WE Europe: A report on CSR policy and SA 8000

Irene Schipper Septem ber 2004

A m sterdam , 2004

Contents

Contents ...... 2 Introduction of the research ...... 3 1. WE Europe B.V.: a com pany profile...... 4 1.1. Introduction...... 4 1.2. H istory ...... 4 1.3. O w nership structure W E Europe B.V...... 6 1.4. The m anagem ent of W E Europe...... 7 1.5. Financial facts and figures of W E International...... 8 1.6. Strategy tow ards the m arket: ...... 9 1.7. M em bership of branch organisations...... 11 2. The SA 8000 certification system ...... 12 2.1. SA 8000: an introduction ...... 12 2.2. Criticism on the SA 8000 by N G O ’s and trade unions ...... 14 2.3. Corporate Involvem ent Program (CIP) ...... 16 3. WE Europe: CSR Policy...... 17 3.1. W E and its CSR history...... 17 3.2 .The im plem entation process of SA 8000 w ithin the Com pany...... 17 3.2.1. The certification of the H ead O ffice ...... 18 3.2.2. To put the dem and at the suppliers...... 18 3.2.3. The pre-audit phase...... 18 3.2.4. The certification phase of the suppliers...... 19 3.2.5. Im plem entation experience according to W E Europe ...... 19 3.3 O perational aspects of the CSR policy of W E Europe ...... 20 3.3.1 Supply chain responsibilities...... 20 3.3.2 Stakeholder involvem ent...... 20 3.3.3. Transparency and reporting...... 20 3.3.4 Independent verification ...... 21 3.4 Responsibilities w ithin the com pany regarding CSR...... 22 3.5. The environm ental policy of W E Europe...... 22 4. WE Europe and its suppliers...... 24 4.1 O utsourcing trends of W E Europe...... 24 4.2 W E Europe and the num ber of certified suppliers...... 25 5. Conclusions by SO M O on the CSR policy of WE Europe...... 27 A N N EX 1: A bstract M onitoring and Verification Term inology guide Clean Clothes Cam paign ...... 29

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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 Turkeys 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 direct 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 G SU S and WE Europe. These com panies w ere selected for a num ber of reasons: WE Europe 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 Europe. G SU S, 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. WE Europe B.V.: a com pany profile

1.1. Introduction W E Europe B.V. is a Dutch fam ily ow ned fashion retailer that operates in the N etherlands, Belgium , G erm any, France, Luxem bourg and Sw itzerland. Traditionally, m en's clothing’s has been the com pany's core business, and still the m ajority of the stores are m en’s clothing’s stores (W E M en), w here also often children’s are clothing’s available. The w om en stores are called ‘W E W om en’ and the com bined shops for m en and w om en are just called ‘W E’. In M ay 2004, the total num ber of stores w as 231, of w hich 128 in The N etherlands, 44 in Belgium , 11 in France, 21 in G erm any and 26 in Sw itzerland2.

W E Europe had consolidated sales of 273 m illion euro in the financial year 2002/2003. Com pared w ith fashion retailers num ber tw o and three of Europe, C& A Europe3 and H & M H ennes & M auritz AB, w hich both have sales figures over 5 billion euro4, one can say that W E Europe does not belong to the large players in this field.

W E Europe doesn’t have its ow n production facilities. There are about 300 suppliers from w hich they purchase their clothing. Som e of their m ain suppliers are located in China, Bangladesh and India. They are m aking use of about 30 m ain suppliers5.

W E Europe is one of the few fashion retailers supporting the Social Accountability Standard, SA 8000.

1.2. H istory In 1917 M r. E.H . De W aal started a w holesale business in m en clothings in Am sterdam , nam ed, Sir Edw in. H is son, Kees de W aal took over the m anagem ent in 1961. H e transform ed the m en's apparel w holesaling business into a retail distribution concept focused on m id-m arket clothing. The first shop operated under the nam e the ‘Captain Shop’, but soon this w as changed into ‘H ij’. In 1977, the 25-year old son Ronald de W aal, becam e active in the fam ily business. H e began w ith the expansion abroad, starting w ith buying Sw iss stores for m en’s clothing. Stores in Belgium , Luxem burg, G erm any and France follow ed. At the beginning of the ’80-s, M r. Kees de W aal w as getting into trouble w ith the tax authorities. There w as the suspicion of evading taxes by using post-box com panies in H ong Kong. The investigations lasted 8 years, but at the end there w asn’t sufficient evidence and M r. Kees de W aal w ent scot-free. During these investigations Ronald de W aal took over

2 According to the w ebsite of W E International, http://w w w .w e.nl/ visited at M ay 17 2004. 3 5 billion Euros turnover for C& A in Europe in 2000, http://w w w .fashion- lifestyle.com /euro/about/com panyinfo/default_.asp 4 5,805.9 m illion euro, turnover of 2002, 5 G enova, M ., (2003) ''Kledingconcern W E, G egarandeerd geen Kinderarbeid", in People Planet Profit, Vol. 1, sum m er 2003

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the m anagem ent (1984). After the acquisition of the w om en’s clothing’s retailchain W itteveen, the first ‘Zij’ (She) Store w as launched in 1987.

In O ctober 1998, W E International tried to take over the departm ents stores of Koninklijke Bijenkorf Beheer (KBB). But KKB didn’t w ant to be taken over by Ronald de W aal and his concern, and due to the protection shield of KBB against hostile take-overs, Ronald de W aal didn’t succeed6 in his attem pt. As a consequence of this unsuccessful take over, there w as a lot of m edia attention for W E, that until then avoided every m edia. W E International is know n as a very closed com pany, com parable w ith C& A, also a Dutch fam ily ow ned clothing retail com pany. They prefer to operate in the background. This m eans that W E International is reluctant in giving (financial) com pany inform ation to the public. Because W E International is not quoted on the Stock Exchange, it’s not obliged to publish annual reports. And they indeed choose not to, w hile other com panies w ithout a quotation, frequently do publish annual reports because it is their ow n choice to be transparent about the com pany. But during the tim e of the take-over failure, Ronald de W aal w as forced to com e forw ard and to give som e openness.

In O ctober 1999 W E International took over the Sw iss Beldona G roup. This lingerie chain consisted of 76 shops selling luxury brands as La Perla, W arner, H am ro en M arie Jo. W ith the shops of the Beldona G roup the num bers of shops in Europe of W E International grew at that tim e to a total of 3367.

W ith the purpose of becom ing a strong European brand the nam e "H ij & Zij” changed into "W E" (W E M en & W E W om en) in 1999.

1962: first H IJ (H E) store 1978: expansion to Sw itzerland 1983: expansion to Belgium 1987: first ZY (SH E) store 1989: opening head offices H IJ and ZY in U trecht 1992: expansion to G erm any 1995: expansion to France 1999: H IJ/H EY/ZY get a new nam e: W E (W E M en / W E W om en) 8

6 Vendex did succeed, the com pany is now know n as Vendex KBB. 7 De Telegraaf, O ctober 18, 1999, W E neem t Zw itserse lingerieketen over. 8 http://w w w .w e.nl

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1.3. O w nership structure WE Europe B.V. WE Finance & Services S.A.R.L., Luxembourg. (Holding company, ultimate Holding manager parent of WE Europe B.V.) Mr. G. van Noord. 100% ownership Board of Directors We International B.V. Mr. de Waal (Holding company) (temp.) and Mr. G. van Noord.

100 % WE Europe B.V., Utrecht. ownership (Fashion retail company)

WE Netherlands B.V., Utrecht. (Service company for Has its own Board employment issues) of Commissioners WE Vastgoed B.V., Utrecht (real estate comp.)

WE France B.V., Utrecht

WE Belgium B.V., Utrecht.

WE Belgium N.V., (Bel.)

WE Luxembourg S.A., Luxembourg

WE Germany B.V., Utrecht

WE Fashion GmbH & Co. KG, Essen

WE Switzerland AG, Baden

Beldona AG, Baden, Switzerland. (lingerie retail company)

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The parent com pany of W E Europe B.V. is the holding Com pany W E International B.V.. The ultim ate parent is the W E Finance & Services s.a.r.l., located in Luxem bourg. M r. Ronald de W aal is the ow ner and only shareholder of W E Finance & Services. M r. Ronald de W aal is a m em ber of several private boards in Europe and the U SA 9 and also sits on the board of the Dutch N ational Retailers Association, The N ederlandse Raad van Detailhandel (N RD).

