ESQUEL GROUP ASSESSMENT FOR ACCREDITATION February 2013
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
TABLE OF CONTENTS Introduction................................................................................................................................. 3 Esquel Group's Labor Compliance Program .............................................................................. 3 Analysis of Esquel Group’s Labor Compliance Program Using the FLA Principles of Fair Labor & Responsible Production ......................................................................................... 6 Conclusion ................................................................................................................................ 21
www.fairlabor.org
2
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
INTRODUCTION FLA-accredited Participating Suppliers 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 companies. 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 Esquel Group’s compliance program on February 20, 2013, based on proven adherence to FLA's Workplace Code of Conduct and the Principles of Fair Labor and Responsible Production. Details on FLA's accreditation methodology can be found at www.fairlabor.org/accreditation.
ESQUEL GROUP’S LABOR COMPLIANCE PROGRAM The Esquel Group (Esquel), a privately held company, is a full-service textile and apparel manufacturer with over 55,000 employees globally. Headquartered in Hong Kong, the company produces high quality cotton apparel for European, Japanese, domestic and US brands and retailers. Esquel is a vertically integrated company, which enables it to control the quality of the product from cotton to packaging. The company’s supply chain includes cotton farms, ginning and spinning, specialty yarn spinning, knitting, weaving, fabric mills, technical development center, research and development center, merchandising and design, apparel factories, garment washing, accessories, trims and packaging, and retail and direct distribution centers.
Esquel’s vertical integration: Cotton Farming, Spinning, Knitting & Weaving, Apparel Making, Trims & Packaging, and Retail and Direct Distribution
www.fairlabor.org
3
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
Esquel affiliated with the FLA as a Participating Supplier in October 2008 and has been an active affiliate within the FLA community. Esquel hosted the October 2010 FLA Board meeting and related events at the company’s Gaoming, China location. In February 2012, the Esquel Director of Corporate Social Responsibility (CSR) began serving a three-year term as a voting member of the FLA Monitoring Committee, representing the business caucus. In April 2012 the Esquel Director of CSR was elected by the Business Caucus to serve on the FLA Esquel factory in Gaoming, China Board of Directors, and in June 2012 was selected to serve on the Principle 8 Working Group, a multistakeholder group dedicated to bringing about improvements to the Principles of Responsible Purchasing and Responsible Production for FLA affiliated brands and suppliers. Esquel’s Director of CSR leads a multi-national team with staff in Hong Kong, China, South Asia and Southeast Asia. She reports directly to the Vice Chairman and CEO of Esquel. Esquel’s Internal Audit team, led by the Director of Internal Audit who reports to an independent Esquel Board member, conducts in-depth Human Resources audits at all Esquel sites every three years and works closely with the CSR Department. The CSR department also conducts internal assessments based on Esquel’s workplace code of conduct at all facilities each year. As described further in this report, the Esquel CSR team collaborates with various Esquel departments to ensure that standards are integrated throughout the company. Esquel has 21 applicable facilities within the scope of the company’s affiliation with the FLA. Nine factories are currently WRAP-certified and as mentioned, all factories are subject to Esquel Internal Reviews, as well as thirdparty audits from their customers (brands). Esquel produces for 55 clients that have their own social compliance programs. In 2011, Esquel hosted a total of 119 social compliance audits at its garment factories; in 2012, the total number decreased to 101. Esquel has been proactive in reaching out to customers that are Esquel’s semi-automated sewing lines interested in looking at the group’s internal system of oversight and considering working together in a way that might result in more meaningful change on the factory floor. This effort is related to both the need to drive sustainable change and reducing the repetitive and excessive auditing that exists in the industry today. In these discussions, several customers agreed to accept internal updates and/or an existing third-party audit in lieu of conducting additional audits. Currently, five Esquel clients are FLA affiliated companies. Esquel collaborates with union representatives at a number of applicable facility locations. Four facilities in Sri Lanka are unionized, there is an in-house union in Malaysia, a branch of [union] in Vietnam, and [union] branch in the applicable China facilities.
www.fairlabor.org
4
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
Along with workplace standards, environmental sustainability is a core focus of the company’s CSR work. The company has prioritized key issues such as energy, water, chemicals, waste, recycling and management systems throughout its supply chain, using various innovations to reduce harm and improve systems in a sustainable manner.
Esquel’s holistic approach to environmental sustainability
The table below describes Esquel’s applicable facilities over the period 2009-2012, as reported to the FLA. During this period, Esquel’s applicable facilities were subject to a total of 5 FLA due diligence visits, including 3 Independent External Monitoring visits (IEMs), 1 Independent External Verification visit (IEV) and 1 Sustainable Compliance Initiative assessment (SCI). Information on the results of these visits, and the remediation undertaken by Esquel in response to findings, are provided in the FLA reports online and discussed, as appropriate, in the next section.
ESQUEL APPLICABLE FACILITIES AND FLA DUE DILIGENCE VISITS, 2009-2012 COUNTRY
2009 APPLICABLE FACILITIES
2009 FLA VISITS
2010 APPLICABLE FACILITIES
2010 FLA VISITS
2011 APPLICABLE FACILITIES
1
5
2011 FLA VISITS
2012 FLA APPLICABLE FACILITIES
2012 FLA VISITS
11
1
China Hong Kong Malaysia
5
5
2
2
0
1
1
Mauritius
2
2
3
3
Sri Lanka
4
4
4
4
Vietnam
1
2
2
2
TOTAL
15
1
1* 1 2
16
1
15
1
1
1
21
1
*In 2009, Esquel requested that an additional IEM be conducted at an applicable facility in Malaysia.
www.fairlabor.org
5
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
ANALYSIS OF ESQUEL GROUP’S LABOR COMPLIANCE PROGRAM USING THE FLA PRINCIPLES OF FAIR LABOR & RESPONSIBLE PRODUCTION BENCHMARKS Information used in this assessment originates from annual reports submitted by Esquel to the FLA verified through: (1) visits to Esquel headquarters by FLA staff; (2) shadowing of an internal audit for Esquel; (3) observation of Esquel training at an applicable facility; (4) information gathered in-person, via phone interviews and through email correspondence with Esquel staff; (5) documentation review of supporting evidence submitted by Esquel; (6) results of FLA visits to Esquel applicable facilities conducted by FLA monitors/assessors; and (7) interviews with civil society organizations and other key stakeholders.
