Sustainable Supply Raising standards and building capacity

Our supply chain encompasses more than 1 million people, employed through 788 global suppliers, who run more than 2,400 production units, across four entirely different sourcing regions and many different cultures. On one hand, this represents a real opportunity to help normalise sustainable behaviour amongst diverse populations. On the other, it requires vigilance and dedication to better practices. We must identify issues and build capacity for change, working in partnership with our suppliers and stakeholders.

newborn collection

 

We start with our supplier relationships because we understand that we can, collectively, create positive impact. We always look for ways to collaborate and improve standards further, driving sector-wide change on important issues, together with other industry partners that think alike. We focus on two main areas: ensuring that the people who make our clothes are safe and treated fairly, and that we foster and support a clean environment to support healthy communities in our sourcing countries.

Safe and fair labour

Clean environment

Our ambition

A sustainable supply chain from farmer to customer

Sustainability means moving towards a circular model where clothing is designed with it's next life in mind ­– clothing that is also made with fewer, safer chemicals, renewable energy, clean water, and safe and dignified working conditions.

To normalise sustainable behaviour, we believe in building capacity across our supply chain - from the farmer’s field to the factory floor. We see compliance as the starting point but not the ultimate goal: we must collaborate with our suppliers and their factories to create change. We’re also making steps towards our goal of circular fashion ­– where we create endless flows of materials and clothing in a fair and restorative manner. We are focusing on how to design sustainability considerations in from the start – rethinking how we design products with their next life in mind. This means carefully selecting materials and chemicals that are safer from the beginning and by working with our suppliers’ factories to ensure that working conditions are safe and fair. We’re also seeking to expand the ‘end of use’ solutions we offer our customers. 

newborn collection

 

Our 2020 goals

100%

of our products will be from from top-performing, A-and B-rated suppliers


We will build capacity within our supply chain going beyond auditing to engage our suppliers and their workers

Zero

Zero discharge of hazardous chemicals

20%

carbon footprint reduction across stores, distribution centres and offices (from a 2012 baseline)

In Europe

30% reduction of water use in the production of our raw materials

10% reduction of water use in our stores, distribution centres and head offices

Zero waste to landfill in our retail operations

Auditing and transparency

Making transparency the norm

The apparel industry’s supply chain is notoriously complex; ours spans around 2,400 tier-1 production units. This creates challenges, but also a huge scope for impact and creating change. By re-evaluating our own standards and influencing the development of shared ones, we’re taking the industry with us, embedding good practice as we go.

Being transparent is one part of the solution. We need to create traceability and accountability across the apparel industry’s supply chains. That way, we can collaborate with stakeholders including other brands, to understand shared challenges, offer the right kind of support, reward good behaviour and drive change. Last year, we published a list of our tier-1 production units (PUs) for C&A Europe. In 2017, we have considerably extended the scope of our transparency with this report by publishing our tier-1 and tier-2 PUs globally. 

Our overall approach

An important first step to achieving greater transparency in our supply chains is to make sure we are gathering accurate data about our suppliers’ performance – for everything from chemical, energy and water use, to issues such as wages and safety in the workplace – and assessing their ongoing actions and results. The more comprehensive and accurate the information is, the more targeted and effective support we can offer.

Different auditing and assessment tools are currently being used by different businesses and organisations in the apparel industry. However, we believe – as do many of our stakeholders – that we must create convergence and use standardised tools to increase the quality of our data, the efficiency of our actions and therefore, the rate of change.

The Sustainable Apparel Coalition’s (SAC) Higg Index provides that centralised standard of assessment. It is already used by many major brands, including C&A, and is growing in its scale and effectiveness. C&A is currently piloting the Higg 3.0 Facility Environment Module (FEM), which, once operational by the end of 2017, will act as a full environmental assessment tool for the entire apparel supply chain. We are also part of the Social and Labour convergence project within SAC that aims to develop an assessment tool for human and labour rights.

