GSUS Clothing industries

Novem ber 2004

A m sterdam , 2004

Contents

1. Introduction of the research ...... 3 1. GSUS Clothing Sindustries: clothing com pany of streetw ear...... 4 1.1. Introduction ...... 4 1.2. Strategy towards the market...... 5 1.3. Ownership structure GSUS ...... 6 1.5. Financial facts and figures...... 7 1.6. Number of employees ...... 7 2. GSUS: CSR Policy...... 7 2.1. GSUS and its CSR history ...... 7 2.2. Transparency ...... 8 2.3. Responsibilities within the company regarding CSR ...... 8 2.4. The environmental policy of GSUS...... 8 3. Fair W ear Foundation (FW F) M em bership ...... 8 3.1. The Fair Wear Foundation: an introduction...... 8 3.2. Strengths of FWF...... 12 3.3. Weaknesses of FWF ...... 13 3.4. Where GSUS is at...... 14 3.5. Conclusion: the value of FWF membership...... 14 4. GSUS and its suppliers...... 15 4.1. Outsourcing trends of GSUS...... 15 4.2. Production strategy ...... 15 5. Conclusions by SO M O on the CSR policy of GSUS...... 16 Annex 1: D istributors Gsus...... 18

G SU S and the Clothing Industry 2

1. Introduction of the research

SOMO is a centre for research on multinational corporations. SO M O has been critically follow ing and researching developm ents in the field of corporate social responsibility (CSR) and corporate accountability for m any years. SO M O ’s expertise in this field lies prim ilary w ith labour standards, hum an rights and environm ental issues in developing countries, and the (inter)national initiatives that are being developed to im prove corporate behaviour in these areas. This is done both through research into the actual practices of m ultinational corporations in developing countries, and by exam ining such issues as im plem entation, m onitoring and independent verification of CSR standards.

In 2003 and the first half of 2004, SO M O conducted a sector study on the garm ent industry.1 The study described trends and ‘critical issues’ in the sector from the perspective of poverty eradication and sustainable developm ent. The trends and critical issues w ere identified through discussions w ith organisations and trade unions w orking on garm ents and textiles. The study aim ed to give insights and background inform ation for groups w orking on im proving the situation in the garm ent industry and to provide argum ents for civil society organisations to feed the debate on trade & investm ent and corporate accountability. The study w as conducted by SO M O in collaboration w ith Southern partners. SO M O focused on the corporate structures and relations throughout the sector and the production, supply and subcontracting chains. Another part of the sector study conducted by SO M O includes a w ider study on Turkey’s changing position in the w orldw ide garm ent industry, country case studies on M alaw i and Indonesia, and five bulletins, each focusing on a particular issues that currently directs the garm ent industry.

As part of the SO M O study on the garm ent industry, SO M O conducted tw o com pany case studies on the Dutch com panies GSUS and W E International. These com panies w ere selected for a num ber of reasons: W E International w as selected because of its involvem ent in the SA 8000 system . SA 8000 is one of the initiatives that receives m uch attention in the CSR debate. Therefore, SO M O w as interested to assess the level of im plem entation of CSR norm s by one of the m ain proponents of SA 8000, nam ely W E International. GSUS, a sm all Dutch garm ent brand, w as selected because it is a young, fast-grow ing com pany. SO M O w as interested to assess to w hat extent such a young new com er in the field w as w orking w ith CSR issues.

The case studies on these tw o com panies have focused on their corporate structures, CSR policies and im plem entation system s in place. H ow ever, it w as beyond the scope of this research to assess the actual labour conditions in the factories that produce for these com panies.

1 This study w as co-financed by the Dutch M inistry of Foreign Affairs

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1. GSUS Clothing Sindustries: clothing com pany of streetw ear

G SU S2 Clothing Sindustries B.V. Johan van H asseltw eg 27 1021 KN Am sterdam

1.1. Introduction G SU S is a Dutch clothing com pany of street w ear. The founders of G SU S started w ith a shop selling clothing designed and produced by others in 1993. In 1996, they had their ow n collection produced for the first tim e. The original idea w as to design clothing for the youth and related to pop m usic. N ow adays, pop artists w ear G SU S clothing, like Anouk, Krane, Krezip, 100% Isis, the Am ericain band Fun Loving Crim inals, the hardrockband Sepultura and Fear Factory.3 4 G SU S Sindustries has grow n to a w ell-know n brand available throughout all of Europe, Australia, South-Africa and the U SA. The brand nam e G SU S ranks num ber 2, before AJAX on num ber 3, in the Dutch national brand com petition, according to a poll conducted by the m arketing m agazine Adform atie in 2004. The poll m easured the popularity of brand nam es from all industries5.

The European headquarters are located in Am sterdam -N oord w here about 70 em ployees are w orking. The design team of G SU S presents 4 collections per year. At the end of 2003, 3 G SU S stores w ere operating under the nam e “H eavens Playground” in The N etherlands and 1 in Spain6. In total there are about 200 selling points in The N etherlands, like the ‘Chill O ut” departm ent of departm entstore ‘De Bijenkorf’ and in streetw earstores throughout the country7.

