Integrative supplier management
GRI 407-1; 408-1; 413-1; 414-1
The production countries and factories for our consumer goods are chosen based on the requirements of our strategic risk management: we source particularly relevant product groups from at least two production markets – if possible – to ensure availability. We choose the factories carefully, following strict guidelines, to ensure that they meet our quality and sustainability standards. We see long-term business relationships with strategic partners as a decisive point of leverage. This is why, in 2017, we further reduced, in a socially responsible way, the number of suppliers that work for us to around 600, and continued working intensively with the suppliers to these key producers. As part of this risk-minimising purchasing strategy, there are specific characteristics for three purchasing countries:
Bangladesh: For years, Bangladesh has been one of the growing markets for purchasing clothing internationally. We have a direct business relationship – i.e. do business without intermediates –with a few selected producers there. These include long-term partners as well as newly opened, modern factories that meet our strict quality and sustainability requirements. Since 2012, we have handled purchasing in Bangladesh via a separate office in Dhaka. This greatly facilitates our oversight of the factories.
Ethiopia: The historic Turkish company Ayka Textile has been our supplier for many years. Since 2010, Ayka has had a textiles factory in Ethiopia as well, which we source products from. Ayka has fully integrated production in Ethiopia, i.e. all the production stages of cotton processing through to the finished product are concentrated in a single, modern factory. We have been involved locally here since 2011, especially with our WE programme, and will continue these efforts in 2018.
- Myanmar: Because around 50 % of our consumer goods assortment is produced in China, we work with longstanding partners there, too. To stay competitive, Chinese companies are increasingly investing in the garment industry in other Asian countries, e.g. Myanmar. We only accept the factories there if our suppliers can prove that they meet our stringent standards for quality, environmental, and social responsibility.
Ensuring respect for human rights in the supply chain
In 2011, the United Nations adopted the Guiding Principles on Business and Human Rights. They are based on existing human rights commitments such as the International Human Rights Charter and the ILO core labour standards. As an international framework, they formulate requirements for the public and private sector, and for the first time form a generally accepted reference framework that also obliges businesses to respect human rights in global supply and value chains and prevent human rights violations. The National Action Plan for Business and Human Rights (NAP) was adopted at the end of 2016 to implement the UN Guiding Principles on Business and Human Rights. In it, Germany’s Federal Government has for the first time, enshrined the responsibility of German companies for respecting human rights in a fixed framework.
We are aware of this corporate responsibility and integrated due care for human rights into our business practices many years ago. We follow the guideline of respecting human rights and preventing violations of human rights – from raw material to product, above and beyond compliance with national laws. We are committed to ensuring that workers in the supply chains can assert their rights.
As a responsible company, we continuously conduct risk analyses on current human rights issues. In February 2017, for example, we cancelled our participation in the international clothing summit in Dhaka with other manufacturers to protest the Bangladeshi government's repressive action against workers and trade union leaders. In December 2017, in a letter co-authored with other leading brands and trade unions, we called on the Myanmar government to recognise the rights of the Rohingya ethnic minority.
One key element in improving working conditions at production sites is our WE (Worldwide Enhancement of Social Quality) qualification programme, through which we have since 2007 supported 364 producers in implementing and improving their labour and social standards using dialogue-based training. Another important step on this path is the signing of the framework agreement with the IndustriALL Global Union in September 2016. The aim of this agreement is to further improve working conditions in the Asian production sites from which Tchibo sources products. This includes, in particular, the workers’ right to form unions and engage in collective bargaining. In close coordination with the IndustriALL Global Union, we began implementing this in the priority countries Ethiopia, Bangladesh, Myanmar, and Turkey in 2017.
Creating transparency in the supply chain
An essential prerequisite for making supply chains sustainable is transparency. But supply chains are complex, as exemplified by the supply chain for cotton textiles: there are many steps in getting from cotton farming to finished garment, not just harvesting and transporting the raw material, but also other upstream steps such as spinning, weaving, knitting, dyeing, washing, packaging, packing. These are often carried out by different suppliers in different countries. In addition, there are suppliers of ‘ingredients’ such as buttons, zippers and appliqués. Knowing these different stages of the value creation chain is a challenge that we tackle together with our suppliers, because asserting labour, social and environmental standards involves the entire supply chain of all products, not just the last step of manufacturing. Our concept of focusing on fewer producers and developing them into strategic suppliers greatly facilitates this task.
