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ethical sourcing

Sourcing

Ethical sourcing

We will strive to source products in a responsible manner while working with suppliers to improve their social and environmental practices

  

…Kmart and Target have now joined international best practice on supply chain transparency…” Helen Szoke, CEO Oxfam Australia

Our businesses source products from a range of locations outside Australia, including China, Hong Kong, Bangladesh, Europe, the United Kingdom, Thailand, Taiwan and India.

How we source products from developing countries remains an important and challenging issue for our businesses. Buying products from developing countries creates economic benefits for those countries as well as allowing our businesses to provide affordable products to consumers. But many countries from which we source do not have the regulation or infrastructure to protect workers’ rights.

Wesfarmers acknowledges that it has an obligation to continuously improve the way it sources products from developing countries, and this year we have done this in a range of ways.

Increasing supply chain transparency

The garment industries are recognised as posing the highest risk for workers’ rights, because they involve low-skilled labour. This year, both of our discount department store divisions, Kmart and Target, committed to publish the names and addresses of their suppliers. 

Kmart published the names and addresses of its Bangladesh factories on its website in December 2013, followed during this year by Cambodia, Southern China, India and Indonesia, which all now appear on its factory list. Click here to read about this and other measures taken by Kmart to enhance working conditions and improve safety and security at supplier factories in developing countries.

Target published the names and addresses of its factories in Bangladesh in August 2014, but was working towards this during the reporting period.

Coles, which is a relatively small importer of apparel, ceased sourcing from Bangladesh in 2013 as part of a regular review. By reducing the number of countries from which it sources, Coles aims to work more closely with the local industries to help improve working conditions and safety in these factories. Coles published the names and addresses of its factories in Cambodia, India and Vietnam in September 2014, but was working towards this during the reporting period.

Kmart, Target and Coles are in the process of disclosing factory names and addresses on their websites

Transparency in relation to our supplier factory locations helps to ensure accountability and that decent conditions and workers’ rights are being upheld.

The CEO of Oxfam, Helen Szoke, said this about supply chain transparency: 

"Kmart and Target continued to reach important milestones towards ethical garment sourcing this year. The Rana Plaza collapse in 2013 underlined the risks and impacts of international sourcing. Kmart and Target were the first Australian companies to sign the Bangladesh Fire and Building Safety Accord and have now joined international best practice on supply chain transparency by published locations of garment supplier factories. We look forward to Kmart and Target continuing this important journey by successfully tackling the next major milestone for international sourcing – living wages."

Relationships with international suppliers

Building long-term relationships with our suppliers is a priority for our business. Many of our divisions are seeking to reduce the number and turnover of suppliers to increase visibility across the supply chain and enhance productivity and performance.

Our businesses choose their suppliers carefully and in high risk areas we engage with them regularly. This year, Target and Kmart joined the Benefits for Business and Workers Program, which is based on the premise that better businesses are able to support better jobs.  If the productivity of a factory improves, then workers, factory owners and customers can all share the benefits.  

During the year, Coles commenced a research study in conjunction with the International Labour Organization, to understand the effect of meal provision on worker nutrition and productivity. Workers are now being served a daily meal at one of its partner factories in Cambodia where some garments for the 'MIX' range are sourced. The idea of the program came about because it was observed that some Cambodian workers did not have access to ample fresh, nutritious food on site. Should the trial prove successful, Coles will consider expanding this to other Cambodian factories from which it sources.

Click here to watch a video about Target's ethical sourcing approach and relationship with a Bangladesh factory and click here to read about Bunnings' work with a supplier to deliver the first certified responsibly sourced range of Merbau decking and screening products from West Papua.

Our ethical sourcing audit programs

This year, 4,083 suppliers provided house-brand products to our retail businesses for resale. Our audit programs covered 3,904 of the factories used to manufacture products for these suppliers. Other factories were excluded from our audit program because they were considered low-risk due to product type or the location of the factory or supplier. This is because products that require a high level of skill in manufacture tend to be made by more sophisticated suppliers with better human resources management systems. OECD countries are considered to have robust enough regulation to address workers’ rights issues.

The factories under our audit program were in a range of countries, including China, Bangladesh, Thailand and India.

Findings of ethical sourcing audit program

Findings of ethical sourcing audit program 2014

 

This year, 2,622 factories were approved, which means there were no (or only minor) issues identified in an audit. They gained their ‘approved’ status either under our own audit programs, or because they have a current audit certificate from an international retailer whose audit processes meet our standards.

Critical breaches found in 40 out of 3,902 audited factories

A further 1,240 factories were conditionally approved, which means that issues were identified to be remediated by the factories within a timeframe, with appropriate follow up. By continuing to work with factories and follow up their remediation of workers’ rights issues, our businesses have a positive impact on the lives of people working in these factories. 

We identified critical breaches of our ethical sourcing policies in 40 factories across our retail divisions this year, due to issues (or suspected issues) including attempted bribery, child labour, unauthorised subcontracting, withheld wages and unwillingness to disclose information. Of these, six were remedied immediately, two had action plans that were on track at the time of writing and no further orders were placed at the remaining 32. 

Our audit program is continuous throughout the year. At the end of the reporting period, 374 factories were yet to be engaged in our audit program, either because they are new suppliers or because audit programs have been expanded.  

Fire and safety in Bangladesh

In the previous year, both our divisions with significant business in Bangladesh, Target and Kmart, signed the Accord on Fire and Safety in Bangladesh (Accord).

The Accord is a five-year legally binding agreement between international labour organisations, non-governmental organisations and retailers engaged in the textile industry, to maintain minimum safety standards in the Bangladesh textile industry. 

This year, factories registered with the Accord have been inspected to ensure that they satisfy required standards for fire and building safety systems. Target and Kmart are the lead brands in relation to at least a third of their Bangladesh supplier factories, which means they take lead responsibility for ensuring that any issues are addressed within the required timeframe.  

Taking a leading role on fire and safety in Bangladesh

The main issues identified under these Accord inspections related to water tanks on factory roofs and other overloading on the factory floor, which were deemed to be unsafe. These issues were addressed immediately with corrective actions taken to reduce the loading of the buildings inspected.

Ethical sourcing training

567 people trained about our ethical sourcing approach

Buying and sourcing teams need to be fully informed about our ethical sourcing commitments and their obligations, so that we can implement our policies. This year, approximately 1,020 hours of ethical sourcing training has been delivered to 567 people across our retail businesses, either through the Ethical Trading Initiative, external consultants, or via internal training.

Diversifying phosphate rock supply

CSBP, a business within our Chemicals, Energy and Fertilisers division, sources phosphate rock for its superphosphate manufacturing operation in Kwinana, Western Australia. CSBP's introduction of a regenerative thermal oxidiser in April 2012 has enabled us to use a wider range of phosphate rock supply options and since that date, it has not imported phosphate rock from the Western Sahara, where some groups have expressed concerns about human rights issues at the operations of producers. CSBP will continue to review its phosphate rock supply options as it heads into each production season.