In the meantime, we are using a combination of our own auditing and assessment tools, existing Higg modules, and the ZDHC’s audit protocol. We will continue to use and/or supplement these tools as long as necessary, and to avoid any ‘gaps’ in coverage, driving towards one solution endorsed by all brands in a multi-stakeholder consultation process.

newborn collection

 

Transparency Pledge

In 2016, the NGO Human Rights Watch approached 72 global apparel brands including C&A, to commit to the newly created Transparency Pledge. The pledge is part of an initiative to encourage brands to adopt a more consistent approach towards transparency in their supply chains. The pledge will help the apparel industry reach a common minimum standard for supply chain disclosures, requiring them to publish standardised information on all factories in the manufacturing phase of their supply chains. In February 2017, we committed to the Pledge alongside 10 other brands and aim to be fully aligned with the Pledge ourselves, by the end of 2017. 

Read more here on the Transparency Pledge

Our Supplier Code of Conduct

What we expect of suppliers is clearly laid out and communicated through our Supplier Code of Conduct and checked using regular audits by our Sustainable Supply Chain team, comprised of over 100 auditors worldwide. In 2016, we updated the standards expected within the Supplier Code of Conduct on fire safety and the environment, specifically in the areas of waste and chemical storage and management, making them more stringent.

How we rate suppliers

When it comes to rating our suppliers on sustainability, our first guiding principle is transparency, supported by our commitment to capacity building. This is reflected in our ratings. Sustainability criteria makes up 20% of our overall supplier ‘scorecard’ rating and has the same weight as price, quality, delivery and product execution. Each production unit is rated from A to E based on a set of assessment criteria for the elements of our Supplier Code of Conduct. 

Production units rated A and B are those that have no serious violations as rated against weightings that correspond to each element of our Code of Conduct. As an example, the discovery of a serious issue like insufficient firefighting equipment or repeatedly missing fire drill will result in a D rating, while the discovery of any zero-tolerance issue will result in an E rating. 

A supplier’s overall rating is calculated as the average of the total number of production units used for C&A production. However, if a supplier has one E-rated production unit, the overall supplier rating will become E. It is our policy not to place production orders with E-rated suppliers – although we work closely with them to address these issues and improve their rating over time so they are able receive new orders in the future. New suppliers and production units must be able to demonstrate that they meet our sustainability criteria, and if needed, make improvements before they can start working with us.

New zero-tolerance criteria

To continually improve our auditing process and drive the right behaviour, we update our audit protocols every year to raise the bar on our standards over time. For example, C&A's code for underage workers is set at the ILO standard (16 years of age) that can be above national regulations (14 years of age). In 2017, we will work with a new set of zero-tolerance issues, including common infractions like workers working excessive hours in any given work week, or working too many days without a day off. 

The box below shows the complete list of our zero-tolerance issues and their rationale: 

CategoryDescription
Forced, bonded, indentured or prison labourForced work – by actual or perceived threat
Serious forms of child labourA worker under 16 years old who is subject to slavery, forced or compulsory labour, prostitution, pornography, drug trafficking or other work which is likely to harm the worker’s health, safety or morals 
Child labour/underage workersWorkers who are below 16 years old  
AbuseAny evidence of physical, sexual, verbal or mental abuse
Failure to pay minimum wages If less than 50% of sampled workers do not receive the legal minimum wage
Failure to pay probationary wagesIf >50% of sampled workers do not receive the legal probationary wage
Foreign or migrant workers without legal work permitsWorkers do not have the right to work or have a valid work permit
Unauthorised homeworkingProduction which is placed in an unauthorised home production unit 
Denied auditNot granting unrestricted access to workers, records, all areas of the production unit and dormitories, without unreasonable delay for a second time
Working hours
Excessive working hoursAny case where workers work over 91 hours/week
Paid overtimeAny case where workers work over 91 hours/week and are not paid for all overtime hours worked in accordance with legal requirements and at a premium rate
One day off per weekAny case where workers work 31 days or more consecutively
Workplace Health & Safety
SandblastingThe use of manufacturing practices that propel very fine bits of material at high velocity to clean or etch a surface. This process often uses sand with crystalline silica that could lead to silicosis
Building safety
Production unit located in a multi-tenant building where four minimum criteria are not metMinimum criteria:
  1. The entire building has a valid fire licence 
  2. The entire building has a valid building certificate
  3. A common fire drill has been conducted for the entire building
  4. A centralised fire alarm system is installed and operational for the entire building
No legal building certificate or permit A building certificate/permit allowing legal use and occupancy is not available, not valid or does not cover the entire building and/or the building does not have approval for industrial use 
Structure and use of the building are not aligned with the legally approved building planFor example, items like incorrect or addition of floors, number of buildings included in the legal approval and the roof of the building is not constructed or used in accordance with the legally approved building plan.
Business licence not validThe production unit address does not match the address on the business licence 
Fire safety
No fire licence Fire licence is not available, not legally valid or does not cover the whole building
Dormitory or living area is not clearly separated from the production area and/or warehouse
Industrial generators and/or boilers are not isolated from the production area