2 Different w ays of spelling G SU S are used: - on the w ebsite of G SU S: gsus in sm all letters and som etim es in capitals G SU S. - in the Cham ber of Com m erce docum ents: G -SU S and G -Sus. In this profile SO M O decided to use G SU S in capitals 3 N RC H andelsblad, 09-11-2002, Schaam haar bijknippen, zo laag zijn onze broeken, by H ester Carvalho 4 G SU S is sponsoring the follow ing nam es: TV International: Viva Fernsehen, M TV G erm any. TV National: Arne Toonen, Angela Schijf, Chris Zegers, Ruud de W ild, Tatum Dagelet, VJ Kris, Froukje de Both, Sylvana, G eorgina Verbaan, Daniel Louis Rivas. Restaurants: restaurant Leipzig, restaurant Praag H aarlem , restaurant Blender, Joia, restaurant N oa. Dj's: Dj 100% Isis, Dj Bas "the funky bastard", Dj Laidback Luke, Dj Rene Vidal, Rank 1, dj Annem iek, dj Shane. Singers/bands: Ellen ten Dam m e, Tasha's W orld, M iss Bunty, Vj Ed, Anouk, Krezip, Arid. Perform ance: ISH , http://w w w .g- sus.com / 5 Source: Dagblad Flevoland, April 17 2004, Etalage 6 U nder franchise. Further expansion of the num ber of stores is expected in 2004. Source: Interview SO M O w ith M r. Peter Steenstra, the M anaging Director of G SU S, Decem ber 2003 7 Source: Q uote, April 30 2004, Polderm ode

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Tradem arks used by G SU S are: G SU S and Jeans tradem ark G O D (G SU S O riginal Denim ). The collections consists of all types kinds of clothings: coats, bikini’s, skirts, jeans, T-shirts, sw eaters etc.

1.2. Strategy tow ards the m arket On Friday the thirteenth of August 1993 the slogan 'GSUS is coming' introduced a new shop with a totally new concept for that time: streetwear labels were combined with active sports brands, clubwear combined with all kind of 'boardsport' labels. From the beginning on, they had the plan for starting a collection using the shop as a lab, a test-store for their own small GSUS label. At the time that the oversized skate-look was still very common, they bought a large quantity of tight vintage t-shirts from the seventies, and printed these with all kind of vintage funky seventies glittertransfers. Other retailers became interested soon and started selling them: a collection was born8.

GSUS: what's in a name? A lot, the name GSUS was a big help in the success of the brand. The letter 'G' became hyped up in the early nineties. Gangsta rap was rulin', G Love came out with his first record. Gsus symbolizes global individuality. An always positive view on fashion soaked with humor. There's a lot affection with the skate- snowboardscene, where a slick stock of words is common. Some examples of typical gsus expressions: 'W elcome to heavens playground', 'gsus ramplords' and 'gsubelle'. M ore than a religious interpretation, the company wants to give it more a rebellious, controversial touch. Gsus invested in people and collections, and because of that little money was left for advertising. But the name gsus proved to be strong enough to create a little media hype: the label was worn by dj's, artists, skaters, Amsterdam-clubbers and other fast-forward- thinkers. M ore and more the Gsus-style became clear; an individual style, which always combines a sports attitude with a more fashion feeling. The designers like to play with fashion cliches. Gsus is putting classical fashion standards in a new perspective. In one of there first collections (1993) they used businessuite-like garments for their oversized skatepants, also their fakefur bikini's were wellknown. N owadays however, the collection is less provocating but still has that edge to it; the collection grew up, but remained young. 9

Com petitors closest to G SU S are G -Star, M iss Sixty and Diesel10. The tradem ark G SU S belongs to the highest price segm ent. The prices are high, but the designs are rather com plicated to produce, resulting in high m argins also for the suppliers. Production volum es per design are sm all. U ntil now G SU S has started m any law suits against clothing com panies w ho ‘sham elessly’ copied its designs, and w on alm ost all.

8 Source: copied from the G SU S w ebsite, w w w .g-sus.com 9 This part is copied from the G SU S w ebsite: http://w w w .g-sus.com / 10 Interview SO M O w ith the M anaging Director of G SU S, Decem ber 2003

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Availability G SU S clothing is available in W estern Europe, Israel, the U S, N ew Zealand, Australia, Canada, South Africa and Japan. Via its subsidiaries and trade agents (distributors), G SU S clothing is sold in approxim ately 25 countries in total (See AN N EX 1 Distributors G SU S).

(picture copied from the G SU S w ebsite, w w w .g-sus.com )

1.3. O w nership structure GSUS The legal status of G SU S is that of a private com pany (BV). Descriptions of com panies in ow nership: G SU S Clothing Sindustries B.V., Am sterdam . Financial H olding. G SU S H eavens Playground B.V., Arnhem . Retail sale of ladies’ and m en’s outerw ear. G SU S H eavens Playground B.V., Am sterdam . W holesale of textile products. G SU S Real Estate BV, Am sterdam , Financial H olding. G SU S W holesale and Design BV, Am sterdam .