I. COMPANY AFFILIATE ESTABLISHES AND COMMITS TO CLEAR STANDARDS 1.1
Company Affiliate establishes and articulates clear, written workplace standards that meet or exceed those embodied in the FLA Workplace Code of Conduct. Actions Taken: The company first established the Esquel Factory Workplace Code of Conduct in 2005. The Esquel Code highlights the “e-Culture” of Esquel – Ethics, Environment, Exploration, Excellence and Education – and establishes the company’s commitment to workplace standards in Esquel factories. In 2012 and 2013, the Esquel Code underwent revisions to bring the standard in line with the FLA’s updated Workplace Code of Conduct.
Verification by FLA: FLA has reviewed copies of the 2009 version of the Esquel Code, as well as the revised 2013 version. According to FLA staff review of the 2013 Esquel Code, the standard meets all of the elements embodied in the FLA Workplace Code of Conduct. FLA has a copy of the 2013 Esquel Code on file.
1.2
Company Affiliate leadership formally commits to uphold workplace standards and to integrate them into company business practices. Actions Taken: Esquel’s website has a dedicated page to describe the company’s commitments to CSR, which includes labor, health and safety, environmental conservation, and community development. The content describes Esquel’s core values, which include running an ethical, fair, and responsible business, the organization of the CSR Department, its integral place in the structure of the company and the company’s efforts to engage with civil society.
Verification by FLA: During the 2012 headquarter visit, FLA staff reviewed the company’s mission, corporate statement and a statement from the CEO. This statement has been made public on the company’s website. Esquel’s CEO has been engaged with and supportive of the company’s CSR Department and the company’s affiliation with the FLA.
2. COMPANY AFFILIATE IDENTIFIES AND TRAINS APPROPRIATE STAFF 2.1
Company Affiliate identifies all staff (and service providers, where relevant) responsible for implementing its workplace standards compliance program. Actions Taken: Esquel’s Director of CSR reports into the Vice Chairman and CEO of the company. Esquel’s Director of CSR leads a team comprised of individuals at the Hong Kong corporate office, in Gaoming, China, and in South and Southeast Asia, and in Mauritius. Ten full-time CSR staff persons are based in the company’s Hong Kong headquarters. An
www.fairlabor.org
6
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
additional 10 full-time corporate-level staff people are based in China and 42 staff with CSR-related responsibilities work at the factory level. In total, Esquel has 62 employees (38 full-time, 24 part-time) with CSR-related responsibilities in China, Malaysia, Mauritius, Sri Lanka and Vietnam. Esquel uses primarily headquarter company staff to conduct Internal Reviews of Esquel facilities, but when appropriate will use staff from one factory or country to assist with the Internal Review of another factory or location.
Verification by FLA: Esquel’s Director of CSR serves as primary point of contact with the FLA. FLA has on file the company’s organizational chart that describes reporting channels and the various departments within Esquel. As well, FLA has an organizational chart for the CSR department that illustrates the various corporate, operational and factory functions covered by the CSR team. During the 2012 headquarter visit, FLA interviewed corporate-level CSR staff on the company structure and on staff roles and responsibilities. During a field observation, FLA staff observed Esquel assessors conducting an Internal Review and met with local factory CSR representatives. Staff has on file a description of the global head-count of CSR staff.
2.2
Company Affiliate ensures that all staff (including production) and relevant service providers are trained on the company’s commitment to standards and the integration of standards into business practices. Actions Taken: Esquel CSR staff facilitate trainings throughout the company for staff in various departments, including those in General Management, Corporate Communications, Government Relations, Administration, Human Resources, Accounting, Finance, Merchandising/Sales, Quality Assurance, Design, Production, Production Planning & Control, Internal Audit, Cutting, Washing, Shipping, Maintenance, etc. The training that is provided covers the Esquel Code as well as the company’s position on integrating the Code standards throughout Esquel business practices.
Verification by FLA: FLA has reviewed and has on file details of trainings from 2011 and 2012 provided to the various corporate and factory-level departments listed above. Dates, subjects, locations and attendees are captured in these records. These trainings cover Esquel’s history, “E-Culture,” the company Code and the Esquel internal oversight system.
2.3
Company Affiliate ensures that staff or service providers responsible for implementing workplace standards compliance functions have appropriate competencies and suitable training in all areas under their responsibility. Actions Taken: When considered for a CSR-related job, the company specifies certain skill sets, areas of knowledge, attributes, competencies and training required for the position. All Esquel CSR staff members are experienced in the field and have appropriate competencies and training to perform their responsibilities. Esquel CSR staff language abilities are tracked. Currently, the CSR team (including corporate and operational staff) demonstrates proficiencies in the following languages: English, Cantonese, Mandarin, Tagalog, Spanish, French, Bahasa Indonesian, Bahasa Malaysia, Hindi, Sinhalese, Malaysian, Creole, and Vietnamese. All Esquel staff undergoes an annual performance review. Esquel CSR staff receives regular training related to their responsibilities, described further under Principle 2.4.