To increase public transparency in global supply chains, in early 2017 we published our list of producers for home textiles, clothing and footwear, and updated it in early 2018. More and more NGOs and consumers want to know where products come from and under what conditions they are made. We want to meet this need for information. At the same time, however, it is important to us to limit expectations of transparency, because transparency is one thing, change is another. Greater transparency is not always accompanied by improvements. This applies in particular to production steps that lie deep in the supply chain, such as Tier 3 or Tier 4. This is one reason why we have so far taken a critical view of transparency in the form of traceability – it involves considerable manual effort in data collection, which devours capacities that we would rather invest in change programmes. Besides, we have known for some time that many problems are so complex that they have to be dealt with in cooperations. The focus on single supply chain approaches, driven by traceability requirements, carries the risk that time and energy cannot flow into change measures. Moreover, this step involves risks for our business, because by publishing our lists of producers, all our competitors now have transparency about the production sites we have qualified – including those competitors who choose not to publish their own lists of producers. This carries the risk of losing supplier capacity for our own needs. However, we rely on the principle of fairness in competition and feel that society’s interest in transparency in global supply chains is more important than the potential threat to our individual interests.
In 2017, Tchibo also further increased the transparency of wet operations - i.e. upstream suppliers that use water and chemicals on a large scale. Since integrating a corresponding query into our standard processes, we have received information on the relevant preliminary stages for around 90 % of the textile products placed. In all, 166 wet operations were identified where water-based processes such as dyeing or finishing are carried out.
Supplier qualification: building trust and improving conditions in dialogue
Since 2007, Tchibo has relied on the WE qualification programme to achieve a long-term improvement in working conditions at the production sites and ensure respect for human rights, especially in Asia. The dialogue programme, which was jointly developed with the Germany’s Society for International Cooperation (GIZ) and Federal Ministry for Economic Cooperation and Development (BMZ), locally supports producers in complying with human rights at their factories and gradually improving working conditions. Through dialogue and training, Tchibo empowers employees, managers and employees in the production facilities, as well as their representatives, to build and maintain mutual trust; moderated by trained dialogue facilitators, they independently develop solutions. Tchibo employees are an integral part of this dialogue. This approach has had a tangible impact: thanks to WE, occupational health and safety have been improved, wages increased and benefits such as accommodation, canteen meals and opportunities for recreation improved. By the end of 2017, 364 producers from eleven countries (Bangladesh, Cambodia, China, Ethiopia, India, Laos, Myanmar, Pakistan, Thailand, Turkey and Vietnam) had participated in WE training courses or completed the programme. This means we have reached around 360,000 people in factories to date – managers as well as workers.
In 2015, based on a project evaluation and our many years of experience, we began to develop the next step in the evolution of the WE programme. On the one hand, the idea is to tailor the programme even more individually to the respective production countries and increase its effectiveness. On the other, we are focusing WE even more stringently on human rights in accordance with the ILO Core Labour Standards, to boost social sustainability. We are also separating out the environmental standards training from the WE programme, and shifting it to independent programmes and projects as part of our Detox Commitment. This allows us to delineate the topics more sharply from each other and increase the effectiveness of the measures, as the two topics require different implementation approaches.
Five key topics will form the core of the programme from now on: prevention of modern forms of slavery, occupational health and safety, living wages and reasonable working hours, freedom of association and collective bargaining, and protection against discrimination and sexual assault. The training and measures related to these key topics are based on international and national standards, guidelines and laws. The factory’s employees and managers and the local dialogue coaches independently decide which of the focus topics they consider a matter of priority, based on their individual circumstances.
At the Fair Wear Foundation (FWF) conference in November 2017, the ‘Strong Together’ project, which we carried out in cooperation with hessnatur, came third in the Best Practice Award 2017. In cooperation with hessnatur, we were able to sustainably improve working conditions in a supplier company through intensive training and restore the destroyed trust between the union and management.
Case Study Ayka Textile
In Ethiopia, we cooperate with the Turkish textiles company Ayka Textile, which opened a factory for clothing and textiles in Addis Ababa in 2010. At Ayka Textile in Ethiopia, all production steps take place at one site, from processing the cotton to the finished product. Around 6,000 employees work at the Addis Ababa site. We have been running our WE programme (Worldwide Enhancement of Social Quality) here since 2011 and have achieved a great deal since then. Communication and the working atmosphere have improved significantly, a pay-scale system has been established, co-determination structures have been introduced and are also practised, and there is a trusting and constructive working relationship with the local trade union. Discrimination cases have decreased significantly, occupational health and safety measures have been introduced and benefits improved for all employees.
