Sustainable Supply Raising standards and building capacity

Our supply chain encompasses more than 1 million people, employed through 722 global suppliers, who run more than 1,600 production units,across four entirely different sourcing regions and many different cultures. Even though these numbers appear to be very large, our part of the supply chain represents only a very small part of the entire apparel and textile industry. 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 close partnership with our suppliers and stakeholders.

 

C&A’s priority is to invest in long-term relationships with strategic suppliers who live our values, this is why we develop long term relationships with our supply chain. In this light, we have maintained our relationships with over 71% of our suppliers for more than 5 years.Working with those suppliers who understand our social and environmental requirements, and who are committed to meeting them strengthens our supply chain and helps us meet our sustainability goals. Optimising our number of factories and suppliers supports our commitments towards safe and fair labour practices and a clean environment throughout our supply chain. Over the last two years, we have reduced our supply base by 39% and we continue limiting our number of suppliers, as appropriate and possible.

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 like-minded industry partners. 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 for the benefit of healthy communities in our sourcing countries and for the planet more broadly.

Safe and fair labour

Clean environment

Our ambition

A sustainable supply chain from farmer to customer

For us, sustainability means moving towards a circular model where clothing is designed with its next use in mind ­– clothing that is also made with fewer, safer chemicals, renewable energy, and clean water, and in safe and dignified working conditions. To normalise sustainable behaviour among suppliers, 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 and focusing on how to incorporate sustainability considerations from the start. This means revolutionising how we design products with their next use in mind. It means carefully selecting materials and chemicals that are safer from the beginning and working with our suppliers’ factories to ensure that working conditions are safe and fair. And it means expanding the ‘end of use’ solutions we offer our customers.

Our 2020 goals for sustainable supply

Safe and fair
labour

100% of our products will be from top-performing, A-and B-rated suppliers.

We will build capacity and supplier ownership within our supply chain.

Clean
environment

Zero Discharge of Hazardous Chemicals.

20% reduction of carbon footprint in C&A stores, distribution centres, and offices (from 2012 baseline).

30% reduction of water in raw materials stage (from 2016 baseline).*

10% reduction of water in C&A stores, distribution centres, and offices (from 2012 baseline).*

Zero waste to landfill.*

*2025 goal

Auditing and transparency

Making transparency the norm

The apparel industry supply chain is notoriously complex; ours includes over 700 suppliers and 1,600 tier-1 and tier-2 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 the change we want to see in the industry. We continually increase the scope of our supply chain transparency and publish a list of our tier-1 and tier-2 supplier factories at least once a year. 

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 in relation to wages or 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 monitoring 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. Already used by many major brands, including C&A, the index is growing in its scale and effectiveness. In 2018, C&A piloted the Higg 3.0 Facility Environment Module (FEM), which serves as a full environmental assessment tool for the entire apparel supply chain. We have adopted it for use in our supply chain as of 2019. We are also part of the social and labour convergence project (SLCP) that aims to develop an assessment tool for human and labour rights. In fact, C&A has been elected by SLCP members to represent the brands in their Steering Committee.

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

 

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 consistent approach towards transparency in their supply chains. The pledge helps 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. We committed to the Pledge in February 2017, and have since aligned fully with the requirements and provided this information in a consistent manner.

Read more about 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 (SSC) team, which comprises nearly 90 people worldwide, including 36 auditors and 25 development officers. We update the standards expected within the Supplier Code of Conduct as appropriate, such as we did in 2017, when we made our standards on fire safety, environment, and working hours more stringent. When there are breaches of our Supplier Code of Conduct, we invite suppliers, C&A employees, and workers in our supplier’ factories to let us know through our Fairness Channels, where breaches can be escalated to management anonymously. All our suppliers are required to sign our Code of Conduct as part of our contractual relationship and purchasing agreements.

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 make up 20% of our overall supplier ‘scorecard’ rating and have the same weight as price, quality, delivery, and product execution. Each production unit is rated from A to E, with A being the highest rating, 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 evaluated against weightings that correspond to each element of our Supplier Code of Conduct. As an example, the discovery of a serious issue like insufficient firefighting equipment or repeatedly missing fire drills 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.

Relationship termination

In cases where suppliers and the factories are non-compliant with our Code of Conduct, we seek to work with the supplier, factory management, and our internal teams to improve. Unless the non-compliances are serious and of a zero-tolerance nature, we maintain our business relationship to avoid unintended consequences to workers.

If a supplier maintains a non-compliant factory (E-rated) for longer than 6 months, the relationship with the supplier and associated factories is suspended. Because every situation is unique, potential exit strategies must be tailored to each situation. In all cases, we ensure that the workers are not adversely affected by a potential termination of our business relationship – at a minimum, by following the local laws.

