AUDITORS REPORT ON CORPORATE SOCIAL RESPONSIBILITY (TURKEY-BASED FACTORIES) ALEN Tekstil (MANGO S SUPPLIER: ATK)

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1 AUDITORS REPORT ON CORPORATE SOCIAL RESPONSIBILITY (TURKEY-BASED FACTORIES) ALEN Tekstil (MANGO S SUPPLIER: ATK)

2 TABLE OF CONTENTS 1. INTRODUCTION SUBJECT-MATTER SCOPE AUDITING APPROACH AUDITING CRITERIA DOCUMENTARY REVIEW PERSONAL INTERVIEWS WITH EMPLOYEES INTERVIEWS WITH REPRESENTATIVES OF THE COMPANY INSPECTION OF THE FACTORY AUDITING TEAM GENERAL DATA ON AUDITED FACTORY RESULT OF COMPLIANCE WITH THE CODE OF CONDUCT CHILD LABOUR FORCED LABOUR HEALTH & SAFETY AT WORK RIGHT TO ORGANISE AND COLLECTIVE BARGAINING DISCRIMINATION DISCIPLINARY ACTION, HARASSMENT AND ABUSE WORKING TIME REMUNERATION ENVIRONMENTAL ASPECTS COMPLIANCE WITH LEGISLATION APPENDICES May 2010 Page 2 of 20

3 1. INTRODUCTION In modern society corporate social responsibility has become an increasingly relevant part of companies operations. The concept of a sustainable organisation that creates economic, environmental and social value both in the short and long term thereby contributing to the progress and well-being of present and future generations requires companies to adopt a proactive approach. As part of their commitment to social values, companies should develop initiatives to achieve their social responsibility objectives and ensure that they are fulfilled adequately. In order to ensure that these objectives are met across the entire organisation, companies need to draw up ethical codes, or codes of conduct that provide an optimal tool for attaining these objectives. Companies should also ensure that the suppliers that have adhered to the code of conduct comply with its requirements, as well as drawing up improvement plans to ensure that the principles set out in the relevant code of conduct are implemented effectively. AUREN AUDITORS BARCELONA, S.A. has staff specialising in the implementation, assessment and control of Corporate Social Responsibility. PUNTO FA, S.L. (MANGO) asked us to conduct an audit of its suppliers (textile factories) in Turkey, to ensure that they comply with the company s Code of Conduct (RC/COD/RC/01). This document contains the auditors report drawn up by our firm according to principles of independence and objectivity, and has been prepared to the best of our knowledge. 2. SUBJECT-MATTER A series of controls were carried out to ensure that the textile factories to which production is subcontracted comply with the requirements of the Code of Conduct (RC/COD/RC/01) drawn up by Mango. 3. SCOPE This report is concerned with the operations carried out on behalf of MANGO in the Turkey-based textile factories. The audit conducted as part of this report was performed on 14 June It deals with the application of the principles set out in the MANGO Code of Conduct in relation to the company s activities. May 2010 Page 3 of 20

4 4. AUDITING APPROACH The audit was conducted on site by one auditor. The following section outlines the criteria that were taken into account in conducting the audit, as well as the different stages of the audit AUDITING CRITERIA The auditing criteria used are those laid down by the following documents and organisations: The Mango Code of Conduct (RC/COD/RC/01) The 2003 Labour Act of Turkey No TRADE UNIONS ACT. Law No The Turkish Regulations for Labour Health and Job safety (7/7583), Employment Criteria and Guidelines of the ILO (see appendices) Auditing Requirements specified by AUREN AUDITORS BARCELONA, S.A DOCUMENTARY REVIEW I have reviewed a number of documents relating to the company s commercial and payroll management. I went to the offices of the department responsible for the company s payroll and commercial management and requested to see the documents that I thought could be of interest to us. Among the documents reviewed were employment contracts and staff records, a sample of 3 pay slips chosen randomly, the records kept by the company with regard to the employees performance, and other documents relating to the company s ordinary business activities PERSONAL INTERVIEWS WITH EMPLOYEES The company provided us with a room isolated from other employees and their representatives. I interviewed 3 employees and asked them questions about the company s activities in the areas of interest relating to the requirements of the MANGO Code of Conduct. Out of the 3 people interviewed, 2 were selected randomly from the line and the other one was selected randomly from the worker s list 4.4. INTERVIEWS WITH REPRESENTATIVES OF THE COMPANY I met with the company s representatives at the company s head office and asked them a series of questions concerning the company s compliance with the principles set out in the MANGO Code of Conduct (area of interest). A lot of the questions were identical to those put to employees, so that I could compare the answers. May 2010 Page 4 of 20

