Factory Fair Labor Compliance
REI’s commitment to stewardship is specifically called out in our core purpose. Respect of others is one the co-op’s six values, which serve as the foundation for how we conduct business, serve members, and treat each other.
In REI’s practice of stewardship and respect, the proper treatment of workers is a key tenet. To advance this practice, the Fair Labor Compliance (FLC) team partners with departments across the co-op as it implements fair labor strategies. In particular, the Sourcing and Fair Labor teams collaborate on process alignment, supplier approvals, and audit remediation.
REI’s FLC program has a unique element – a group of five top executives serve as the Fair Labor Oversight Committee (FLOC). The FLOC monitors program development and is consulted on key, strategic decisions. While the FLC team reports directly to REI’s general counsel, the FLOC has reporting responsibilities directly to the Audit & Finance Committee of REI’s board of directors.
In January 2011, the FLOC approved FLC’s first-ever strategic plan. The plan is composed of four key dimensions:
Audits and Capacity Building
Each year, REI audits a number of the factories where our branded products are manufactured. Since resources are limited, REI elects to audit a percentage of the “tier one” factories in our supply chain. REI identifies “tier one” as the location where final assembly occurs. In 2011, the supply chain for REI-brand product consisted of 133 factories. Of those, we audited 28 factories, or 21 percent of our supply chain. To reduce the burden on factories of redundant audits, we obtained eight of the 28 audits from other brands that maintain high standards for factory compliance.
Audit data and findings are uploaded in a shared industry database. REI then asks suppliers to identify the root cause of each finding, develop a corrective action plan, and commit to specific completion dates. The REI fair labor analyst consults regularly with suppliers throughout the process until the factory attains a status rating of “continuous improvement.”
The following Factory Code of Conduct violations were routinely identified during the audits:
- Lack of transparency in record keeping
- Inconsistencies in, and unavailability of, payroll records, such that auditors could not verify hours worked and related compensation
- Lack of policies and procedures to protect workers’ health and safety and prevent discrimination, harassment, and abuse
- Lack of worker education generally and, in particular, with respect to freedom of association and grievance procedures
The following chart illustrates the categories of non-compliance with REI’s Factory Code of Conduct.
In addition to the Code of Conduct violations, the following trends were identified by monitors, factory owners and non-governmental organizations:
- China continues to be a high-risk country from a labor perspective
- As vendors gain an appreciation for the importance of worker retention, their factories are paying higher than minimum wage (for regular hours) throughout China and Vietnam
- Overtime is not properly calculated or paid and some employees continue to work off the clock on Sundays and evenings
- Factory owners are voicing concern about the demanding behavior of third-party auditors, as their approach is counter to their interactions with brands
Internal Process Improvement
The FLC team and the FLOC created a formal series of escalation plans that provide a roadmap for consistently remediating difficult situations.
In addition, the FLC team and the FLOC focused on the persistent lack of transparency of factory management in disclosing accurate payroll information. Although this has historically been a common problem for REI and most brands, 2011 was the first year REI exercised a step-by-step remedial plan co-developed by the FLC team, Sourcing, and the FLOC. REI asked for cooperation on key action items from factories and vendors that would bring their facilities into compliance. The work is still ongoing and the results are still to be determined. Working through this process has strengthened the communication and collaboration between the FLC team and the Sourcing team.
Training and Awareness
California Transparency in Supply Chains Act
The California Transparency in Supply Chains Act (“the Act”) went into effect January 1, 2012. The Act requires brands that meet specific criteria to disclose their policies and actions to eradicate human trafficking and slavery in their supply chains. Human trafficking involves the recruitment, transportation, or sale of people for forced labor.
REI’s detailed disclosure on practices covered by the Act is available on REI.com.
External Collaboration
Associations
In 2011, REI actively participated with these associations:
- Fair Factories Clearinghouse
- Outdoor Industry Association Social Responsibility Working Group
- The Sustainable Apparel Coalition Social Labor Working Group
- Business for Social Responsibility
Service Providers
In 2011, REI engaged the services of third-party consultants for audits and capacity-building events, as follows:
- Openview, Inc., based in Hong Kong, specializes in China auditing and capacity building. Openview conducted audits in China and Indonesia
- Level Works, Inc., based in Hong Kong and San Francisco, conducted audits and Health and Safety Trainings in China and Mexico
- Global Standards, based in Hanoi, Vietnam, conducted audits in North Vietnam
- The International Labor Organization, based in Geneva, Switzerland, oversees the Better Work Programs in Cambodia, Indonesia, and Vietnam in which REI participates
- The president and founder of The Cahn Group gave a presentation to REI on the elements and attributes of a credible human rights program. REI is working with The Cahn Group in implementing grievance procedures at the factory level.
As REI developed the Fair Labor Compliance Program in 2011, we recognized and reinforced to two key components of success: collaboration with other companies, retailers, associations, and non-government organizations and a seamless and continuous path of communication between the Sourcing and the Fair Labor teams.