GFSI, INC. ASSESSMENT FOR ACCREDITATION

Transcription

1 Improving Workers Lives Worldwide GFSI, INC. ASSESSMENT FOR ACCREDITATION October 2010

2 TABLE OF CONTENTS Introduction...1 GFSI s Labor Compliance Program...1 Analysis of GFSI s Labor Compliance Program Using the FLA Obligations of Companies and Evaluation Working Group Benchmarks... 5 Conclusion

3 INTRODUCTION FLA-accredited Participating Companies have demonstrated that they have the systems and procedures in place to successfully uphold fair labor standards throughout their supply chains. The complexity and ever-evolving nature of global supply chains make it impossible to guarantee that a product is made in conditions free of labor rights violations. For this reason, FLA does not certify brands. Instead, FLA evaluates companies at the headquarter level in addition to standard factory-level due diligence activities that are conducted annually to determine whether they have social compliance systems in place to proactively identify and address risks or instances of noncompliance. Accreditation is the highest level of recognition for FLA-affiliated companies, and is reevaluated every three years. The FLA Board of Directors voted to approve the accreditation of GFSI s compliance program on October 26, 2010, based on proven adherence to FLA s Workplace Code of Conduct and the Obligation of Companies. Details on FLA s accreditation methodology can be found at GFSI S LABOR COMPLIANCE PROGRAM GFSI is a privately owned company that owns the brand Gear for Sports and also produces for other well known brands. Headquartered in Lenexa, Kansas, GFSI produces headwear and custom decorated apparel for normal distribution channels and is also a university licensee. GFSI owns a domestic facility and works with contract facilities in the U.S. and overseas. GFSI established the office of Global Human Rights Compliance in GFSI affiliated with the FLA in June 2000 and the FLA Board of Directors approved GFSI (then Gear for Sports, Inc.) as a Participating Company in January At the GFSI headquarters in Lenexa, Kansas. time of application, the compliance department was known as the Global Human Rights Program. Upon joining the FLA, GFSI requested a 3-year implementation period. In April 2006, a new Director of Social Responsibility was designated and given responsibility to manage GFSI s Corporate Social Responsibility (CSR) Program. The Director also oversees GFSI s quality assurance program and divides her time between both roles. GFSI s labor compliance program utilizes staff situated in other departments, mainly quality, taking on partial compliance responsibilities. GFSI staff involved with compliance efforts was expanded to include all Country Managers, Quality Control Managers, and Quality Assurance and Sourcing staff. The company hired a dedicated full-time CSR Manager in April 2007 and now has staff with compliance-related job responsibilities in 12 countries. 1

4 The tables on the next two pages describe GFSI s supply chain from , as reported to the FLA. During this period, GFSI factories were subject to 11 unannounced Independent External Monitoring (IEM) visits conducted by FLA accredited independent external monitors. Information on the results of the IEMs, and the remediation undertaken by GFSI in response to IEM findings, are provided in FLA IEM reports online and discussed, as appropriate, in the next section. Participants at the Quality Control Conference in The sewing area at one of the GFSI supplier facilities. Workers at one of the GFSI supplier facilities. 2

5 GFSI APPLICABLE FACILITIES AND IEMS, COUNTRY 2003 APPLICABLE FACILITIES 2003 IEM 2004 APPLICABLE FACILITIES 2004 IEM 2005 APPLICABLE FACILITIES 2005 IEM 2006 APPLICABLE FACILITIES 2006 IEM Cambodia Canada 1 China Colombia Egypt 1 2 El Salvador Guatemala Honduras India 2 3 Indonesia 1 2 Korea 1 1 Macau 1 1 Malaysia Mexico Nicaragua Pakistan Peru Philippines 1 Singapore 1 1 Taiwan 3 3 Thailand 1 1 United States 2 Vietnam Total

6 GFSI APPLICABLE FACILITIES AND IEMS, COUNTRY 2007 APPLICABLE FACILITIES 2007 IEM 2008 APPLICABLE FACILITIES 2008 IEM 2009 APPLICABLE FACILITIES 2009 IEM 2010 APPLICABLE FACILITIES 2010 IEM Cambodia 1 Canada China Colombia Egypt El Salvador 1 Guatemala 2 Honduras India Indonesia 2 2 Korea 1 Macau 1 Malaysia Mexico Nicaragua Pakistan Peru Philippines Singapore Taiwan 1 Thailand 1 United States 2 2 Vietnam Total