In our Supplier Code of Conduct we describe in more detail what C&A expects from our suppliers regarding legal compliance, labour practices, environmental performance, and anti-corruption. The provisions in the Code constitute the minimum, not the maximum standards. These are different to the zero tolerance issues outlined above. For instance, in the Supplier Code of Conduct when we outline our expectations for working hours, our suppliers should meet the following minimum standards:

  • Suppliers must define standard working hours by contract, at a number that is in line with national law or collective agreements, with a maximum of 48 hours per week including overtime.
  • Suppliers must make use of overtime work responsibly, not request overtime work on a regular basis, and accept that overtime is voluntary, and therefore not coerce workers to work overtime.
  • Working hours must not exceed 60 hours in any seven-day period, except in truly exceptional, unforeseeable circumstances. And only if all the following conditions are met: 1) allowed by national law, 2) allowed by collective agreement, and 3) safeguards are taken to protect workers’ health and safety.
  • Suppliers must allow workers to take breaks, to have a least on day off in every seven-day period, and to take statutory holidays.

Read more about our supplier Code of Conduct

Read more about the guidelines for implementation of our supplier Code of Conduct

How we’re doing

The majority of our production (93%) is concentrated in nine sourcing countries. Our main sourcing countries are as follows:

Garment sourcing countries by % share of volume of product made

This is the first year we have reported our global supplier ratings by production unit and by percentage of workers. Throughout 2016, Brazil and Mexico started to implement the global Sustainable Supply Chain (SSC) programme guidelines and audit process. As a result, this is the first year the new Supplier Code of Conduct has been in effect in all sourcing regions, allowing us to provide global figures. However, implementing our global programme in Brazil and Mexico has raised expectations for domestic suppliers, leading to lower ratings. As a result, our global performance of products sourced from A/B rated suppliers decreased from 90.8% to 77.8%.

It is important to note that Brazil and Mexico have sizeable domestic supply chains. 80% of products sold in Brazil and 30% of the products in Mexico are produced domestically.  Because our new requirements are unique for the supply chain in Brazil and Mexico, we are working closely with each supplier and factory to build their capacity and improve ratings over time to meet our Code of Conduct requirements. 

As a result of using the same standard across all sourcing regions, we are finding that in some cases our requirements are generally higher than industry standards in sourcing countries like Myanmar, Brazil and Mexico. This poses a challenge as capacity building and technical assistance require high levels of resources. But on the other hand it presents an opportunity to continually improve our strategy and include a more risk-based approach in subsequent years.

Percent of products sourced from A/B rated suppliers (% volume/region)

Tier-1 and tier-2 production unit rating of percent volume sourced by country of origin

From this data, we have also assessed the percentage of workers who work in our suppliers' factories according to these ratings. 

Percent of workers in production units by rating and country of origin

 

 

We found that 61% of the workers in our supply chain work in A and B rated factories. However, 7% still work in D and E rated factories. To continually improve ratings over time, all D and E rated factories have corrective action plans, are monitored by local teams, and have order placements restricted until their performances improve.

In Brazil and Mexico, 37% and 45% of the workers respectively, work in D and E rated factories. As mentioned previously, this is mainly due to the implementation of the new Code of Conduct elements which are higher than the current industry standards. In subsequent years, the teams working with the domestic supply chains of Brazil and Mexico will focus on building capacity and technical know-how in all production units to ensure adequate progression toward the goal.

Improvements in supplier standards

Each year, we review our requirements, standards and processes to ensure continual improvement and to raise the bar on industry norms. We do this to ensure that our supply chain is challenged and motivated to achieve higher performance. In 2017 we have made several modifications in our rating schemes to increase our supply chain leadership and to drive improved behaviours. The table below outlines the changes made, showing how ratings have been affected.

