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Building a better world through ethical sourcing
Feature: 3/7/2006

Enlarge Image click hereAlthough some people may ignore it, it's a bitter truth that much of the modern clothing industry is built on the brutalisation and exploitation of workers.

Approximately 27 million people in the developing world are employed in free trade zones - also known as export processing zones - that provide cheap exports by suspending minimum wage, neglecting safety and forcing employees to work 18-hour shifts.

In these zones, seven-day weeks are the norm; trade unions have been made illegal, wages can be as low as $2 for 12 hours of work and female employees must sometimes endure forced abortions to make sure that they keep working.

This is a particularly appalling example, of course, but it is unique only in the degree to which these atrocities are committed - there are still millions of factories across the world that continue to employ people in unsuitable conditions, for low wages, with nonexistent health and safety policies.

There are few companies that would say that this is acceptable, yet many of them continue to source from such areas, either because of ignorance of their own supply chain or a lack of knowledge about how to effect change.

But for every problem there is a solution - and for every company looking for help with ethical sourcing there is the Ethical Trading Initiative.

Developing the Initiative
ETI was started in 1998 by a coalition of companies, trade unions and non-governmental organisations (NGOs) with the backing of Claire Enlarge Image click hereShort, then-UK Secretary of State for International Development.

Recognising the need to develop a consensus on what companies should be doing to tackle poor working conditions in their supply chains, the founding members hoped that working together would help provide answers to some of the challenges that ethical trade poses.

Eight years later it is still going strong, as Julia Hawkins, media relations manager at ETI, explained: "We currently have 37 corporate members and membership is continuing to increase over time.

"For example, we had Primark join us early on this year, and last year we had Inditex join. We have some very large companies on board, but we accept smaller companies, too.

"We're primarily set up for retailer and supplier companies that have a market presence in the UK, including companies that are based abroad. But there's no reason why we wouldn't accept anyone from abroad that doesn't supply to the UK." (To contact ETI, call Carol Sheldon on +44 (0) 207 404 1463 or e-mail carol@eti.org.uk)

Deciding ethical values
The backbone of ETI is its base code, a set of nine principles to which every member must adhere, developed by ETI’s founding Enlarge Image click heremembers and based on the UN's International Labour Organisation conventions.

These values - which include a ban on child labour and the right to start trade unions - provide a structure for assessing suppliers. But Julia is quick to point out that any supplier companies that are found to be noncompliant may not have to change overnight.

She said: "Suppliers should be given time to bring themselves up to the base code standard, because doing so may involve financial outlays and fears of being competitively disadvantaged.

"Most of our member companies will work with their first-tier suppliers first and try to get them up to speed and then they'll go to the next tier.

"One thing we do ask, however, is that they provide an annual report that shows that there has been improvements – for example, in increased awareness of the base code within their own company and evidence of better working conditions among their suppliers.

"We want companies to use their audits as diagnostic exercises, not for tests for suppliers to pass and fail."

Constructing ethical networks
But for anyone looking to improve working conditions in their supply chains, a list of rules and regulations might not seem like enough. After all, rules are useless unless you know how to implement them.

Thankfully, ETI can help here as well. The organisation’s greatest strength is that it is not just a collection of guidelines, but also a gathering of minds from every corner of the ethical world.

These minds include trade unions like The International Textile, Garment and Leather Workers' Federation and NGOs such as Oxfam and the Fairtrade Foundation, but by far the largest group is that of businesses, including corporate clothing companies.

DCC Corporate ClothingOne such company is DCC Corporate Clothing. A member of the Johnson Service Group, DCC - formerly Dewhirst Corporate Clothing - has a wide portfolio that includes corporatewear, healthcare clothing, workwear and PPE.

They joined ETI in 2005, but according to Gordon Gimby, operations director for DCC, the company’s interest in ethical sourcing goes back much further than that.

