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An initial assessment of Auchan’s action plan for combating undeclared subcontracting

Textile industry:
An initial assessment of Auchan’s action plan for combating undeclared subcontracting

AREA 2 – Increasing the effectiveness of inspections
The plan provided for the creation of a mission undertaking random traceability checks on production, involving unannounced visits to the sites on which our suppliers have undertaken to produce their goods (see area 5). This mission supplements the existing series of social (examining working conditions) and quality audits, and the production checks already in place.
The first random traceability check took place on 10/10/2013, in Bangladesh. In this country, these inspections are now operational and are being carried out by our local teams: a quality controller is assigned exclusively to this mission. So far, 82 unexpected inspections have been carried out in 46 factories (where 31 of our suppliers operate) of the 66 involved in producing goods for Auchan. In the wake of these inspections, 2 suppliers who were engaged in undeclared subcontracting have been delisted.
In India and China, the first random checks were carried out at the end of February 2014.
AREA 3 – Increasing the severity of sanctions against any suppliers engaging in undeclared subcontracting: business relations will immediately be broken off.
The new sanctions applicable to suppliers engaged in undeclared subcontracting were notified to suppliers in Bangladesh in June 2013, and again in January to suppliers by the offices in Bangladesh, India and China. These sanctions are as follows:
– Cancellation of the order in progress;
– and an immediate breaking off of business relations with Auchan (as indicated above in
the case of 2 suppliers). This includes any orders on which work has already begun but that are not yet completed at the date of the finding.
AREA 4 – Intensifying and systematically applying the safety and ethics training given to all buyers, and the impact of these issues on production costs, so that they can be taken into account when we determine our cost prices.
A comprehensive 2-day training course on responsible purchasing (Human Rights, Ethics, Quality and the Environment) is currently being developed with the assistance of a firm of external consultants, to replace the current training course. The training module will be finalised at the end of June 2014, tested in September 2014 and delivered to all buyers with effect from December 2014.
AREA 5 – Making the system function more smoothly by developing an Internet portal on which suppliers must declare which factories they will use to produce their orders, no later than 24 hours before production commences.
This “Traceability” Internet portal was set up in December 2013.
The purchasing offices in Bangladesh, India and China have trained all of their listed suppliers how to use it, and these suppliers are now declaring their production sites on it.
AREA 6 – Developing a partnership policy with strategic suppliers, in order to provide them with better medium-term visibility over orders and thus remove any temptation to resort to undeclared subcontracting.
The objective for 2017 is to develop a partnership policy with 100 strategic suppliers, on whom we plan to concentrate 80% of the textile sales turnover from purchasing offices.
This supplier strategy has been put in place to enable manufacturers to manage, schedule and anticipate their orders more effectively, and at the same time to develop a continuous improvement policy for their employee-welfare and quality standards. The purchasing offices have started to explain this strategy to suppliers, for example with an initial presentation meeting held for 16 strategic suppliers in Bangladesh on 18 February this year. The implementation of this strategy is being actively pursued, with a review being held at the end of each season. The Group is demonstrating vigilance in the deployment of this strategy, notably with regard to those suppliers who realise a significant proportion of their sales turnover with Auchan, in order not to destabilise them.
AREA 7 – Auditing these arrangements
As announced, Groupe Auchan’s Internal Audit Department has been instructed to audit this action plan and to check that it is being properly complied with.
This initial summary report is enabling us to take stock of the actions taken, 6 months after the plan was launched. Many actions are currently in progress and will be monitored in due course.
AREA 8 – Communicating at regular intervals on the progress made with this new policy
The content of internal audit reports and the outcomes of unexpected visits made by production inspectors will be published annually, in the CSR section of the group’s management report, starting in 2014.
Auchan would also like to take this opportunity to restate its positions regarding the questions raised by the Rana Plaza tragedy.
For the record, 20 days after the catastrophe occurred, NGOs indicated that a pair of trousers bearing our In Extenso brandname had been found in the rubble, even though the building’s ruins had already been cleared away.
Did Auchan do business with the companies that were present at Rana Plaza?
No. The company never placed any orders with any of the workshops at Rana Plaza and never had any business relationship with the manufacturers working in this building.
How did Auchan react after the NGOs stated that they had found this product?