1.4. The m anagem ent of WE Europe After having three generations of De W aal in charge, a non fam ily m em ber becam e executive director in 1997. Ronald de W aal decided to resign as director and to becom e a ‘delegated com m issionaire’ at W E Europe. W hich m eans that he is having m ore influence than a ‘norm al’ com m issioner: “som etim es I’m several days in U trecht, checking the business”.10 At the tim e of the first interview of SO M O w ith W E Europe, (O ctober 2003) the position of chairm an of the Board of Directors of W E Europe w as fulfilled by M r. Jan H uism an. In the sum m er of 2004, a restructuring of the m anagem ent had taken place, w hich had brought som e positional changes. As a result, the position of Chairm an of the Board of Directors of W e Europe w as still vacant at m id August 2004.11 This position is tem porarily fulfilled by the ow ner of the com pany: M r. Ronald de W aal. The position of the second m em ber of the Board of Directors (form ely M r. Dickm ann) w as taken over by M r. G . van N oord. At the sam e tim e, M r. G . van Noord is the holding m anager12 of W E International.

Board of D irectors, consisting of tw o m em bers. Chairm an, vacancy (tem porarily M r. de W aal)) (form ely Jan H uism an) G . van N oord (form ely Drs. A.F.C. Dickm ann)

Supervisory Board Ronald de W aal, Chairm an Drs. J.F. Balkem a, registered accountant D. de M onçeau de Bergendal J.R.L. Travers13

W e Europe is controlled by its Board of Com m issioners. The buyers and salesm en of W E Europe are in the position to m ake their decisions quite independently.

9 The Body Shop, U K N on-Executive Director W E International B.V. (N L) Chairm an of the Supervisory Board Saks Inc., (U SA) Vice-Chairm an of Saks Inc Post Properties Inc., (U SA). M em ber of the Board of Directors

10 Q U O TE, April 21, 1999, H IJ VAN W E 11 SO M O interview w ith M r. G . van N oord, Director W e International B.V., 17 August 2004. 12 (Holding Director) 13 Annual account 2002/2003 as deposit on July 17 2003 at the Cham ber of Com m erce.

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M r. G . van N oord pointed out that the Board of Com m issioners is not w ell inform ed about the SA 8000 system . They only check the com petence and know ledge of the buying directors on this. W E Europe has its ow n statutory m anagem ent level (“statutaire directie”), w hich m eans that it can take its decisions independently from the H olding com pany14, it only has to present its yearly budget proposal w hich has to be approved by the Supervisory Board.

1.5. Financial facts and figures of WE International.

Table. Consolidated Profit and Loss account for 2002/2003 15. (in thousands of euro) 2002/2003 2001/2002

N et turnover16 273,433 265,551 Costs of sales 159,353 159,105 G ross result on turnover17 114,080 106,446

Selling expenses 65,965 66,340 G eneral m anaging expenses 43,316 44,061 Total of costs 109,281 110,401

N et result on turnover 4,799 -3,955 O ther operating incom e 13,641 18,883

O perating result 18,440 14,928

The above table represents the figures of W E International B.V., the direct holding com pany of W E Europe B.V. Thanks to the ‘other operating incom e’ the operating result w as positive in 2001/2002 and also in 2002/2003, the other operating incom e is substantial m ore than the net result on turnover of the core business, w hich am ounts 4,7 m illion euro. The other operating incom e includes rent proceeds from properties rented to third parties. O n the Consolidated Balance Sheet as at 31 January 2003, the com pany buildings of W E International B.V. are valuated at ¤ 210,678,000. At the m om ent, W E International is m ore successful as a real estate com pany than as a fashion retailer.

14 At the m om ent how ever, M r. G . van N oord is the holding m anager of W E International, as w ell as m em ber of the Board of directors of W E Europe, so there cannot be an independent m anagerial relationship betw een W E international and W E Europe at the m om ent.

15 Annual account 2002/2003 as deposit on July 17 2003 at the Cham ber of Com m erce. 16 N et turnover only pertains to turnover to third parties for m erchandise supplied, less sales tax. 17 The gross result on turnover is the difference betw een the revenues for goods supplied during the financial year and their cost price, respectiveley the direct costs pertaining to them .

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Table N et turnover divided according G eographical areas (In thousands of euro) 2002/2003 The N etherlands 136,350 50% O ther EU countries 71,619 26% O utside the EU 18 65,464 24%

N et turnover 273,433 100%

Table N O . O f em ployees at the end of the financial year 2002/2003

Shop personnel 2,295 O ther personnel 395

Total 2,690

1.6. Strategy tow ards the m arket19:

W E Europe m ission statem ent: "W e are expanding our com pany, developing our stores and enhancing our collections by deploying the best people and w orking as a team to build a better future step by step".

W E's strategy is to grow w ith 10 stores per year. W E alw ays chooses A1 locations for its stores. This m eans that all the branches can be found in the heart of m ajor shopping centres20. But there are also a num ber of shops located on “H igh Street” locations (Rue de Rivoli in Paris, Tauentzien Strasse in Berlin). These locations have m arked a m ove in another direction. Another m ove w as m ade in 1999, w hen the com pany reorganised its then separate m en’s and w om en’s’ businesses w ith the W E banner. The com pany launched a new concept, called the W E store, w hich grouped both m en’s and w om en’s apparel under one roof. M en’s and W om en’s w as sold separately previously.

18 Sw itzerland is not an EU country. 19 W E International Factsheet, 2003 20 W E International Factsheet, 2003

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Table N um ber of stores.21 N L BE FR LU X D E CH Europe W E M en 85 22 5 0 22 13 26 151 W E W om en 34 15 1 - 2 - 52 W E Store 9 7 5 - 7 - 28

Total 1 28 44 1 1 0 22 26 231

The table show s that the m ajority are m en stores. 151 out of the 231 stores are stores for m en’s clothing. But w om en’s apparel and accessories represents the com pany’s fastest grow th area.

W E m arketing and com m unications director (in 2001) Aad Boon described W E apparel “betw een Zara and H & M in term s of style. W hile H & M is very trendy, and Zara a bit m ore fashionable, W E is m ore approachable, a little m ore traditional, but w ith a European touch.” 23 W E, as w ell as H & M and Zara, can be characterised as a ‘Fast-Fashion’ retailer. Especially H & M and Zara depend on strong runw ay trends, w hich they reinterpret and recycle, som etim es w ithin w eeks. They have the trends in the store for cheap, [just] w eeks after they've been on the runw ay. But others contend that these trends explains only half the story, saying that fashion item s account for only 15 percent of H & M 's product pyram id, w ith basic item s accounting for the m ajority of its sales. At Zara, the story is sim ilar, although analysts said the m ost fashionable item s account for a slightly greater percentage of the m ix. According to M r. Boon, the m ajority of the W E collection’s focus is basic. W E produces three principal collections per season, and besides that is also feeds the stores as it picks up on the season’s trends. The com pany is aim ing at w orking w om en at the age group betw een 25 and 35 years old24.

In an interview w ith Q uote m agazine in April 1999, M r. Ronald de W aal said he aim ed at a turnover of 2 billion guilders (908 m illion euro) w ithin 5 years, by taking over large departm ent stores in Europe and by autonom ous grow th of 15 stores a year. As w e see the turnover figures of 2002-2003, one can say that W E Europe did not succeed in its grow th plans. The net turnover rem ained stable the last 5 years at about 272 m illion euro25. Also the num ber of stores is not grow ing. An article published in 2000 m entions 251 W E stores and 76 stores of the Sw iss lingerie chain Beldona acquired by W E on 17 O ctober 1999,

21 http://w w w .w e.nl, on M ay 14, 2004. 22 According to the International Factsheet there is one W E M en store in Luxem bourgh, but this store is not m entioned on the w ebsite of W E International. 23 In W om ens W ear Daily, January 22, 2001, W E shines its light on Pairs; W E to open new French Stores. 24 Ibid. 25 N et turnover in 1999 w as about 600 m illion guilders, w hich is 272 m illion euro, in 2002-2003 the net turnover w as 273 m illion euro.

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m aking it a total of 327 for the entire group26. O ne year later, at the tim e that W E w as about to open its second store in Paris’, on Rue de Rivoli, one of Paris’ busiest shopping thoroughfares, the total num ber stood at 245 27, and currently in 2004 there are 231 stores, w hich m eans a decrease of 20 stores in 4 years. There are no plans for a stock quotation in the near future.