Verification by FLA: FLA has interviewed key Esquel CSR staff, the Director of CSR, the Director of Finance, and the Associate Director of Production Planning & Control. FLA has reviewed job descriptions for key CSR employees as well as for employees with related responsibilities, including: CSR Assistant, CSR Officer, CSR Assistant Manager, CSR Manager, CSR Senior Manager, HR Officer, HR Manager, HR Executive as well as Environment, Health and Safety Assistant Manager. During review of the job descriptions, particularly those at a leadership level, FLA noted that they describe
www.fairlabor.org
7
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
the position’s relationship to the overall ethical and responsible business practices of the company and require the employee to act in both a responsive and proactive manner. During the headquarter visit, FLA interviewed Esquel CSR staff on the annual performance review process and FLA has a copy of the company form on file. FLA has on file records related to CSR staff language abilities. FLA staff reviewed the Esquel Internal Review Guideline, which includes a section on Proficiency and Continuing Professional Development requiring that all internal assessors commit to continuous learning and development of the skills relevant to their responsibilities. The CSR Director is also responsible for the development of a quality assurance and improvement program for the Internal Review process. FLA staff observed Esquel assessors conducting an Internal Review of a facility in 2012 and noted that that the team of assessors exhibited rich CSR knowledge and expertise as well as sound methodology for conducting the assessment..
2.4
Company Affiliate ensures that training is updated at regular intervals. Actions Taken: Esquel staff with CSR-related responsibilities undergoes regular training. Types of regular training include monthly EHS meetings, quarterly CSR meetings, as well as periodic trainings on topics such as occupational health, fire safety, root cause analysis, and updates to labor laws. In addition, Esquel CSR staff attends numerous trainings at the request/requirement of their brand clients to remain up-to-date on changes to brand compliance program requirements, or other topics in the industry . In 2011, Esquel started organizing internal CSR conferences to provide a forum for its internal CSR teams to come together to share information and best practices, hear updates on global CSR issues and acquire additional job-related skills. In 2012, the CSR Conference was titled “Be the Change” and all full-time and part-time CSR staff attended and participated in discussions and training related to global CSR events, factory best practices, and safety initiatives.
Verification by FLA: During the headquarter visit in September 2012, FLA and company CSR staff discussed regular training and reviewed files keeping account of training activities dated from 2007 to the present. The FLA has on file detailed accounts of regular training for Esquel CSR staff that demonstrate the significant time and resource investments the company has made to meet Esquel’s training requirements as well as those of the company’s clients. The trainings cover a wide range of topics such as: brand collaboration, industry working groups, customer requirements, management systems, updates to labor laws, environmental initiatives, database systems, emerging CSR trends, sustainability reporting, human trafficking, forced labor, etc.
3. COMPANY AFFILIATE SHARES COMMITMENT TO WORKPLACE STANDARDS WITH PRODUCTION SITES AND WORKERS 3.1
Company Affiliate formally conveys workplace standards to production sites and receives written acknowledgement of standards and commitment to uphold them. Actions Taken: Esquel conveys workplace standards and commitments to all facilities as part of the communication related to overall expectations of each facility management team. All Esquel facilities have posted the Esquel Code.
Verification by FLA: During the headquarter visit, FLA reviewed photos of Esquel Codes posted in the factories. FLA has copies of the photos on file.
www.fairlabor.org
8
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
3.2
Company Affiliate obtains written agreement of production sites to (a) submit to periodic inspections and audits, including unannounced audits conducted by independent external monitors accredited by the FLA for compliance with workplace standards, and (b) collaborate with the Company Affiliate to remediate instances of noncompliance Actions Taken: Esquel asks factories to acknowledge in writing that they may be subject to periodic assessments by FLA or FLA appointed assessors, that they will cooperate openly, and that they will remediate any noncompliance that may arise.
Verification by FLA: FLA has on file email exchanges from 2012 between Esquel corporate CSR staff and factories whereby factories acknowledge that they may be subject to periodic assessments by FLA, they will cooperate openly, and will remediate instances of noncompliance. FLA recommends formalizing the process of obtaining written agreement from all applicable facilities to all of the items in Principle benchmark 3.2. This could be incorporated into existing CSR procedures within the company.
3.3
Company Affiliate includes an indicator focused on continuous improvement of compliance performance in its overall performance appraisals of production sites. Actions Taken: Esquel management evaluates factory performances every quarter on the following key performance indicators: (1) safety; (2) quality; (3) productivity and fulfillment; (4) human development, which includes information on wages, absenteeism, and turnover and (5) cost. The Director of CSR is present at the quarterly reviews, along with the CEO. Each factory tracks the information on a regular basis and the data is reviewed during monthly meetings. Each factory also has annual targets.
Verification by FLA: FLA has on file a sample operational review of a factory, where the above five key performance indicators are accounted for. During an interview with a factory manager, FLA verified the practice of providing quarterly data to Esquel headquarters, for the purposes of the performance reviews. FLA recommends incorporating additional CSR measurements into the overall performance appraisals of production sites. This recommendation was discussed with Esquel during the headquarter visit; Esquel will evaluate whether, over time, the company’s use of the SCI tool may be able to provide relevant data for such performance appraisals. Esquel is also sensitive to the need for any such appraisal to encourage transparency and dialogue with each site based upon fair comparisons.
3.4
Company Affiliate ensures that workplace standards are made available to workers, managers and supervisors in written form and appropriate languages. Actions Taken: Esquel has translated the company’s Code into languages appropriate for workers, managers and supervisors in the applicable facilities. Translations of the newly revised 2013 version of the Esquel Code are underway. The Esquel Code is posted in all Esquel factories.
