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SUSTAINABILITY REPORT 2014

Dialogue and Participation: Leverage for Lasting Improvements

Fair wages and ensuring trade union rights are important goals of our holistic supplier management. However, our efforts in these areas have their limits: especially when broader political factors play a role, far-reaching challenges cannot be tackled at the factory-level alone. Therefore, we work together with employers, trade unions, govern­ments and other companies in efforts to promote industry-wide improve­ments of working condi­tions.

All employees have a right to safety at work, living wages and the repre­sen­tation of their interests. The imple­men­tation of these rights, however, continues to be a challenge in many of our sourcing countries. Some govern­ments are concerned that raising legal minimum wages will lead investors and buyers to move overseas. Furthermore, in some countries, the widespread discrim­i­nation of certain social groups, such as women and ethnic minorities, is a funda­mental challenge to the repre­sen­tation of their interests, not only at the factory level. We are convinced that factory working condi­tions will only continue to improve when change is triggered industry-wide. For this, it is crucial that factory workers are involved in decision-making and are able to negotiate fair compen­sation. This is not only an ethical concern; worker involvement has been shown to have a positive impact even on produc­tivity and product quality.

Buyers, Factory Workers and Management: Fair Wages through Dialogue

In most sourcing countries the legal minimum wage is not suffi­cient to meet the basic needs of factory workers and their families. Therefore, we support the workers at our strategic suppliers to indepen­dently negotiate fair wage levels and improve their working condi­tions. With our WE (Worldwide Enhancement of Social Quality) Programme, we promote dialogue between management and factory workers so that both sides better under­stand the links between wages, working hours and produc­tivity. In one exercise, for example, they are encouraged to calculate a fair wage for themselves, based on their monthly expenses. The workers share and discuss the results with each other, and come to a consensus on a value that they need to justify. This exercise helps to develop skills that are valuable for wage negoti­a­tions. In the end, the managers and workers in the training create action plans for imple­menting concrete improve­ments in the factory. In this way, the WE Programme has succeeded in increasing wages by 30 to 50%, on average.

Model projects at the factory level

In 2014, in addition to our regular WE trainings, we carried out a number of model projects with strategic suppliers, to explore whether and how we can improve the level of wages at the factory-level. For example, we worked with our strategic supplier Ayka to revise the wage system in their modern garment factory in Ethiopia. It encap­su­lates fair compen­sation based on the core labour standards of the Inter­na­tional Labour Organ­i­sation (ILO) and the salary system of the civil service in Ethiopia. The new wage structure will be intro­duced in the factory in 2015 and further optimised.

In a factory in Bangladesh, an indus­trial engineer analysed the potential for more efficient production and initiated recom­men­da­tions. Together with the factory management, we agreed that the resulting savings should benefit the workers. Together with worker and manager repre­sen­ta­tives, the living wage level was calcu­lated. But we found that wage increases do not neces­sarily improve the situation for workers in Bangladesh: the workers of the factory reported that the increase in wages, even when limited to an individual factory, was offset by higher rents. This is a well-known nationwide phenomenon, with no efforts by the government to regulate it. What surprised us was that landlords were aware of wage increases in individual factories and thereupon targeted rent increases to the tenants working in those factories. In a workshop, we considered various non-financial measures that could also improve the living condi­tions of workers. While this experience is not a reason to ignore the need for higher wages, we need targeted approaches so that higher wages will actually lead to better living condi­tions for workers and their families.

Global cooper­ation for fair wages

These experi­ences have encouraged us to work with other actors towards system-wide change. Together with other well-known brands and retailers as well as the inter­na­tional trade union confed­er­ation Indus­triALL Global Union, we are involved in the ACT (Action, Collab­o­ration, Trans­for­mation) on Living Wage. ACT aims to improve wages in the industry by estab­lishing industry collective bargaining in key garment and textile sourcing countries, supported by world class manufac­toring standards and respon­sible purchasing practices. Industry-wide agree­ments set a benchmark that applies to all manufac­turers, while still allowing for individual manufac­turers to offer higher pay and condi­tions. In 2015 we signed a Memorandum of Under­standing ("Memorandum of Under­standing") with Indus­triALL and will take joint actions in various production countries having started in Cambodia. Jenny Holdcroft of Indus­triALL Global Union describes the cooper­ation under ACT as "We are working in a way that we have never been able to do before, with brands that want to make a difference."