1.7. M em bership of branch organisations W E Europe is m em ber of the RN D (Raad N ederlandse Detailhandel). The RN D is divided into several branches, such as the VG T28 active in the textile branch. The VG T is responsible for providing inform ation and organizing activities on social responsibility issues. At the national level, the VG T has been w orking together w ith the M inistry of Social Affairs and the Environm ent tow ards the publication of brochures for the consum ers, providing inform ation about the activities of the VG T w ith respect to social responsibility. This brochure also include a step-w ise description of the VG T's approach tow ards social responsibility throughout the w hole production chain. Ronald de W aal, ow ner of W E International, is m em ber of the Board of Directors of the RN D 29.

26 De Financeel Ekonom ische Tijd, August 25, 2000, Sw iss Lingerie Chain to try its luck in Belgium . 27 W om ens W ear Daily, January 10, 2001, W E shines its light on Paris; W E to open new French stores. 28 The Association of Retail Trading Com panies in the Textile Brands of the N etherlands (VG T). 29 http://w w w .raadnederlandsedetailhandel.nl/

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2. The SA 8000 certification system

2.1. SA 8000: an introduction SA 8000 is a global m ulti-sectoral standard for m onitoring and certifying labour standards30, in w hich SA 8000 stands for ‘Social Accountability 8000’. This standard w as developed by Social Accountability International (SAI)31 in cooperation w ith com panies, unions and N G O ’s. The SA 8000 standard is based on the U niversal Declaration of H um an Rights and fundam ental labour standards, supplem ented by various ILO core conventions on safety and health, w orking hours and sustainable w ages. The SA 8000 system w as m odelled after the ISO 9000 system used in corporate quality checks. SAI trains and accredits auditing com panies w hich m ay subsequently be contracted by m anufacturers and suppliers to gain SA 8000 certification. Com panies that have been accredited to be SA 8000 m onitors by the SAI are quality-control firm s such as the Sw iss SG S, the N orw egian DN V and the British BVQ I.

The SA 8000 system does not certify brands or product lines, it addresses w orkplace conditions in com pany’s supply chains by certifying individual production facilities for com pliance w ith the SA 8000 code. The standard takes a m anagem ent system s approach. For exam ple, it requires com panies to establish internal procedures for review ing, planning and im plem enting the code. A factory that w ishes to be SA 8000 certified needs to be audited by one of the accredited auditing com panies that can be hired directly by that factory32. It alw ays start w ith a pre-audit, the pre-audit report contains a list w ith al the im provem ents that has to be m ade by the com pany before it com plies w ith the SA 8000 code. O nce a factory is granted certification, it m ust undergo a periodic follow -up audit and a full certification audit every three years.

Currently there are 400 certified facilities, representing 40 industries in 40 countries. The num ber of certified garm ent facilities is 71.

Table N um ber of certified SA 8000 garm ent facilities per country33

India 23 Vietnam 13 China 9 Thailand 6 Pakistan 6 Bangladesh 2 The N etherlands34 2

30 N o environm ental standards. 31 Form erly the Council on Econom ic Priorities Accreditation Agency. 32 Chain store age, M ay 1, 2002, M aking it right: sw eatshops, ethics and retailer responisbility, labor. 33 List of SA 8000 certified facilities as of M ay 2004, http://w w w .cepaa.org/Accreditation/CertifiedFacilities.xls

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Rom ania 2 N epal 1 Italy 1 Belgium 1 Indonesia 1 Philippines 1 U SA 1 Sw itzerland 1 Sri Lanka 1

Total of certified garm ent facilities 71

BO X The norm ative fram e of SA 8000

1. Child Labour: N o w orkers under the age of 15; m inim um low ered to 14 for countries operating under the ILO Convention 138 developing-country exception; rem ediation of any child found to be w orking 2. Forced Labour: N o forced labour, including prison or debt bondage labour; no lodging of deposits or identity papers by em ployers or outside recruiters 3. H ealth and Safety: Provide a safe and healthy w ork environm ent; take steps to prevent injuries; regular health and safety w orker training; system to detect threats to health and safety; access to bathroom s and potable w ater 4. Freedom of Association and Right to Collective Bargaining: Respect the right to form and join trade unions and bargain collectively; w here law prohibits these freedom s, facilitate parallel m eans of association and bargaining 5. D iscrim ination: N o discrim ination based on race, caste, origin, religion, disability, gender, sexual orientation, union or political affiliation, or age; no sexual harassm ent 6. D iscipline: N o corporal punishm ent, m ental or physical coercion or verbal abuse 7. Working H ours: Com ply w ith the applicable law but, in any event, no m ore than 48 hours per w eek w ith at least one day off for every seven day period; voluntary overtim e paid at a prem ium rate and not to exceed 12 hours per w eek on a regular basis; overtim e m ay be m andatory if part of a collective bargaining agreem ent 8. Com pensation: W ages paid for a standard w ork w eek m ust m eet the legal and industry standards and be sufficient to m eet the basic need of w orkers and their fam ilies; no disciplinary deductions 9. M anagem ent System s: Facilities seeking to gain and m aintain certification m ust go beyond sim ple com pliance to integrate the standard into their m anagem ent system s and practices.

34 W E Europe and Kuyichi Europe B.V.. Kuyichi is a w holesale fashion com pany based on fair trade principles and the use of organic cotton. Kuyichi designs, develops and sells its products all over Europe. Those com panies are not production facilities but offices and stores.

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The package of conditions outlined in the standard itself is very sim ilar to the ICFTU m odel code, and thus, as opposed to the O ECD G uidelines, includes provisions on living w ages and w orking hours. Besides that, SA 8000 requires firm s to ‘facilitate parallel m eans of independents and free association and bargaining” in countries w here it is not possible to form free trade unions (such as China). But this rem ains controversial, as it is not clear, for instance, w hat exactly w hat w ould qualify as effective parallel m eans of representation in countries such as China.

The advantage of SA 8000 is that the basic package of standards is translated into ‘auditable’ standards. The G uidance docum ent that is used to verify com pliance, consists of extensive checklists and exam ples of m ethods for verifying com pliance35. The G uidance docum ent provides guidance to the auditor, although auditors do not have to follow it by the letter, therefore is too m uch to say that the guidance docum ent leads to verification of com pliance. Exam ples of evidence to assess com pliance or non-com pliance by auditors are given, as w ell as suggestions for corrective actions to be taken in cases of non-com pliance. SA 8000 also includes a section on m anagem ent system s that requires policies and procedures to ensure ongoing com pliance w ith the standard. This m eans that SA 8000 is m uch m ore com prehensive than for exam ple the O ECD G uidelines in term s of im plem entation of ethical standards at the w ork flour.

2.2. Criticism on the SA 8000 by N G O ’s and trade unions In theory, N G O s could be accredited by the SAI to becom e auditors, but up to date it is only the large com m ercial quality control and traditional financial auditing firm s that perform the SA 8000 audits. This has brought about the sam e criticism from N G O s and trade unions as w ith the external m onitoring that individual com panies use: the com m ercial relationship m ay not be trustw orthy. The fact that these audit com panies are directly paid by the factories being audited, raises questions of independence.

Besides that, the outcom es of the audits by com m ercial audit firm s m ay not reflect the reality, because the com m ercial auditors are not alw ays trusted by the w orkers. The com m ercial auditors, for exam ple, are often seen by w orkers as having a relation w ith the m anagem ent of the factories. Therefore, w orkers are afraid to speak openly about sensitive issues such as discrim ination, harassm ent and forced overtim e. Various studies have show n that these com m ercial audits m ay be able to detect visible violations of codes of conduct (such as health and safety issues), but they are less capable to find violations that are less visible, such as w orking hours, w ages, discrim ination, and so on.36 Besides

35 CEPAA, Guidance Document for Social Accountability 8000, # 5 36 See for exam ple, "M onitoring the m onitors: A Critique of Pricew aterhouseCoopers (Pw C) Labor M onitoring", Dara O 'Rourke, Ph.D. Assistant Professor Dept. of U rban Studies and Planning, M assachusetts Institute of Technology, Septem ber 28th, 2000

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that, critics have argued that it is im possible to “certify “ that any factory is in com pliance w ith the SA 8000 standard based on a 1-day audit, once per year.37

In sum , civil society organisations have questioned the com petence of com m ercial auditors to perform social audits, w hich require different com petences that financial audits. Finally, the m ethodology used w hen conducting the audits are being questioned. For exam ple, there is a big difference betw een announced and unannounced factory visits. Also, w hether, w here, how and w hich w orkers are being interview ed is of im portance. For exam ple, w hether w orkers are interview ed in a place w here they feel confident to speak openly, and w hether they have been selected by m anagem ent to speak to the auditor all influences the outcom es of the audit. Civil society organisations have questioned the w orker interview m ethodology used w ithin the SA 8000 system .