7 ANALYSIS OF GFSI S LABOR COMPLIANCE PROGRAM USING THE FLA OBLIGATIONS OF COMPANIES AND EVALUATION WORKING GROUP BENCHMARKS Information used in this assessment originates primarily from annual reports submitted by GFSI to the FLA verified through: (1) visits to GFSI s headquarters by FLA staff in July 2007 and June 2009; (2) interactions with GFSI representatives at meetings of the FLA Monitoring Committee and Board of Directors and at FLA stakeholder engagement sessions; (3) visits to factories by FLA staff and shadowing of internal monitoring visits at a factory in Nicaragua in March 2008, in Honduras in May 2010 and in Vietnam in October 2010; (4) observation of GFSI training sessions and other field activities by FLA staff, including a remediation session with a factory in Malaysia; (5) information gathered via in-person and/or phone interviews, and/or correspondence with GFSI monitors and other key stakeholders; and (6) analysis of results of IEMs and ensuing remediation. 1. ADOPTS AND COMMUNICATES A CODE 1.1 Formally adopts a code that meets or exceeds FLA standards In 2000, GFSI established a Code of Conduct that follows FLA standards. GFSI has a website devoted to CSR. The Code is posted on this website in English as well as 12 other languages. In 2008, the company revised Code posters to include local contact information to allow for direct contact to GFSI for employee grievances. GFSI also revised all Code posters to include the corporate name GFSI, Inc., instead of Gear for Sports, in order to encompass all GFSI brands. GFSI adopted a Code detailing labor standards for suppliers in 1995 and the current Code of Conduct in In 2008, GFSI revised its Code of Conduct to include its corporate name GFSI, Inc. (rather than Gear for Sports ) to encompass all GFSI brands. GFSI has committed to revise its Code to make it consistent with the revised FLA Workplace Code of Conduct. GFSI has adopted the FLA s Compliance Benchmarks and uses the FLA audit instrument to conduct internal monitoring. 1.2 Informs all suppliers in writing A Factory Obligation Letter is sent yearly to all factories for them to sign agreeing to the GFSI Code and agreeing to uphold all GFSI requirements. The Factory Obligation letter includes the following attachments: GFSI Code of Conduct, notice of the policy of factory disclosure, explanation of the relationship with the FLA and the factory s obligations during unannounced audits, requirements of licensors and policy on internal third-party audits. GFSI country office staff explains the Factory Obligation Letter in a meeting with the factory to ensure understanding. GFSI gives yearly notice to its suppliers of the company s commitment to CSR. The FLA reviewed documentation indicating that GFSI requests written acknowledgement from suppliers that they commit to uphold the GFSI Code of Conduct and are informed about FLA affiliation, including IEM requirements. The FLA has reviewed the yearly Factory Obligation Letters and packets sent to GFSI suppliers (including signed copies and signed Code of Conduct confirmation forms). The packet contains the GFSI Code of Conduct, factory disclosure conditions, an explanation of the relationship between the company and the FLA, expectations and policies regards third-party assessments, and requirements of licensors. 5

8 1.3 Posts the code in a prominent place in supplier facilities in the local languages of workers and managers Factories are sent as many posters as are needed in their local languages. They are to sign a form stating they received the posters. Quality Control Managers conduct yearly internal audit surveys to make sure posters are posted in a prominent place. They also take pictures of the locations. In keeping with the company s commitment to the environment, Code posters are now sent in local languages by to factories and each factory prints as many copies as are needed for the facility. When posters are sent, the factory signs a confirmation letter stating that they have posted the posters as well as sending photos of poster locations. GFSI asks the factory to post the Code in areas that are accessible to workers. On a yearly basis, country office staff visits the factory to complete the Internal Audit Survey. At that time, they verify the number of posters and that the locations of posters are in areas accessible to workers. Photos are taken again of poster location. The CSR Manager reviews photos of Code location to ensure they are posted in areas that meet requirements. FLA staff have received and reviewed copies of the GFSI Code in English, Arabic, Chinese, Hebrew, Bahasa Indonesia, Korean, Malay, Sinhalese, Spanish, Tagalog, Thai, Urdu and Vietnamese. During a March 2008 internal audit in Nicaragua and a May 2010 audit in Honduras, the FLA verified that the GFSI Code was posted in appropriate languages and locations. The FLA recommends that the Code be printed on larger paper since it can be difficult to read in small font. Though there were Korean managers at the factory in Honduras, there was no Code of Conduct available in Korean. FLA staff has reviewed photos indicating that the Korean Code of Conduct is now posted at the facility. The October 2010 observation in Vietnam revealed that the Code was posted though the print-out was not very clear and in locations that were somewhat inaccessible to workers. With respect to the 11 IEMs conducted for GFSI between 2003 and 2010, FLA-accredited monitors found one instance in which the Code was not posted in the local language and it was not posted in an appropriate number of locations accessible to workers. GFSI and the factory remediated this noncompliance. GFSI follows a good practice in verifying that the Codes of Conduct are posted appropriately and are removed if the business relationship ends with a factory, relying on the Quality Control staff to oversee this process. 1.4 Ensures that workers are informed orally and educated at regular intervals (to take account of labor turnover) Factories are asked to explain the GFSI Code during new employee orientation meetings to make sure all employees are aware of the Code. GFSI personnel periodically sit in on these meetings to confirm that the Code is explained. GFSI allows factories to communicate in terms of workers rights rather than a Code of Conduct since it is more important to GFSI that the workers understand their rights rather than being able to recognize the GFSI Code. GFSI monitors are requested to find out what is being taught to the workers regarding their workplace rights. The Internal Audit Survey asks suppliers how they communicate the Code to the workers. In 6 out of 11 IEMs conducted by the FLA, accredited monitors found that there was no evidence of regular trainings on Code provisions being provided to the factory or workers were not aware of Code provisions. During an internal monitoring visit to a factory in Nicaragua shadowed by the FLA, there was no evidence of a training program, policies or procedures to indicate ongoing training efforts by factory management staff. FLA staff arrived at the same finding during an observation of an audit in Vietnam in During a similar event at a factory in Honduras, FLA staff confirmed that factory management informs factory workers about the factory s own Code of Conduct (the supplier is a Participating Supplier of the FLA). The FLA had recommended to GFSI that the Factory Self-Assessment form include questions on whether supervisors and workers had received training on Code of Conduct provisions. These questions have now been 6