At the m om ent of the SO M O interview w ith the m anaging director11, G SU S had four subsidiaries abroad, located in the U S (4 em ployees), Canada (6 em ployees), (1 em ployee) and in Spain (3 em ployees).

1.4. The m anagem ent of GSUS G SU S is a sm all and relatively new com pany w ithout a strong internal hierarchy. The lines in the decision m aking process are short. The com pany is m anaged by the m anaging director.

11 Decem ber 2003

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1.5. Financial facts and figures Turnover: the m anagem ent does not talk about turnover figures, but an estim ation m ade in 2000 w as about 50 m illion guilders (24,5 m illion euro) 12. 80% of the turnover is derived from sales abroad13.

The annual results for 2002, as deposited w ith the Dutch Cham ber of Com m erce, do not show turnover results but state an operating profit of nearly 4.3 m illion euros for that year14.

1.6. N um ber of em ployees In total, G SU S has about 120 to 150 em ployees w orldw ide. The num ber of em ployees w orking at the European headquarters in Am sterdam has recently reached the num ber of 70, w hich has resulted in the decision of setting up a w orks council.

Locations of em ployees in the rest of the w orld are: Canada, Israel, Finland, U SA, U nited Kingdom , G erm any, Italy, Sw itzerland, Japan, Denm ark, Sw eden, M exico, Austria, Spain & Portugal, Belgium & Luxem bourg15.

2. GSUS: CSR Policy

2.1. GSUS and its CSR history At the tim e of the interview , G SU S did not have any official CSR policies in place, but w as convinced that good corporate practice is part of their natural w ay of doing business. That’s also the reason G SU S w ill not use CSR for m arketing purposes: it is a legitim ate expectation from the people that the com pany is socially and environm ental com m itted. But being com m itted not autom atically leads to com plying w ith CSR standards. The reality of the labour conditions at their suppliers w as largely unknow n by the m anagem ent of G SU S.

The m anufacturing agreem ent, as used by G SU S, w ould be suitable as instrum ent for including issues like labour rights, environm ental standards and other CSR issues. But in the m anufacturing agreem ent, as received by SO M O , no CSR standards w ere found. There are no references to ILO labour standards, international U N treaties or environm ental guidelines.

The purchasers of G SU S, visiting each factory at least tw ice a year, do not have special interest in the labour conditions and have no specific instructions, but the m anaging

12 Carp, 21-03-2000, Sleazy glam our, by Alies Pegtel 13 Source: Q uote, 30 April 2004, Polderm odel 14 Source: Cham ber of Com m erce, annual accounts of 2002 as deposited on 19 M arch 2004 15 Brochure Fall, w inter collection 2003

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director assum ed that, if they w ould see bad labour conditions, they w ould report it. This has how ever never happened.

A short w hile before the interview w ith SO M O , the m anaging director of G SU S w as having a m eeting w ith the Fair W ear Foundation, and he m entioned in the m eeting w ith SO M O , that G SU S w as seriously thinking about joining the Fair W ear Foundation initiative. A few m onths later, it turned out that G SU S indeed joined this initiative, w hich m eant a progressive step forw ards from having no w ritten CSR policy to having one of the best policies in the sector.

2.2. Transparency From our experience during the m eeting G SU S seem ed open to discuss issues and are w illing to cooperate w ith stakeholders. U nlike other com panies, w hich SO M O has dealt w ith in the past, G SU S w as w illing to provide all the requested inform ation (also the nam es and locations of their suppliers (!)), and engaged in an open discussion on corporate social responsibility w ith SO M O .

2.3. Responsibilities w ithin the com pany regarding CSR The m anaging director of G SU S is responsible for the CSR policy w ithin the com pany. H e also functions as the spokesm an for the com pany regarding CSR related topics.

2.4. The environm ental policy of GSUS. The new head office of G SU S is Am sterdam is built w ith sustainable constructions m aterials and a sustainable design. The new head office is m aking use of a “w aterbron” w hich pum ps w ater out of the earth and uses it to control the tem perature of the building in both the w inter and the sum m er. It is a transparent w arehouse w ith natural light and a com pletely isolated building. These investm ents are m ade for a better environm ent. G SU S pays adequate attention to reducing w aste from internal operations.

3. Fair W ear Foundation (FW F) M em bership

O n the 24th of M arch 2004, the Dutch Fair W ear Foundation announced its participant com panies to the public for the first tim e. G SU S turned out to be one of the 11 com panies w hich currently endorse the FW F Code of Labour Practices. This chapter w ill treat the im plications of FW F m em bership for G SU S, and w ill close w ith an evaluation of the com m itm ent to corporate social responsibility w hich w ill result from FW F m em bership.

3.1. The Fair W ear Foundation: an introduction Goal and strategy The Fair W ear Foundation w as established in 1999 w ith the aim to achieve better labour conditions in the w orldw ide garm ent industry through the creation and prom otion of a code of conduct for Dutch garm ent com panies. Com panies w hich support the Fair W ear

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Code of Labour Practices com m it them selves to im plem enting the labour standards included in the code, and agree that the FW F verifies com pliance w ith the code16.

