contractors (see monitoring).
Fast Retailing and Inditex disclose their codes also apply to home workers. Inditex specifies its code applies to "all suppliers and factories that make up the company's supply chain, irrespective of which tier they are or what process they do." The company requires suppliers to communicate and enforce its code with subcontractors and report to the company the locations and working conditions of subcontracted homeworkers.

Purchasing Practices

The company demonstrates awareness of the increased risk of human trafficking and forced labor caused by certain purchasing practices such as short-term contracts, excessive downward pressure on pricing, and sudden changes of workload, and takes steps to mitigate this risk.

The company: (1) demonstrates awareness that certain types of purchasing practices can increase the risk of human trafficking and forced labor (e.g. such as short-term contracts, excessive downward pressure on pricing, and sudden changes of workload). (2) is taking steps to mitigate the risk of human trafficking and forced labor caused by certain purchasing practices (e.g. such as short-term contracts, excessive downward pressure on pricing, and sudden changes of workload).

Low: 0
High: 100
44

Supplier Selection

The company assesses risks of forced labor at potential suppliers prior to entering into any contracts with them, and has a procurement selection process that considers the capacity of suppliers to meet fluctuating demands.

The company: (1) assesses risks of forced labor at potential suppliers prior to entering into any contracts with them. (2) has a procurement selection process that considers the capacity of suppliers to meet fluctuating demands (to reduce risk of undeclared subcontracting).

Low: 0
High: 100
69

Integration into Supplier Contracts

The company integrates supply chain standards addressing forced labor and human trafficking into supplier contracts.

The company: (1) The company integrates supply chain standards addressing forced labor and human trafficking into supplier contracts.

Low: 0
High: 100
35

Cascading Standards through the Supply Chain

The company extends its supply chain standards beyond its first tier by requiring that its first-tier suppliers ensure that their own suppliers implement standards that are in line with the company's standards.

The company: (1) requires its first-tier suppliers to ensure that their own suppliers implement standards that are in line with the company's supply chain standards addressing forced labor and human trafficking.

Low: 0
High: 100
59

Supplier Selection: Leading Practice

Gap

Gap requires potential new suppliers to undergo an assessment against the company's supplier code of conduct. After the initial assessment, the facility either earns approval or is placed in pending status while it addresses outstanding issues. Gap further evaluates potential suppliers' technical capability and capacity in order to understand whether a facility has the necessary equipment and number of lines to produce the quantity of the product ordered without subcontracting. Approved suppliers are required to obtain written authorization from Gap to use subcontractors and are required to monitor and verify performance of their handwork subcontractors. If Gap discovers a situation of unauthorized subcontracting, it requires the supplier to immediately stop production and to register for management systems training.

Recommended Action

Purchasing Practice

Take steps to mitigate the risk of human trafficking and forced labor caused by certain purchasing practices (such as excessive downward pressure on pricing and sudden changes of workload) and address risks related to subcontracting. Incentivize suppliers to implement good labor practices and reward suppliers which have good practices in place.