5 4.5. INSPECTION OF THE FACTORY I inspected the premises (plant and offices) using graphic reproduction means. Despite being accompanied by a guide, I was able to inspect the factory without interference from company representatives or employees, who complied with all the inspection requirements I had established for them. All common areas, lavatories, production rooms, administrative rooms, entrances and exits were inspected thoroughly. I took photographs and videos, without interruptions, to analyse in detail the aspects most relevant to the audit. May 2010 Page 5 of 20

6 5. AUDITING TEAM The audit was performed by Josep Julià Villà (AUREN Expert Auditor) 6. GENERAL DATA ON AUDITED FACTORY The most relevant management and organisational features of Alen Tekstil. factory is listed below: Location Length of the relationship with MANGO Merkez MahMithatpasa Cad.Reyhan Sk. Aybakan Is Merkezi No. 1Kat2 Yewnibosna Istanbul ½ year Staff Working times 80, 60% male 8-18,30 xwith two pauses (1/4 h), and 1h break time, Monday to Friday. Shifts 1 Type of production for MANGO Woven Delivery times About 3 weeks OTHERS CSR AUDIT Tommy Hilfiger Has the factory adhered to the MANGO Code of Conduct? Yes Does the factory subcontract production to other companies? No Exclusive production for MANGO No Does MANGO/supplier own the factory? No May 2010 Page 6 of 20

7 7. RESULT OF COMPLIANCE WITH THE CODE OF CONDUCT The results of the audit for each of the requirements included in the Mango Code of Conduct (RC/COD/RC/01) are detailed below: 7.1 CHILD LABOUR AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE Payslips, payroll records including identity documents. Unanimity in employees answers. Confirmation by the company s representatives. During the visit I did not identify anyone under the minimum employment age. During the review of payslips, contracts and employment records I did not find any evidence suggesting that any of the workers is under the age of 15. Employees professional records include a copy of their ID and, in some cases, of their birth certificate. In all cases the company uses the official model contract of employment approved by the Turkish Labour Ministry. In this respect, the answers of employees matched those of the company. The on-site inspection of the factory did not reveal any incident that could result in a breach of the Code of Conduct. STRENGTHS According to the audit performed, none of the company s workers is under the age of 15, which is the statutory limit under Turkish law. In fact, according to my review of payslips and employment records, which include a copy of the employees identity cards, none of the workers is aged under 16. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 7 of 20

8 7.2. FORCED LABOUR AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE No documents were reviewed. Unanimity in employees answers. Confirmation by the company s representatives. I did not detect any behaviour in breach of the law. In reviewing the documents I did not find any evidence of forced labour, within the definitions of forced labour laid down in Conventions 29 and 105 of the ILO. All the employees said that there was no forced labour in the company. The company confirmed these statements. During on-site review I did not detect any event or behaviour suggesting any case of forced labour. STRENGTHS According to the audit performed, none of the company s workers is subjected to forced labour. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 8 of 20

9 7.3. HEALTH & SAFETY AT WORK AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE There are no written documents relating to health and safety policies or procedures. Unanimity in employees answers. Confirmation by the company s representatives. The safety and emergency exits and signs are well displayed. Below is a description of the most relevant aspects in this area: - Machines: The machines used in production have stop systems in case of emergency and protecting devices. - Accidents: During the interview both the company and the employees said that serious accidents were rare. The company provides the workers with the protection equipment needed to carry out their functions, such as steel gloves. - Ventilation of the factory: The level of ventilation is good. The factory is provided with adequate ventilation systems. - Ergonomics in the workplace: Employees have good ergonomics in the workplace. - Medical assistance: According to the statements of company representatives, and employees, there is a doctor visiting regularly the factory. There are also emergency kits. May 2010 Page 9 of 20