M ulti-Stakeholder Initiative FW F is a M ulti-Stakeholder Initiative (M SI) because it includes actors from different parts of society, each w ith their ow n interests. Both the FW F Board and the advisory Expert Com m ittee contain m em bers representing garm ent retailers, producers, trade unions and N on-G overnm ental O rganisations. The participating organisations on the FW F Board and the Expert Com m ittee are M itex (business associations for garm ent retailers), M odint (business associations for garm ent suppliers), FN V Bondgenoten and FN V M ondiaal (labour unions), the Clean Clothes Cam paign and the Zuid N oord Federatie (N G O s). The Expert Com m ittee also includes representatives from M ax H avelaar and N ovib (N G O s)17.

The Fair W ear Code of Labour Practices The Fair W ear Code of Labour Practices is based on the m odel codes of conduct of the Clean Clothes Cam paign and the ICFTU (International Confederation of Free Trade U nions). The principles laid dow n in the FW F Code cover five issue areas: labour standards, supply chain responsibility, process approach, involvem ent of local stakeholders, and independent verification. Apart from the area of labour standards, all other subjects covered by the FW F Code concern the operational aspects of the FW F initiative18.

Labour standards The labour standards w hich are included in the Fair W ear Code of Labour Practices reflect im portant ILO Conventions, and the labour-related articles of the U nited N ations U niversal Declaration of H um an Rights (articles 23-25). M ore specifically, the labour standards contained in the FW F Code are the follow ing eight internationally recognized core labour rights19:

1. em ploym ent is freely chosen; 2. no discrim ination in em ploym ent; 3. no exploitation of child labour; 4. freedom of association and the right to collective bargaining; 5. paym ent of a ‘living w age’; 6. no excessive w orking hours; 7. safe and healthy w orking conditions;

16 Source: Fair W ear Foundation w ebsite, w w w .fairw ear.nl, 20/7/2004 17 Source: Fair W ear Foundation Annual Report 2003, http://w w w .fairw ear.nl/Annual%20report%202003.pdf, 20/7/2004 18 Source: M VO -initiatieven in de koffie-, kleding-, en bloem ensector. Frans-Paul van der Putten, G em m a Crijns & Joris O ldenziel, N yenrode/SO M O (in opdracht van H IVO S), 2004. http://w w w .nyenrode.nl/dow nload/eibe/M VO -Initiatieven2004.pdf, 20/7/2004 19 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004

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8. a legally binding em ploym ent relationship.

Supply chain responsibility A com pany w hich signs the FW F Code of Labour Practices agrees to perform inspections at all its supplier factories w ithin three years after becom ing a m em ber, and to form ulate corrective action plans in case these inspections point out that the circum stances of garm ent production are not in line w ith the labour standards laid dow n in the FW F Code. This auditing process m ust then be repeated each year. The m em ber com pany takes on responsibility for the labour conditions in the entire supply chain of the products it sells in the Dutch m arket. This m eans that not only direct suppliers, but their sub-contractors too are checked for com pliance w ith the FW F Code.

The audits (inspections) of suppliers w hich are perform ed by FW F m em ber com panies them selves are referred to as ‘internal m onitoring’. FW F defines ‘supply chain’ as the netw ork of suppliers and suppliers of suppliers (sub-contracted suppliers, licensees, etc.) of m em ber com panies, w hich are involved in garm ent production. This m eans cotton producing farm ers, producers of fabric and sim ilar suppliers of m aterials are not included in the FW F supply chain concept20.

Process approach FW F encourages a phased approach to im proving w orking conditions in the garm ent sector. It realises that term inating supplier relations if suppliers do not m eet the FW F criteria is not an answ er to the problem of poor labour conditions. Instead, m em ber com panies com m it them selves to im proving labour conditions in their supply chain step by step, through the creation and im plem entation of corrective action plans21.

In the end, FW F m em ber com panies are judged on the process of change they have triggered w ithin their supply chain, not on absolute levels of com pliance w ith the ILO labour standards. M em bers pledge to do ‘everything possible’ to rem edy breaches of the ILO standards22. The w ays they try to achieve im provem ents, and the pace of change, are not left entirely to the m em bers’ ow n discretion, but are closely tied to proposals and procedures suggested by the Fair W ear Foundation23.

Involvem ent of local stakeholders The Fair W ear Foundation w ants to involve local stakeholders in all levels of the process of im proving labour conditions. To this end, FW F has established partner netw orks in various

20 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004 21 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004 22 Source: M ulti-Stakeholder Initiatives: Fair W ear Foundation. SO M O w ebsite w w w .som o.nl, 20/7/2004 23 Source: Interview w ith Petra W ijnholds of the FW F, 21/7/2004

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countries w here suppliers of FW F operate. These local partner netw orks include trade unions, em ployers’ organisations, local authorities, and N G O s. The Fair W ear Foundation itself consults these netw orks w hen form ulating its ow n policies. Furtherm ore, at the level of m onitoring com pliance w ith the FW F Code, local partner organisations are asked by FW F m em ber com panies to carry out inspections at production sites. This is not optional: m em bers should alw ays involve local partners in at least part of their inspections. The corrective action plans, too, m ust be executed in cooperation w ith local organisations.24.

