We strive to source products in a responsible manner while working with suppliers to improve their social and environmental practices.
Wesfarmers' retail businesses source products for resale from a range of locations. Some of the major locations we source from outside Australia include China, Bangladesh, Europe, Indonesia, India, Thailand, New Zealand, Vietnam, South Korea and Malaysia. Buying products from these regions creates economic benefits for them as well as allowing our businesses to provide affordable products to consumers.
The breadth, depth and interconnectedness of our supply chain make it challenging to manage ethical sourcing risks including child labour, forced labour and freedom of association. We are committed to working with our suppliers to adhere to ethical business conduct and proactively address these issues through a range of actions.
We have a Group-wide Ethical Sourcing Policy, which sets the minimum standards expected of our divisions. Each division has its own ethical sourcing policy appropriate to its business.
Increasing supply chain transparency
The apparel industries are recognised as carrying a higher risk of child labour, forced labour and freedom of association, due to the lower skill level required in the manufacturing process. With a high volume of apparel sold by our Department Store division, ethical sourcing practices are material issues for Wesfarmers.
During the year Target, Kmart and Coles continued to lead the way for Australian retailers in relation to supply chain transparency.
Kmart has published details of the high risk factories that directly produce all Kmart apparel and general merchandise on its website.
Coles has published details of the factories that supply its Mix clothing range on its website. Coles is making preparations to launch SEDEX (Supplier Ethical Data Exchange) to streamline ethical compliance and monitoring, and provide efficiencies to its suppliers. SEDEX will facilitate risk assessment and an information sharing platform for social compliance audits to maintain visibility and drive consistency across Coles' supply chain.
Target has published details of all factories that directly produce Target products in Bangladesh, Cambodia, Vietnam, India, Sri Lanka, Indonesia, Pakistan, China and other countries on its website.
"We have strategies in place in all our businesses to improve our sourcing and ensure where we source our products, it is done ethically and sustainably." Richard Goyder, Managing Director
This year, 96 per cent of Coles' fresh fruit and vegetables were sourced in Australia. Coles has led the way on responsible sourcing in Australia in recent years, including the introduction of RSPCA-approved chicken, sow stall free pork, cage free eggs and Fairtrade coffee, tea and chocolate. In response to issues of unfair and illegal labour conditions on supplier farms and processing sites identified in Coles' Australian supply chain in May 2015 by ABC’s Four Corners program, Coles has continued to communicate in writing to local fresh produce and meat suppliers regarding their legal obligations in regard to immigration and workplace laws. A significant audit and review program was undertaken by Coles during the year to identify and address compliance gaps in its supply chain, and inform communications to these suppliers on areas for improvement.
Coles continues to work closely with its Australian fresh produce and meat suppliers, and cross-industry working groups. This year, Coles established a wages and conditions hotline for farm and factory workers. In Australia, employees who work for a Coles supplier can call the hotline and learn more about their conditions of employment or report unfair labour practices. For workers where English is not their first language, Coles provide alternative options for communicating their concerns or learning more about their rights.
For more information on Coles' relationship with suppliers, see the Suppliers page of this report.
Ethical sourcing audit programs
To mitigate the risk of unethical practices occurring in our supply chains, the relevant Wesfarmers businesses (Coles, Bunnings, Target, Kmart, Officeworks and WIS) apply an ethical sourcing audit program to certain suppliers. Suppliers are considered lower risk if they operate in more regulated countries, or if they are supplying recognised international brands.
This year, our audit program covered 3,211 factories used to manufacture house-brand products for resale, in a number of countries with lower regulation than Australia, including China, Bangladesh, Indonesia, India, Thailand, Vietnam and Malaysia.
Factories in the audit program are required to have a current audit certificate, which means they have been audited by us or another party whose audits we accept. Those audits identify a range of non-compliances, from minor non-compliances such as minor gaps in record keeping to critical breaches, such as incidences of forced labour or bribery. Where a non-compliance is identified, the factory is required to fix the issue, within an appropriate period of time, depending on the nature of the non-compliance.
More than 3,200 factories in the audit program
Factories are ‘conditionally approved’ if non-critical non-compliances have been identified and notice has been given that they must be fixed. If a factory then addresses a non-compliance, it can move to becoming an ‘approved’ factory. If critical breaches are identified, they must be addressed immediately. If they are addressed satisfactorily, a factory can then become approved. In this way, our audit process is contributing to improving conditions for workers by working with factory owners to address any issues. If a factory is not willing or able to address a critical breach, our business will not continue to buy from that factory.