9 included. Responses from factory management reviewed by the FLA showed mixed responses on training and Code awareness some indicated that they held monthly trainings, some mentioned training for new hires, and generally not many details were provided. The FLA has reviewed GFSI procedures (dated June 2010) directing Quality Control and Country Managers to observe two orientation trainings at each factory every year. Through this procedure, GFSI will collect information on whether the Code of Conduct was conveyed at the orientation sessions. The FLA recommends a focus on Code provisions and suggests GFSI provide training to factory personnel responsible for training on the Code to ensure the Code provisions are clear (helping the factory to resolve conflicts with other customer Codes) and ensure training is provided to workers on an ongoing basis to account for worker turnover and that such training is documented and tracked. 1.5 Obtain written agreement of suppliers to submit to periodic inspections/audits, including by accredited external monitors, to remediate instances of noncompliances with FLA Workplace Standards that arise, and to inform employees about those standards A yearly Factory Obligation letter is sent to all factories. This letter explains the GFSI compliance program and what the factory agrees to and is responsible for. A senior executive of the factory must sign the letter. Factories must sign the Factory Obligation Letter yearly agreeing to submit to FLA IEMs. Additionally, yearly they are provided the FLA Access Letter, which they must sign showing that they understand the process. FLA staff reviewed Factory Obligation Letters signed by factory management stating that factories may be subject to periodic audits, including by third-party auditors and FLA accredited monitors. The letter also indicates that the supplier has agreed to follow the GFSI Code, uphold the Code, post the Code, and remediate any instances of noncompliance. FLA staff also reviewed signed Code of Conduct Confirmation Forms which indicate that suppliers have received the Code, agree to uphold the Code and will post the Code in areas where workers can review it. 2. TRAINS INTERNAL COMPLIANCE STAFF 2.1 Identifies the staff or service provider responsible for implementing their compliance program Compliance staff includes the Director of Social Responsibility, country office staff (Quality Control Manager, Country Manager), Sourcing Department staff and third-party monitors, GFSI s CSR Director and Manager at the corporate offices are responsible for managing the compliance program. The CSR Manager manages the country office staff responsibilities regarding compliance. Country office staff is responsible for following up with documentation, remediation, and are to assess factory conditions each time they are in the factory. GFSI utilizes third-party monitors to audit factories. The FLA audit instrument is used as well as FLA accredited monitors, where available. The Sourcing Department is responsible for reviewing factory compliance when in factories. GFSI experienced significant compliance staff turnover and restructuring during its early years of affiliation with the FLA. The current Director of Social Responsibility started to oversee the compliance program in April 2006 with 50% of her time being dedicated to compliance and 50% to quality control. In addition to the Director, the Quality Control staff and country managers, based globally, and the GFSI sourcing department work closely to integrate compliance into GFSI s business processes. Towards the end of 2007, the company recruited a full-time CSR manager who formally worked with a supplier and was exposed to audits while accompanying clients on their compliance visits. FLA staff reviewed the job description for the CSR Manager, Senior Sourcing Manager and Sourcing Manager. FLA staff also interviewed the Senior Director of Sourcing and a Sourcing Manager during a headquarter visit. The Senior Director of Sourcing emphasized that GFSI strives to establish long-term relationships with factories and therefore the company s supply chain tends to be relatively stable. 7

