Events for ETI Members

RAISING THE STAKES
ETI AGM November 2002

Roundtable Workshop 2
How influencing suppliers is best achieved when buying power is limited?

Chair:	Dan Rees, Director,ETI
Speakers:	Rachel Wilshaw, Ethical Purchasing Manager, Oxfam Fiona Gooch, Ethical Business Advisor, Traidcraft
Case Study:	Meriel Hoban, Code of Practice Co-ordinator, Next

Who participated

13 participants attended and amongst members there were 8 companies, 1 Trade Union and 2 NGO represented. Staff from ETI Secretariat were also in attendance.

Key points from presentations

Fiona Gooch, Ethical Business Advisor, Traidcraft

This presentation gave an overview of experience and lessons learned in:

Agricultural commodities.

• Majority of product bought indirectly (e.g auctions) with little tracability to source. Yet these workers often endure the worst conditions. These supply chains therefore high-risk. E.g coffee producers are paid deflated prices at auction that do not conform in any way to a living wage. Cocoa another example of high risk supply chain.
• Yet companies have managed to make progress on other (non-social) standards such as pesticide residues.

General Merchandise

• Characterised by very short-term supplier relations (e.g fashion and accessories).
• Traidcraft works in these sectors by establishing long-term relationships with the suppliers but helping them adapt to changing demands of the market.
• Could members work together in key source areas "cluster towns" e.g Moradabad in India?

Lessons learned and ways forward

• Increase the proportion of direct purchasing
• Explore other alternatives for improving labour conditions in commodity purchase.
• Work together to raise awareness about labour standards in key (e.g cluster) areas. No member may have a lot of purchasing power but together we may have some influence.
• Support direct suppliers to take responsibility by working down the supply chain.
• Learn from experiences of working with "cluster towns".
• Establish realistic goals of year on year improvement.

Meriel Hoban, Code of Practice Co-ordinator, Next

Experience

• Parts of Next's supply chain are highly fragmented and this poses a number of difficulties. (Who is responsible? Short-term relationships, manufacturing/assembly dispersed across numerous countries, small orders, leading to a low bargaining power. Also with agents, where in many instances the other customers do not have codes).
• Products include accessories, gifts, footwear and home industries. Next has 1,300 factories in 38 countries and have audited 40% of them. In footwear over 250 factories and 78 suppliers.
• Successes include: improvement by direct suppliers and agents who have then developed their own code in their sourcing.
• Failures include: suppliers who have disengaged from Next because they do not want to comply with social standards and do not need to supply others.

Lessons learned and ways forward

• Possible actions to influence suppliers in these conditions.
• working with suppliers and agents more closely.
• use strength of the brand to influence (often greater than the order size for big brands), incentive of extra orders.
• raising awareness through supplier training.
• approaching trade associations.
• joint retailer approach at e.g. trade fairs and associations and with key suppliers.

Rachel Wilshaw, Ethical Purchasing Manager, Oxfam

Experience

• SSS (stable, short and simple) supply chains are clearly the easiest to apply codes with confidence. The further Oxfam moves towards the complex supply chains the higher the risks generated. Can we change existing supply chains to make them easier to work with?
• In those circumstances have to start by raising the awareness of suppliers and as audits the principle means of close contact, they have to serve the purpose of changing attitudes.

Lessons learned and ways forward

• You can use the brand, the efficiency argument, provide a free consultancy service which will include the ethical aspect.
• Include the language and cultural factor when approaching suppliers.
• Two types of supply chains require focus - replenishment and seasonal products/fashion.
• Initiatives to raise awareness and the capacity of suppliers and middle management are crucial.

for full presentation notes please contact: adil@eti.org.uk

Key issues arising

Raising awareness of suppliers, agents, small producers and homeworkers was a common trend in all the presentations. Members agreed that in the following initiatives had proved helpful or promising:

• Use audit/visits as an awareness raising/educational opportunity. Audit visits can be used to teach factory/workplace management how to monitor (e.g. Health and Safety) on an ongoing basis.
• Management can be encouraged to implement other monitoring processes too and members can provide technical support to help them do this.
• Focus first on the three key corrective actions rather than a list of 15 and feedback to supplier after improvement.
• Training and briefing of suppliers and agents.
• Get buy in of suppliers at governance level and commitment to educate/raise labour standards with their own suppliers.

Members also highlighted the importance of using tools other than audit/inspections to improve observance to labour standards. Until now, much of the focus of the membership and ETI has been on supplier inspection techniques/corrective actions/verification. In fragmented supply chains there may be other approaches that are more cost effective and credible. For example:

• building capacity and awareness is particular locations such as the "cluster towns" with (e.g homeworkers, suppliers, agents and others). An idea to emerge from discussion was developing "ethical trade forums" to which suppliers and other key stakeholders could be invited.
• aim to influence government (regional or national) to take more responsibility for applying the law. It makes most sense to work in alliance with others in order to do this (e.g. DFID, ILO)
• develop better benchmarks of performance to help companies measure suppliers progress in these supply chains.
• Improve the HR management in supplier workplaces.

Discussion focussed on the importance of the quality of the relationship between buyers and suppliers when hoping to increase influence.

• Dangle "the carrot" - the logical thing to do when you don't have a stick! There are links between improved quality and productivity and raising labour standards.
• Also makes sense to focus first on replenishment markets rather than seasonal.

Awareness and capacity building of workers to understand their rights and codes was also a theme.

• Companies should focus first on building the relationships with trade unions and other organisations that can do this work credibly. ETI members can be sources of information.

Summing up/recommendations

• Don't just audit! Use visits as opportunities to raise awareness and capacity of suppliers to raise labour standards.
• Present the "win-win" of raising labour standards and improving business standards and encourage suppliers to make small, tangible steps using carrots not sticks.
• Harness and develop local resources including government.

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See also:

• ETI Annual Report 2001/2002 - "Raising the Stakes"
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• Events