Finally, partner organisations are also involved in the FW F com plaint m echanism . In this procedure, em ployees or local organisations m ay report breaches of the FW F Code to the Fair W ear Foundation. W hereas em ployees m ay report directly to the FW F, local organisations can file com plaints through the local partner netw ork25. So far, FW F has set up partner netw orks in India, Indonesia, Pakistan, Poland, Rom ania, China, and Turkey. In 2004 this list w ill be expanded w ith Bangladesh, M acedonia and Tunisia26.

Independent verification An im portant aspect of FW F m em bership is that com panies allow the Fair W ear Foundation to conduct independent or external verification of com pliance w ith the FW F Code of Labour Practices. FW F conducts independent verification at tw o levels: 1. verification of labour conditions 2. verification of M anagem ent System Requirem ents

1. The external verification of labour conditions by FW F has to m ake sure that the internal m onitoring by com panies them selves is done correctly, and that corrective action plans are actually being executed as agreed. For the external verification of labour conditions, FW F Board m em bers random ly and unexpectedly visit production sites. Every three years, audits take place at 10% of each m em ber com pany’s supplier facilities. The FW F com plaints procedure is also used to verify labour conditions. If em ployees file a com plaint at the Fair W ear Foundation, it w ill m ost likely conduct an external audit at their production facility to follow up on the com plaint27.

2. W hen a com pany supports the FW F Code of Labour Practices, it takes one year of preparations before the participant actually becom es a m em ber of the FW F. During this application period, one of the things the applicant com pany m ust do is to adapt its m anagem ent system so that it is fit to m eet the FW F’s expectations. M ore specifically, the

24 Source: Fair W ear Foundation w ebsite: partner netw ork. w w w .fairw ear.nl, 20/7/2004 25 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004 26 Source: M VO -initiatieven in de koffie-, kleding-, en bloem ensector. Frans-Paul van der Putten, G em m a Crijns & Joris O ldenziel, N yenrode/SO M O (in opdracht van H IVO S), 2004. http://w w w .nyenrode.nl/dow nload/eibe/M VO -Initiatieven2004.pdf, 20/7/2004 27 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004

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FW F M anagem ent System Requirem ents have to m ake sure a com pany is able to com ply w ith the FW F Code of labour Practices. Com pliance w ith the M anagem ent System Requirem ents is checked by auditors w hich are contracted by the Fair W ear Foundation.

Both the labour standards and the M anagem ent System Requirem ents, and their im plem entation and auditing procedures, are described in detail in accom panying m anuals, w hich are distributed by the Fair W ear Foundation to the (potential) m em ber com panies28.

3.2. Strengths of FW F The m ulti-stakeholder character ensures good cooperation betw een labour unions, retailers, producers, and N GO s The FW F initiative is based on an ongoing dialogue betw een different stakeholders, w hich has led to the form ulation of com m on goals that are supported by all parties. This harm onization of interests w ill contribute to the success of the FW F initiative. The consensus-based, voluntary character of m em bership of the FW F does m ean that, at least in the beginning, only a sm all num ber of industry leaders w ill sign up for the FW F initiative. This quantitative aspect is m ore than offset by a qualitative one: the standards w hich com panies prom ise to adhere to are set very high.

The Fair W ear Foundation Code of Labour Practices is considered the m ost strict corporate social responsibility standard to w hich D utch garm ent com panies can sign up N o other codes of conduct in the Dutch garm ent industry, w hich are open to m em bership from various Dutch-bases garm ent producers29, w ork tow ards such strict labour standards.

The involvem ent of local organisations in the im provem ent of labour conditions is an im portant contribution to local capacity building The Fair W ear Foundation really sets itself apart from other initiatives in the garm ent industry by putting so m uch em phasis on involving local organisations and training local partner netw ork m em bers. The capacity w hich FW F builds in supplier countries w ill really help transform their garm ent producing industries in a lasting m anner.

Assessm ents lead to im provem ents The FW F approach is dynam ic, not static: its focus is on the process of change. M uch attention is given to the follow -up on internal and external audits and assessm ents. The corrective action plans offer realistic proposals for change, and their im plem entation is carefully m onitored. U nlike som e other codes of conduct, the FW F Code guarantees im provem ents.

28 Source: The Fair W ear Foundation: Principles and Policies. http://w w w .fairw ear.nl/Policy%20docum ent.pdf, 20/7/2004 29 This m eans w e exclude the clothing brand Kuyichi

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3.3. W eaknesses of FW F The Fair W ear Foundation is a relatively new initiative w hich is still in a start-up phase, m eaning that som e aspects of the FW F w orking m ethod are not fully operational yet Although founded in 1999, the FW F has only becom e operational after the conclusion of several pilot projects in m id-2003. Som e of the participants of FW F have only signed up recently, and the full list of participants w as published for the first tim e in M arch 2004. This m eans that m ost participants are not m em bers yet, but are still in the application phase. They them selves and their suppliers are in the process of being audited by the Fair W ear Foundation. For now it is therefore not possible to evaluate the outcom e of this process, let alone the quality of the follow up and actual im plem entation of change of m em ber com panies. This m eans the value of FW F m em bership itself can not yet be assessed w ith certainty.