10 GFSI uses third-party monitors to conduct internal monitoring. FLA staff observed a third-party monitor conducting an internal audit in Nicaragua in March 2008 and in Honduras in May The monitors used the FLA s audit instrument and methodology. Based on the March 2008 observation, the FLA recommended that GFSI communicate a clear description of zero-tolerance issues to monitors and ensure that monitors are educated on the procedures in case of a zero-tolerance issue raised during the course of an internal audit (to ensure that workers are not at risk). The FLA has since reviewed guidance to GFSI monitors (sent along with the audit instrument) that contains examples of zero tolerance issues and instructions to monitors to notify GFSI in case of zero tolerance issues. 2.2 Ensures that they had training in all the areas under their responsibility, including, as appropriate, international and national labor standards, local languages, occupational and production risk factors, and techniques for monitoring, interviewing and remediating Country Managers, Quality Control Managers and the entire supply chain are trained once a year on CSR and the GFSI program. Periodically, CSR program reminders, updates or changes are sent via to the country offices and Sourcing Department. All information on training and updates are kept on the CSR calendar. The company uses a third-party monitor to ensure they are trained in all areas for auditing and each country s local laws. Yearly conferences are scheduled to update training. Country office staff (Country Managers, Quality Control Managers and Logistics Managers) are brought to corporate headquarters yearly where they are trained on CSR. Trainings focus on general CSR topics and an overview of their responsibilities as well as specific training on remediation and corrective action. FLA accredited monitors are used to ensure monitors have been trained properly on the FLA audit instrument and FLA Monitoring Guidelines and Compliance Benchmarks. In the case where there is no FLA Monitor, a member of the country office staff shadows the third-party auditor. GFSI has made a concerted effort to actively participate in FLA meetings and trainings and has used these opportunities to learn about various field-level initiatives. During headquarter visits FLA staff confirmed that the Director of Quality & Social Responsibility and the CSR Manager are aware of recent labor law developments in countries where the company sources and that they keep in touch with local GFSI staff to advise them of changes. The FLA reviewed various training materials prepared internally by GFSI or by vendors covering social compliance issues, including: Country Manager training (delivered in 2007); Supply Chain training (February 2007); Quality Control training (February 2007); Ethical Sourcing (March 2008). GFSI staff also attended CSR Seminars held by other organizations or licensors, among them a CSR Seminar held in India (April 2008), [brand] Supplier Seminar held in Hong Kong (June 2008) and in Indonesia (August 2008); [monitoring organization] Managing Factory Site Closures (March 2009); and Honduran Maquila Association Guidelines of Good Practice (June 2009). The FLA recommends training for country managers and third-party monitors related to gathering worker testimony in cases of freedom of association risks and violations. 2.3 Updates that training at regular intervals Yearly conferences are scheduled to update training. Internal training is updated yearly. Trainings attended by GFSI staff are compiled and relevant information is presented. Quarterly compliance review meetings have been established with GFSI senior staff to discuss CSR issues and factory compliance. In 2007, the first CSR training on supply chain issues was held with a target audience which included global staff from sourcing, logistics, design, and quality. A specific training for the Quality Control team and their role in compliance oversight was also initiated in 2007 and the training is now held on an annual basis. FLA staff reviewed training material from the 2007 meeting and attended a part of the 2008 training. Copies of training material are on file at the FLA offices. 8

11 3. PROVIDES EMPLOYEES WITH CONFIDENTIAL REPORTING CHANNELS 3.1 Encourages the establishment of grievance procedures at supplier facilities Country office personnel have been instructed to be open and receptive to factory worker complaints. They are instructed to bring these issues confidentially to the Director s attention at headquarters to be addressed. Factories are encouraged to keep the channels of communication open. If there appears to be tension during the third-party audits, this is noted in the report for GFSI to follow up on. The GFSI Code has been updated to include a local contact number and an address for workers to address their complaints. A procedure has been developed and training was conducted so staff understands how to handle complaints as they are reported. Third-party auditors are directed to hand out business cards so that workers can contact monitors after the interview. In 2008, GFSI sent out a questionnaire to factories to ask them about grievance procedures and confidential reporting channels. FLA staff reviewed results of the survey. The FLA recommends that GFSI follow up that survey with an action plan to help build functional grievance procedures. During the March 2008 observation in Nicaragua, FLA staff noted that the factory management maintains positive communication channels with workers; however, the channels were not formalized and therefore not sustainable. FLA staff recommends development of a formal internal grievance policy and procedure at this factory and others supplying GFSI. During the May 2010 observation of an internal audit, FLA staff noted that the Honduran factory had a grievance procedure that enabled factory workers to call a CSR person in the factory to raise concerns. This CSR point person received, on average, 6 complaints per month, regarding issues such as quality of food, broken bathroom equipment, etc. During the October 2010 observation of an initial internal audit, FLA staff noted that though there was a suggestion box available to workers at the door of the supervisor s room, no workers had used the box and there were no other grievance procedure mechanisms available at the factory. 3.2 Provides channels for Company employees and workers at those facilities to contact the Company directly and confidentially if warranted The factory workers are encouraged to communicate directly with any GFSI representative. In most of the factories, the Quality Control staff are there on a daily basis. The Quality Control staff have established good relationships with the factory workers and have open lines of communication for them to bring any grievances to our staff. GFSI s Code of Conduct posters now include a local phone number for workers to contact the company directly. During a visit with GFSI staff in Hong Kong, FLA staff observed that the GFSI Code of Conduct poster had a local phone number listed along with an address for workers to access. The FLA recommends training for workers so that they know that this channel exists, how to use it and in what language, and how information will be handled and feedback provided. During a May 2010 shadow of an internal audit in Honduras, FLA staff observed third-party monitors handing out business cards to workers with their contact information for grievances and in instances of potential retaliation. GFSI has included an account and a local phone number at the bottom of the Code of Conduct posters for workers to contact the Honduran GFSI office and formally present grievances. Worker grievances are collected at the Honduran office and then sent to the Social Compliance Manager based at the GFSI headquarters. This system works well for the Honduras factories. However, for factories located in El Salvador and Nicaragua, workers would need to make an international phone call in order to submit a complaint. Although there is an address for 9