O thers criticism relates to the undefined responsibility of the buying com panies (retailers). Retailers too m ay w ant to apply for the SA 8000 certificate, but obviously the supplying com panies in production countries w ill have to m ake the m ost changes to becom e certified. The SA 8000 system does not require the com pany at the ‘top’ of the chain to enable their suppliers to m ake the additional changes, so the burden is placed on the supplier and sub-contractors. In the case of W E Europe, the head office also applied for the SA 8000 certificate, because the com pany w ants all their suppliers to becom e SA 8000 certified in the future, and figured it w ould be appropriate to have the certificate them selves then as w ell. For W E Europe, w ith its headquarters in The N etherlands, applying for the SA 8000 it m eant m aking a few m inor corrections (although it took m uch m ore tim e then they expected in advance)38. For W E's suppliers, m ost of them located in developing countries, the changes that are needed to be approved for SA 8000 m ay have considerable financial consequences that the suppliers w ill have to bear them selves.

Another disadvantage of SA 8000 could be seen in the fact that there is no transparency to w hat degree the com plete supply chain is certified, w hen a certain enterprise declares to be w orking w ith SA 8000. In the developing w orld, the SA 8000 initiative w as conceived w ith m uch suspicion because it w as developed w ith little involvem ent from the South.39

Sum m ary of criticism : - The quality of the auditing is not sufficient for various reasons: o the com m ercial relationship betw een the audit com panies and the factories raises questions of independence. o incom petence of the com m ercial auditors to perform social audits. o N o N G O s have been accredited as auditors.

37 Policy Studies Journal, February 1, 2003, Outsourcing regulation: analyzing nongovernmental systems of labor standards and monitoring, Dara O’Rourke. 38 Sometimes it is confusing that the headquarters of WE International is SA 8000 certified. It gives the impression that WE is only making use of certified suppliers, which is not the case. 39 Labour Rights in China (LARIC), N o Illusions Against the G lobal Cosm etic SA 8000, M ay 1999.

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o the w orker interview m ethodology is incom petent. - The burden to get certified is placed on the supplier and sub-contractors and not on the retailer. - The facilitation of parallel m eans of w orkers representations in countries as China rem ain highly controversial because there are no qualifications defined. - N o transparency to w hat degree the com plete supply chain is certified.

2.3. Corporate Involvem ent Program (CIP) The criticism relating to the transparency should be solved by the ‘Corporate Involvem ent Program ’ (CIP). The CIP Program enables com panies to test the SA8000 standard, to im plem ent it and to publicly report about the progress. The program consists of tw o stages: 1. SA8000 Explorer: Com panies test the SA 8000 system as an instrum ent for their supply chain via pilot audits. 2. SA 8000 Signatory: A tim e path for im plem entation is set up to com ply w ith the SA 8000 standard in the entire of a part of the supply chain via certification. The progress of the im plem entation is com m unicated by a public report w hich is verified by the SAI.

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3. WE Europe: CSR Policy

3.1. WE and its CSR history The first steps to develop a CSR policy w ere taken in 1998, as W E Europe started to develop its ow n Code of Conduct. But a real an eye-opener w as the People's Perm anent Tribunal in Brussels in M ay 1998, organised by the Clean Clothes Cam paign. The Tribunal w as attended by M r. Frits N agel, at that tim e Purchase Controller of W E Europe and responsible for developing social standards w ithin the com pany. O ne of the m ost im portant conclusions of the Tribunal w as that just having a Code of Conduct is not enough: Codes of Conduct are often used as PR-instrum ents and do not have real positive effects on the labour conditions in practice. Based on this know ledge, W E Europe decided that they didn’t w ant to have a Code of Conduct w ithout garantees, and therefore they choose for the SA 8000 system .40

Apart from W E’s public com m itm ent to SA 8000, there is no specific w ritten vision or Code of conduct available.

3.2 .The im plem entation process of SA 8000 w ithin the Com pany In 2000, W E has started to w ork w ith SA 8000. Since then, W E has raised the issue at their suppliers and told them that in tim e, W E w ants to source from SA 8000 certified suppliers only. A tim e fram e w as set, w ith a view to have all their suppliers certified w ith SA8000 by 2004.41 W hat is clear by now , is that the tim efram e has not been m et. According to W E, one of the reasons for the delay is the fact that the purchase director of W E only visits the suppliers tw ice a year. M oreover, the suppliers have not felt m uch pressure to start w orking w ith SA 8000, as apart from W E, not m any buyers are asking the suppliers to com ply w ith SA 8000. A new tim efram e w ill not be set.

The purchase director is responsible for inform ing its suppliers about the role that the SA8000 standards plays w ithin the com pany and w hat they expect from the suppliers. As social responsibility issues are not part of the selection criteria of suppliers, the introduction to suppliers about the SA8000 standard and W E’s expectations in this respect takes only place in a later stage of the negotiations; w hat W E calls ''the second visit to the supplier''. In a first visit to a possible future supplier are costs, quality and delivery-tim e key criteria for selection. In a second visit W E introduces its SA8000 standard in the hope that the supplier w ill agree w ith initiating a certification process tow ards the SA8000 standard42.

40 From the interview of SO M O w ith Dhr. Frits N agel on February 17 2004, he w as Purchase Controller of W E International until 2002, and responsible for the im plem entation of the SA 8000 system at W E. 41SO M O interview w ith J. H uism an, Board of D irectors, W E International B.V. (5 O ctober, 2003) 42 SO M O interview w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003)

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3.2.1. The certification of the H ead O ffice Although the com pany has initially intended to begin the process of certification w ith its suppliers, it realized that the H ead O ffice itself also had to be certified. This certification is related to the Purchasing process, office and logistic organization on head office in U trecht, together w ith 16 stores located in The N etherlands (Am stelveen, Am sterdam , Arnhem , U trecht and Zw olle, G ouda (2) in Sw itzerland (Bern and Zurich), in France (Paris (2)), in Belgium (M echelen (2) and Antw erp(2) and in G erm any (Essen)43

3.2.2. To put the dem and at the suppliers. The first steps that W E Europe took w hen they decided to w ork w ith SA 8000 w as to visit all the m ain suppliers in the Far East, this w as done by M r. Frits N agel, and to ask all the suppliers to start w ith the SA 8000 certification process. After suppliers have been inform ed about the SA8000 standard w ithin W E, they w ere given the tim e to think w hether they w ill start im plem entation or not (first sign of delay in the certification process, this m ight take half a year), Because m ost of the production is obtained from the Far East, this w as the first region to visit. The second region w ill be Eastern Europe, the third region the m editerean region and the fourth region W estern-Europe.

3.2.3. The pre-audit phase. The second phase is a pre-audit by one of the official accredited auditing com panies. The independent bureaus in charge for the pre-audit and the audit are BVQ I or SG S, depending on the country in question. Com m on problem s identified during the pre-audit are related to w orking hours and health & safety issues44. According to M r. N agel, the first pre-audits w ere carried out in Indonesia, H ong Kong, India and the Philippines. W E Europe is w illing to financially support the suppliers for the pre- audit. In exchange, W E insists to receive the pre-audit report w hich contains a list w ith al the im provem ents that has to be m ade by the com pany before it com plies w ith the SA 8000 code.

M r. N agel indicated that the pre-audit phase becam e increasingly im portant for W E. W E states that it is very difficult for a lot of the suppliers to com ply w ith all the standards on short term . To prevent them from quitting w ith the certification process, W E Europe decided to grant the efforts m ade by the suppliers. Each half year, the suppliers have to show the efforts they m ake on im provem ents to the purchasers/buyers of W E45, w ho bring w ith them a checklist w ith the non-conform ities. Som etim es, one or tw o standards are too difficult to com ply w ith, but if im provem ents are m ade, W E shall sustain the relationship. So, it is not a strict dem and to be a SA 8000 certified com pany before one can supply garm ents to W E Europe, but one m ust have the intention to get certified.

