To mitigate the risk of unethical practices occurring in our supply chains, all our businesses apply a human rights and ethical sourcing audit program to certain suppliers. We take a risk-based approach to managing ethical sourcing issues and concentrate on suppliers supplying own-brand products as well as services, both in Australia and overseas. We recognise the risks of modern slavery occurring anywhere and in any industry and this year expanded our ethical sourcing due diligence program to consider all suppliers of products (both goods for resale and not for resale) and services. At the end of this year, the businesses’ audit programs covered more than 3,700 factories supplying to our businesses. The number of factories audited has reduced from last year as a result of a combination of the demerger of Coles, consolidation of factories used by divisions and the utilisation of pre-existing sites which have already been audited and approved for two years last financial year. The decrease in the number of factories audited signifies some of our businesses preference for longer-term partnerships with fewer and existing factories. Factories in the businesses’ audit programs are required to have undertaken an assessment as mandated by our business. Factories may then be required to undertake further assessments including having a current audit certificate, which means they have been audited by our businesses or another party whose audits we accept. The 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. During the year, we identified 127 critical breaches across 90 factories. The critical breaches identified included allegations relating to excessive overtime, lack of transparency, safety, forced labour, unauthorised subcontracting and 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. We were able to remedy 69 of these issues immediately, 43 had action plans that were on-track at the end of the reporting period, five were exited immediately and no further supply orders were placed at the remaining 10. Our businesses regularly engage with workers in tier-one factories in our supply chain through factory visits (announced and unannounced), through the audit program and our grievance mechanisms. Through these engagements, we seek feedback on how well the policies and procedures outlined in our Modern Slavery Statement work in practice.
To manage business and sustainability issues in our complex supply chain, we map our tier-one suppliers. Where possible, we are also mapping tier-two and tier-three suppliers (suppliers producing components which go into a final product) for high-risk products. For example: Bunnings has identified the following high-risk product areas in which forced labour may be prevalent and in which it is engaging with suppliers and mapping them down to their raw materials: timber, horticulture, stone, conflict minerals and charcoal. Horticulture and stone were key focus areas for Bunnings during the year; Kmart and Target are examining measures that will eventually enable them to achieve traceability and transparency of cotton from spinning mill to factory for own brand clothing, towel and bedding ranges. Target and Kmart are also continuing to publish the details of all tier-one factories that directly produce their own brand products; Blackwoods and Workwear Group have identified raw materials as key high-risk areas to focus on in the coming financial year. Blackwoods is focused on minerals from conflict regions and Workwear Group is focusing on the sourcing of sustainable cotton; and Officeworks requires all factories that produce Officeworks own brand products as well as any local suppliers that are unable to provide sufficient evidence to demonstrate they have a robust ethical sourcing program in place, to disclose the site of manufacturing for their products, complete the Sedex self-assessment, and provide an independent audit when requested.
We aim to build long-term direct supplier relationships which helps us to work over time with our suppliers to safeguard human rights. This may have a number of additional benefits. For example, a long-term relationship may provide increased certainty for their businesses, may lead to increased efficiencies and productivity, and may result in the delivery of enhanced services and products. For example: Bunnings merchandising team and buying agents are responsible for building long-term relationships (some formed more than 30 years ago) with suppliers, with a common vision towards a responsible and sustainably sourced supply chain; Kmart and Target have joined the ILO/IFC Better Work Program as a buyer partner. The Better Work program aims to make sustainable improvements in working conditions within the garment industry and make the sector more competitive overall. Kmart and Target’s ethical sourcing team work in partnership with the Better Work program on long-term improvement plans for factories; Industrial and Safety is committed to building long-lasting supplier relationships that include a continuous improvement methodology. This is sustained by an established off-shore office in China (44 per cent of Industrial and Safety own-brand spend in FY19 was in China) and partnered sourcing offices in Bangladesh and India further supporting the Industrial and Safety sourcing model by facilitating supplier interaction in local language wherever possible; and Many of Officeworks supplier relationships date back to the founding of the business twenty-five years ago, and have evolved into strategic partnerships that have regular business review meetings covering topics including ethical sourcing performance.
Collaboration with industry-wide initiatives, government and non-government organisations is an important part of managing modern slavery risks and our businesses have programs in place. For example: Bunnings is a founding member of the European DIY Retailer Association (EDRA) DIY Platform and played an active role this year in developing the mutual recognition program and collaborating in investigating and resolving modern slavery risks identified with common suppliers. This platform links DIY Hardware retailers together to share ideas on leading practice in ethical and sustainable sourcing; Bunnings worked with Elevate and the Responsible Business Alliance during the year on a worker voice program in Malaysia sponsored by the Walmart Foundation. The program educates workers on their rights, engages factory managers to empower workers and focuses on responsible recruitment to mitigate forced/bonded labour which is prevalent within the region; Kmart and Target have continued their participation in the ACT living wage collaboration, a ground-breaking agreement between global brands and retailers and trade unions to transform the garment, textile and footwear industry by achieving living wages for workers through collective bargaining at industry level linked to purchasing practices; Kmart, Target and Workwear Group, along with other brands and global unions, have signed an extension of the Accord on Fire and Building Safety in Bangladesh to 2021; Bunnings, Officeworks and Wesfarmers Industrial and Safety businesses gain access to several Australian and world-leading businesses as part of their Sedex membership. Bunnings joined the Sedex audit quality working group to strengthen audit firms, SMETA reporting and analytics to identify collaborative opportunities with a focus beyond compliance. By attending member events, the businesses are able to connect and share insights into ethical sourcing with other brands, retailers and suppliers; Wesfarmers, Kmart, Target and Bunnings are involved within the Global Compact Network Australia’s Modern Slavery community of practice sessions, providing feedback and guidance on the recent modern slavery legislation and guidance documentation; Bunnings, Officeworks and Wesfarmers Industrial and Safety businesses support the Association of Professional Social Compliance Auditors (APSCA). Its mission is to govern and improve the standards and techniques used within the social auditing space. Governing this area enables auditors to reliably identify and remediate risks; and Workwear Group is a certified member of Ethical Clothing Australia (ECA), an accreditation body that works collaboratively with local textile, clothing and footwear companies manufacturing in Australia. The ECA voluntary accreditation program offers practical and affordable assistance to these businesses, and ensures that their Australian supply chains are fully transparent and legally compliant.
Our buying and sourcing teams are kept up-to-date on our ethical sourcing and human rights commitments and how their actions may impact workers’ rights through training, collaboration, information sharing and capacity building. For example, the findings from our audit program and stakeholder engagements are fed into the team’s training to ensure that they improve their understanding of ethical sourcing and human rights. The Group also trains relevant team members on how to incorporate respect for human rights into all business decisions, making team members aware of the impact their actions can have on human rights. For example, we train relevant team members about the implications of making short notice purchasing decisions. We deliver training on ethical sourcing requirements to relevant team members, third party auditors, suppliers and factories so that they understand ethical sourcing risks and the standards expected by our divisions. During the year we delivered more than 3,000 hours of ethical sourcing training to our team members. Cross-functional teams in our businesses regularly collaborate through regular human rights forums to share lessons learned and continue to improve their knowledge. GRI Standards reference: GRI 412-2