In the autumn of 2017, we faced a major challenge: Due to a national state of emergency in the fourth quarter of 2016, reliable production in Ethiopia was virtually impossible, and production losses were high. Together with Ayka boss Yusuf Aydeniz, in December 2017 we began to further develop the structures and processes at Ayka in such a way that stability can be restored. A first workshop on restructuring the production process has already taken place. The aim is to further improve not only delivery times but also product quality. The further development of high social standards and the integration of sustainable local cotton into the supply chain will also be part of future activities. We are working with the Ethiopian government and other stakeholders on implementation. The development of a sustainable cotton sector in Ethiopia is also part of a 15-Year Plan by the Ethiopian government
Preventing risks, auditing producers
Usually the value chain of a consumer good comprises many stations worldwide. As a trading company, we cannot rule out breaches in this global chain, but we can identify them and systematically work to minimise them. To do this, we have developed a risk management system across the value chains, as stipulated by the United Nations’ Guiding Principles for Business and Human Rights.
The basis for cooperation with our suppliers is the Tchibo Social and Environmental Code of Conduct (SCoC), which we updated in May 2017. We always audit new suppliers and producers according to the requirements of the SCoC before awarding a contract. Only if factories pass the audit do we accept them into our portfolio of producers. At a higher level, we also analyse the situation and risks in those countries where we want to produce our products or have them produced. We also prioritise factories with regard to their respect for human rights and culture of dialogue between managers and employees. The results of these analyses are incorporated into the purchasing strategy.
Suppliers that have not yet been able to participate in the WE programme are audited every three years in compliance with the stipulated deadlines; either we audit them ourselves, or commission external service providers to perform the audits. We also continue to further develop our monitoring system. In 2017, for example, we began successively auditing leather-tanning operations.
We see long-term partnerships with suppliers and producers as an opportunity to sustainably improve conditions in the supply chain. In 2017, we focused on further developing our existing key supplier program. We will give our partners greater planning certainty and focus on greater commitment in adhering to and improving social and environmental standards.
Establishing grievance mechanisms
Grievance mechanisms allow those affected by violations of labour and environmental standards to formulate and address their problem elsewhere than to their employer. If there is a lack of trust in the employer or national complaints bodies, or if there is a threat of serious consequences, they can turn to the production site’s clients or to independent organisations. Afterwards, the latter can – ideally in cooperation with the complainant – seek joint solutions and provide access to remedies.
However, such a grievances mechanism alone cannot be the sole approach to problems in factories. On the one hand, it requires resources that those affected do not necessarily possess despite many measures: the knowledge that an independent grievance channel exists and access to it, as well as the language and capacity to formulate a complaint. This creates hurdles, especially for individuals affected by infringements, which they find difficult to overcome without the trust and support of others. On the other hand, such a mechanism does not contribute to long-term improvement, as it only intervenes retrospectively, in some cases long after the incident occurred. Causal structures in the workplace that favour violations of labour law are rarely changed in this way.
The key to change is local trust and dialogue. In this way, those affected and those responsible can jointly identify, solve, and prevent the problems. Employee representatives provide safety when lodging complaints with supervisors, and are also important partners for improving workplaces and processes in dialogue.
In addition to the SCoC, which forms part of every purchasing contract and which also obligates producers to set up grievance procedures for employees and their representatives, Tchibo relies on three different approaches to anonymous complaints mechanisms:
Sectoral grievance systems: We also work with the IndustriALL Global Union to make particular efforts to promote freedom of association and the workers’ right to form unions. Our strategic objective is for workers to be able to form local, independent and legitimate employee representations and exercise their right to join unions. The idea is to resolve complaints directly and locally and prevent violations.
The framework agreement with IndustriALL also describes a process by which Tchibo's national and local IndustriALL memberships inform us about labour law violations at production sites. In the first year of the framework agreement, we worked with trade unions from Bangladesh, Cambodia and Turkey to resolve incidents on the ground. We also work with other major brands to increase our leverage. As part of the ‘Accord on Building and Fire Safety in Bangladesh’ we have established a cross-factory grievances system with representatives of trade unions, NGOs and trading companies. In addition, health and safety committees are being set up to report security issues at an early stage.
Dialogue-oriented grievance channels: In our dialogue-oriented qualification program WE, we create a trustful space and the opportunity for employees to address shortcomings and wishes, and to work together with the management on improvements.
Direct grievance channels: Since the share of (unionized) production sites in Asia and hence among our suppliers is low, Tchibo has set up mechanisms whereby workers can also turn directly to Tchibo in cases of labour law violations. Since the WE Facilitators are regularly on site at the factories and have built up the necessary trust among employees, they are often the first point of contact. If they cannot resolve the problems as part of their activities, they will involve Tchibo and we will seek appropriate action beyond the programme as well.