43 w w w .sa-intl.org (w eb site of SA8000) 44 from interview w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003) 45 It concerns 4 buyers w ho are instructed by M r. N agel.

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3.2.4. The certification phase of the suppliers Although W E Europe financially support the pre-audit, the certification itself has to be paid by the supplier. Also the ‘true costs’, that is, the costs of the im provem ents that has to be m ade by the com pany before it com plies w ith the SA 8000 code, are for the suppliers account. O ne of the official accredited auditing com panies, the Sw iss SG S, the N orw egian DN V or the British BVQ I, w ill be contracted by the supplier to gain the SA 8000 certification. O nce a factory is granted certification, it m ust undergo a periodic follow -up audit and a full certification audit every three years.

3.2.5. Im plem entation experience according to WE Europe46 For W E Europe the m ost difficult area of undergoing a SA8000 certification are the w orking hours. Its is difficult to im plem ent standards in a country w here the socio-econom ical situation m ake the supplier perceive the (m al) practices as a necessary m ean for survival. This is the typical situation of an em ployee that w orks longer hours to earn m ore m oney. The SA8000 can force to reduce the w ork-tim e, but the em ployee w ill, anyw ay, look for an extra job that w ould provide him w ith a second incom e. In cases like this, W E Europe has com e to a realistic solution: allow ing a m axim um of 60 hours w orkload per w eek, com pensated by a low w orking period, so that the average w ork-tim e per w eek is 48 hours m axim um . Another difficult area is the financial draw backs for both the suppliers and the com pany itself.

Sanctions: For W E Europe, the process tow ards the SA 8000 certification is very im portant as w ell. If the social perform ance of the supplier is consequently developed and im proved by w orking on the correction plans that w ere m ade, the supplier is given sufficient tim e47 by W E to get the certification. W hen serious problem s keep exciting w ithout any im provem ents, then eventually W E Europe can only w arn the supplier and put an end to the contract. So far, W E Europe has been confronted only one tim e w ith the fact of having to choose for another supplier, and this w as m ainly due to unconform ities w ith the environm ental norm s set by W E Europe to its suppliers48.

Stagnation: At the m om ent, the problem for W E Europe is the stagnation of the num ber of certified suppliers. According to M r. H uism an, it is very difficult for the suppliers to take the last hurdle for certification. The very last parts on the checklist are often alm ost im possible to correct, that can be things like an em ergency exit. Because of those last corrections that can’t be m ade, the supplier is not able to get the certification49.

46 SO M O interview w ith M r. Jan H uism an, Chairm an of the Board of Directors, 5 october 2003. 47 If a supplier can show its improvements, then the maximum period can be longer than three years to get the certification. Source: Interview Goede Waar & Co with Mr. Jan Huisman, February 25, 2004. 48 SOMO interview with Mr. Jan Huisman, Chairman of the Board of Directors, 5 october 2003. 49 Interview Goede Waar & Co with Mr. Jan Huisman, February 25, 2004.

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3.3 O perational aspects of the CSR policy of WE Europe

3.3.1 Supply chain responsibilities A corporation’s social responsibility should cover all of its suppliers, subcontractors, licensees, alliances, and anyone serving the com pany irrespective of the form al relationship, the nature of the product or service concerned, or the geographic location. 50

The supply chain responsibility of W E Europe is officially regulated w ith ‘the Letter of Com m itm ent’. According M r. N agel, as stipulated in the SA 8000 regulations, a certified com pany has to prove that its sub-contractors, w ho m ust be representative for m ore than 75% of its production volum e, have signed a “letter of com m itm ent’, in w hich the sub- contractors state that they are aw are of the standards of SA 8000 and they have the intention to apply for a pre-audit.51 Apart from this regulation, there is no supply chain responsibility dow n the w hole chain, as SA 8000 certification takes place at the level of the individual production facility. Especially w hen it com es to the stages before ‘cut m ake and trim (CM T)’, W E takes no responsibility, as the com panies believes these production stages are beyond their sphere of influence.

3.3.2 Stakeholder involvem ent Various stakeholders are represented in the SA 8000 Advisory Board. The SA 8000 G uidance Docum ent has stipulations w ith regard to consultations w ith interested parties. For exam ple, SA 8000 auditors are required to consult w ith local trade unions, N G O s, branch representatives and G overnm ent representatives. H ow ever, there is no involvem ent of stakeholders in the actual audit itself, the level of involvem ent does not go beyond the consultative phase, and m any civil society organisations in production countries have criticised the low level of involvem ent in the auditing and m onitoring, as w ell as the follow -up phase.

Apart from the stakeholder involvem ent in the SA 8000 system , W E Europe does not actively involve stakeholders in the developm ent, im plem entation and verification of its CSR policies. W E Europe is open to questions from civil society organisations, and allow s for interview s by N G O s and research institutes, such as SO M O and G oede W aar & Co.52

3.3.3. Transparency and reporting W E Europe is not w illing to give the com pany nam es of any of the production facilities. The investm ents m ade by W E Europe at those suppliers is one of the m ain reasons for this, they

50 CSR Fram e of Reference, published by the Coalition of Dutch N G O ’s and Trade U nions actively prom otin CSR, July 2003. 51 51 From the interview of SO M O w ith Dhr. Frits N agel .Februar 2004, form er Purchase Controller of W E International until 2002, and responsible for the im plem entation of the SA 8000 system at W E. H ow ever, this regulation has not been found by SO M O in the SA 8000 G uidance D ocum ent. 52 G oede W aar & Co, conducted an interview w ith W E International as part of their project ‘G ew oon G oed’ oin february 25, 2004.

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don’t w ant other fashion retailers having the advantage of their investm ents. Another reason is the costly and confidential fashion inform ation supplied by the styling team of W E Europe. Besides that, it is the policy of W E Europe not to be transparent about the num ber of SA 8000 certified suppliers producing for W E, or the percentage of the total production w hich is produced by certified facilities, or a indication on the progress.

W E Europe is a fam ily-ow ned com pany, and as such it is not obliged to publish an annual report. W E does not publish any environm ental or social reports either. M r. J. H uism an (Board of Directors) believes that reports m ade by civil society organisations (such as SO M O ) have m ore credibility than a report m ade by the com pany itself.53

Another reason for not reporting on social issues is that m aking public the nam es of the suppliers could m ean a risk to the future success of the com pany54. The branch organization VG T is evaluating w hether the database of certified suppliers can be m ade public, allow ing other com panies to place order w ith certified production sites.

At the tim e of the interview w ith H uism an, W E w as not aw are of the existence of SAI’s Corporate Involvem ent Program m e (CIP). This program m e has been set up by SAI in order to enable retailers to be m ore transparent about its progress and publicly report about the im plem entation. It is designed as a tool for im plem entation by retailers.

3.3.4 Independent verification

The term independent verification has led to m uch confusion betw een different stakeholders in the CSR debate. According to W E Europe, SA 8000 provides sufficient and independent verification. H ow ever, as m entioned above, there are a num ber of criticism s against SA 8000, w hich w ould lead to the question w hether the SA 8000 audits can be seen as independent verification. In this context, verification is about establishing the credibility of claim s concerning labour conditions, the observance of code com pliance or of code im plem entation. Because the essence of verification is credibility, it m ust be perform ed by an organisation that is independent of the com pany or organisations w hose claim s are being verified. Verifiers should enjoy the credibility of all stakeholders. In order for the verification process to be credible it m ust m eet certain quality standards relating to audits, w orker involvem ent, com plaint m echanism s and transparency, and be part of a m ulti-stakeholder approach. W hen using this definition of independent verification, the certification by SA 8000 does not m eet these criteria. See annex 1 for a sum m ary of term s used in the field of m onitoring and verification.

53 from interview w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003) 54 G enova, M ., (2003) ''Kledingconcern W E, G egarandeerd en Kinderarbeid", in People Planet Profit, Vol. 1, sum m er 2003

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3.4 Responsibilities w ithin the com pany regarding CSR M r. Jan H uism an, Chairm an of the Board of W E Europe is responsible for the CSR policy w ithin the com pany and he also functions as the spokesm an for the com pany for all The CSR related topics.