12 workers to send messages to GFSI, most workers do not have access to the Internet. The FLA recommends that GFSI consider using a local office phone number. IEM findings support that suppliers do not have in place confidential grievance mechanisms; in IEMs between 2003 and 2010, monitors found noncompliances in 7 instances, indicating that there were no mechanisms in this regard in place for the confidential reporting of noncompliances directly to the company. While working to put in place grievance mechanisms, as a starting point, the FLA recommends that GFSI make it mandatory for thirdparty auditors conducting worker interviewers to hand out business cards so that auditors can be contacted by workers after an interview. The FLA has reviewed guidance to monitors (sent along with the audit instrument) to hand out their business cards with local contact information during interviews. Auditors are instructed to notify GFSI immediately if a worker contacts the auditor following the audit. 3.3 Ensures the channel is secure, so workers are not punished or prejudiced for using it If a worker advises a GFSI representative of an issue, the representative advises the headquarters. The issue is addressed from headquarters to factory management, so that staff does not compromise confidentiality with the worker and the worker s identity is not revealed. The Factory Obligation Letter has a statement about non-retaliation by the factory against workers raising complaints. The Code of Conduct does not currently include a non-retaliation policy nor has such a policy been communicated to factory workers. GFSI informed FLA staff that they intend to make this change when the Code of Conduct is revised to make it consistent with the new FLA Workplace Code of Conduct. 4. CONDUCTS INTERNAL MONITORING 4.1 Internally monitors an appropriate sampling of suppliers to assess compliance, which includes worker interviews, records review, occupational safety and health review, practices of suppliers in relation to the FLA Workplace Standards A risk-based assessment was done by a third-party monitor in 2005 to determine the highest risk areas and the highest volume factories to audit. For 2006, the company focused on new areas of development as well as some high volume and lower volume factories to get a random sampling of the remaining factories. The company targets 33% of the factories to be audited every year by a third-party monitor. The third-party audit is a risk analysis in the following areas: child labor, employee documents, restricted liberties, wages and benefits, working hours, legal requirements, freedom of association, discrimination, health and safety, and undisclosed subcontracting. Internal surveys and questions are asked of all factories throughout the year. GFSI uses FLA accredited monitors (where available) and the FLA audit instrument. Beginning in 2004, a positive change to GFSI s compliance program is the company s decision to place orders directly with factories rather than through agents or intermediaries. As verified during the initial headquarter visit in 2005, GFSI worked with third-party monitors to develop a risk assessment of its factory base to determine priorities for factory audits. Since 2006, GFSI has further refined the risk assessment and aims to have 33% of its factories audited on an annual basis. FLA recommends a revision of the risk assessment matrix GFSI has adopted to incorporate all Code provisions. The FLA further recommends that GFSI develop clear procedures for addressing zero-tolerance issues such as child labor and wage issues to ensure they are handled responsibly and without placing workers at greater risk. GFSI uses third-party monitors to conduct internal monitoring for the company. Country Managers in Nicaragua, El Salvador and Honduras at times conduct initial compliance assessment at new factories; generally, however, GFSI contracts third-party monitors to conduct internal factory assessments. In May 2010, FLA staff shadowed an internal audit conducted by an accredited monitor; the audit met standards and was conducted using the FLA s audit instrument and auditing methodology, including pre-audit CSO engagement. 10

13 The FLA recommends that GFSI strengthen and regularize its evaluations of third-party monitors to ensure that expectations are met and guidelines followed. After feedback from the FLA from an internal audit observation in 2007, GFSI discontinued use of a previous audit instrument and now uses the FLA audit instrument for internal audits. 4.2 Collects, verifies and quantifies compliance with workplace standards Third-party audits are done yearly on 33% of the factory base. Using FLA accredited monitors has allowed for consistency in audit reporting. As provided in company annual reports to the FLA and confirmed during headquarter visits, GFSI gathers audit findings and analyses results on a yearly basis. Analysis includes break-downs by country, Code element, violations by region (correlating to GFSI s various country offices), and violations according to type (major concern, minor concern). 4.3 Analyzes the monitoring results and implements remediation plans to address noncompliance issues Based on monitoring results, a remediation recap report is created and sent to the country office to be forwarded to the factory. This recap includes a letter to the factory explaining the process and the dates by which the recap must be returned as well as dates by which all issues must be completed. The factory has 30 days to return the filled out recap and 90 days to correct all issues. GFSI has focused to ensure remediation plans are more sustainable. Factory compliance is reviewed with sourcing during meetings and as needed. During headquarter visits, FLA staff reviewed sample remediation plans from internal audit. As confirmed through GFSI s annual report submissions and verification in the field, the company analyzes internal monitoring results and develops remediation plans with factory management. 4.4 Tracks the progress of remediation GFSI maintains compliance information in Excel spreadsheets, including a CSR Master Chart. Remediation is tracked on the CSR Master Chart. This chart lists the dates the initial letter was sent, the date the CAP is due and also the date in 90 days by which all issues must be corrected. The chart also tracks if a re-audit is to be scheduled. As verified during the headquarter visit, the CSR Manager maintains the status of all remediation items. 5. REMEDIATES IN A TIMELY MANNER 5.1 Upon receiving the internal and independent external monitoring reports, contacts the supplier concerned (within a reasonable timeframe) to agree to a remediation plan that addresses all compliance issues identified by the monitor 11