10 - Chemical and/or flammable products: The factory does not use flammable products in quantity as per being a risk factor - Hygiene in common areas: There are lavatories enough (divided into a men s section and a women s section). Employees have unrestricted access to the bathroom. The lavatories are kept in good hygienic conditions. There are lavatories in each plant of the factory. - Other services: I was also able to establish that the company provides additional services to its employees. These services, which are recognised by the employees themselves, include: Canteen, free food and free transport. - Fire prevention: The factory carries out one emergency drills and first AID training. During the inspection of the factory I was able to ensure that the fire precautions are appropriate to the organisation. Both the fire signs and the equipment are in good conditions and easily accessible but evacuation path should be remarked with reflective substances. Anyway, evacuation plans are poor. May 2010 Page 10 of 20

11 - Fire extinguishers: The number of extinguishers observed during the on-site review is appropriate to the size of the factory, and the maintenance service is right. Sometimes access to fire extinguishers is blocked. The staff evacuation signs in case of emergency are appropriate, both in floor and walls. May 2010 Page 11 of 20

12 STRENGTHS According to the audit performed, there is no breach of legislation. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK Evacuation plan and access to fire extinguishers can be improved. May 2010 Page 12 of 20

13 7.4. RIGHT TO ORGANISE AND COLLECTIVE BARGAINING AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE Labour regulations are available to employees. None of the employees said that the company had prevented them from exercising their rights to organise and bargain collectively at any point. Confirmation by the company s representatives. During the visit I did not detect any non-compliance with current legislation. The applicable employment regulations are displayed on signs. The company s commitment to observing the workers right to organise and bargain collectively provides evidence of its compliance with this aspect of the Code of Conduct. The answers of employees and the company have been the same ones in the sense that, due to cultural questions and of structure of country trade unions are not firmly fixed. Consequently, given that it cannot be concluded from either the employees or the company s answers that the company bans or takes coercive action to prevent employees from exercising their right of freedom of association; I have found no evidence of any breach of this requirement of the MANGO Code STRENGTHS No particular one AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 13 of 20

14 7.5. DISCRIMINATION AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE Payslips, remuneration, personnel files, personnel records, selection processes. Unanimity in employees answers. Confirmation by the company s representatives. Not applicable. During the documentary review conducted in the company, I did not detect any discrimination on grounds of religion, sex, race, status or ideology. All of the employees I interviewed said that they had not been selected on the basis of religion, politics or race, but on the basis of their previous experience in similar positions. They also said that the company ensured equality of treatment to all employees. This was confirmed by the company, which said that the candidate s experience and skills are important criteria when it comes to filling a vacancy. Similarly, promotions are decided on the basis of the employee s experience and skills. STRENGTHS According to the audit performed, there are no discrimination practices in the treatment of employees. There is no discrimination in the hiring, promotion, salaries or training of employees. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 14 of 20

15 7.6. DISCIPLINARY ACTION, HARASSMENT AND ABUSE AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE Personnel records (written warnings). Unanimity in employees answers. Confirmation by the company s representatives. Not applicable. None of the documents reviewed seems to indicate that the company encourages or imposes corporal punishments, mental or physical constraints, or any other kind of abuse. In the event of a breach by an employee, the company uses the prior notice procedure provided for by the 2003 Labour Code, thereby complying with current legislation. According to the employees statements, the above-mentioned legal procedure is frequently used by the company. The employees were all of the opinion that the company treats them respectfully. The company stated that it complies with Turkish legislation with regard to the application of disciplinary action. STRENGTHS AREA OF IMPROVEMENT According to the audit performed, there is no Physical abuse, or other harassment. NONE NON- COMPLIANCE REMARK May 2010 Page 15 of 20