O ne m em ber of the board of directors (at present M r. J. H uism an) and the purchase director are in charge of the SA 8000 system w ithin the com pany. Purchase directors and sales m anagers receive training on SA 8000 as w ell as a refresher course before they visit producers in other countries in order to receive updated inform ation on actual social issues55.

As it concerns the im plem entation of the SA 8000 standard M r. Jan H uism an w orks together w ith the purchase director and the sales director.

Purchase, m arketing and sales operate from the H ead O ffice in the N etherlands. The purchase director is also responsible for analyzing the general environm ental conditions (hygiene, em ergency exits, etc.) in the production sites56.

O ne m em ber of the board of directors (at present M r. J. H uism an) and the purchase director are both responsible for the im plem entation of the SA8000 standard throughout the com pany. Purchase director/s follow a training course on SA8000 and a refresher course before they visit their suppliers in other countries in order to receive updated inform ation on the latest social issues. Also sales m anagers follow a training course on SA8000 and are responsible for questions from the consum ers57.

3.5. The environm ental policy of WE Europe.

O ne of the w eaknesses of SA 8000 is the lack of environm ental requirem ents w ithin the system . The m ain environm ental problem s in the garm ent industry can be seen in the pre- CM T phase, such as the painting and dying of the fabrics. H ow ever, W E does not take responsibility for this phase of the production. According to W E, im proving labour conditions in the factories often have an environm ental im pact as w ell. For exam ple, w hen health and safety issues such as storage of hazardous chem icals are dealt w ith. There is no use of Biological Cotton by W E Europe. The reason W E gives is that there is a lack of availability and quality guarantees.

55 interview SO M O w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003) 56 G enova, M ., (2003) ''Kledingconcern W E, G egarandeerd en Kinderarbeid", in People Planet Profit, Vol. 1, sum m er 2003 57 Interview SO M O w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003)

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Despite of the w eakness of SA 8000 regarding environm ental issues, W E Europe did not form ulate an additional environm ental policy. 58

3.6 Ensuring social standards - The joint initiative of the A VE and VG T

Another im portant initiative to m ention here is the joint initiative of the AVE and the VG T, ‘Ensuring social standards”. W E Europe, as m em ber of the VG T, has show n an interest in this initiative and is considering w hether to participate in this, because it is based on the sam e standard currently used by W E, SA 8000.

The Association of Retail Trading Com panies in the Textile Brands of the N etherlands (VG T) started in 2002, together w ith its European partner organizations, the Foreign Trade Association (FTA) and the AVE (Aussenhandels-vereinigung des Deutschen Einzelhandels) to consent on one single code of practice for social responsibility issues. The advantage for the suppliers is that they w ould have to com ply to only one system , thus being m ore attractive to them , accelerating the process of certification and adherence of m ore suppliers to the system . The use of only one code of practice w ould also m ake it easier to provide assistance to the suppliers during the im plem entation of the system . During the discussions held betw een de VG T, it has been agreed that, at present, the SA8000 standard is the only w orldw ide standard w ith an independent controlling system .

In 2003, the VG T and the AVE started w ith the im plem entation of the system , the FTA w ill follow in 2004. The follow ing m em bers of the VG T and the AVE are m entioned as participants in the brochure of the initiative: Sinn Leffers W ehm eyer H unkem oller (Vendex KBB) H EM A (Vendex KBB) V& D (Vendex KBB) Prom iss M iss Etam O BI Deichm ann O TTO N eckerm ann Versand Karstad Q uelle Steilm ann Peek & Cloppenburg M etro G roup C& A

The AVE sector m odel social responsibility is based on the AVE Code of Conduct59 w hich is com parable w ith the SA 8000 standards, in term s of the standards m entioned. H ow ever the SA 8000 standards are m ore explicit w hen it com es to for exam ple w orking hours and child labour. It is m aking use of the auditing com panies of the SAI. The AVE/VG T m odel follow s the SA 8000 Standard by interpreting and applying it from the point of view of developm ent policy. W ithin the scope of correction plans w hich are

58 Interview G oede W aar & Co w ith J.H uism an, February 25, 2004. 59 AVE Declaration Concerning a Code of Conduct for the procurem ent of G oods to ensure Protection of W elfare Standards, 1999.

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recorded by the auditing com pany and the supplier, possible divergences shall be rem oved. This w ould be done w ith the assistance of AVE/VG T m em ber firm s, and possible service providers engaged by these and local netw orks that exist in the supplier countries or w hich are being set up. Thus the focus lies on consequently im proving the social perform ance of the suppliers. The certification itself is not the m ost im portant issue, suppliers w ill only be encouraged to obtain the SA 8000 certificate. The supplier him self decides if on top of this, he w ishes to be certified according to SA 8000 or not. In no case the certification is a prerequisite for the taking up and/or m aintained of the business relations w ith the AVE/VG T m em ber firm s.60 Rem arkable in the AVE/VG T initiative is the condition to be fulfilled by the auditing com panies in charge w hich include readiness to cooperate w ith local N G O ’s and trade unions. Another rem arkable thing in a positive w ay is that the costs for the coaching and the im plem entation of the corrective actions are borne on principle by the AVE/VG T m em ber firm s.

Very useful for garm ent retailers w ho w ill join the initiative w ill be the AVE-database w hich is set up to store audit results of the suppliers. In the AVE-database the suppliers are distinguished according to the follow ing features: - first audit com m issioned - first audit carried out (date) - no further qualification required - In the qualification procedure - Re-audit carried out (date) - Certified according to SA 800061 Also considered as very useful are the w orkshops given by AVE to suppliers in production countries to introduce the SA 8000 system .

If W E Europe decides to join the AVE/VG T initiative it w ould m ean that the com pany no longer put the dem and at the suppliers to get the SA 8000 certification. Then it entirely focusses on the process of im proving of the social perform ance of the suppliers instead of the certification itself. In practice, this is the line W E Europe already follow s.

4. WE Europe and its suppliers

4.1 O utsourcing trends of WE Europe. The production of the goods and garm ents sold by W E is outsourced to countries w ith low labour costs, such as Eastern Europe and the Far East. According to W E, the total num ber of suppliers is around 30062, but a process is started to reduce this num ber. The num ber of

60 Sector M odel Social Responsibility of m em ber firm s of the AuTenhandelsvereinigung des Deutschen Einzelhandels e.V. AVE, (Foreign Trade Asociation of the G erm an Retail trade)., April 2003, Description of the system . 61 Ibid. 62 People, Planet, Profit, P+, Volum e 1, Sum m er 2003, # 4, Interview J. H uism an

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m ain suppliers in the Far East is about 30.63 A num ber of 32 m ain suppliers is m entioned in the research of the consum er organisation G oede W aar & Co. M ost of the productionvolum e is produced by those m ain suppliers in the Far East. The other (m ore variable) suppliers are m ore im portant for the accessories and sm aller articles.

Recent trends in sourcing can be seen, m ore and m ore production takes place in Eastern Europe, due to its proxim ity to the m arket. W ithin Asia, there is also a shift from H ong Kong to southern locations such a Shangai, in China. A recent new location is Cam bodia, due to its low prices. India the m ajor location for the production of T-shirts. H ow ever, according to W E, it is a difficult location because producers w ork w ith m any sub- contractors thus controlling w orking and environm ental conditions is not easy. An alternative to India w ould be Bangladesh, how ever the political instability and the frequent floods does not m ake it econom ically attractive for W E. In the search for producers, W E Europe chooses for long term contracts and short term delivery-tim es64.

In som e countries W E Europe has only one product line for cotton clothing, as in India and Bangladesh. But the one production line in India is m ore im portant for the production volum e than the ten production lines for cotton in Turkey65.

4.2 WE Europe and the num ber of certified suppliers

Progress of the w hole certification process w ithin W E and its suppliers rem ains confidential to W E Europe. O penness about the num ber of producers that are SA 8000 certified is the m ain lack of transparency from W E. W E does not w ant to disclose the num ber of suppliers that are SA 8000 certified, nor the percentage of suppliers.66 W E considers this inform ation to be com m ercially sensitive. Another reason given by W E not to m ention percentages or num bers, is that the suppliers and the total num ber of suppliers are alw ays subject to change. W hich w ould m ake giving any num bers or percentages irrelevant.

This position by W E m akes it difficult for SO M O (and any other civil society organization) to assess the true level of im plem entation of the SA 8000 system in its production process by W E. It should be noted that m ost of the labour problem s in the garm ent industry take place at the level of the supplier in the production country. The num ber of stores that have SA 8000 in Europe, is therefore not very relevant to the issue CSR in a garm ent com pany.