Audit questionPrevious
rating (worst
case)
Previous
impact (worst
case)
Current
rating
(worst case)
Current 
impact
(worst case)
Freedom of association
1Are workers allowed to select worker representatives without interference from management?Minor+BMajor+D
2If a collective bargaining agreement exists, does the PU comply with all contractual provisions?Minor+BMajor+D
Child Labour
3Is the PU free from historical child labour in the last 12 months?MinorAMajorC
Wages
4Do all workers receive and are guaranteed to receive at least legal minimum wage?Zero
Tolerance
EZero
Tolerance
E*
5Does the PU pay workers for all overtime hours worked?MajorCMajor+D
6Are workers paid within the timeframe required by law?Major+DMajor+D*
Do the sampled workers work within 60 hours per week?Major+DZero
Tolerance
E
8Do the samped workers take one day off per week?Minor+BMajorC
Chemical Safety
9Does the PU have an up to date chemical inventory list?MajorCMajor+D
Waste water
10Is industrial wastewater adequately treated and regularly tested on-site prior to its discharge?MajorCMajor+D
11Does treated industrial wastewater comply with BSR Water Quality Guidelines?No ratingNo ratingMinor+B

Improving conditions on the ground

Our Sustainable Supply Chain (SSC) team was strengthened in 2014 and has grown rapidly over the past few years. Now located in different sourcing hubs – including China, Bangladesh, India, Turkey, Hong Kong, Cambodia, Brazil and Mexico – the SSC team is made up of experienced practitioners. They are supported by the Global Sustainability Team, who share learnings and drive the implementation of sustainability across all our sourcing countries and retail markets. This allows the SSC team to focus on execution on the ground by supporting production units through their continuous improvement journey.

In 2015, C&A set up a third-party relationship with a professional services provider to carry out human rights due diligence in the supply chain, using the UN Guiding Principles for Business and Human Rights and to verify whether the current C&A Code of Conduct compliance and audit programme is fit for purpose and effective. Through the process, extensive testing and analysis was conducted to assess our progress in implementing the SSC strategy in C&A Europe, examining how it was rolled out throughout our Asian sourcing countries and across our European region. We also conducted a deep-dive on one of our newest sourcing countries, Myanmar. This analysis covered the company’s supplier portfolio, audit programme, capacity building programme and our approach to minimising human rights risks. As part of the due diligence process, 25 shadow and validation audits were conducted in five different sourcing countries to assess the accuracy, precision and repeatability of our audit processes.

Through this we found that the SSC programme is working effectively within its mandate. Our approach to human rights due diligence is evolving from the initial stages of maturity to become more operational and start to be embedded in our business processes. To effectively address the human rights risks in C&A’s supply chain, it was concluded that C&A should continue moving towards a more strategic and systematic approach. We have taken note of the individual recommendations and are in the process of integrating them into our operations. Several of the findings are as follows:

  • The SSC programme is effectively operating within its mandate – The current SSC programme governance is appropriate and operational. It will be strengthened by the implementation of regular, formalised reporting on progress, currently under way.
  • Calibrated application of the SSC audit programme – The SSC teams are consistently applying C&A’s Code of Conduct and internal guidelines. A third party performed a total of 25 shadow and validation audits, in which they recorded the same SSC PU rating in 24 (96%) of the audits, confirming our findings are accurate. External auditing of our own auditing is in place to confirm the credibility of our approach. 
  • Awareness of Code of Conduct – Through interviews, our third party auditor observed a good level of awareness of the C&A Code of Conduct among suppliers, PUs and C&A staff. 
  • Leadership approach – Our external auditor found that C&A’s audit programme contains a number of elements in line with international good practice. The programme is continuously being updated and tailored to the needs of C&A.
  • Need to continually improve systems – There is a need to improve how we manage audit data across our retail markets to improve sourcing and buying decisions.
  • Improving SSC linkages to sourcing strategy and business processes – There is a need to continually improve the connection between the approaches to SSC execution in the local retail markets, with the respective sourcing strategies and decision-making processes.
  • Systematic Human Rights risk assessments – When entering new sourcing countries, it is recommended that we have a systematic approach to human rights due diligence including an improved policy, checklist and integration process.
  • Improvement of grievance process – While we currently utilise the C&A Fairness Channel for grievances in the supply chain, it could be improved and made more systematic and consistent across the retail markets.

 

In 2017, our due diligence process continues by assessing C&A’s Brazil and Mexico domestic supply chains in the same format that was used for C&A Europe. Next year we will be reporting the outcome of this process.

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