ethical sourcing

Sourcing

Ethical sourcing

We strive to source products in a responsible manner while working with suppliers to improve their social and environmental practices.

Photo courtesy of Impactt

We directly source products for resale from a range of locations outside Australia, with the largest volume sourced from China, Bangladesh, Hong Kong, New Zealand, India, Thailand and Vietnam.   Buying products from these countries creates economic benefits for them as well as allowing our businesses to provide affordable products to consumers. 

As some of these countries have a lower level of regulation, our businesses need to be aware of risks such as unreasonable labour practices, child labour, forced labour and lack of freedom of association.

We have an ethical sourcing policy, which sets the minimum standards expected of our divisions. Each retail division has its own ethical sourcing policy appropriate to its business, most of which exceed the minimum expectations set. 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 Committee.

Increasing supply chain transparency

Our divisions are leading the way for Australian retailers in relation to supply chain transparency. This year, Kmart, Target and Coles continued rolling out disclosure of their factories’ names and addresses.

The apparel industries are recognised as carrying a higher risk of child labour and forced labour and threats to freedom of association and collective bargaining. With a high volume of apparel sold by both our discount department store divisions, ethical sourcing practices are material issue for Kmart and Target.

Kmart has now disclosed all factories that directly produce Kmart products in apparel categories, and commenced publication of general merchandise categories. These factories are in Bangladesh, Cambodia, China, Egypt, India, Indonesia, Malaysia, Pakistan, Taiwan and Vietnam. A list of these factories is available on Kmart’s website and will be updated annually.

As at 30 June 2015, Target has published details of all factories that directly produce Target products in Bangladesh, Cambodia, Vietnam, India and Sri Lanka on its website Target intends to publish details of its remaining factories, including those located in OECD countries, by April 2016.

Coles published the names and addresses of its apparel factories in Cambodia and Vietnam in September 2014 on its website.  Coles has a plan to publish the details of all General Merchandise and Apparel factories by the end of calendar year 2015.

Increased transparency in relation to our supplier factory locations helps to ensure accountability and that decent conditions and workers’ rights are being upheld.

Proactively addressing ethical sourcing issues

Our businesses are aware of the risks of human rights violations in their supply chains and address these risks both through their ethical sourcing audit programs and through positive actions to address these issues proactively.

Our businesses are aware of the risk of child labour in China, India, Pakistan, Peru, Thailand, India, Vietnam, Pakistan and Bangladesh, in industries involving agriculture and apparel. Forced labour is a risk in primary production and factories with migrant workers across a range of countries and can even occur in Australia. Freedom of association is an issue in many Asian countries from which we source.

Our businesses proactively address these issues through a range of actions, including by providing supplier and factory education through seminars, training and workshops.

In relation to freedom of association, Target has undertaken preliminary research to better understand worker participation, committees, trade union participation and mechanisms for collective bargaining with its Bangladesh factories. Coles is a buyer partner with Better Factories Cambodia which supports open dialogue between management and workers and advocates for policy and implementation through the Cambodian government, as well as having an open dialogue with social NGOs in Cambodia on this issue.

 

 

Both Kmart and Target have teams located in Asia, which means that team members are able to visit supplier factories regularly. All retail divisions visit suppliers and these visits supplement our more formal audit processes and ensure more open communication channels.

In March, Kmart held its first Irresistible Supplier Conference for more than 50 of Kmart’s key international suppliers, providing an opportunity to work with suppliers to further strengthen ethical sourcing and quality systems.

 

 

 

Australian suppliers

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 May 2015, the ABC’s Four Corners program aired an episode reporting unfair labour conditions in Australia’s fresh produce and meat industries related to the use of labour hire contractors and workers on temporary visas. Coles does not condone the abuse of workers’ rights.

Coles has responded by writing to all our fresh produce and meat suppliers reminding them of their obligations under Australian workplace laws, and has commenced enquiries into a number of suppliers identified on the Four Corners program.

Coles is working collaboratively with the National Farmers Federation and PMA Australia-New Zealand Ltd to develop an industry-accepted best practice guideline for the management of contracted labour within the Australian fresh food supply chain.

Ethical sourcing audit programs

To mitigate the risk of unethical practices occurring in our supply chains, we apply an ethical sourcing audit program to higher risk suppliers.   Suppliers are considered lower risk if they operate in more regulated countries, or if they are supplying recognised brands.

This year, our audit program covered 3,888 factories used to manufacture house-brand products for resale, in a number of countries with lower regulation than Australia, including China, Bangladesh, Thailand, India and Cambodia.

Factories in the audit program must 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 incidents of bribery or forced labour.

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. 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.

 

3,888 factories audited

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This year, there were 2,139 approved factories in our audit program.   A further 1,500 factories were conditionally approved and 210 were due to be re-audited. During the year, we identified 39 critical breaches across the factories in our audit program. These mainly concerned issues (or allegations) of bribery, unauthorised subcontracting and forced labour. Twenty-one of these issues were immediately resolved and no further orders were placed at the factories where the remaining 18 breaches occurred.

During the year Bunnings continued to work closely with suppliers to strengthen sourcing practices.  A further 152 eligible suppliers became members of the Supplier Ethical Data Exchange (SEDEX) program, taking participation in the program to more than 74 per cent.

Ethical sourcing training

It is important that we keep our buying and sourcing teams up-to-date on our ethical sourcing commitments and how their actions may impact worker rights. This year, we delivered approximately 4,600 hours of ethical sourcing training to 2,000 people in our retail businesses and supply chains to refresh their knowledge on this subject. In addition, work has commenced on an ethical sourcing video to be used for wider audiences across the Group, which will be finalised in the coming year.

Timber procurement

Bunnings is confident that more than 99 per cent of Australian and New Zealand timber products are confirmed as originating from low risk sources including plantation, verified legal, or certified responsibly sourced forests. Within that, more than 82 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 (FSC) and the Programme for the Endorsement of Forest Certification (PEFC).

Bunnings' ongoing focus on responsible timber procurement included independent assessments of their timber imports due diligence processes by the Federal Department of Agriculture, Fisheries and Forestry (DAFF) and the World Wide Fund for Nature Australia (WWF). Bunnings also continued a high level of engagement with respect to illegal logging and deforestation risk and worked collaboratively with DAFF and environmental groups such as Greenpeace and WWF to inform their policy and maintain an industry-leading position.

 

Living wage

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.

Our retail businesses do not own any factories directly or employ apparel workers. Generally, factories that supply to our businesses supply to many other customers too, which limits the impact we can have on how that factory interacts with its employees. Our ethical sourcing audit programs aim to ensure that workers are being paid in accordance with local laws, appropriate records are kept and employment terms are clearly communicated to workers.

This year, our businesses have also participated in trials of different approaches to improving the real wages earned by workers.

 

Coles trialled the provision of meals to apparel workers in Cambodia, which is one way of ensuring that any additional benefits flow directly to workers. Target has participated in the Benefits for Business and Workers Program in Bangladesh, which aims to create more efficient factories, with better job satisfaction and higher wages for workers, as well as benefits for factory owners.

During the reporting period, Kmart launched a research project to better understand the challenges and opportunities associated with living wage and identify the implications of different options for Kmart.

Our businesses will continue to work to find appropriate ways to promote living wages in the factories that supply our products.

GRI 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-LA15