63 SO M O interview w ith D hr. Frits N agel, form er Purchase Controller of W E International and responsible for the im plem entation of the SA 8000 system . (17 februari 2004). 64 SO M O interview w ith J. H uism an, Board of Directors, W E International B.V. (5 O ctober, 2003) 65 Interview G oede w aar & Co m et M r. Jan H uism an of W E in M arch 2004. 66 SO M O interview w ith J. H uism an, Board of D irectors, W E International B.V. (5 O ctober, 2003). Before the interview took place, M r. H uism an already stated that he w ould not disclose the nam es of the factories, nor the num ber of SA 8000 certified suppliers, nor the percentage of total volum e produced by certified facilities.

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BO X Different sources about W E Europe and its suppliers

Inform ation on the suppliers and the Source of inform ation num ber of certified suppliers of WE. Less than 10% of the T-shirts sold under the Interview Consum entenbond, M elanie W E brand are produced by certified Peeters w ith W E, outcom e of this interview suppliers. W E Europe w ants to increase this is published in the ‘Consum entengids’ van percentage to a 60%. Decem ber 2001 At least tw o of the suppliers of W E are Research SO M O 2001, published in the certified, nam ely, Sonal G arm ents in India report: ‘The reality behind the code’, 2001. and Eastm an Export in India67 In 2001, W E started the process to have all Interview w ith M r. Frits N agel (W E), June its 32 m ain suppliers certified. In June 2002, 2002 w ith G oede W aar & Co. 8 of the m ain suppliers of W E are certified and another 6 suppliers w ere expected to get the certification in short term . Total num ber of suppliers is 300 Interview w ith M r. Jan H uism an, Chairm an of the Board of W E Europe in People, Planet, Profit P+, Volum e 1, Sum m er 2003. It’s the policy of W E not to give figures on Interview SO M O w ith M r. Jan H uism an of W E the num ber of suppliers or the num ber of SA Europe, 5 O ctober 2003. 8000 certified suppliers producing for W E. W E has about 30 m ain suppliers in the Far Interview SO M O w ith M r. Frits N agel form er East. At the end of 2002, 8 of them w ere Purchase Controller of W E, February 17, certified and another 6 suppliers w ere about 2004. to be certified. All the rem aining suppliers received a pre-audit. O ne of the certified suppliers of W E is Interview G oede W aar & Co w ith M r. Jan located in H ong Kong. Currently, W E is H uism an on February 25, 2004. m aking use of m ore than 12 certified suppliers, but it stagnates at this point.

SO M O cannot verify the above inform ation on the certified suppliers, altough w e did try. In February 2004, the total num ber of SA 8000 certified garm ent factories w orldw ide w as 54.68 As a test, SO M O conducted a sm all survey by telephone and em ail am ong those 54 factories, w ith the question w hether or not they are producing for W E Europe. But, unfortunately, this didn’t w ork out.

67 W E is not m entioned anym ore anym ore on the w ebsite of Eastm an Exports as a client in January 2004. 68 w w w .sai-intl.org (checked February 2004)

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

Conclusions

W E Europe provides a good case for the current state of affairs regarding corporate social responsibility w ithin the garm ent industry. W E Europe is one of the few Dutch garm ent retailers that has been w orking tow ards im plem entation of social standards w ithin their supply chain since the late nineties. Com pared to m any other garm ent com panies that do not have a m onitoring system or even a code of conduct, W E Europe is considered a frontrunner in this field. W E Europe has often been m entioned as a ‘best practice’ com pany because of their com m itm ent to SA 8000. The norm ative fram e on w hich SA 8000 is based, is in agreem ent w ith the CSR Fram e of Reference used by the Dutch Civil Society.

Som e key questions rem ain unansw ered. First of all, it rem ains unknow n w hat the im pact has been of the efforts of W E Europe on the actual labour conditions in the factories that produce for the retailer. It w as beyond the scope of this case study to undertake research into the labour conditions in factories supplying for W E Europe. Secondly, it rem ains unknow n w hat the exact efforts have been of W E Europe in the past six years, since the com pany started to w ork on CSR and SA 8000. This is one of the key issues in the CSR debate. N G O s, trade unions, governm ents and the society at large expect com panies to do everything they can to enable im provem ents of CSR standards w ithin their spheres of influence, w hich include the supply chain in the case of garm ent retailers. At the sam e tim e, there is general consensus am ong different stakeholders that changes take tim e, especially in developing countries, and that one cannot expect from a retailer to have their w hole supply chain com plying w ith their code of conduct overnight. But civil society has the legitim ate expectation that progress tow ards im provem ents is show n.

Basic assum ption of the CSR policy of W E Europe is that eventually all suppliers w ill be SA 8000 certified. W E Europe is not transparent about how m any of its suppliers are certified or w hich percentage of its clothings is produced by certified suppliers or the progress of certification. Therefore it is not possible to assess the level of im plem entation of the SA 8000 standard. A valuable addition to its CSR policy w ould be a public periodical report about the progress of the im plem entation (see also the Corporate Involm ent Program m e paragraph 2.3). The argum ent used by W E that this inform ation is business sensitive is not valid, as progress can be show n w ithout disclosing nam es of suppliers.

In the CSR debate, civil society organisations are often given the role of the ‘w atchdog’, as part of the voluntary approach taken by G overnm ents. It is argued that civil society organisations should keep the pressure on com panies by pointing to critical areas w here im provem ents need to be m ade. This case study m akes clear that is it not alw ays possible for N G O s to play that role if com panies are not transparent about their CSR efforts.

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Although the lack of transparency about the progress of certification, there are indications that the process has stalled. A possible reason for this could be that the attention from W E is m oving from SA 8000 to the developm ents taking place at the VG T/AVE (see also paragraph 3.6 Ensuring social standards – the joint initiative of AVE and VG T).

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AN N EX 1: Abstract M onitoring and Verification Term inology guide Clean Clothes Cam paign

In 2002 and 2003 SO M O coordinated a project funded by the European Com m ission w hich brought together the leading European m ulti-stakeholder initiatives in the garm ent industry. As part of this project, a term inology guide w as developed on com m only used term s in the context of m onitoring and verification in the garm enty industry. This guide w as w ritten by N ina Ascoly and Ineke Zeldenrust involving the Centre for Research on M ultinational Corporations (SO M O ), the Clean Clothes Cam paign (CCC), the Ethical Trading Initiative (ETI) and the Fair W ear Foundation (FW F). Below is an abstract of som e key term s that are relevant for this com pany profile on W E International, as they often generate confusion betw een different stakeholders: audit, m onitoring and verification.

Audit: This term is m ost com m only used to refer to a form al, often periodic exam ination and checking of accounts or financial records to verify their correctness. But m ore generally, an audit refers to any thorough exam ination and evaluation of a problem . The essence of an audit is the exam ination of evidence and the cross checking of the evidence to establish its truth. In this sense an audit differs from an inspection that does not necessarily involve the crosschecking of inform ation. In the context of m onitoring and verification activities, an audit refers to the thorough form al exam ination of the labour practices of a particular w orkplace or com pany, based on corroborated evidence. The audit aim s to check these labour practices against a certain set of labour standards, follow ing a certain agreed protocol (established rules and procedures) concerning the gathering and evaluation of the various kinds of evidence. The result of an audit can be report based on such an exam ination. In the context of the m ulti-stakeholder initiatives that the CCC is participating in, the term auditing is used to refer to auditing of labor conditions throughout the garm ent production supply chain (som etim es referred to as an assessm ent).

M onitoring: G enerally speaking m onitoring m eans to w atch or check on. In the context of the w orkplace, m onitoring refers to the surveillance of labour practices against a given set of labour standards by a person (or persons) w ith a regular or frequent presence in the w orkplace and unobstructed access to m anagem ent and staff. "Frequent", in this context, m eans being present in the w orkplace sufficiently often as to be able to detect variations from standard behaviour. In the context of a code of labour practice m onitoring m eans observing w orkplaces covered by a code to determ ine w hether the provisions of the code have been im plem ented and are being observed. This can be contrasted w ith the term s “inspection” or “audit” w hich can describe activities that are not continuous or necessarily repeated.

