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SUSTAINABILITY REPORT 2014

Strengthening Strategic Partnerships and Promoting Dialogue

On our way towards becoming a sustainable business, we are committed to ensuring compliance with social and environ­mental standards in the production of our goods. Our sourcing strategy builds on solid partner­ships and we cooperate with our strategic supplies in the context of the WE (Worldwide Enhancement of Social Quality) Programme. Together with the managers and workers, we develop concrete solutions for improving working condi­tions and environ­mental protection in factories. In factories new to our portfolio or those located in countries where we have not yet estab­lished the WE Programme, we conduct audits to check compliance with standards. Only if minimum require­ments are met, orders will be placed.

Our sourcing strategy rests on building long-term partner­ships with strategic suppliers. We work closely with the factories to introduce sustainable improve­ments in the social and environ­mental condi­tions at the production-level. With our WE Programme, we have created an approach within which workers and managers in the factories can develop solutions themselves. Factories that are not yet part of the programme will be audited to monitor their compliance with the Tchibo Social and Environ­mental Code of Conduct (SCoC).

The WE Programme: From Pilot Project to Far-Reaching Engagement

The WE Programme supports factories in devel­oping and emerging markets to comply with the social standards of the SCoC. Moreover, business aspects such as quality, produc­tivity and efficiency are also addressed, since these can have a positive impact on issues such as working hours or pay. In the WE Programme, factories can address the issues that are most relevant to them and find solutions that fit their needs. In addition to social issues, environ­mental and climate protection issues have played an important part of WE trainings since 2014 (Environ­mental aspects of production).


Including all Parties in the WE training program

WE is based on an innovative and inter­active approach, that creates a level playing field for managers and workers to engage in dialogue on such important issues as fair wages, health and safety or production processes. Experi­enced WE trainers help partic­i­pants to under­stand the other’s perspective and push for the imple­men­tation of joint solutions to workplace issues. Even issues that can be more difficult to detect, such as discrim­i­nation or viola­tions of workers' rights, are addressed. The pilot phase of the WE Programme (2007-2011) was carried out in partnership with the GIZ, and funded by the Federal Ministry of Economic Cooper­ation and Devel­opment (BMZ). Since the completion of the pilot phase, Tchibo has expanded the WE Programme to all its strategic suppliers, with 320 partic­i­pating thus far (Sustainable supply chains).

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Dialogue as a Key to Success: 40 Local Trainers in Action
Managers and worker repre­sen­ta­tives use a dialogue approach to find solutions that improve social and environ­mental condi­tions at factories. Through expert facil­i­tation, cultural, organ­i­sa­tional and other obstacles can be identified and overcome. This approach ensures that the measures are acceptable to both managers and workers, improving the prospect of their imple­men­tation. Local trainers play a key role because they are familiar with the cultural context and speak the language. So far, more than 40 experi­enced trainers are working in the WE Programme.

Positive results: 75% of Purchasing Volume from WE producers

Through the WE Programme, we support more than a third of the factories supplying our goods to implement social and environ­mental standards. By the end of 2014, 320 factories in nine countries in Asia and Africa will have been engaged in the training programme (Bangladesh, China, India, Cambodia, Laos, Thailand, Turkey, Vietnam). In 2014, approx­i­mately 60% of our orders (67% or our purchasing volume) were placed in WE factories.

In fiscal year 2015 around 75% of our purchasing volume of consumer goods came from factories in high-risk countries that had success­fully completed the WE Programme. The dialogue-instead-of-finger-wagging approach is proving effective. In the factories involved, health and safety have improved, wages have increased, and workers' welfare has been addressed, for example dormi­tories, canteen food and leisure activ­ities have been intro­duced. In some factories, elected worker repre­sen­ta­tives stand up for the interests of their colleagues, without fear of retri­bution. In the medium-term we want to include all strategic suppliers in the WE Programme.

Through regular surveys of our suppliers, we contin­u­ously adjust the WE Programme to meet the needs of workers. We can thereby tailor our efforts to the needs onsite and use resources efficiently. For remote factories in Vietnam, for example, we success­fully intro­duced the WE Factory Programme in 2013. With the WE approach, the GIZ and Tchibo wanted to achieve the highest impact possible. We thus make available the training method and approach. Other inter­ested companies can, upon on request (and subject to avail­ability), enjoy access to experi­enced local trainers and training materials.

Risk Management through Monitoring of Social and Environ­mental Standards

WE does not yet reach all the factories producing our goods. As part of our risk management, we thus conduct targeted audits of factories’ compliance with the SCoC, including the zero-tolerance require­ments in the areas of fire protection, occupa­tional health and safety, wages, working condi­tions and the environment.

In 2014, we funda­men­tally reworked our audit programme. We are aware that social audits are not effective at achieving substantial progress, since they are simply snapshots of condi­tions and can create false incen­tives. Factories spend a lot of energy and resources on the audits, rather than on initi­ating lasting change. Furthermore, the factories’ workers are given no role to play in the audit process. Finally, some factories use double book-keeping to hide viola­tions. With this in mind, we are focusing instead on the cooper­ative approach of WE, as this provides greater trans­parency and has greater impact.

New Direction for our Auditing Programme in 2014

We continue to conduct audits as part of the monitoring programme of factories. However, since 2014, these are primarily used as a tool to pre-select potential new suppliers. That is why we have changed the timing and are now auditing factories before order placement. The audits focus on selected issues such as occupa­tional safety and an assessment of the human resources management system, as they can provide important insights for pre-selection. Other topics, such as discrim­i­nation and freedom of associ­ation, are no longer reviewed by our auditors because audit are ineffective at uncov­ering viola­tions in these areas.

The audit result will determine order placement: Only factories that meet the minimum require­ments will be added to our portfolio, regardless of the product and order volume. Even existing suppliers, that are not integrated in the WE Programme, are audited every three years. To reduce the number of follow-up audits, we now accept photo and video material or certifi­cates of independent standard-setting organ­i­sa­tions as evidence for the remedi­ation of certain issues. Regular suppliers (including the partic­i­pants of the WE Programme) are given four weeks to address zero tolerance issues. If this deadline is not met, the vendor is black­listed and no new orders can be placed until problems are fully addressed.

The audit type varies according to country risks and our local presence: In countries where we have dedicated staff who speak the local language, our internal quality experts conduct the Factory Audits. In other high-risk markets, external service providers who have the necessary profes­sional and linguistic skills, conduct the Risk and Compliance Audits.

Factory Monitoring in 2014: Key Figures
In 2014, 586 audits were conducted. Of these, 439 were internal and 147 were external audits. Since internal audits were not included in previous reports and we began auditing potential factories, these figures are not compa­rable with those of the past. External social and environ­mental audits increased from 113 to 147 in 2014. The increase is due to the fact that audits are now being carried out at an earlier stage in the buying process, so that some of the factories audited will not end up receiving orders. Since 2014, we have increased the audits as we started auditing sub-suppliers and producers of packaging.

Social aspects of production

Fair wages and trade union rights are important goals of our holistic supplier ...

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Environmental aspects of production

In addition to social issues, environmental standards are an essential aspect ...

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