Following the NGOs’ declarations, the company decided to carry out an in-depth investigation with the supplier who provided these trousers. He denies having engaged in any form of subcontracting on this order, and Auchan’s investigation did not yield any formal
evidence. In the absence of the slightest proof, we were unable to instigate legal proceedings against this supplier. We did however decide to unilaterally terminate our business relationship with him.
Did Auchan follow its own internal procedures when ordering the product in question?
Yes. Auchan had ordered the product that the NGOs said they had found in the ruins from a supplier who has its own audited factories that comply with Auchan’s requirements. The order for this product had been placed within lead-times that were entirely compatible with the production capacity of the supplier’s factory, and the order provided for deliveries extending over a period of several months. If the supplier in question did wish to subcontract the manufacture of some of these goods, he was contractually obliged to inform Auchan that he was taking this step, but he did not report any information of this nature.
Does Auchan prohibit its suppliers from subcontracting their orders?
No. Our suppliers are allowed to subcontract orders if they see fit, but in that case, they must systematically inform Auchan that they are doing so, so that we can inspect and approve the production site in question. In Bangladesh, all sites producing the orders issued by our purchasing offices have been systematically audited since 2010, and we approve them before production can commence.
Consequently, if the product in question had indeed been the subject of undeclared subcontracting, this would have been a complete violation of our business contracts and of the normal methods of collaboration with our suppliers.
Why doesn’t Auchan decide to pay compensation to the victims?
In the drama that unfolded at Rana Plaza, no direct or indirect link existed between Auchan and the companies operating on the site. Since Auchan never placed any orders with the companies at Rana Plaza, it cannot be held responsible for the building’s collapse.
For the record, and furthermore, in its report on the textile and clothing industry dated 2 December 2013, the National Contact Point, which is the OECD’s representative in France, calls on firms “to join forces with all stakeholders in paying compensation and reparations for harm caused where a direct link is established”. (recommendation no. 10)
Having one of its products manufactured on the site would represent a violation, by the supplier, of our business contracts and our normal ways of doing business. Needless to say, Auchan was extremely upset by this event, but responsibility for the catastrophe lies with those who forced the employees to work in a building that did not comply with local planning regulations and presented visible risks of a collapse. In the end, the investigation carried out by the country will define the names of those responsibles.
Does Auchan feel concerned about the working conditions and the safety of the workers who manufacture its products?
Auchan, which has always been faithful to its values of social responsibility, pursues a policy of responsible purchasing and accompanies its suppliers in a production process that shows respect for human rights. This is what prompted it to adopt a code of business ethics at a very early stage (in 1997) and to be one of the founder members of the Social Clause Initiative (in 1999), so that it could make a concrete contribution to achieving progress in the working conditions of its suppliers’ employees. This initiative has of course been deployed in Bangladesh, and in all areas of the world from which Auchan procures its goods.
In addition, and still in accordance with these same values, Auchan, together with 158 other companies (including 5 French companies), decided to sign the Fire and Building Safety Agreement (“the Agreement”), which seeks to improve safety standards in the textile factories in Bangladesh, via in-depth audits of building safety. Auchan, in the person of the Group’s purchasing office manager, is both making a financial contribution to and playing an active role in this initiative, which provides for an audit of the structures of the buildings comprising the country’s 1500 factories.
What was the story behind the closing-down of a factory working for Auchan in March 2014?
On 10 March, following an audit of building structures carried out under the Agreement (the FBSA), the Softex company was requested to close its factory. Auchan was a customer of this factory, as were many other international brands (some of them had signed the Agreement and some had not). Like all brands that are signatories of the FBSA, Auchan plans to contribute to the ongoing improvement of building safety. The fact that audits laid down by the Agreement and performed in factories working on behalf of major international groups can highlight possible risks, represents a genuine improvement in safety.
Overall, what resources is Auchan deploying to improve employee-welfare and safety conditions in Bangladesh?
Our 44 employees present in the country systematically carry out quality audits to approve each site on which our products are due to be manufactured, before production can commence.
The action plan supplements these audits with the mission involving random, surprise traceability checks on production.
Lastly, Auchan is making an active contribution to the FBSA, which provides for structural audits relating to the safety of factories in Bangladesh.

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