Exam ples of w orkplace m onitoring include m onitoring carried out by (1) a m anager w ith a designated m onitoring function, w ho is continuously or frequently in the w orkplace in

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question; (2) an em ployee in that w orkplace w ith a designated m onitoring function (for exam ple a union delegate); (3) a governm ent or local authority official w ho is assigned to a particular w orkplace for m onitoring purposes and is continuously or frequently present in the w orkplace; (4) representative of the brand nam e com pany/retailer, not necessarily a direct em ployee of the com pany; but including som eone hired (possibly locally or via a com m ercial auditing com pany) to carry out m onitoring functions on the com pany’s behalf; or (5) a civil society organization, for exam ple the Central Am erican m onitoring N G O s.

The term s first, second, and third party m onitoring have also been used, but generally have led to confusion. U sually businesses see them selves as the first party, the supplier as the second party, and the m onitor as a third party.

Verification: In this context, verification is about establishing the credibility of claim s concerning either actual labour practices, the observance of code provisions, or of code im plem entation. Because the essence of verification is credibility, it m ust be perform ed by organizations or individuals that are independent of the com pany or organizations w hose claim s are being verified (for instance the claim s of sourcing com panies, suppliers, trade or industry associations).

Verification can involve the sam e or sim ilar activities that m ay have been used to im plem ent (give effect to) a code - inspections, interview s, com plaints, social audits, factory audits etc. or it m ay involve the re-exam ination of evidence acquired from these activities. Verification can concern the actual situation at a w orkplace or it could concern an exam ination of m anagem ent system s and other evidence that w ill indicate w hether a com pany (a sourcing com pany for instance) or organization has assum ed the responsibilities that it claim s. Claim s to be verified could include those m ade w ith respect to the obligations of com panies participating in a m ulti-stakeholder organization.

Verification cannot be credible unless it is carried out by qualified people and organizations according to previously defined rules and processes, w hich cannot be changed by the com pany w hose claim s concerning w orkplaces or suppliers are being verified. Verifiers should enjoy the confidence of the relevant stakeholders. Based on their experiences to date w ith verification, the CCC has concluded that in order for the verification process to be credible it m ust m eet certain quality standards relating to audits, w orker involvem ent, com plaint m echanism s and transparency, and be part of a m ulti-stakeholder approach.

Current debates on the usage of selected term s

A: audit An audit involves the cross-checking of inform ation such as an exam ination of the entire com pany or its books, depending on the audit protocol. It can include an inspection.

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An audit is a tool in a certain process depending on how , by w hom , and w here the audit is executed. Thus, an audit can be a tool in m onitoring as w ell as in verification (see below ). In the Clean Clothes Cam paign initiatives, the term audit is used in different w ays. There is currently a lot of discussion regarding w hen exactly the term audit should be used, and in particular w hat constitutes an audit. For exam ple, com panies that carry out quality control or accounting tasks refer to factory visits as audits. In general, these com panies are referred to as com m ercial auditing firm s. As m ore and m ore garm ent retailers hire such firm s to audit their suppliers, the term s audit and auditing are increasingly associated (especially by w orkers and w orker representatives in the production country) w ith the factory visits m ade by these com m ercial auditors. H ow ever, despite these associations it is im portant to note that the term audit itself does not say anything about the quality and scope of an audit. An audit can include representative interview s w ith em ployees and m anagem ent and a thorough checking and cross- referencing of docum entary inform ation (such as pay and tim e records). For exam ple, the audits in the Sw iss CCC pilot projects w ere m uch broader than a factory visit (w hich in that case w as referred to as an "inspection"), and contained both interview s w ith the w orkers (outside the factory prem ises), as w ell as an "inspection" at the factory, both carried out by m em bers of a verification team (w hich did not include com m ercial auditors). The Dutch Fair W ear Foundation uses the term audit to include factory inspection, consultation w ith local organizations, and w orker interview s. O f great im portance (and w idely debated) is w ho carries out the audit, in term s of their skills, qualification, credibility, and relationship to the supplier (factory being audited) and the retailer w hose goods are being produced at this facility. Auditors have ranged from senior m anagers or auditing com panies to specialized N G O s or trade union organizations, or a com bination of these.

Som e have used first party, second party, and third party to distinguish w ho carries out the auditing. Social Accountability International (SAI) for exam ple uses first party for internal audits (the factory em ploys the auditor), second party for audits by the buyer or a consulting group and third party for audits by an accredited auditor.

B: stakeholder During the O ctober 2001 conference “From Code to Com pliance” a w orkshop, bringing together participants from the various CCC m onitoring and verification initiatives, w as convened to discuss the possible roles of local stakeholders. Participants considered w ho stakeholders are, w hat their roles are, and how to facilitate the fulfilm ent of those roles. Participants said that local suppliers w ere stakeholders, though they have not been involved in key inform ation sharing and decision m aking, and local trade unions. But beyond that there w as not total agreem ent am ong those w ho participated in the w orkshop. Som e thought that N G O s, local governm ent (ex. labour inspectorates) and academ ics (w ho conduct research) are all stakeholders. N ot all local people w ere seen as stakeholders. Suggested roles for local stakeholders w ere research and inform ation gathering, though this in itself w as not seen as enough. Local stakeholders should be able to give input. O ther roles m entioned w ere trust building and involvem ent in

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corrective action (ex. defining w hat action should be taken and how to im plem ent a corrective action plan). Som e felt that as stakeholders, w orkers should be involved in developing the code. Stakeholders should have a role in any institutional fram ew ork that deals w ith these issues. Participants concluded that the m ain obstacle to the local involvem ent of stakeholders is know ledge (ex. know ledge of the code and its relevance) and capacity (lim ited resources m eans getting involved w ith codes can quickly overw helm an organization and prevent other im portant w ork from being done).

C: verification

Som e current discussions regarding the usage of the term verification relate to the boundaries of the verification process (w hat is verification and w hat is m onitoring? are they overlapping processes?). Also being debated is the need to be m ore specific about the content and positioning of the verification process in relation to the interests of specific stakeholder groups (is another term needed -- independent verification, for exam ple -- to refer to a verification process that is independent of control by any one stakeholder group?).

It is difficult to distinguish w here m onitoring ends and verification begins. Both currently utilize sim ilar tools (factory inspections, w orker interview s, com plaints procedures) blurring the distinction betw een the tw o processes. As a result these tw o term s are often discussed together because, for exam ple, any discussion of m ethodology for w orker interview s as a tool for gathering inform ation to m onitor code com pliance w ould also be relevant for discussions of the use of this tool for verification of code com pliance. Interview s w ith w orkers can be used to gather inform ation by auditors hired by a com pany, but can also be carried out by an organization involved in verification to determ ine if the m onitoring process - including the w orker interview s carried out by the auditors - w as a sound one.

This relationship betw een the tw o processes w as highlighted by the Sw edish initiative on m onitoring and verification in w hich the Sw edish CCC participated. Com panies participating in the project found that their internal m onitoring system s (at that tim e based on factory visits and talks to m anagem ent) had not uncovered w hat w as really going on in the w orkplace. This cam e to light during an unannounced audit conducted by a team com posed of representatives from an audit firm and from the project, using inform ation collected in advance during w orker interview s by local researchers, recom m ended by N G O s. During the audit m any violations reported during the w orker interview s w ere confirm ed. The Sw edish initiative tested out this type of social audit in Bangladesh, India, and China, but m ore in the context of verification than as part of the m onitoring process. N evertheless, the lessons learned w ere applicable to both processes. In this w ay, the findings of the verification process can be used to im prove the m onitoring process.

There has been m uch discussion about the need to preface the term verification w ith the term "independent." Som e w ithin the CCC see this as necessary to stress the independence

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of the verification process from control or dom inance by any one stakeholder group. Therefore, they have used the term "independent verification" to refer to a verification process that is part of a m ulti-stakeholder process and that m eets certain quality criteria that reflect such a m ulti-stakeholder approach. To date these criteria relate to the quality of auditing, w orker involvem ent in verification processes, the inclusion of a system to handle com plaints, and obligations regarding transparency. H ow ever, others believe that it is not necessary to preface the term verification w ith the w ord independent. In their view , coining the phrase "independent verification" only gives rise to the idea that there could be such a thing as verification that is not independent. O thers suggest that independence is not the correct term to use to convey the type of verification that the CCC supports, because no one is truly independent. Instead, they have proposed, the term “m ulti- stakeholder verification” could be used to highlight the im portance of using a m ulti- stakeholder approach to verification.

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