1. 1 Walking the talk – Responsible supply chains Suppliers speak up: How their clients’ purchasing practices undermines supply chain compliance on wages and working hours Gunelie Winum Head of International Programs

2. Our vision: Cooperation and trade safeguarding Human rights Workers’ rights Sustainable development Our main goals: Strengthen members’ ethical trade efforts Advocate for increased engagement in ethical trade IEH - Ethical Trading Initiative Norway (est. 2000) Advocate and resource center for ethical trading (responsible supply chain management). ETI Norway is not about guarantee: members commit to continuous improvements

3. Persisting Code violations - the viscous circle Low wages Long working hours Accidents Why?

4. IEH/Members approach to purchasing practices as an ethical issue Purchasing Practices KPI’s in annual report Suggested KPI’s in GRI Supply Chain Reporting (G4, launch May 2013) Included in IEH Code of Conduct template Substantial part of IEH training in Norway and supplier trainings CN; IN; VN Discussed/raised issue internationally: ETI, DIEH, BSCI, GSCP  Many good practice examples

5. IEH Supplier Trainings 2007-2011 (  ) +800 suppliers in China, India and Vietnam, Many SMBs Wide range of sectors: Apparel; Footwear; Toys; Accessories; Home Wear/Interior; Agriculture and Horticulture Suppliers entire client base: EU, North America, Australia and Asia Norwegian clients said to be the better: Politeness or SMB advantage? ◦ Long-term trade relationship ◦ Communication ◦ Flexibility IEH Supplier Surveys Methodology & Topics Written & audio response surveys; discussion groups ① Communication buyer and supplier ② Placing and changing orders ③ Lead times ④ Price & Payment Terms About IEH Supplier Surveys on Purchasing Practices Chen Sing h Nguye n

6. Suppliers speak up: What’s wrong with PP? According to suppliers, buyers: Internal management is poor Cut, cancel and change orders frequently Place orders without checking factory’s production capacity and/or availability of raw material Samples: too many different, no co-ordination, no correction details Place orders without considering national holidays in country of production Some IEH Supplier Survey Findings: Ca 50% reports workings hours as toughest client requriement to comply with Labour shortage is the most challenging for factories Lead times has decreased from 3 years ago. Overtime increased in same period Ca 25% report they have to ask workers to work OT more than 20 days/month Suppliers face reduced profit margins: Additional costs not counted for when setting prices «From Thailand and China to Honduras and Morocco, factory managers reported short lead times» Oxfam, 2004

8. Buyer Low wages Long working hours Accidents Lead times Changes (too many!) in orders Price pressure Lack/insufficient cost calculation Poor production planning Poor management systems Competition Lack/insufficient cost calculation Summarizing problems Lack of communication. Holding back decisions Manufacturer Terms & conditions Merchandising strategy Long-term planning Investments: HR and equipment Unablele

9. Suppliers constructive in suggesting solutions Remember Diwali Remember CN New Year Remember Tet

10. Possible ways forward: 3-5 years Key Stakeholders Buyers Suppliers Industry Associations Multi Stakeholder Initiatives (Industry Initiatives) Capacity building/Action Points Awareness raising/training Aling internal policies, procedures & routines with ethical requirments Long-term trade relationships, incentives, Worker Reps Root Cause Audit/Assessment methodology Decent Work/Compliance Accounting Awareness raising/Training Decent Work/Compliance Accounting Standard Production Time/Budgeting skills Facilitate, Co-ordinate; Disseminate Good Practice, Institutionalize learning