16 7.7. WORKING TIME AUDITING CRITERIA Documentary review Interviews with employees Interviews with company On-site audit AUDITING EVIDENCE Working time records Unanimity in the employees answers regarding working hours. Confirmation of compliance by the company s representatives. Working time records. Notice boards. Clock-out and breaks. The company working time covers five days per week in one shift, from 8:00 to 18:30 with 1 hour for lunch and two tea breaks of 15 minutes each. It s usual to work some overtime on Saturdays. I was able to check these times through the records and notice boards located on the premises. Time controls have been revised, and no evidence has been found that overtime supported by Turkish legislation has been exceeded. All the information regarding the workers contracts and overtime records was filed in the factory premises, so I was able to check them. During the stay in the company I was able to ensure that the company fulfills the requirements in terms of resting time and clock-in and clock-out times. STRENGTHS According to the audit performed, none of the company s employees has been forced to work extra hours in excess of the limit prescribed by Turkish law. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 16 of 20

17 7.8. REMUNERATION AUDITING CRITERIA AUDITING EVIDENCE Documentary review Interviews with employees Unanimity in the employees answers. Interviews with company On-site audit Confirmation of compliance by the company s representatives Not applicable. At the time of conducting the audit, the professional salary in Turkey was determined according to the minimum categories set out in the minimum wage regulations laid down by the Turkish Labour Ministry. The region in which the audited company is located falls into a category of 629, 96 YTL per month. The wages reviewed during the audit were consistently higher than the minimum monthly wage. Wages and related benefits are accepted by the employees by Bank Transfer that provides proof of payment of the employees pay. This shows that the company complies with Turkish law. Overtime hours are correctly paid. All employees are registered in the Social Insurance system of the Turkish Government. Apart from the purely financial aspects, I was also able to establish that the company provides additional services to its employees. These services, which are recognised by the employees themselves, include: food, canteen and transport, all of them paid for by the company. I was able to ensure on site that the company currently provides the additional services described above. STRENGTHS According to the audit performed, no worker is paid less than required for Turkish legislation. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 17 of 20

18 7.9. ENVIRONMENTAL ASPECTS AUDITING CRITERIA Documentary review AUDITING EVIDENCE None. Interviews with employees None. Interviews with company On-site audit Confirmation of compliance by the company s representatives. I have not detected any non-compliance. There is no dangerous waste production. Waste is separated, and picked up for recicling. There is no boiler. STRENGTHS According to the audit performed, the company complies with Turkish environmental legislation. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK May 2010 Page 18 of 20

19 7.10. COMPLIANCE WITH LEGISLATION AUDITING CRITERIA Documentary review AUDITING EVIDENCE Sampling of pay slips and personnel files. Interviews with employees Employees answers. Interviews with company On-site audit Confirmation of compliance by the company s representatives. I did not detect any non-compliance. At the time of the audit the regulatory framework was established by the 2003 Labour Code of Turkey. This code deals with deals with wages, work organisation, work duration, placement, labour inspection and administrative sanctions. As a result of the audit, the legislation discussed in the preceding paragraphs is followed. Anyway, we have some minor remarks: STRENGTHS According to the audit performed, there is no breach of legislation. AREA OF IMPROVEMENT NONE NON- COMPLIANCE REMARK Evacuation plan and access to fire extinguishers can be improved. May 2010 Page 19 of 20

20 8. APPENDICES LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS LIST OF THE ILO CONVENTIONS ASSESSED BY THE AUDITORS C2 Unemployment Convention, 1919 C14 Weekly Rest (Industry) Convention, 1921 C26 Minimum Wage-Fixing Machinery Convention, 1928 C29 Forced Labour Convention, 1930 Workmen's Compensation (Occupational Diseases) Convention C42 (Revised), 1934 C59 Minimum Age (Industry) Convention (Revised), 1937 C98 Right to Organise and Collective Bargaining Convention, 1949 C100 Equal Remuneration Convention, 1951 C105 Abolition of Forced Labour Convention, 1957 C111 Discrimination (Employment and Occupation) Convention, 1958 C118 Equality of Treatment (Social Security Convention), 1962 C138 Minimum Age Convention, 1973 C155 Occupational Safety and Health Convention, 1981 C158 Termination of Employment Convention, 1982 Vocational Rehabilitation and Employment (Disabled Persons) C159 Convention, 1983 C182 Worst Forms of Child Labour Convention, 1999 May 2010 Page 20 of 20

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