The FW F netw orks are still under construction and m any local organisations still have to be trained on w orking w ith the FW F Code and the im plem entation and verification procedures. The FW F com plaint m echanism has only recently taken on a definite shape, w ith fixed procedures, and is not yet operational in m any supplier countries. The SO M O research paper “Considering com plaint m echanism s” published in 2003, describes the w eaknesses of this m echanism . The w eaknesses pointed out by the report concerned the criteria for acceptance of a com plaint, specification of the follow -up process, and the reporting policy30. In 2004, the FW F published its revised and im proved com plaint m echanism 31.

O verall, the FW F, just as its participant com panies, m ay not have the full capacity needed to im plem ent all of its policies and principles just yet. It m ay take another year or tw o before the w hole program is fully operational and running the w ay the FW F “Principles and Policies” docum ent envisions, especially in the areas of partner netw orks and com plaint procedures.

There is no guarantee that m em ber com panies are not involved in unfair labour practices The only guarantee FW F can give about its m em bers is that they try their best to im prove labour standards in the garm ent sector, not that their suppliers actually m eet all the labour standards included in the FW F Code of Labour Practices. This w eakness m ay as w ell be a strength of the Fair W ear Foundation’s w orking m ethod, w hich em phasises the process of change rather than the absolute level of com pliance at a given point in tim e. FW F m em bers are forced to m ake a long-term com m itm ent to their suppliers, instead of abandoning them if they do not im m ediately respect all labour rights contained in the FW F Code.

30 Source: Considering com plaint m echanism s: an im portant tool for code m onitoring and verification. N ina Ascoly and Ineke Zeldenrust, SO M O , 2003 31 http://www.fairwear.nl/tmp/Klachten%20procedure%20feb%202004.pdf

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But even w hen the process m ethod is considered a strength of the FW F initiative, it has its consequences for the final evaluation of FW F m em bership: if anything, it im plies that m em bership becom es m ore valuable the longer it lasts. After som e years of FW F m em bership, it can be assum ed that a com pany does not only em brace the theory of corporate social responsibility, but has com e a long w ay in putting it into practice, too.

3.4. W here GSUS is at G SU S signed up for the FW F initiative in February 2004, after only one m eeting w ith FW F staff in O ctober 200332. G SU S is a good exam ple of a com pany that expresses im m ediate enthusiasm for the FW F initiative, and does not need any pressure to join. Apparently, the goals of the Fair W ear Foundation are a good m atch w ith G SU S’ corporate culture.

At the m om ent, G SU S is still in the application period, w hich m eans the com pany is given the tim e to m ake the necessary adjustm ents to its m anagem ent system , and prelim inary research on G SU S suppliers and possibilities for im provem ents is being done. FW F w ill start auditing G SU S this autum n (2004) and som e of its suppliers in accordance w ith the standard application procedures. The next step after the audits w ill probably be the proposals for im provem ents in the m anagem ent system and in labour conditions. These proposals w ill be presented to G SU S and to the respective m anagem ent team s of their suppliers. Together, the parties w ill agree on the changes to be m ade and the w ay to im plem ent them 33.

G SU S w ill becom e a full m em ber of the FW F after the application period ends in January 2005, or before that tim e if FW F thinks the com pany does not need the full application period to prepare for m em bership.

G SU S does not plan on using its Fair W ear M em bership for m arketing purposes. Corporate social responsibility is part of the w ay they do business: the com m itm ent they m ake through the FW F m erely reaffirm s their ow n beliefs about w hat labour conditions should be like. For G SU S, the FW F Code is a useful tool for checking their ow n com pliance w ith the standards they find acceptable34.

3.5. Conclusion: the value of FW F m em bership G SU S’ FW F applicant status and the subsequent FW F m em bership status are considered a very positive com m itm ent to corporate social responsibility standards in the area of labour rights. The long-term com m itm ent G SU S m akes to im proving labour conditions up to a very high standard under the auspices of the Fair W ear Foundation, really m akes the trendy label a good choice for consum ers w ho take CSR aspects into consideration at the tim e of buying their clothes. The system of internal m onitoring and external verification w hich is

32 Source: Interview w ith Petra W ijnholds of the FW F, 21/7/2004 33 Source: Interview w ith Petra W ijnholds of the FW F, 21/7/2004 34 Sources: Interview s w ith Petra W ijnholds of the FW F, 21/7/2004 and w ith the m anaging director of G SU S, Decem ber 2003

G SU S and the Clothing Industry 14

used by the fair W ear Foundation is considered an adequate guarantee that local labour conditions w ill actually im prove in the years to com e.

4. GSUS and its suppliers

4.1. O utsourcing trends of GSUS Independent of the requirem ents from the Fair W ear Foundation, the norm al G SU S procedure is to visit each production location at least tw o tim es a year, not only before the actual production, but also during the production period. In the starting phase of the production, a lot of consultation betw een G SU S and the supplier is needed because m any of the designs of G SU S are innovative and require new production techniques. Creative solutions for new production techniques alw ays com e from both sides, that is from the supplier’s side, as w ell as from G SU S. G SU S is supporter of short production lines, or actually of w orking in production units. Suchs units consists of about 10 people w ho are responsible for the final product. The m anaging director expects that in the future, large m anufacturers w ill also sw itch to such production processes because the m argins on sm all production volum es are m uch higher35.

