Designated Suppliers Program

 

Overview

 

University logo apparel goods will be sourced from a set of designated supplier factories that have been determined by universities to have affirmatively demonstrated full and consistent respect for the rights of their employees.  In addition to respect for the standards currently embodied in university codes of conduct, these factories will also be required to meet two additional standards:  demonstrable respect for rights of association – as evidenced by the presence of a legitimate, representative union or other representative employee body – and the payment of a livable wage.  University licensees will pay these factories prices for their products sufficient to allow factories to achieve these standards, prices which will represent modest increases over industry norms, and will be expected to maintain the kind of long-term relationships with these factories necessary to allow for a reasonable degree of financial stability and job security.  These factories will produce primarily or exclusively for the university logo goods market. 

 

Sourcing Requirement and Workplace Standards

 

The purpose of this proposal is to ensure to an extent not possible through current codes of conduct and code of conduct enforcement strategies that university logo apparel products are not made under sweatshop conditions.  Upon implementation of the Designated Suppliers Program, licensees will be required to source most of their university apparel logo goods from factories that have been designated by the Worker Rights Consortium (WRC).  In order to qualify as a designated university supplier, a factory will be required to meet the following criteria:

 

 

Implementation of the Program will be phased-in over time, with the percentage of goods that licensees are required to source from designated supplier factories increasing each year. After the first year of implementation, licensees will be required to source 25% of their logo goods in this manner.  After two years, the requirement will be 50%.  After three years, the requirement will be 75%.  Once the 75% level is reached, the university community will review the effectiveness of the Program and evaluate the desirability of applying the system to 100% of university production, bearing in mind that there may be value in some university production occurring outside of the sphere of the Designated Supplier Program in order to maintain a broader influence on the apparel industry at large.

 

Licensees are responsible for ensuring that the required amount of goods is manufactured in designated factories.  Subcontracting by designated suppliers will not count towards a licensee’s obligation unless those subcontractor factories are also qualified as designated suppliers. 

 

These standards apply only to university licensed apparel and textile products and only to production facilities in which products are sewn and assembled.  Upon full implementation of the Program, the university community will assess whether the Program can be applied to facilities beyond those engaged in sewing and assembly operations and to products beyond apparel and textile goods. 

 

Explanation of Key Standards

 

Freedom of Association

 

To qualify as a designated supplier, a factory must be found to fully respect employees’ associational rights, as evidenced by the existence of a legitimate labor union or other representative employee body.  The union or employee body must have a leadership freely elected by the workforce, without interference from management, and have standing to bargain over wages and working conditions on behalf of the majority of workers.  The factory must negotiate in good faith a collective bargaining agreement with the union or employee body.  The factory must not curtail associational rights of employees by engaging in terms of employment, such as temporary contract labor arrangements, that have the effect of hindering the exercise of these rights.

 

Living Wage 

 

Factories will be obligated to pay employees, as a floor, a living wage.  A living wage is a “take home” or “net” wage, earned during a country’s legal maximum work week, but not more than 48 hours, that provides for the basic needs (housing, energy, nutrition, clothing, health care, education, potable water, childcare, transportation and savings) of workers and their families.

 

Producing primarily for the university logo goods market

 

In order for compliance with the above standards to be achievable, university licensees will need to account for a substantial majority of production at each participating supplier factory.  The burden will therefore be on licensees to ensure that those factories they intend to use toward fulfillment of their obligation have sufficient orders to ensure that two thirds of annual sales are for the university logo goods market.  At the end of its first twelve months as a designated supplier, each factory will be assessed to verify that this standard was met during those twelve months.  If it is determined that the standard was not met, the factory will lose its status as a designated supplier and licensees will not be able to count goods sourced from that factory over that twelve month period toward fulfillment of their sourcing obligations under the Program.  The purpose of this requirement is twofold: to ensure that designated suppliers receive sufficient orders at prices adequate to allow for compliance with Program standards, and to ensure that these orders are sufficient in volume, and in consistency over time, to enable suppliers to provide stable employment to their workers.

 

 

 

 

Monitoring

 

Ongoing compliance with the standards by designated suppliers will be assessed by the WRC through a combination of complaint-based investigations and spot investigations (see Appendix for further explanation of the implementation and monitoring processes).

 

Fair Pricing Requirement

 

Licensees and/or their agents will be required to order goods from the designated factories at prices that are sufficient for the factory to pay a living wage and to comply with all other code of conduct standards. The failure of a licensee to purchase goods at prices that meet this standard will represent a violation of its obligations under the Program.  It is the responsibility of each licensee, in negotiation with each supplier factory on each order, to determine the appropriate price.   The WRC will provide technical assistance, as needed.   If the WRC determines that the price being paid for a particular order is insufficient to allow a factory to meet the living wage standard, the licensee will be deemed to be in violation of its obligations under the Program.

 

Licensees are encouraged to assist factories in enhancing productivity and to improve their own ordering practices in ways that lower suppliers’ costs.  To the extent that a supplier derives cost savings from such efforts, it is expected that the price premium required to allow that supplier to achieve the workplace standards will be reduced.  However, it is the responsibility of the licensees to ensure, in the case of each order, that the price paid to the supplier is sufficient, in view of actual production costs, to allow all of the standards to be met.