Verification by FLA: FLA has on file copies of the Esquel Code in Bengali, Creole, English, Malagasy, Malay, Burmese, Nepalese, Sinhalese, Simplified Chinese, Traditional Chinese, and Vietnamese. FLA has on file photos of posted Esquel Codes in applicable facilities.
www.fairlabor.org
9
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
During the 2009 IEM in Sri Lanka, monitors noted that the Esquel Code was posted in English and in local languages. The 2009 IEM in Malaysia revealed that the Code was in the process of being translated to local languages and was not posted during the visit by FLA monitors. In the 2010 IEM in China, monitors confirmed that the Esquel Code was posted in the production area.
3.5
Company Affiliate ensures that workers, managers and supervisors are informed orally and educated about workplace standards at regular intervals to take account of labor turnover. Actions Taken: At Esquel factories, workers, managers and supervisors are trained at regular intervals on all elements of the Esquel Code. Each factory has a factory trainer on-site; a member of the Esquel CSR team has trained each trainer.
Verification by FLA: FLA has reviewed and has on file attendance records and presentations from worker orientation trainings held throughout 2012 at Esquel applicable facilities. The trainings cover Esquel Code elements, with specific trainings dedicated to EHS, fire safety and Human Resources policies. An example of records include a monthly training schedule for a facility in China, describing the daily, weekly and monthly trainings for new and current employees; training topics ranged from basic orientations to review of health and safety, conflict resolution, problem solving, supervisory skills, fire fighting, team building, etc. Records on file with the FLA include documentation related to the June 2012 training of factory service providers at the Esquel Sri Lanka site; service providers were trained on Esquel Code elements. FLA also has photos on file of worker and management trainings covering the Esquel Code and CSR topics at the Sri Lanka factory. During IEMs in Sri Lanka (2009) and China (2010), monitors confirmed that workers had been trained on the Esquel Code. During the 2012 field observation, FLA staff observed training by Esquel headquarter CSR staff of factory managers and supervisors on the Code as well as CSR topics.
4. COMPANY AFFILIATE ENSURES WORKERS HAVE ACCESS TO GRIEVANCE PROCEDURES AND CONFIDENTIAL REPORTING CHANNELS 4.1
Company Affiliate ensures there are functioning grievance procedures at production sites. Actions Taken: Esquel has a Grievance Policy, applicable to all Esquel factories, that requires them to have grievance mechanisms in place that allow and encourage employees to discuss any grievance with his/her immediate supervisor, and if not resolved, to have options for elevating the issue(s) to factory management. Esquel factories must have confidential reporting channels available to employees based on the culture and practices of the workplace; they may include suggestions boxes, employee hotlines, and/or an email address. Grievance cases must be recorded, reviewed and analyzed regularly to evaluate the effectiveness of the mechanism and to identify other areas of improvement. In one manufacturing country, there is a worker committee at every site that meets on a monthly basis. In another country, Esquel is working with 3 independent unions, (with 4 branches at the Esquel facilities) which file frequent grievances directly to factory senior management. At the remaining Esquel manufacturing sites there is an in-house union or worker committee which also helps workers file grievances when necessary. At each factory, there is also a health and safety committee where workers can raise concerns and in two factories, the management holds a regular monthly meeting with randomly selected employees as well. Grievances may also be raised through the unions. The timeframe for resolving a complaint varies depending on the nature of the grievance. Factories may post responses to grievances on a notice board or announce them over the public announcement system, if appropriate. Factories are asked to send monthly reports of grievances to the Hong Kong CSR Department. In 2010, an Esquel factory participated in “Piloting Principles for Effective Company-Stakeholder Grievance Mechanisms: A Report of Lessons Learned“, a project conducted by the Harvard Kennedy School’s CSR Initiative on behalf of the Special Representative of the UN Secretary-General for Business and Human Rights. The project
www.fairlabor.org
10
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
provided Esquel with feedback on its policies and procedures as executed in the facility. Specifically, Esquel received 1 feedback focused on enhancing the effectiveness of the factory-level grievance procedures. At the outset of the project, Esquel worked with FLA on a SCOPE Workers Survey and a Management Survey at the facility to independently assess workers’ and management’s perceptions of the existing grievance mechanisms.
Verification by FLA: FLA reviewed and has on file a copy of the Esquel Grievance Policy and factory-specific grievance procedures for Esquel facilities. FLA facilitated the SCOPE Workers’ Survey and the Management Survey portions of the above-described project looking at grievance mechanisms in an Esquel facility. Reports are on file with the FLA. Esquel has also made use of FLA materials such as the FLA’s “Advanced Module on Dispute Resolution: Rights Based Processes and Consensus Building.” The 2009 IEM in Sri Lanka revealed that despite an established Grievance Policy and a policy on the prohibition of harassment and abuse, several complaints by workers of verbal abuse by a particular supervisor were not consistently addressed through the grievance procedure. Esquel’s remediation plan described enhancements to the grievance procedure to include investigation of all harassment complaints, escalation to factory management and where possible, follow-up with the complainant, notice board summaries of grievances with management’s response and actions taken. In addition, as reported to the FLA, Esquel increased awareness of the grievance procedures and the harassment and abuse policy by posting banners in the canteen and making announcements through the public announcement system. Relevant production staff also received conflict resolution training. FLA has not conducted a verification visit to this factory. During the 2012 field observation, FLA staff noted that Grievance Procedures were posted in writing above the suggestion boxes outside of the canteen and sewing department.