14 A corrective action plan for each issue identified is requested from the factory with a timeline of implementation and completion. These CAPs are reviewed and if any additional information is required, a follow up by country office personnel or the Director of Social Compliance is done. CAPs from all audits are sent to the factory and they are asked for their input in correcting any violations. This is either completed by or one of GFSI s CSR staff will visit the factory to discuss the audit with them. GFSI works with the factory to develop timeline that is agreeable to both parties. Upon the completion of an audit, the CSR Manager creates corrective action plans. The CSR Manager reviews the Factory Audit Summary and grades the audit according to the Grading Matrix (based on a system with criteria and matrix). The FLA examined the Grading Matrix at GFSI headquarters and recommends the development of a clear procedure for handling zero-tolerance issues, such as no time records, harassment of union members or sympathizers, certain forms of discrimination, and presence of children on-site. 5.2 Implements a remediation plan regarding the noncompliances and the actions taken to prevent the recurrence of such noncompliances A remediation plan from the factory is first requested and any additional action taken by the headquarters is added to the report. Suggestions on how to correct are given to the factory. A timeline is included and follow up is made to make sure these are completed as indicated. GFSI s collaborative approach to working with the factories helps ensure that remediation plans are sustainable. Policies, procedures and fail-safe measures are encouraged to prevent recurrence of noncompliances. During a 2009 GFSI staff visit with factory management in Malaysia observed by FLA staff, the Director focused discussions on root causes and encouraged transparency. GFSI looks for ways to resolve compliance issues through collaboration and partnering with factories. The FLA recommends that GFSI also engage with civil society organizations to provide external support for remediation. 5.3 Within sixty (60) days, supplies the FLA with the remediation plan citing all progress made and a timeline for outstanding items A remediation plan is sent based on each issue with dates of completion. GFSI supplies the FLA with all materials within requested timelines. GFSI has supplied remediation plans in a timely manner to the FLA. 5.4 Confirms the completion of remediation The tracking chart is marked with any remediation areas that are completed and areas that are on-going. This is updated as needed. GFSI confirms the completion of remediation plans by requesting documentation from the factory and scheduling follow-up visits by either GFSI internal staff or independent third-party auditors. GFSI updates tracking charts to record progress/completion of remediation. The FLA recommends that GFSI put in place a system for systematically updating IEM reports and informing the FLA of actions on the progress of remediation and closed remediation plans. 12