 

Transparency and Disclosure          

 

Licensees and designated suppliers must be fully committed to transparency in order for the WRC to effectively verify their compliance with this program.  Factories must allow the WRC and its representatives unobstructed access to the factory when requested. 

 

In order to demonstrate compliance with the sourcing requirement, licensees must publicly disclose, on a quarterly basis, the raw number of goods procured from each supplier factory for each product type during the preceding quarter.  The WRC will review this disclosure on an ongoing basis and annually assess each licensee’s compliance with the Program. 

 

In order to demonstrate compliance with the fair pricing requirement, in the case of a dispute over appropriate price levels the licensee and the factory must provide the WRC, on a confidential basis, access to relevant financial records and production data.

 


Appendix

Implementation Process, Schedule and Monitoring

 

Program Phase-in and Sourcing Requirements

 

Because of the nature of apparel industry sourcing practices, it is not presently feasible for any factory to fully meet the standards necessary to qualify as a designated supplier.  Only when, as a result of the Program, stable orders are available to factories at appropriate price levels will full compliance be possible.  Therefore, the Program will involve a start-up phase in which the WRC will work with licensees and factories in order to identify potential designated suppliers, direct orders to these suppliers, and bring them into full compliance with the standards of the Program. 

 

This process will work as follows:

 

Upon adoption of the Program by licensor universities, the WRC will provide licensees with a list of factories that possess the capacity to achieve designated supplier status, but have not yet done so.  This determination will be based on the level of overall code compliance demonstrated by particular factories, including manifested respect for rights of association.  Licensees may choose factories from this list and/or or factories from their existing supply chains that they believe can be brought into full compliance under the standards of the Program.  The WRC will advise licensees on which of their existing suppliers may be likely to achieve compliance and will work with licensees to map out plans for remediating deficiencies and achieving full compliance at a sufficient number of facilities.   

 

The first six months after the inception of the program will be a grace period; licensees will not be required to demonstrate that they are sourcing from designated suppliers until this period has ended.  During the grace period, the WRC will advise licensees on an ongoing basis as to whether sufficient progress is being made at a given factory such that it will be feasible for compliance to be achieved in a timely fashion.  Assessment of factories to identify designated suppliers will occur at the end of the grace period, and will be initiated in response to requests from workers and their representatives at each factory.

 

After the grace period concludes, licensees will incur the obligation to demonstrate that they are sourcing the appropriate percentage of their university logo goods from designated suppliers.  Compliance will be measured annually, starting from the end of the grace period – meaning that the first compliance assessment will occur 18 months after the inception of the program and will cover the period from the 7th through the 18th month.

 

Enforcement of Living Wage Standard

 

Compliance with the living wage standard will be assessed through a combination of complaint-based investigations and spot investigations. 

 

Since in most or all cases, suppliers will need to receive increased prices from buyers before a living wage can be paid, compliance with this standard will be measured only after a factory has

 

 

 

been in receipt of steady orders from licensees under the Program for at least six months, including a commitment from the licensees to pay prices sufficient to enable a living wage. 

 

Because wages at each factory will be set through contract negotiation between worker representatives and management, a factory’s compliance with the living wage standard will not be assessed until there has been sufficient opportunity for these negotiations to occur. 

 

A living wage will be established on a worksite-by-worksite basis.  The process for establishing a living wage will work as follows.  For each facility or facility cluster, the WRC will assemble a committee of experts from the region in question.  The committee shall be comprised of individuals from non-governmental organizations, academia, and other civil society institutions with expertise in the local cost of living and workers’ issues in the region.  The committee will, with assistance from WRC staff, develop a living wage minimum threshold based on a review of data on the cost of living (including both data gathered for the committee and any credible, pre-existing data).  The living wage standard will reflect the minimum necessary income in the region in question to provide for the basic needs of housing, energy, nutrition, clothing, health care, education, potable water, childcare, transportation, and savings for a family of average size. 

 

If, as a result of an assessment of wage levels carried out in response to a complaint from workers or their representatives, the WRC determines that the wage offered by factory management falls below this living wage threshold, and the factory refuses to remedy this non-compliance, the factory will lose its designated supplier status.

 

Enforcement of Fair Pricing Requirement

 

The fair pricing requirement will be assessed through complaint-based investigations and spot-investigations. 

 

Licensees and supplier factories will freely negotiate prices for licensed apparel orders that enable full compliance with each of the Program’s standards.  If, at any time, the WRC receives a complaint regarding the alleged failure of a licensee to pay prices sufficient for the factory to comply with Program’s standards and the complaint is deemed credible, or if other evidence indicates violations of the fair pricing requirement, the WRC will initiate a review of the prices paid by the licensee to the facility in question.  This review will be carried out by a team of trained specialists with expertise on production costs in the apparel industry.  The team of specialists will assess the factory’s production costs for the product in question and make a determination as to whether the prices paid by the licensee for purchase of licensed goods is sufficient to enable full compliance with the Program’s standards.  If the licensee is found to be in non-compliance with the fair pricing requirement, and the licensee fails to remedy the non-compliance, the WRC will report this failure to adhere to the Program’s requirements to affiliate universities.