It is not im portant for G SU S to be able to react on strong runaw ay trends and therefore it is not necessary to have its production locations near the m arket. It is not part of the strategy of G SU S to follow trends; G SU S follow s its ow n line and creates trends instead. W hen G SU S has developed a new product, the suppliers first have to m ake 1 or 2 prototypes and after that a sam ple. O nly after that, agreem ents are m ade and this procedure takes considerable tim e. At the end of 2003, G SU S w as already w orking at the collection of spring 200536.

4.2. Production strategy G SU S uses 2 selection criteria for its suppliers: 1. Can the supplier produce exactly w hat G SU S w ants? So; quality first, the price is less im portant. G SU S delivers the design, and the supplier has to m ake a product out of it. 2. H ow stable and trustw orthy is the supplier?

G SU S is supporter of w hat they call ‘partnerships’ w ith suppliers and retailers, aim ing at long term relationships w ith the com panies producing their clothing and the com panies selling their clothing37.

O ne of the w ays to endure partnerships is to be as transparent as possible. The m anaging director w ants to achieve the highest level of transparency by introducing a system of m aking agreem ents about the profit m argins of the supplier on forehand. The idea behind

35 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003 36 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003 37 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003

G SU S and the Clothing Industry 15

this, is that if the profit m argin is fixed, all the other price com ponents can be discussed openly, such as the prices of the fabrics used, transportation costs, labour costs, quota’s etc. This w ay, there is com plete transparency about the price com ponents. This idea of fixed profit m argins is still in a prelim inary phase, and no concrete steps to im plem ent it have been taken yet38.

G SU S itself strives for transparency about their suppliers. All the garm ent retailers investigated by SO M O so far, w ere not prepared to disclose any of their suppliers nam es and locations. But G SU S w as w illing to give SO M O a list of their suppliers and they even have the intention to place all their suppliers on internet so all stakeholders and other com panies can have a look and see w hat they are doing.

Another interesting note is that G SU S is developing and im plem enting a bar code system m aking the entire production process traceable and transparent. G SU S spends considerable tim e to introduce the barcode system to others. This idea is m ore concrete than the fixed profit system : G SU S has already organised w orkshops to prom ote the new bar code w ithin the garm ent industry39.

4.31 Production locations. 70 percent of total production volum e of G SU S is produced in Turkey in three different factories. These factories are big com panies quoted on the stock exchange. O ther production countries are Rom ania, Pakistan, India (2 locations in M um bai, 1 in Tirupur and 1 in Chennai). Fabrics are dyed in Am hedabad, Bangladesh, Thailand and China. G SU S is m aking use of 35 suppliers in total40.

The m anaging director indicates that because of the innovative techniques required by the designs of G SU S and the requested large volum es, G SU S ends up autom atically at large, m odern and sophisticated factories for its production. H e assum ed that labour conditions are good at such m odern factories. Besides that, other w ell know n com panies like N ike and Adidas, having Codes of Conduct and m onitoring system s, are w orking w ith the sam e suppliers. This is another reason for the m anaging director to assum e that no serious breaches of labour rights take place in its supplier factories.

5. Conclusions by SO M O on the CSR policy of GSUS

G SU S w as selected by SO M O for a case study to asses to w hat extent a young fast-grow ing clothing com pany such as G SU S is w orking w ith CSR issues. At the tim e of the interview , G SU S did not have any official CSR policies in place, but w as convinced that good corporate practice should be part of their natural w ay of doing business. This view is

38 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003 39 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003 40 Source: Interview SO M O w ith M anaging Director of G SU S, Decem ber 2003

G SU S and the Clothing Industry 16

positive in the sense that it attaches im portance to CSR, but it lead G SU S to believe that it w as indeed com plying w ith CSR standards even w ithout having CSR policies in place, w hereas the reality of the labour conditions at their suppliers w as largely unknow n. The G SU S approach, at the tim e of the interview w ith SO M O , could be therefore considered as a bit naïve. But in a short period of tim e, not needing a very long tim e for reflection, the decision w as taken to join the Fair W ear initiative. It turns out to be an advantage to be a private com pany, because decisions can be taken quickly. This is because the decision m aking process contains few er stakeholders than in public com panies and therefore less tim e is needed for decision m aking. As a new com er in the field and a fast grow ing com pany it is difficult to focus on several issues at the sam e tim e, but G SU S show ed that if an issue is being tackled, it is possible to m ake progressive steps in a short period of tim e.

G SU S has stood out positively from other clothing com panies because its transparency about internal policies and operations, and the w illingness to cooperate w ith N G O s on the subject of CSR, are also appreciated.