Cambodia: Shared Commitment for Higher Wages

A good example of our collab­o­rative approach is an initiative with eight other large textile companies in Cambodia. We wrote a joint letter to the government and the national employers' associ­ation, in which we expressed our expec­tation of higher wage levels through fair and open collective bargaining. At the same time, we reaffirmed our intention to continue purchasing products from Cambodia. At the beginning of 2015, the minimum wage was increased to the equiv­alent of 128 US Dollars per month. We are monitoring the situation closely: at the end of 2014 an independent auditing company surveyed the wage levels at factories producing our goods in Cambodia. According to the survey, approx­i­mately 90% of the workers receive a monthly income of about 128 US Dollars, and about 70% even receive more than 140 US Dollars. In 2015 we are continuing our efforts for increased wages in Cambodia.

Independent Study Commends Commitment to Wage Increases

A 2014 study published the Clean Clothes Campaign (CCC) on wages in the textile industry recog­nises efforts of Tchibo and three other companies to improve working condi­tions and increase wages. Despite these positive first steps, there is still a long way to go for fair living wages to become a reality. Due to the complexity of the issue we are convinced that only a holistic approach, that involves all relevant stake­holders, can be successful. We are actively devel­oping and shaping this process.

Bangladesh Accord: A new form of industry-wide cooper­ation

Tchibo has supported the estab­lishment of the "Accord on Fire and Building Safety in Bangladesh" and, in 2012, were one of the first companies worldwide to sign. By doing so, we committed to take steps to work with factories to improve their building and fire safety. Three weeks after the devas­tating collapse of Rana Plaza building in April 2013, many other companies joined the agreement. The Accord was ground-breaking, with companies and trade unions working together to improve safety measures





“Accord on Fire and Building Safety in Bangladesh” at a Glance

The "Accord on Fire and Building Safety in Bangladesh" is a five-year, binding contract for building and fire safety in the garment industry in Bangladesh. More than 200 companies, as well as Indus­triALL Global Union, UNI Global Union and local unions and NGOs have signed the Accord.


Driving the imple­men­tation of the Accord

From November 2014 until September 2015, we were one of six companies in the steering committee of the Accord. In addition to an independent Chair (led by the ILO), members of the steering committee represent in equal parts companies and trade unions, with NGO repre­sen­ta­tives serving as observers. The committee meets four times a year and transcripts of the meetings are published, in an attest to the Accord’s commitment to trans­parency. Prior to serving on the Steering Committee, we supported the on-site imple­men­tation of the Accord as a member of the Advisory Board.

Put to the Test: Inspecting Building, Electrical and Fire Safety

The Accord stipu­lates unannounced safety inspec­tions of factories by third-party engineering companies, and factories must remedy any issues found. Publicly available action plans with concrete measures and deadlines for their imple­men­tation are developed with the factory owners. The measures include struc­tural changes such as additional emergency exits, as well as the mainte­nance of electric wires. If a factory does not take necessary action, we are obliged to terminate the business relationship. In the majority of the approx­i­mately 1,600 Accord factories, including all 17 factories producing for Tchibo, the inspec­tions were completed in 2014. We are currently working together with these factories on the corrective actions and the moderni­sation of fire protection systems.

Taking seriously the safety concerns of employees

In addition to inspec­tions, an important principle of the Accord is the active involvement of workers in improving workplace safety. Workers on the front­lines often recognise early signs of safety risks but do not have the support of management to report their concerns. In a working group composed of repre­sen­ta­tives from trade unions, NGOs and companies, we have developed principles for the partic­i­pation of factory employees, which rely heavily on the methods of our WE Programme. A cross-factory complaint system has been estab­lished, and the working group is now concerned with setting up health and safety committees in the factories. A pilot is planned for autumn 2015. However, for the estab­lishment of health and safety committees we are awaiting the legal guide­lines from the government of Bangladesh. In the context of our Accord engagement, we have called for the prompt publi­cation.

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