Ethical Sourcing at the Warehouse 2018 Report 2019 Update 2 Contents

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Ethical Sourcing at the Warehouse 2018 Report 2019 Update 2 Contents ETHICAL SOURCING AT THE WAREHOUSE 2018 REPORT 2019 UPDATE 2 CONTENTS ETHICAL SOURCING AT THE WAREHOUSE CONTENTS 2018 REPORT Ethical Sourcing 4 // Introduction at The Warehouse 5 // The Warehouse and its supply chains 2018 & 2019 Report 7 // Ethical sourcing programme structure The structure and content of this report was informed by: 13 // Policy Themes and commentary The Warehouse Group Ethical 5.1 Management Systems Sourcing Policy (2017) 5.2 Child Labour The Modern Slavery Act 5.3 Voluntary Labour (UK) 2015 and its guidance 5.4 Health & Safety on Transparency in Supply 5.5 Wages and Benefts Chains. 5.6 Working Hours Baptist World Aid Australia’s 5.7 Freedom of Association and Collective Bargaining ongoing series of “Behind 5.8 Environment the Barcode“ reports on the 5.9 Subcontracting Fashion industry. 5.10 Business Integrity Data within this report is derived from labour 22 // New Initiatives audits undertaken for Apparel Supplier Survey & Tier 2 Discovery The Warehouse in calendar Customer Survey – New Zealanders views on Ethical Sourcing years, 2017 & 2018 and from our internal purchase ELearning – online resources for factory managers order management Worker Voice - Integrated Audits systems. Responsible Workplace Programme - Malaysia Where data or commentary 31 // Trending now is derived from external Transparency sources these are referenced in the footnotes Living wages on each page. Bangladesh Human Trafcking and Modern Slavery The report was compiled and authored by our Ethical 37 // Programme Update January 2019 Sourcing Manager and reviewed and approved by 40 // Appendices our Executive. Factory Lists List of The Warehouse’s Private Label (“House”) Brands Country Working Hour and Wages table 3 INTRODUCTION INTRODUCTION The Warehouse Ltd is the largest subsidiary of The Warehouse Group1 – New Zealand’s largest publicly listed non-food retailer. The genesis of our Ethical Sourcing programme dates to the values and vision of our founder and cornerstone shareholder Sir Stephen Tindall. Sir Stephen’s and The Warehouse Group’s attention. We have provided disclosures organisation to tackle these challenges vision is to help communities throughout and commentary in relation to these alone – even in tiers of the supply New Zealand to fourish and to contribute NGOs’ expectations - even where they chain where there is direct contact and to a more sustainable country and planet. currently exceed our capabilities. This infuence. We need further collaboration refects our commitment to transparency between business, government, and At The Warehouse, with our extensive and continuous improvement. civil society. Consumers also have an direct sourced, private label merchandise important role to play by informing programme, we recognise that we have Our report also highlights several themselves about the ethical attributes a special duty to protect the welfare of new initiatives undertaken during of the choices available to them and workers in our supply chain. Since 2004 the year and for the frst time a list continuing to support those businesses we have been on a journey to continually of our apparel factories along with who are meeting their expectations. improve and extend the scope and a comparative real wage and We aim to be one of those businesses, effectiveness of our programme. working hour table across different and look forward to informing you further source countries. This report is intended to inform the about our progress in the future. reader openly and transparently about Despite signifcant progress on our Nick Grayston conditions “behind the barcode” in our journey to date there remain many Group Chief Executive Ofcer source factories. It describes how our issues to address. Each year we reset Ethical Sourcing Programme functions, The Warehouse Group our strategy according to our learnings and how we work to ensure that the and emerging external expectations. Your feedback or questions are welcome proft in our enterprise and the value we It’s impossible for any single sourcing at [email protected] deliver to customers is also functioning to protect and improve working conditions for those at the origin of our supply chain. The information in this report is presented through the lens of our January 2017 Ethical Sourcing Policy2 – so readers can see how we have implemented the policy in practice over the past year. We have also taken account of the “Transparency in Supply Chains” guidance3 provided by the UK Government to companies preparing public statements under the UK’s 2015 Modern Slavery Act. Although no such legislation exists yet in New Zealand it has attracted considerable interest in Government, NGO, and Academic