G SU S provides an good case to show the value added by joining a CSR initiative such as the Fair W ear Foundation. By joining, chances are m uch greater that G SU S’ good intentions w ill actually be put in practice. As one of 11 participants of the Fair W ear Foundation, G SU S has the potential to becom e an industry leader in the area of labour practices policy and im plem entation. As said in section 3.5, the long-term com m itm ent G SU S m akes to im proving labour conditions really m akes the trendy label a good choice for consum ers w ho take CSR aspects into consideration. The system of internal m onitoring and external verification w hich is used by the Fair W ear Foundation is considered an good guarantee that local labour conditions w ill actually im prove in the years to com e.

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A nnex 1: D istributors Gsus

austria australia the Caligula Distribution NMI Nick Mascitelli Imports gsus wholesale and design bv Andreas Pekasting Rocco Mascitelli Roderique de klein, Hoyte van der Zee Petra Schröckeneder 13-15 Levey street Johan van Hasseltweg 27 Schwarzstra§e 8 Chippendale, Sydney NSW 2008 1021 KN Amsterdam A 5020 Salzburg 0061 2 93 19 31 99 0031 20 509 55 55 0043 662 87 20 30 0 0061 2 93 19 53 55 fax 0031 20 509 55 00 fax 0043 662 87 20 30 0 fax [email protected] www.g-sus.com [email protected] [email protected] belgium & canada Denmark Gsus Belgium & Luxembourg Gsus Canada Ltd Kayar Diane Steinfort Everton McDougall, Peter Smit Jacob Olesen Lange Nieuwstraat 64 675 King Street West #205 Naest vedgade 18,4 sac B-2000 Antwerpen M5V 1M9 Toronto, Ontario DK-2100 Kobenhavn-O 0032 32 273 959 Tel. +1 416 703 0070 0045 8619 9999 tel. 0031-20-509 55 00 fax Fax. +1 416 703 0090 [email protected] gsm Diane0032-473-95 16 16 [email protected] e-mail: [email protected] www.gsus.ca finland Rainmaker Oy Harri & Tommi Björk Mag Distribution Backstage Distribution Tallberginkatu 1 C 3rd floor 331 Jean-Jacques Vuillemenot Thomas Kemner, Sabina Matic Cable Factory 00180 Helsinki 254 rue des Chanterelles Weenderstra§e 63 00358 968 550 001 F 34980 St. Gely du Fesc D-37073 Gottingen 00358 968 550 002 fax 0033 467 66 66 88 0049 55 153 172 91 [email protected] 0033 467 66 66 86 fax 0049 55 153 172 93 fax [email protected] [email protected]

israel italy greece Ender-Tex Ltd Interga S.P.A. Trade Distribution Network Yakov Ender, Ofer Toviyahu Maurizio Camillo, Alex Lechner George Souranakis 5. Tel Giborim St. Via Julius Durst 20A Marianna Founda, Gueseppe Skalco 68105 Tel Aviv I 39042 Bressanone 37 Akominatou Street 00972 368 168 71 00390 472 270 777 10438 Athens 00972 368 126 22 fax 00390 472 208 700 fax 0030 210 5231683 [email protected] [email protected] 0030 210 5200168 fax [email protected] japan Norway

Brest Co Ltd Mexico GSUS Norway Toshitaka Maeda, Nobuo Tanaka C&F Importers Bjarne Lutro Minamisemba 1-2-5 Chuo-Ku Carmen Martinez, Francisco Bojorge Sagvaien 17 542-0081 Osaka Orizbayo Jabonaro 5801-8 0459 Oslo 0081 662 605 588 Walks of the sun Norway 0081 662 605 658 fax Zapopan, Jal.45079 0047 9010 7930 tel. [email protected] 0052 33 3634 0272 [email protected] 0052 33 3344 7862 fax [email protected] new zealand spain & portugal

Findlay Agencies GSUS 2001 S.L. Sweden kevin Findlay, Damon Jackson Guillermo Solana, Marìa Tellitu F. Division 46 Omahu Rd Polg. Ind. Errotatxu, pabelln 6c Frederik du Hane Remuera Auckland E 48990 Getxo Vizcaya Lyckholms Bryggeri 2c

G SU S and the Clothing Industry 18

0064 9 529 19 26 0034 94 430 87 11 S-412 63 Gothenburg 0064 9 529 19 98 fax 0034 94 430 08 48 fax 0046 3133 580 60 [email protected] [email protected] 0046 3133 580 70 fax [email protected]

united kingdom & ireland USA west switserland Kippered GSUS USA Ltd NO WAY Distribution Tony Wall, Adam Jarrett, Andre Thompson, Mandy Elledge H.P. Endras Jules Lai Lin Hau 127 east 9th street suite 904 Hohlstra§e 201 95-99 North Street - unit #20 90015 Los Angelas, California CH-8004 ZŸrich Clapham, SW4 0HF London tel. 1 800 930 5277 only USA & Canada 0041 124 028 33 0044 207 720 64 25 tel. 001 213 892 8951 0041 124 109 11 fax 0044 207 720 64 26 fax [email protected] [email protected] [email protected]

USA east Solo Agency Lisa Shivak 420 West 42nd Street Suite 30E 10036 New York, NY 001-917-568-5915 [email protected]

G SU S and the Clothing Industry 19