Sustainable Supply Raising standards and building capacity

C&A’s priority is to invest in long-term relationships with strategic suppliers who live our values, which is why we develop long-term relationships with our supply chain. In this light, we have maintained our relationships with many 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 also supports our commitments towards safe and fair labour practices and a clean environment throughout our supply chain.

We have taken concrete measures to support our suppliers, in which we place great importance. We have established a close and strong relationship with them over many years. Our objective was to not abandon any of our suppliers during this global crisis.

During the spring of 2020, while its 1,400 stores in Europe were closed at the height of the health crisis, C&A had suspended its orders as a precautionary measure. Few months later, we gladly were able to ensure all the payment for all pre-Covid orders which were being shipped, already produced, or in the process of production, at their original price and according to the agreed payment terms. Additionally, suppliers which had not yet started production of products, were compensated either financially or by, “placing new orders using the raw materials already purchased. It important to underline as well that a number of C&A’s manufacturers have also been able to benefit from C&A’s financing scheme run in partnership with our banks.

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.

The majority of our production is concentrated in ten sourcing countries.

Garment sourcing countries by % share of volume of product

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.

Making transparency the norm

The apparel industry supply chain is notoriously complex. 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 (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 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 100 people worldwide. 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.

Since 2019, we decided that we are only going to carry out unannounced social and environmental audits throughout our supply chain. In the past some of our audits where still semi-announced but last year we changed the protocol to ensure that all of our audits are performed unannounced.

The scope of our social and environmental audits does not stop at the first tier. Since 2015 we have progressively incorporated in our audit portfolio all laundries, dying houses, and a very significant number of textile mills that support our first tier suppliers to produce our garments.

As part of our social and environmental methodology back in 2015 we incorporated the possibility to carry out offsite interviews during our audits. In some occasions, offsite interviews are a very useful tool to better understand the dynamics that might occur within a factory.  Our upmost interest is to preserve worker information anonymous and in some cases we prefer to meet them in public spaces outside of the factory premises.  

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. 

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

Taking a new approach

Over the past 5 years we have rated our suppliers against our Code of Conduct, while driving towards our aspirational goal of sourcing 100% of our product volume from A/B- rated suppliers. Throughout this journey, our programme has matured and we have continually modified our approach to drive the best outcomes. As we have examined our aspirational goal, we have realised that the most important outcome of our work is in supporting our suppliers to shift towards new mindsets. In this light, we have accepted that our 100% goal will not drive this outcome and changed our approach in the following areas:

1. Re-evaluating our ratings: In several cases, we have re-evaluted and changed our ratings, leading to a generally lower score, but one that represents our performance accurately and drives the right behaviours, both internally and externally.
2. Optimising our auditing approach: We have reaffirmed our commitment to the Social and Labour Convergence Project (SLCP) and have committed to one audit across the industry. We aim to follow this approach to eliminate audit fatigue, increase the opportunity for greater comparability of social and labour data, and deploy resources for capacity building together with our suppliers.
3. Improving purchasing practices: In 2019, we evaluated our purchasing practices and found ways to optimise them to avoid unintended consequences. In 2020, we will build capacity among our own staff and deploy new ways of working with our suppliers.

In 2019, 52% of our products were sourced from A/B-rated suppliers. We are developing new goals for Safe and Fair Labour throughout 2020 and in 2021, will launch a new set of KPIs that reflect desired outcomes.

We acknowledge and accept that we will not achieve our aspirational goal of 100% volume sourced from A/B-rated suppliers, and believe that this new approach will ultimately lead to better supplier relationships and improved wellbeing for workers.

Percentage of products sourced from top-rated suppliers in our retail markets

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. 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.