4.2
Company Affiliate provides channels for workers to contact the Company directly and confidentially Actions Taken: Esquel places primary emphasis on factory ownership for the handling of employee grievances but has also put a system in place for employees at the factory level to report to the headquarter office, which should only occur when the factory-level grievance process is not working. The Esquel Grievance Policy asks that all factories have in place a grievance mechanism that allows a worker’s grievance to be elevated to Esquel management in Hong Kong, if necessary. Factories must also include the Esquel corporate headquarter hotline phone number in all communications on confidential reporting channels.
Verification by FLA: During the 2010 IEM in China, monitors confirmed via observation and worker and management interviews that a confidential noncompliance reporting mechanism was available for workers to contact Esquel directly.
4.3
Company Affiliate ensures training and communication is provided to all workers about the grievance procedures and channels. Actions Taken: Through the Esquel Grievance Policy, the company requires factories to inform and train workers on the grievance procedure and applicable rules.
1
Piloting Principles for Effective Company-Stakeholder Grievance Mechanisms: A Report of Lessons Learned,
pp. 13, 41-42, available at http://www.hks.harvard.edu/m-rcbg/CSRI/publications/report_46_GM_pilots.pdf.
www.fairlabor.org
11
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
Verification by FLA: The worker orientation trainings described above in Principle 3.5 include training on Grievance and Discipline Procedures. FLA has on file training materials and attendance records for sample trainings. In one example, the training covered methods to communicate a grievance, the process for receiving a complaint, the documentation involved as well as the approximate timeline. FLA has on file attendance records from March, April and June 2012 worker-management meetings at an applicable facility. Minutes from the monthly meetings mention the possibility of workers raising grievances. In one meeting, workers raised concerns about insufficient overtime hours; management replied that Sunday overtime was not permitted and overtime hours on public holidays were based on need. At the same meeting, management discussed the worker shortage and subsequent meeting minutes revealed that foreign workers were recruited. Workers and management also discussed solutions to the warm working conditions, safety procedures, and piece rate increases. FLA has on file attendance records for orientation training that covered grievance procedures, in addition to other labor related issues.
4.4
Company Affiliate ensures that grievance procedures and complaint channels are secure and prevents any punishment or prejudice against workers who use the systems. Actions Taken: The Esquel Grievance Policy is explicit that no employee will be subject to retaliation upon filing a grievance or participating in any grievance case. The Policy also requires that all grievances be dealt with seriously and confidentially, including keeping the complainant’s identity confidential when requested.
Verification by FLA: FLA has reviewed and has on file a copy of the Esquel Grievance Policy, updated in September 2012. This policy is also expressed in training materials reviewed by FLA staff. The FLA has seen no evidence of worker retaliation for the use of grievance mechanisms.
5. COMPANY AFFILIATE CONDUCTS WORKPLACE STANDARDS COMPLIANCE MONITORING 5.1 Company Affiliate conducts pre-production assessment of production sites to review compliance with workplace standards. Actions Taken: When taking on subcontractors, Esquel conducts pre-production assessments of the site. In building a new factory or in making an acquisition, Esquel takes workplace conditions and CSR policies and procedures into account at the outset. Policies and procedures on the pre-production assessment of subcontractors are currently undergoing revisions.
Verification by FLA: During the headquarter visit in 2012, FLA discussed with Esquel the company’s plans for building a new factory and a recent acquisition. The company’s Internal Review Guidelines prioritize assessments of newly acquired factories. FLA interviewed CSR staff on the acquisition of a new factory in 2011, where it was found that the factory being acquired had been using double books. A subsequent dialog occurred with existing and new factory management to look into the root causes and to discuss a remediation plan. FLA reviewed an example from when Esquel did not approve a potential subcontractor for workplace compliance reasons.
www.fairlabor.org
12
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
5.2 Company Affiliate monitors an appropriate sampling of applicable production sites regularly to assess compliance with workplace standards. Actions Taken: Esquel has an internal oversight system in place whereby all Esquel garment factories undergo Internal Reviews on an annual basis. In all cases, the Esquel Internal Review is preceded by training for workers, supervisors and/or managers on a CSR related topic. In addition to regular Internal Reviews, Esquel has an established policy and procedure to address overtime hours. Overtime hours are monitored at all facilities on a monthly basis. A corporatelevel risk analysis process is in place to ensure overtime is avoided where possible. Root causes are identified to track reasons for overtime and help find ways to reduce OT as much as possible. OT hours are tracked by month, number of workers, and department.
Verification by FLA: As verified during the headquarter visit, Esquel began conducting full Internal Reviews of all Esquel applicable facilities in 2009. Sample audit tools are on file with FLA. FLA staff reviewed overtime-tracking templates and examples. In 2012, Esquel began its transition to implementing the FLA’s SCI methodology for its internal monitoring program. Esquel started this transition with the Recruitment, Health and Safety, Termination & Retrenchment employment functions of the SCI.
5.3
Company Affiliate ensures that monitoring includes as appropriate, but not limited to, workers interviews, management interviews, documentation review, visual inspection, and occupational safety and health review. Actions Taken: Esquel Internal Reviews are comprised of the following components: opening meeting with factory management, management interviews, factory walkthrough, document review, interviews with workers and union committee, and a closing meeting.
Verification by FLA: FLA staff reviewed Esquel Internal Review Guidelines, which includes procedures for management, worker, and union committee interviews; factory site inspection; and review of documentation. Internal Review tools also include extensive review of factory policies and procedures in relation to workplace standards. FLA observed Esquel assessors conducting an Internal Review with SCI methodology. The assessment included Code of Conduct and SCI overview training, an opening meeting, factory walkthrough, worker interviews, management interviews, documentation review, review of previous assessment findings and a closing meeting. FLA provided feedback directly to the company. Assessors demonstrated a good understanding of the SCI methodology, sound practices related to worker interviews, management interviews and document review and a proper use of prompts to gather and crosscheck information. FLA recommends further enhancement of the Internal Review Guidelines to include Esquel’s use of SCI methodology.