At the end of this reporting period, there were 1,555 approved factories in our audit program. A further 1,373 factories were conditionally approved and 241 were due to be re-audited. During the year, we identified 46 critical breaches across 42 factories in our audit program. These concerned issues (or suspected issues) of attempted bribery, forced labour, unauthorised subcontracting, transparency and child labour. We were able to remedy 18 of these issues immediately, 16 had action plans that were on track at the end of the reporting period and no further supply orders were placed at the remaining 12.
Ethical sourcing training
We deliver training on ethical sourcing requirements to our team members, third party auditors, suppliers and factories to ensure they understand ethical sourcing risks and the standards expected by our divisions. During the year, our divisions delivered more than 2,800 hours of training.
Our divisions continuously review and make enhancements to ensure our ethical sourcing programs run effectively and are up to industry standards and the expectations of our customers and stakeholders. The ethical sourcing teams in the divisions participate in forums and seminars and have regular discussions with other stakeholders including retailers, industry associations, non-government organisations and third-party audit firms to understand emerging trends and risks.
Our cross-divisional ethical sourcing forum meets quarterly to share best practice and audit program outcomes, and ethical sourcing practices are reported regularly to the Audit and Risk Committee.
As the leading timber product retailer in Australia and New Zealand, Bunnings' material ethical sourcing risk relates to the procurement of sustainable timber and wood based products. Bunnings timber and wood products purchasing policy has been part of Bunnings mandatory supplier trading terms since 2003, requiring all timber and wood products to originate from legal and well-managed forest operations.
Bunnings is confident that more than 99 per cent of its timber products are confirmed as originating from low risk sources including plantation, verified legal, or certified responsibly sourced forests. Within that, more than 90 per cent of Bunnings' total timber products are sourced from independently certified forests or sourced with demonstrated progress towards achieving independent certification, such as that provided by the Forest Stewardship Council and the Programme for the Endorsement of Forest Certification (PEFC).
During the year, Bunnings continued high level of engagement with respect to illegal logging and deforestation risk and worked collaboratively with the Federal Government's Department of Agriculture, Fisheries and Forestry. Bunnings continued to engage with environmental groups such as Greenpeace and WWF to inform their policy and maintain an industry-leading position. During the year, Bunnings' Merbau supplier from West Papua achieved FSC certification, the first of its kind in the region. This was well received by global non-government organisations including WWF and FSC international.
Sourcing products from less developed countries contributes to the economic development of those countries, but concerns are sometimes raised as to whether workers, particularly in apparel supply chains, earn enough to meet their basic needs (a ‘living wage’). This is a complex issue and our businesses are working to understand how they can appropriately contribute.
Living wage is defined as the minimum income necessary for a person to meet their basic needs and his/her family, including some discretionary income. This is in contrast to the minimum wage, which is the lowest wage permitted legally within a country or sector.
Kmart and Target have signed 'ACT' (Action, Collaboration, Transformation) a partnership between brands, retailers, manufacturers and IndustriALL (the global union) aimed at achieving living wages in apparel-sourcing countries.
ACT aims to improve wages by establishing industry-wide collective bargaining, supported by world class manufacturing standards and responsible purchasing practices.
All our businesses explicitly require freedom of association for workers in their supply chain, as stated in their supplier code of conduct.
Along with their commitment to the ACT collaboration, our divisions are looking at other initiatives and partnerships to enhance transparency on wages and empower workers in our factories.
Responsible sourcing of palm oil
Feedback from Coles' customers indicate that they care about where their food comes from and how it’s produced, so Coles committed to 100 per cent certified sustainable palm oil in Coles branded products. Coles brand food and drinks now use sustainable palm oil.
Palm oil is a particularly useful product in baked goods, however, unsustainable farming practices have a negative impact on the environment and wildlife in developing countries where palms are grown.
"WWF believes that the rainforest habitats of species like rhino, tigers and orangutan can best be protected through the greater uptake of certified sustainable palm oil (CSPO). This tackles the serious environmental and social problems associated with unsustainable palm oil. WWF encourages companies like Coles, who have made a commitment to 100 per cent CSPO, and looks forward to continuing its support for their progress on this journey." Paul Toni, Conservation Director - Sustainable, WWF
Wesfarmers human rights and modern slavery statement
Wesfarmers has written a statement in pursuant to Section 54, Part 6 of the United Kingdom’s Modern Slavery Act 2015. View the statement here.
Reference: G4-DMA (Supplier assessments for labor practices), G4-DMA (Investment), G4-DMA (Freedom of association and collective bargaining), G4-DMA (Child labor), G4-DMA (Forced or compulsory labor), G4-DMA (Supplier human rights assessments), G4-12, G4-15, G4-21, G4-HR11, G4-HR2, G4-HR4, GR-HR5, G4-HR6, G4-LA15Futures