15 5.5 Conditions future business with contractors and suppliers upon compliance standards Factories are made aware of standards up front. Sourcing is aware of noncompliance findings and is directly involved in working with the factory to correct these issues as needed. The company creates partnerships with factories to help them meet all obligations. GFSI notifies factories of compliance standards prior to placing production at a factory and they understand they must maintain the level of compliance to stay a sourcing partner. Compliance standards must be met prior to a factory being accepted as a sourcing partner. Since GFSI does not accept factories that do not meet standards, it is easier to keep a factory at the level of compliance needed. GFSI works to create long-term partnerships with factories rather than placing one order and then leaving. As verified through field observations of meetings between factory management and GFSI compliance staff, GFSI seeks to ensure that suppliers are aware of GFSI compliance expectations at the start of the business relationship, and sourcing staff are used to communicate this message. They have also taken a number of steps to ensure that factories are aware that compliance is a condition of doing business. For example, as verified during headquarter visits, GFSI started to develop a pre-sourcing assessment process in 2007 which aims to consider compliance, along with business needs, quality, delivery, etc. GFSI has also developed a partnership tiering which allows good performing factories to become strategic partners with GFSI and compliance is one of the parameters evaluated in factory performance although there is currently no formal factory review process. 6. TAKES ALL STEPS NECESSARY TO PREVENT PERSISTENT FORMS OF NONCOMPLIANCE 6.1 Analyzes compliance information to identify persistent and/or serious forms of noncompliance Audit information is reviewed for areas that are common among the audits. Audits are reviewed to identify persistent forms of noncompliances. Currently information is kept in an Excel spreadsheet. GFSI conducts analysis of noncompliance using Excel spreadsheets and other tools as its supplier database is relatively small. GFSI considers that the most persistent noncompliance in its supplying factories is related to hours of work. For excessive hours of work issues, GFSI encourages the factory to cut hours of work gradually over time. The FLA recommends that GFSI focus also on Freedom of Association and social dialogue issues and remediation in all of its supplier factories. As verified through review of meeting minutes and interviews with GFSI staff, CSR-related issues are discussed during Sourcing Department meetings on an as- needed basis. On a quarterly basis, CSR staff provide a recap of audits to all of sourcing. In larger Supply Chain meetings (which includes sourcing, quality and social compliance, inventory management, customs and logistics), various topics are discussed including orders, shipping, volume, projections and forecasting, seasonal work, retail orders (one-time placement), etc. 6.2 Establishes and implements programs designed to prevent the major forms of such noncompliance Sourcing and country offices are aware of compliance requirements. These requirements are discussed up front when first choosing a factory. Requirements are in writing and the factory is required to sign the Factory Obligation Letter at the start of business. Timelines are put in place in the beginning for all aspects of the process to help alleviate timing issues that can cause some of the noncompliances. GFSI issued communication to suppliers in 2009 informing factories of the company s stance on purchasing cotton from Uzbekistan. The FLA reviewed two letters from GFSI to suppliers setting out the ban on the use of Uzbek cotton in its supply chain. FLA staff also reviewed a letter to suppliers forwarding a copy of the FLA s Retrenchment Guidelines, aimed at encouraging factories to act responsibly in situations where workforce reduction is necessary. 13

16 As confirmed through FLA staff interviews with [CSO], GFSI has enlisted the training services of [CSO] to address general compliance and labor law issues at a factory in Vietnam. 6.3 Takes steps to prevent recurrence in other Applicable Facilities where such non-compliance may occur GFSI has started the FLA 3.0 process in Honduras. GFSI has applied the process of root cause analysis learned in FLA 3.0 to all audits. In 2009, all factories completed self-assessments. These will be reviewed and concerns will be addressed and discussed with the factories. The self-assessments will also be used to schedule upcoming audits. 7. SUBMITS TO INDEPENDENT EXTERNAL MONITORING 7.1 Provides the FLA with an accurate, up-to-date factory list, factory profile, access letters, etc. In the first week of January, April, July and October any factory changes or updates are sent to the FLA. Access letter is sent at the beginning of each new year. Factory list updates are sent to the FLA as required and also as there are changes in the factory base. Other documents are sent as requested. GFSI has been responsive and cooperative with the FLA and independent external monitors. Factory lists and other documents have been received in a timely manner. 7.2 Ensures that the suppliers selected for IEMs cooperate with the FLA monitors The Factory Obligation Letter explains the FLA role and the IEM process. The factories are also sent a copy of the Access Letter that is sent to the FLA at the beginning of the year. Factories are provided with the Factory Obligation Letter and the FLA Access Letter. Factories are required to sign both of these letters, agreeing to cooperate with IEM monitors. FLA can confirm that GFSI factories have cooperated with the FLA. GFSI has not had any aborted IEMs due to a denial of access to monitors by factory management. 7.3 Cooperates with FLA requests for information, clarification and follow-up in the IEM process GFSI cooperates with the FLA requests for information, clarification and follow up in the IEM process. GFSI responds in a timely manner to FLA requests for information, clarification and follow-up in the IEM process. 8. COLLECTS AND MANAGES COMPLIANCE INFORMATION 8.1 Maintains a database GFSI maintains compliance information in Excel spreadsheets, including a CSR Master Chart. Up-to-date spreadsheets are kept on file at all times. A summary of all issues by factory is kept so that prior audits can be easily reviewed for recurrent and outstanding issues. Issues are quantified and reviewed by country and noncompliance type. 14