5.4
Company Affiliate ensures that, where relevant, monitoring is consistent with applicable collective bargaining agreements. Actions Taken: Esquel ensures that Internal Reviews are consistent with the applicable collective bargaining agreements (CBAs) at 5 facilities.
Verification by FLA: Esquel provided FLA with copies of CBAs from Esquel facilities. FLA has on file one factory’s CBA comparison to the company Code. The document summarizes the clauses of the CBA and whether they meet or exceed the company Code and local labor law. Esquel’s Internal Review tool includes document review of any existing CBA policies.
www.fairlabor.org
13
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
6. COMPANY AFFILIATE COLLECTS, MANAGES AND ANALYZES WORKPLACE STANDARDS COMPLIANCE INFORMATION 6.1 Company Affiliate maintains a complete and accurate list of all production sites. Actions Taken: Esquel maintains a complete and accurate factory list.
Verification by FLA: FLA has reviewed Esquel’s complete and accurate list of all applicable facilities.
6.2
Company Affiliate collects and manages information on production sites’ compliance with workplace standards. Actions Taken: From 2009-2011 Esquel captured audit data during the annual Internal Reviews and filled in a document that captures both the findings and the remediation plans. Beginning in 2012, Esquel piloted the use of several SCI employment functions as its internal assessment tool and captured the data, findings and remediation plan in an Excel file.
Verification by FLA: During the headquarter visit, FLA reviewed Internal Review samples and confirmed that the document collects data, findings and remediation plans on workplace conditions at the factory. Findings are identified with the corresponding FLA benchmark and factories are provided an opportunity to comment and provide context within the report. The current data collection and management system at Esquel, while quite thorough and up-to-date, is manual and time-consuming. FLA recommends continued development of a database solution for assessment findings and remediation plans. This was discussed during the FLA visit to the company’s headquarters.
6.3
Company Affiliate analyzes noncompliance findings to identify trends, including persistent and/or egregious forms of noncompliance and reports to the FLA on such analysis. Actions Taken: Based on analysis of audits and experience at Esquel factories, the company has found that more prevalent noncompliances are related to EHS, overtime and communications issues. Esquel synthesized audit findings of all facilities over the course of 2009-2011 and identified persistent noncompliance findings related to labor and environment, health and safety by factory over time. Honing in on the number of health and safety findings, company analysis identified the three most common health and safety issues each year and took company-wide corrective action to address them. Esquel also conducted this analysis with respect to external audits conducted by other parties, which also helped them to prioritize focus areas for ongoing work on their internal systems.
Verification by FLA: Esquel has analyzed noncompliance findings, particularly due to the thorough capture of data from Internal Reviews, external brand audits of Esquel facilities, and the regular monitoring and approval system for overtime hours. FLA staff reviewed and has on file slides of analysis conducted. During an interview with the Esquel EHS Senior Manager at the Hong Kong headquarters, FLA staff noted the detailed tracking and analysis of EHS findings and remediation over time.
www.fairlabor.org
14
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
7. COMPANY AFFILIATE REMEDIATES IN A TIMELY AND PREVENTATIVE MANNER 7.1
Company Affiliate, upon completion of the monitoring visit, contacts the production site concerned within 14 days and collaborates with the production site to create a remediation plan within 60 days that addresses all noncompliances. Actions Taken: The Esquel CSR staff review the findings with factory management during the closing meeting at the end of the Internal Review process. Remediation plans are created by the factory management with input from the corporate team.
Verification by FLA: FLA staff reviewed Esquel Internal Review Guidelines that provide procedures for assessors in how to handle the discussion of findings and noncompliances. While the assessors may provide recommendations, corrective action plans are to be created in collaboration with factory management. The Guidelines state that assessors will draft the report within 30 days and send to factory management for comment. A timeline will be established and the factory must submit the remediation plan by that deadline. FLA staff verified adherence to the Guidelines and timelines after the observed Internal Review.
7.2
Company Affiliate takes steps to conduct root cause analysis, apply sustainable production solutions and prevent the occurrence of noncompliances in other production sites. Actions Taken: Esquel compiled a presentation of learnings from the UN/Harvard Grievance Mechanisms project (including analysis of root causes related to issues of turnover and overtime) and has shared it with other factories. Esquel conducts root cause analysis for findings related to overtime and health and safety. Beginning in 2012, Esquel has been capturing root causes related to 3 SCI employment functions. Since 2005, Esquel has had in place thorough policies and procedures to manage overtime hours in the factories. There is an Internal Overtime Risk Analysis Form that must be approved by factory management, the Director of CSR and the Associate Director of Production Planning & Control. This system provides key management in Hong Kong with visibility into the issue of working hours and the opportunity to review root causes of requested additional overtime. This review of root causes also leads to ideas about what preventative actions can be taken in the future, including the possibility of conversations with customers about how their forecasting and confirmation of orders, as well as the fluctuation of those orders contribute to the challenges faced in this area.