He said: ”Ethical sourcing has been an important part of the business ever since it began. We’ve always tried to make sure that our staff are well cared for, no matter where they are.”  To contact DCC, call customer services on +44 (0) 870 55 55 333 or e-mail: sales@dccdirect.co.uk

But although the company felt strongly about the subject, they still needed help to structure their offshore sourcing properly - and that’s where ETI’s network of experts proved vital.

Gordon explained: "ETI has been an extremely valuable vehicle for us. We're not a very big organisation, although we’re part of the Johnson Service Group, and so it was very useful to meet with other companies that could throw a different light on issues that are coming up in the world.

"The regular meetings and groups that we attend mean that we know all the other companies very well, which helps create a useful network of contacts."

These contacts allow the company to ensure that its sourcing practices remain as up-to-date as possible - and since ethical sourcing is now top of the company’s agenda, that’s extremely important indeed.

Some retailers have made the move into ethical sourcing as well. One of these is Marks & Spencer; a company that prides itself on having tried hard to ensure that its workers are treated fairly and that supplier relationships are kept healthy.

However, the company recognised flaws in its supply chain when a 1996 BBC documentary, World in Action, revealed that one of its suppliers in Morocco was employing children in dangerous working conditions, including extremely high temperatures.

Although Marks & Spencer had no knowledge of the supplier's actions, they realised that something needed to be done to correct the problem and stop it from happening again.
Enlarge Image click here

Julia Dobson, ethical and quality systems manager of Marks & Spencer, said: “Until the mid-1990s, we had sourced most of our garments from within the UK. However, in order to remain competitive and deliver value for customers, we had to move much of our sourcing overseas.

"We thought that we could outsource to other countries while keeping our supply chain structure relatively the same, and that the foreign suppliers would run their business in the same way our suppliers in the UK had done.
“However, that wasn’t always the case and we became increasingly aware of the working conditions in some of the factories and wanted to know more.”

Since then, Marks & Spencer has undergone a series of changes overseen by chief executive Stuart Rose, including the introduction of a transparent supply chain and the new, ethically-focused “Look behind the Label” advertising campaign.

But this task would have been much harder without help from the ETI, as Julia Dobson explained: "Trying to do things on your own can be very challenging so having the opportunity to work with other companies, trade unions and NGOs is extremely helpful.

"It really helps you to understand the issues that you're dealing with and you can usually work together to find the best way of dealing with them."

How to implement ethical sourcing
So once you have the ETI base code, what do you need to do next? According to Julia at Marks & Spencer, preparation is everything.
Enlarge Image click here
She said: "I think one of the key things when putting any programme in place is understanding and mapping your supply chain to know where and how your products are being made.

"We were in an advantageous position when we started because we had a long term history with many of our suppliers, so we found it quite easy to look at the chain and know which factories we were working with and who we were buying from. But not everybody has that."

Of course, once the suppliers have been identified and it has been made clear to them that they must comply with the ETI base code - or whatever guideline your company is using - you will have to start monitoring them."

Gordon of DCC explained: "We have factories in China, Indonesia, Thailand, Romania and many other places besides. We measure them annually through external, third party auditors and that's a key part of the process.

"However, we also back them up with our own staff, who are trained to audit factories themselves. Anybody visiting the foreign production side for whatever reason - whether it's to fix machinery or help out the management - will conduct their own review of the factory, as and when they are required.

"We've been doing this for so long that it's just part of the process. One of the things that I like is that our employees recognise how important this is, both ethically and in terms of company stability.

"Many of them also think that it’s important that they work for an organisation that has ethical values. It gives a feeling of well being in the team back home."

Resolving manufacturing problems
Of course external auditors aren't free, but as Julia from Marks & Spencer pointed out, that doesn't always mean that the distributor or retailer will have to pay for the auditing itself.

"Factories generally pay for their own audits," she said. "We have found that companies tend to take ownership of something more if they've made some sort of financial commitment to it.