17 As verified during headquarter visits, the CSR Manager maintains thorough files on each factory in the company s supply chain. Currently the information is maintained in separate Excel files. The CSR Manager is developing a database to house factory and compliance information. The FLA encourages GFSI to devote resources to design and implement a centralized database as soon as possible. FLA staff reviewed various documents during the headquarter visit including Factory Audit Tracking (internal monitoring schedule), Factory Audit Summary (summary of one factory s audit by type, monitor, audit purpose, and list of noncompliances), CSR Master Chart (showing audits over years and tracking [certification organization] expiration dates), completed corrective action plans with target dates, photo evidence of implemented remediation plans, and communication with GFSI country staff about following-up on pending issues. 8.2 Generates up-to-date lists of its suppliers when required In December, March, June and September the current factory list is sent to the country offices to make sure all information is complete and accurate. Quarterly, a meeting is held with the Sourcing department to review the factory list and make sure there are no additions or changes to the list. GFSI maintains an up-to-date factory list and reports to the FLA on a regular basis. FLA staff confirms that GSFI s factory list and reports have been received in the correct format and in a timely basis. 8.3 Analyzes compliance findings All noncompliance findings are evaluated and a remediation plan with dates is requested from the factory. GFSI staff regularly reviews compliance findings across regions and factories and develops remediation plans that are responsive to the noncompliances. 8.4 Reports to the FLA on those activities Updates to the tracking chart are sent to the FLA. GFSI submits annual reports in a timely manner and includes analysis of compliance findings in such reports. 9. CONSULTS WITH CIVIL SOCIETY 9.1 Maintains links to organizations of civil society involved in labor rights and utilizes, where companies deem necessary, such local institutions to facilitate communication with Company employees and employees of contractors and suppliers in the reporting of noncompliance with the workplace standards Part of GFSI s strategic plan for 2009 included a statement to continue to build strong relationships with all stakeholders internal and external. This will allow us to keep abreast of issues and to keep our stakeholders informed. GFSI has faced significant challenges with respect to civil society outreach. GFSI has asked its third-party monitor to gather information on labor issues from external sources prior to audits and to examine FOA and collective bargaining issues at factories as required. The FLA encourages GFSI to build more relationships with CSOs and to work with FLA companies to facilitate more interactions where possible. 15

18 In March-April 2008, GFSI participated in the FLA Beginner s Guide to CSO Outreach activity led by the FLA s NGO and Trade Union Coordinator. GFSI has also participated in FLA multi-stakeholder forums, a way in which the FLA has sought to increase exposure to CSOs among companies facing challenges in CSO outreach. The FLA has reviewed a project description of engagement with [CSOs] which addresses issues surrounding cotton from Uzbekistan. The FLA has reviewed the communication drafted by [CSO] and GFSI and sent to suppliers banning the use of Uzbek cotton. Through 2008 and early 2009 GFSI engaged with the FLA, [CSO], [university], and another FLA Participating Company in an effort to resolve a case of non-payment of severance arising from the closure of a facility in Guatemala. A third-party monitor conducted an independent investigation and estimated the value of unpaid severance due workers. As a result of the multi-stakeholder engagement, additional severance was paid to 871 workers by the factory s parent company. 9.2 Consults knowledgeable local sources as part of its monitoring activities GFSI uses third-party monitors to conduct internal audits. Third-party auditors are required to consult with civil society organizations as part of the auditing process. Information is collected on the audit instrument (GFSI uses the FLA s audit instrument). The FLA verified (during a May 2010 observation of an internal audit in Honduras) that third-party monitors engage with CSOs prior to the audit. The FLA recommends that third-party monitors conducting internal monitoring activities for the company strengthen pre-audit outreach to CSOs. While the aforementioned pre- audit outreach in Honduras met expectations, in another audit observed in Nicaragua, the consultations were insufficient and did not meet expectations. The FLA further recommends that GFSI highlight for their third-party monitors the priority to gather information on external sources prior to audits and to examine Freedom of Association and collective bargaining issues at factories as required. 9.3 Consults periodically with the legally constituted unions representing employees at the worksite regarding the monitoring process and utilize the input of such unions where appropriate During third-party audits, monitors interview union representatives as appropriate. The FLA verified in an observation of an audit in Honduras that third-party monitors engaged with CSOs prior to the audit. The lead auditor and assistant consulted with two prominent and active worker advocates. 9.4 Assures the implementation of monitoring is consistent with applicable collective bargaining agreements During third-party audits, information is gathered and questions are asked on collective bargaining agreements and freedom of association. As verified during field observations, the third-party auditors reference collective bargaining agreements during their internal audits. 16

19 10. PAYS DUES AND MEETS ITS OTHER PROCEDURAL REQUIREMENTS 10.1 Pays annual dues GFSI has paid its annual dues to the FLA. GFSI is up-to-date on its annual dues. Documentation is available at the FLA office Pays IEM administrative and monitoring fees GFSI is up-to-date on all relevant fees to the FLA. GFSI has paid all relevant dues and fees to the FLA. Documentation is available at the FLA office Signs and honors required FLA contracts GFSI has signed and honored required FLA contracts. The FLA confirms that GFSI signs and honors required FLA contracts Submits factory lists, a standardized annual report and other information in complete form and on time GFSI submits factory lists, annual report and all requested information in complete form and timely manner. During the first several years of affiliation, GFSI experienced staff changes that resulted in late submissions of annual reports. The FLA confirms that in recent years GFSI has submitted factory lists and annual reports in complete form and in a timely manner. 17

20 CONCLUSION Accreditation of GFSI s compliance program should not be interpreted as a guarantee against issues and risks in the supply chain. Rather, accreditation indicates that the company has the systems in place to proactively identify and remediate those risks. Accreditation is not granted automatically, and is only renewed every three years following a satisfactory FLA evaluation of labor compliance systems and activities during the timeframe. FLA will continue to conduct standard due diligence activities on GFSI. To check an affiliate s accreditation status, visit a