Verification by FLA: Regarding the shared learnings from the UN/Harvard Grievance Mechanisms project, FLA has copies of translated presentations as well as attendance sheets from several Esquel applicable facilities on file. FLA has on file Internal Review and CSR department documents that capture root causes related to overtime, health and safety and 3 SCI employment functions. During the 2012 headquarter visit, FLA interviewed the Director of CSR, CSR team members, and the Associate Director of Production Planning & Control regarding overtime policies and procedures. FLA reviewed sample Internal Overtime Risk Analysis Forms. Esquel also maintains a summary of all data since 2005 from Internal Overtime Risk Analysis Forms, capturing the working hours in excess of 60 by the number of workers affected, type of production (knit vs. woven), date, location, department and reason. Esquel demonstrated analysis of this information for peak periods, by departments that are commonly affected, as well as by measured progress over years. FLA staff viewed the latest summary data in September 2012.
www.fairlabor.org
15
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
7.3
Company Affiliate updates the FLA periodically on progress of remediation and confirms completion. Actions Taken: Esquel updates FLA as requested.
Verification by FLA: FLA staff confirms Esquel provides periodic updates on the progress of remediation and confirms completion.
7.4
Company Affiliate records and tracks the progress of remediation. Actions Taken: Esquel factories are asked to send in documentation as evidence of progress on remediation plans. Esquel CSR staff also follow up with factories by email, phone and / or follow-up visits. If by email or phone, they request supporting documentation, which is later verified during the next factory visit / review.
Verification by FLA: During the headquarter visit, FLA reviewed remediation plans and supporting documentation and confirmed that the company tracks implementation through to completion.
8. COMPANY AFFILIATE ALIGNS PRODUCTION CRITERIA AND WORKPLACE STANDARDS2 8.1
Company Affiliate analyzes production plans to ensure that production criteria are consistent with workplace standards. Actions Taken: Esquel has in place 3 levels of planning – annual planning, a booking stage when capacity is reserved, and actual order placement. At each stage, the Production Planning & Control department analyzes plans and negotiates with the Sales, CSR and factories regarding capacity in order to align plans with workplace standards expectations.
Verification by FLA: FLA interviewed the Associate Director of Production Planning & Control in September 2012 regarding the company’s 3 levels of planning and the regular communication and challenging negotiations that occur internally to ensure that production plans align with workplace standards expectations. FLA reviewed, as an example, the latest production planning and analysis that had also been shared with the CEO, Sales Directors, Planning team and CSR Department.
8.2
In the event of conflicts between production criteria and workplace standards in production plans, Company Affiliate provides a mechanism to resolve them in a timely manner to avoid negative impacts on workplace standards and reports to the FLA on those mechanisms annually. Actions Taken: The CEO and senior staff from Production, Planning & Control, Sales and CSR attend weekly meetings to review and align sales orders with production capacities in line with workplace standards. The reviews cover the current quarter and beyond. Updates on customer developments, expansion plans and CSR news are also discussed.
2
There is a FLA multi-stakeholder Working Group tasked with making revisions to Principle 8 for both buyers
and suppliers.
www.fairlabor.org
16
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
In the Internal Overtime Risk Analysis Forms (described above), the factory manager is able to specify a root cause of the issue and must provide a description/comments. Esquel considers whether there are alternatives to the proposed plan. Esquel also reviews the client production involved and the specific department affected. Esquel’s Director of CSR is in regular communication with Production Planning & Control staff and, in instances, can help prompt a negotiation on adjustments (e.g. to cost or method of shipment) if there are concerns about the impact of orders on workplace conditions. Esquel noted the tension when workers desire additional overtime hours, and at times, the realities that the company may lose workers if overtime hours are reduced below a certain level.
Verification by FLA: During the headquarter visit, FLA interviewed various Esquel corporate staff regarding the weekly inter-departmental meetings. In interviews with the Associate Director of Production Planning & Control, and review of his most recent data and presentation to the inter-departmental meeting, FLA staff confirmed that his team engages in extensive negotiations. There are a number of limitations to the possible alternative production plans, including that some brands have strict country-of-origin requirements and it is not possible to move their production to another facility. FLA reviewed sample Overtime Risk Analysis Forms and verified that Esquel tracks root causes and outcomes. Interviews with Esquel staff in various departments confirmed the complexity in identifying root cause when there are numerous variables and requirements. FLA confirmed that Esquel has a mechanism in place to capture conflicts between factory capacity and workplace standards. Pending approval by the FLA Monitoring Committee and Board of any revisions to Principle 8 and subsequent incorporation into the FLA’s annual reporting requirements for companies, Esquel will be expected to keep FLA apprised of progress.
8.3
Company Affiliate analyzes its production capacity on a quarterly basis to identify negative impacts of production plans on compliance and makes necessary adjustments. Actions Taken: Esquel has a weekly review of production capacity among senior leaders of appropriate departments. These reviews, in addition to the reviews and approvals of Overtime Risk Analysis Forms, enable Esquel to adjust production plans where needed and possible.
Verification by FLA: FLA interviewed senior staff from the CSR and Production Planning & Control Departments to verify regular internal communication and implementation of policies and procedures. Company efforts are aimed toward the analysis of factory capacity, negotiations and adjustments to production, where possible, to minimize negative impacts on working conditions
9. COMPANY AFFILIATE ESTABLISHES AND MAINTAINS RELATIONSHIPS WITH LABOR NON-GOVERNMENTAL ORGANIZATIONS, TRADE UNIONS AND OTHER CIVIL SOCIETY INSTITUTIONS 9.1
Company Affiliate reviews production base and develops a civil society outreach strategy that reflects the geographical distribution of production. Actions Taken: Esquel has an External Stakeholder Engagement strategy that frames the company’s engagement with universities, civil society organizations, government, suppliers and customers on the topic of workplace improvement, environmental conservation and community development. Esquel’s strategy is to engage with stakeholders that complement the company’s business needs and that (a) possess expertise and reputation on topics of interest and concern to the company; (b) are geographically located in areas of Esquel operation; and/or (c) can provide new and
www.fairlabor.org
17
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
unique perspectives. Esquel engages actors via phone, email, visits, conferences, seminars, workshops, meetings and company events. In addition, Esquel is engaged in various initiatives through memberships, participation, contributions and donations. Esquel’s Hong Kong headquarters has engaged with a variety of business associations, think tanks, consultants, environmental groups, and labor rights groups in China, Malaysia, Mauritius, Sri Lanka and Vietnam.