circles. Closer to home, reports published by Baptist World Aid Australia and Oxfam addressing labour issues and setting expectations for apparel supply chains have also captured media 1. http://www.thewarehousegroup.co.nz/ 2. http://docs.thewarehouse.co.nz/red/pdfs/suppliers/ethical-sourcing/the-warehouse-group-ethical-sourcing-policy-01.17.pdf 4 3. https://www.gov.uk/government/uploads/system/uploads/attachment_data/fle/649906/Transparency_in_Supply_Chains_A_Practical_Guide_2017.pdf THE WAREHOUSE AND IT’S SUPPLY CHAINS Heniemo quilting comforter 5 THE WAREHOUSE AND IT’S SUPPLY CHAINS THE WAREHOUSE AND IT’S SUPPLY CHAINS The Warehouse is New Zealand’s largest general merchandise retailer with 92 stores throughout New Zealand and a large online presence at www.thewarehouse.co.nz Our customers represent a completely layers of margin capture, with the origins goods is China. Everyday consumables diverse group of New Zealanders. Our of manufacture usually invisible to the and grocery items tend to be sourced marketing, and wide ranges of general retailer if not the local wholesaler as well. closer to home in New Zealand and merchandise and apparel, are focused Australia. Recently we have seen a primarily on families, and shoppers Commencing with opening of our growth in home textiles and apparel being looking for great everyday bargains. own direct sourcing ofce in Shanghai sourced from India and Bangladesh. To in 2004 The Warehouse set about support this, we opened another sourcing At the time of The Warehouse’s listing revolutionising this model, fattening the ofce in New Delhi India in January 2017. on the New Zealand Stock exchange supply hierarchy, and securing direct in 1995 through to the early 2000s’ the access to manufacturing sources with an The most recent trend transforming dominant model for most large general attendant leap forward in traceability and retail everywhere is the advent of the merchandiser retailers was to source both transparency. For our customers, this has online giants such as Amazon offering branded and private label4 merchandise meant reduced prices for most product consumers efcient direct access to vast through a New Zealand network of local classes while maintaining our position in ranges of merchandise where ever they agents, manufacturers, wholesalers an increasingly competitive marketplace. might be. and importers. These enterprises in turn This trend has continued to accelerate in sourced merchandise through their own recent years to a point where at the end Fortunately, because of the work we have supply chains – additional networks of of 2017 more than a quarter of our already done fattening our supply chain, “middlemen” (trading companies) and merchandise is sourced direct through developing our direct sourcing expertise, factories predominantly in Asia5. our own sourcing ofces. and investing in our online webstore The Warehouse is very well placed to meet This old model was characterised by By far our biggest source of general the challenges of an international and highly dispersed supply chains, multiple merchandise, apparel, and electrical digitised market place. THE WAREHOUSE PRODUCT SUPPLY CHAIN The Warehouse Diminishing levels of influence and control In recent years The Warehouse Top 20 Source Countries Share of Business External Tier 1 Agent Vendor has been moving to much more CHINA 61.14% Brand factory direct and concentrated sourcing relationships with attendant NEW ZEALAND MADE 11.17% improvements in traceability and AUSTRALIA 7.41% all forms of assurance. In 2017 UNITED STATES OF AMERICA 3.68% about 43% of our sales were No further Tier 1 Tier 2 derived from own branded BANGLADESH 1.67% Vendor visibility factory supplier merchandise. We can trace 99% UNITED KINGDOM 1.64% of our branded merchandise to its Tier 1 (final manufacture) source. DENMARK 1.48% In 2017 we had 1240 vendors INDIA 1.42% overall of whom 525 were THAILAND 1.37% supplying our own brands. Tier 1 Tier 2 Tier 3 MALAYSIA 1.32% factory Supplier Supplier Associated with these were 985 Tier 1 factories including 190 KOREA (SOUTH) REPUBLIC 0.94% apparel factories. All these are GERMANY 0.90% required to undergo and pass our quality, labour and environment VIETNAM 0.80% Tier 2 Tier 3 assessment before joining our ITALY 0.65% supply chain. FRANCE 0.48% supplier Supplier At present our traceability and assurance does not extend PAKISTAN 0.48% beyond the first Tier (final POLAND 0.32% Preferred more manufacture) factories but we Historical direct model have now begun mapping and INDONESIA 0.31% Model Tier 3 identifying the 2nd Tier of our CANADA 0.29% Supplier apparel supply chain. SWITZERLAND 0.28% Tier 1 = Final manufacture sites Tier 2 = Components and subsidiary processes Tier 3 = Raw materials 4. A retailer’s own brand versus a national or international brand
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