We also accept complaints directly: Grievances can be addressed directly to Tchibo through non-governmental organisations or by using the email address email@example.com.
Reducing environmental impact in production
Besides putting labour and social standards into practice, we are also committed to reducing the environmental impact of extracting raw materials and manufacturing our consumer goods. We audit the producers for compliance with our environmental standards and share knowledge related to climate and environmental protection with them. A key component of our work is the Detox Commitment to Greenpeace, signed in 2014, in which we pledged to cease the use of unwanted chemicals in production, especially at our textile suppliers, by 2020. In addition, we are engaged in industry-wide initiatives to reduce CO₂ emissions in production and to conserve biodiversity.
Detox Commitment: Minimising the use of chemicals
In 2011, the environmental organisation Greenpeace launched its Detox campaign to draw attention to the use of hazardous chemicals in textile production. By signing the Detox Commitment in October 2014, like many other international trading companies we publicly pledged our commitment to end the use of hazardous chemicals in production, especially by our textiles suppliers, by 2020. The task now is to achieve this ambitious goal step by step – a significant challenge, especially given the widely ramified supply chains.
The basis for eliminating such chemicals from our supply chains is the Manufacturing Restricted Substances List (MRSL). It lists hazardous production chemicals that have been prioritised, and a timeline for their elimination. As part of its membership In the Partnership for Sustainable Textiles Tchibo supports the MRSL of the Zero Discharge of Hazardous Chemicals (ZDHC) initiative as a common minimum standard and starting point for the industry. But Tchibo often goes far beyond them in its own requirements. For example, even before 2016, we completely banned all PFCs (per- and polyfluorinated compounds) for water-repellent coatings on outdoor clothing textiles. Tchibo uses PFC-free finishes like ecorepel® instead. There is also a complete ban on flame retardants in the manufacture of Tchibo products. These requirements formulated in the Tchibo MRSL are being continuously further developed. In addition, process-based restrictions were defined in 2017. Since signing the Detox Commitment, Tchibo has systematically created transparency about the detox-relevant upstream steps in its textile value chains. Since Jun 2017, we have identified the upstream ‘wet plants’ for about 90 % of our orders. Wastewater analyses were conducted at these wet plants to obtain information on the presence of undesirable chemical groups and to derive priority needs for action from this. The results of these tests are published on the Institute for Public and Environmental Affairs (IPE) website.
Tchibo offers its suppliers assistance in the implementation of the sometimes complex and demanding requirements, and we further expanded this offer in 2017. To promote the availability of on-site consulting services, we developed a qualification programme for chemical- and wastewater-intensive production areas in a strategic alliance with REWE Group and the Gesellschaft für Internationale Zusammenarbeit (GIZ). The project will run for three years and has an investment volume of 2.4 million euros. In 2017, the training concept and materials were developed and trainers were trained in Bangladesh and China. 20 producers with wet processes took part in the workshop held in the run-up to implementation. By 2020, 110 producers in Bangladesh and China are to be trained. Findings from individual factory visits and training sessions conducted by Tchibo 2017 were incorporated into the strategic alliance’s development of the program.
The long-term goal is to establish a training and consulting network that is available to all companies in the region.
However, this goal and other more complex problems arising from commitment cannot be solved by individual actors or groups of actors alone. That is why we are committed to creating challenging and consistent framework conditions in the textile industry. We have teamed up with other players in the sector in the Partnership for Sustainable Textiles and other cross-sector initiatives and cooperations to develop solutions for making the ambitious Detox targets a reality. Also in 2017, Tchibo developed scenarios for a sustainable Chemicals sector as part of a research project at Darmstadt University of Applied Sciences.
“In October 2014, Tchibo became the first major retailer to commit to getting rid of toxins by 2020. In contrast to the other supermarket chains, Tchibo’s commitment encompasses not only clothing and footwear, but its entire Non Food portfolio. The various publications connected with its Detox commitment show that Tchibo has established itself as a frontrunner.” (Greenpeace)
Carbon Performance Improvement Initiative (CPI2)
In 2011, we teamed up with eight other companies to found the Carbon Performance Improvement Initiative (CPI₂). It uses an online tool to give manufacturers specific recommendations on how to reduce energy consumption and hence greenhouse gas emissions in production. Modules for water and chemicals management have been integrated since 2015, for which 23 factories registered in 2017.
Biodiversity in Good Company
Since 2012, we have been a member of a cross-sector initiative called Biodiversity in Good Company. By signing its Leadership Declaration, we have committed, among other things, to protecting biodiversity in our environmental management system, defining concrete biodiversity targets, and gradually implementing them together with our suppliers. We will publish our next Progress Report in 2018.