Enlarge Image click here"Also, it helps when the supplier has the opportunity to speak to the auditing company itself and really understand what those requirements are, rather than having us ask them to make changes."

However, even if Marks & Spencer doesn't pay for a particular supplier's audits, taking on a new supplier still means investing time, effort and money. That's why any new suppliers to the company are pre-audited.

Julia said: "If we want to introduce a new supplier, they have to go through a risk evaluation process based on where they are in the world and what the laws are like in that country.

"We audit against our own code of conduct, which requires companies to work within the legal framework of whichever country they're operating in, as well as the ETI base code.

"We expect people to stick to local labour laws as a starting point and over time we would require them to achieve international standards."

But it's inevitable that some suppliers will refuse to comply with the new guidelines, or will at least put up some kind of a struggle. The instinctive reaction of many people in this instance would be to drop them, but Gordon does not agree.

He said: "You need to tackle serious problems immediately, but you can't expect suppliers to reach the required standard straightaway.

"If we identify an issue, we would look for the best way to resolve it. We don't just walk away from problems at the first instance, because doing that changes nothing - you're just leaving a lot of vulnerable people in a bad situation.

"However, if an organisation simply refused to develop, no matter how much we attempted to help it, it obviously wouldn't be a good operation for us to be working with and we would reluctantly have to pull back from it."

Financial advantages
The demands on companies using ethical sourcing, then, can be large, both in terms of money and time. However, ethical sourcing does Enlarge Image click herehave its advantages, as Julia Hawkins of the ETI pointed out.

"The last six months or so, there's been huge growth in the public's interest in ethically sourced goods," she said. "In fact, there is some evidence that they're now starting to shop based on their knowledge about brands' sourcing strategies. More and more people are turning buying ethical goods into a lifestyle choice."

The statistics are impressive. The Co-Operative Bank's 2005 Ethical Consumerism Report shows that ethical consumption in the UK has grown for the sixth year running, with a 15 percent total value increase on 2004 - that's a total value of £25.8 billion.

The report also reveals that of that figure, £680 million was spent on ethical fashion and the market share for ethical products has increased by 22 percent over the last six years.

Furthermore, 2004 saw boycotts of clothing and footwear increase by 8.4 percent to £296 million, with sweatshop labour concerns proving to be the primary reasons for the boycotts.

But it's not just the end users that are paying attention. Julia added: "There's a growing interest in ethical trade within the investment community. If you're perceived to be looking ahead and managing risks in your supply chain, you're seen as a good investment by mainstream investors."

"Our customers believe in us and trust us," said Julia Dobson of Marks & Spencer, "and I think what our Look behind the Label campaign has done is reinforce that trust and that belief. I also think that our investors want to see that we are being responsible."

Productivity advantages
But the advantages aren't just reserved to good PR; there are practical production rewards too. Gordon of DCC said: "If you have a clean, safe factory that treats its workers well, they will have improved morale, which means less absenteeism, more productivity and better quality products.

"We brand ourselves on being an organisation with the highest standards of quality, so it's extremely important that we get that right. Also, if you suddenly need more output from a factory because of an unexpected order, happy workers are more likely to be flexible and help you out."
Enlarge Image click here
Julia of ETI added: "Companies implementing a comprehensive ethical trade strategy will find that they know more about their suppliers and be in regular, structured communication with them, which should improve trust between both parties."

Investing in the future
Ultimately, then, the benefits of applying ethical sourcing standards to your business have the potential to more than pay back the time and money invested in them.

But for all the advantages that they bring, the real point of ethical sourcing isn't about improved public image, increased efficiency or more money - it's about doing something to improve the lives of the men and women that help your business prosper.

After all, if they do not have the ability to improve their own situation, who else will do it for them?

It might be a long, long time before ethical sourcing becomes standard practice, but as long as ETI and companies like DCC and Marks & Spencer continue to lead the way, that outcome seems inevitable.

 

Author: James Wilkinson
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