Our 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 International Labour Organization (ILO) standard (16 years of age) that can be above national regulations (14 years of age). In 2018, we worked with a new set of zero-tolerance issues to keep improving working conditions in our supply chain. 

Zero-tolerance issues and their rationale

Issue category

Description of issue

General Zero-Tolerance Violations

Forced, bonded, indentured or prison labour

Forced work – by actual or perceived threat

Serious forms of child labour

A worker under 16 years old who is subject to slavery, forced or compulsory labour, prostitution, pornography, drug trafficking, or other work likely to harm the worker’s health, safety, or morals 

Child labour/underage workers

Workers who are below 16 years old

Abuse

Any evidence of physical, sexual, verbal or mental abuse

Failure to pay minimum wages 

If more than 50% of sampled workers do not receive the legal minimum wage

Failure to pay probationary wages

If more than 50% of sampled workers do not receive the legal probationary wage

Foreign or migrant workers without legal work permits

Workers do not have the right to work or have a valid work permit

Unauthorised working at home

Production placed in an unauthorised home production unit 

Denied audit

Not granting unrestricted access to workers, records, all areas of the production unit and dormitories, without unreasonable delay for a second time

Bribery and corruption

Any case of giving or receiving an unearned reward to influence behaviours in C&A’s value chain, including kickbacks and facilitation payments. Any unlawful or improper behaviour that seeks to gain an advantage through illegitimate means.

Working Hours

Paid overtime

Any case where more than 50% of sampled workers are not paid for their overtime hours and the gap between the amount they get and legally required is more than 50%

Workplace Health & Safety

Sandblasting

The 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 met

Minimum 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 or application for the permit allowing legal use and occupancy is not available, is 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 plan leading to a high risk for workers, and the application for building inspection is not available

For example, items such as incorrect or addition of floors, incorrect number of buildings included in the legal approval, and the roof of the building not constructed or used in accordance with the legally approved building plan

Business licence not valid

The production unit address does not match the address on the business licence 

Fire safety

No fire licence 

Fire licence is not available, is not legally valid, or does not cover the whole building, and /or the company is not able to provide an official application of the fire licence

Separate living area for workers

Dormitory or living area is not clearly separated from the production area and/or warehouse

Separation of generators and/or boilers

Industrial generators and/or boilers are not isolated from the production area

Environment

Wastewater Treatment Plant

Offsite or onsite wastewater treatment is legally required, but is not present

Wastewater discharge

Wastewater discharge does not meet legal requirements

Our Supplier Code of Conduct describes 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, never the maximum standards. These are different to the zero-tolerance issues outlined above. For instance, the Supplier Code of Conduct outlines our expectations for working hours, which means our suppliers must 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, plus 12 hours maximum of 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

Our 2018 performance

The majority of our production (94%) is concentrated in ten sourcing countries.

Garment sourcing countries by % share of volume of product made

Volume of products (%)
Production countries

2016 was the first year we reported our global supplier ratings by production unit and by percentage of workers. Throughout 2015, Brazil and Mexico began implementing the global Sustainable Supply Chain (SSC) programme guidelines and audit process. As a result, 2016 was the first year the new Supplier Code of Conduct was in effect in all sourcing regions, allowing us to provide global figures.

It is important to note that Brazil and Mexico have sizeable domestic supply chains, with 84% of products sold in Brazil and 45% of the products in Mexico 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 Supplier Code of Conduct requirements.

Proportion of products sourced from A- and B-rated suppliers (% volume/region)

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

Share of rated units (%)
Production countries

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

 

Share of rated units (%)
Production countries

In 2018, 46% of the workers in our supply chain were working in A and B-rated factories. This is a reduction of nine percentage points compared to 2017, when 55% of workers were in top-rated factories. The change is largely due to an increase in the percentage of workers in C-rated factories. For C&A Brazil suppliers, this is primarily a result of the significant decrease in production unites with D/E ratings as they improved their ratings to C. For C&A Europe, it is due to the high percentage (24%) of new production units brought into our supply chain by the growth of the business. Many of these new suppliers performed at a C rating.

As of the close of 2018, 12% of the total still work in D- and E-rated factories. To continually improve ratings over time, all D- and E-rated factories have corrective action plans (CAPs), are monitored by local teams, and have order placements restricted until their performances improve significantly.

In Brazil and Mexico, 22% and 15% of supply chain employees work in D- and E-rated factories, respectively, in 2018. These regions adopted the full Supplier Code of Conduct for the first time in 2016, meaning that we now have a single global standard for suppliers in all regions. In 2018, the teams working with the domestic supply chains of Brazil and Mexico focused on building capacity and technical know-how in all production units to progress towards our goal. In Brazil, we focused mainly on making sure suppliers and their workers secured and maintained the required governmental documentation to permit working in that country. This was done with the support of our development officer team as part of an effort recognised by the ECO AMCHAM Award. In addition, it is worth noting that three of the D and E-rated facilities in Brazil are large, representing about 17% of workers in the supply chain. These factories have clear action plans for development in 2019 and no critical issues.