Verification by FLA: FLA has reviewed and has on file the company’s 2012 External Stakeholder Engagement strategy that covers all of the aspects described above.
9.2
Consults knowledgeable local sources as part of its monitoring activities Actions Taken: Esquel tracks all stakeholder engagement, whether led by the Hong Kong headquarters, staff based in mainland China, or field-level staff in South and Southeast Asia. Esquel’s engagement includes communications with groups local to the Esquel applicable facilities and knowledgeable about local compliance issues. FLA verified Esquel’s engagement with a substantial number and variety of CSOs in China, Malaysia, Mauritius, Sri Lank and Vietnam.
Verification by FLA: FLA has reviewed and has on file tracking documents with details of engagements described above in Benchmark 9.1, including contact names, purpose and content of engagement, and timeframe and frequency of engagement. Esquel was subject to two campaigns (dormitory conditions in Mauritius in 2011 and migrant workers in Malaysia in 2008) and has kept the FLA apprised of responses, engagements and corrective actions.
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 Actions Taken: Esquel’s overall engagement strategy has led to a number of pilot projects and initiatives. Esquel currently references an online database to evaluate current suppliers in China and drive improvements in the supply chain. In 2011, Esquel participated in a pilot worker development project with [another brand]. The training focused on communication, legal literacy, and time stress management. Over 200 workers participated in discussions, roleplaying, and other group activities. After the training, feedback and attendance records were analyzed to gauge methods to improve on future trainings. The company also invests in community development projects that touch upon challenges particular to sourcing countries, including schools and education projects, support for families and children affected by HIV/AIDS, and posttsunami relief efforts. In 2003, Esquel created the Y.L. Yang Foundation with a focus on the education of underprivileged children in Esquel operating countries.
Verification by FLA: FLA has on record details of an Esquel supplier in China that was found to have a water pollution record. Esquel worked with that supplier to remediate the violations in a preventative manner. Project overviews are on file with FLA.
www.fairlabor.org
18
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
9.4
Company Affiliate consults with legally constituted unions or worker representative structures at the production site during audits and remediation. Actions Taken: Esquel consults regularly with legally constituted unions representing employees at four factories in Sri Lanka, the inhouse union in Malaysia, the [union] in Vietnam and the [union] in China. Esquel CSR Team Internal Review Guidelines include specific procedures that require interviews with union committees, if available.
Verification by FLA: FLA staff confirmed the inclusion of union committee interviews in Internal Review Guidelines. FLA has on file the company log of interactions with trade unions and worker representatives gathered through annual Internal Reviews. The log reveals concerns, suggestions, and discussions of remediation.
10. COMPANY AFFILIATE MEETS FLA VERIFICATION AND PROGRAMMATIC REQUIREMENTS 10.1 Company Affiliate participates in FLA due diligence activities, including unannounced production site monitoring and company headquarter visits, as applicable. Actions Taken: Esquel has participated in the FLA’s monitoring/assessment program since 2009 and has received FLA staff at the company headquarters in Hong Kong as well at field locations.
Verification by FLA: Since affiliation as a PS in late 2008, Esquel has been subject to five FLA monitoring visits/assessments – 3 IEMs, 1 IEV and 1 SCI assessment. There have been no aborted audits at selected facilities. FLA staff has visited Esquel headquarters on numerous occasions, including a formal headquarter accreditation visit in September 2012. FLA staff has visited various Esquel factory locations, including an observation of an Esquel Internal Review in November 2012 at an applicable facility.
10.2 Company Affiliate completes a standardized annual report on fulfillment of Principles of Fair Labor & Responsible Production. Actions Taken: Esquel submitted annual reports covering activities from 2009- 2011.
Verification by FLA: FLA confirms that Esquel submitted the annual reports with information on Esquel activities from 2009- 2011. The 2012 annual report is not yet due to the FLA.
10.3 Company Affiliate maintains a complete and accurate list of applicable production sites with the FLA. Actions Taken: Esquel maintains an up-to-date applicable facility list on file with the FLA.
Verification by FLA: FLA confirms that the Esquel applicable facility list with the FLA is accurate and up-to-date.
www.fairlabor.org
19
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
10.4 Company Affiliate responds to FLA requests for documentation, contracts, information and clarification in a timely manner. Actions Taken: Esquel compliance staff responds readily to all FLA requests for documentation, contracts, information and clarification in a timely manner.
Verification by FLA: FLA confirms that Esquel compliance staff is responsive to requests for documentation, information and clarification. Esquel has signed the FLA’s Monitoring Services Agreement.
10.5 Company Affiliate pays annual dues and any other applicable fees. Actions Taken: Esquel has paid annual dues and all other applicable fees to the FLA in full and on time.
Verification by FLA: Esquel is up-to-date on payments of annual dues and applicable fees. Documentation is available at FLA headquarters.
www.fairlabor.org
20
ESQUEL GROUP: ASSESSMENT FOR ACCREDITATION
CONCLUSION Accreditation of the Esquel Group’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 Esquel. To check an affiliate's accreditation status, visit www.fairlabor.org/accreditation.
www.fairlabor.org
21