Validating our programme

Our Sustainable Supply Chain (SSC) team is made up of expert practitioners and located in different sourcing hubs – including Bangladesh, Brazil, Cambodia, China, Hong Kong, India, Myanmar, Mexico, Pakistan, and Turkey.

The global sustainability team leads and owns the global policy and strategy for SSC and facilitates the sharing of learnings across all our sourcing countries and retail markets. This allows the SSC team to focus on executing the SSC programme on the ground, 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 ongoing human rights due diligence in our supply chain, using the UN Guiding Principles for Business and Human Rights to verify whether the current SSC programme is fit for purpose against the requirements outlined in the C&A Supplier Code of Conduct.

Through the process, extensive testing and analysis was conducted to assess our progress in implementing the SSC strategy, examining how it was rolled out through all our sourcing countries in Asia, Europe, Europe, Middle East and Africa (EMEA), and Latin America. We took a phased approach, beginning in 2016 with C&A Europe and following with C&A Brazil and Mexico in 2017.

This analysis covers the company’s supplier portfolio, audit programme, capacity building programme, and approach to minimising human rights risks. As part of this ongoing due diligence process, shadow and validation audits are conducted in different sourcing countries to assess the accuracy, precision, and repeatability of our audit processes. In addition, desk assessments and interviews are conducted with the Sourcing, Buying, and Sustainability teams.

Sustainable Supply Chain focus areas

The due diligence was designed to test our SSC operations against ten strategic focus areas:

  1. Programme governance
  2. Implementation of our Supplier Code of Conduct
  3. Supplier registration and onboarding process
  4. Implementation and follow-up of the audit program
  5. Supplier rating and performance management
  6. Corrective action plan (CAP) implementation and remediation
  7. Building capacity in our supply chain
  8. System integration, processes, and accuracy
  9. Organisational structure and resources
  10. Programme impact and reporting

 

The assessment showed that the SSC programmes have different levels of maturity. Europe and Brazil are the most advanced and their programmes are working effectively within their mandate. The programme in Mexico also made good improvements during 2018 and is now positioned to become even stronger.

The third-party auditor concluded that, to effectively address the human rights risks in our supply chain, C&A should continue moving towards a more strategic and systematic approach. We have taken note of the individual recommendations and have built an integrated, transparent approach through an online real-time project management platform. Regional action plans are being independently verified through third-party assessment for SSC Europe, and second-party assessment for SSC Brazil and Mexico.

Europe

After almost three years since the third-party assessment took place, the majority of the recommendations have been implemented through the regional action plan. SSC Europe is currently updating its strategy, in which it will address the remaining opportunities for improvement.

Brazil

The 2018 assessment carried out by members of the Global Team found that our SSC programme in Brazil is fit for purpose. It has improved substantially since 2017, showing a strong governance model, and the majority of the recommendations have been successfully implemented. Additionally, the programme contains several elements in line with international good practice, setting a benchmark in the country.

The Brazil Regional Sustainability Steering Committee has clear goals and objectives and meets every 6 to 8 weeks. The committee sets targets and conducts follow-up to track progress. Its IT platform and system allow effective management of processes and procedures. Key functions and responsibilities also have been set up, and there is a good level of interaction between the SSC team, Sourcing, and the broader Sustainability team. Awareness of the Supplier Code of Conduct is high and there is a clear and effective on-boarding process for suppliers and production units.

A solid audit and corrective action plan (CAP) process is also in place. Shadow audits of four production units generated the same ratings as the SSC auditors. CAPs were being generated as required, and all issues identified in the CAPs were discussed with the suppliers and their factories. The 2017 assessment also found that some requirements of the Supplier Code of Conduct still had to be adapted locally, particularly building and fire safety. This important piece was addressed during 2018 and a new model that accounts for the Brazilian production units’ specifications is ready to be implemented in 2019.

Mexico

The second-party assessment carried out in 2018 has certified that the SSC programme in Mexico has made good progress compared to the ‘not fit for purpose’ finding of the 2017 third-party assessment. The SSC team is now in place and fully operational, processes and procedures have been developed and rolled out, and the programme is running at an acceptable level. Some of the important milestones during 2018 included:

  • Conducting alignment and capability building workshops to ensure audit consistency and evaluation
  • Improving relationships with commercial areas, sourcing, and buying
  • Generating positive supplier feedback, as the work is starting to show positive impacts
  • Updating the supplier agreements
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