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How to proceed:

1. Draw up a plan for making improvements together with the supplier
2. Follow up  on the improvement plan

1. Draw up a plan for making improvements together with the supplier

A plan for improvements, often called a corrective action plan, is drawn up on the basis of information you have obtained by making your own observations, using SAQs, engaging external experts or by other means. The planning process involves agreeing with the supplier on what needs to be done, when it is to be done, and who is responsible for the various tasks. If you have engaged an external expert to conduct an audit for you, they will usually draw up a proposal for a corrective action plan.

In connection with the planning process, you must ensure that the supplier has the necessary resources and competence to carry out the tasks that he or she is responsible for. This is, of course, essential if you are to succeed in making improvements. Several actors, e.g. ETI-Norway, provide training and resources for suppliers. The corrective action plan is signed by both you and the supplier. When trading with an importer or an agent, your job is to ensure that the agent contributes to improving conditions at the facilities of their suppliers as described in this chapter. The figure below shows an excerpt from a corrective action plan.

2. Follow up the implementation of the improvement plan

The supplier must follow up the implementation of the corrective action plan. It is therefore important that the measures in the plan are clearly described, that clear and realistic deadlines for implementation are set, and that responsibility for implementation of the various tasks is defined.

Some companies choose to reward suppliers for complying with the corrective action plan, for example by giving them the status of priority suppliers. Is this a feasible idea for you?

Furthermore, you must consider what to do if the supplier proves uninterested in implementing the improvement measures you have agreed on. Poor working conditions in themselves are not a reason for terminating cooperation with a supplier. However, if the supplier is unwilling to make changes, then cooperation should be reconsidered. Before you terminate the business relationship, you must be certain that you have clearly conveyed what you want changed, why it is important to you, and what the consequences of failing to follow up on this will be. You must also find out why the planned improvement measures were not implemented. Was the basis for the plan unrealistic? Did the supplier lack the necessary expertise to implement the measures? Were the measures too expensive? Was there anything your company could have done differently?

What characterises good supplier practice?

Detecting shortcomings and deficiencies is one thing; knowing what defines good practice is another. Below you will find examples of good practice and how good practice can be documented.

Combating forced labour

• The supplier keeps an employment contract for each worker that is signed by both the supplier and the worker.
• The supplier does not keep original identity papers and work permits, but archives copies only.
• Neither the supplier nor the employment agency requires a deposit from the worker.

Promoting freedom of association

• There is a trade union with employee representatives who are elected by the workers.
• There is an agreement between the trade union and the supplier governing conditions such as wages, working hours etc.
• No workers are prevented from joining a trade union.

Wages

• The workers have contracts in which wages and working hours are clearly specified. The wages are sufficient to cover basic needs without having to work overtime.
• Wages are paid on time. The workers receive pay slips that clearly show how their wages have been calculated.

Combating child labour

• The supplier has adopted a policy against child labour.
• The supplier has routines for verifying that young workers’ identity documents are genuine.
• The supplier has a list of workers between the ages of 15 and 18.
• There is an overview of tasks that are not to be carried out by workers between the ages of 15 and 18 as well as what their working hours should be. The supplier is able to document that these rules are complied with.

Promoting health, safety and the environment (HSE) at the workplace

• The supplier has adopted an HSE policy for the company.
• There is regular HSE training for both management and workers.
• The supplier has established an HSE committee in which the workers are represented, ideally by representatives who are elected by the workers themselves.
• A log is kept of all work-related injuries and accidents, specifying the cause of the incident and the steps that have been taken to prevent incidents of this kind from happening again.
• Emergency exits are clearly marked, easily accessible and unlocked.

2. Follow up the implementation of the improvement plan

The supplier must follow up the implementation of the corrective action plan. It is therefore important that the measures in the plan are clearly described, that clear and realistic deadlines for implementation are set, and that responsibility for implementation of the various tasks is defined.

Some companies choose to reward suppliers for complying with the corrective action plan, for example by giving them the status of priority suppliers. Is this a feasible idea for you?

Furthermore, you must consider what to do if the supplier proves uninterested in implementing the improvement measures you have agreed on. Poor working conditions in themselves are not a reason for terminating cooperation with a supplier. However, if the supplier is unwilling to make changes, then cooperation should be reconsidered. Before you terminate the business relationship, you must be certain that you have clearly conveyed what you want changed, why it is important to you, and what the consequences of failing to follow up on this will be. You must also find out why the planned improvement measures were not implemented. Was the basis for the plan unrealistic? Did the supplier lack the necessary expertise to implement the measures? Were the measures too expensive? Was there anything your company could have done differently?

Worker participation in improvement processes

Poor working conditions are a matter that primarily concerns the workers at the production site. They are the ones who experience the strain first-hand and are therefore in the best position to describe the problems and identify solutions.

If the workers belong to a trade union, then employee representatives are important partners in the improvement process.

In Norway, we have a long tradition of dialogue between management and trade unions on company conditions. If the company and the union have an opportunity to share their experience with their suppliers’ workers and management, this provides a basis for involving workers in the process of improving conditions in the supplier’s operations.

In countries where the legal system does not allow for trade unions taking the role described above, alternative methods can be used to involve the workers. One example is giving the workers’ HSE committee a role in the improvement processes.

Who should pay the bill?

Improving working conditions at the production site usually has a cost. Who should pay for it: you or the supplier? As a general rule, the supplier must bear the costs of bringing their own operations up to an acceptable standard. However, a supplier could be either a poor farmer in rural India or a multinational concern worth billions. Therefore, the answer to this question depends on context. A supplier who makes large investments or pays their workers higher wages in response to your demands will probably have to raise their prices, which in turn means that you have to be willing to pay a higher price.

When you trade with an importer or an agent, your job is to ensure that they help their suppliers to make improvements as described in this chapter.

Resource - Collaborate:

Below is a selection of resources and tools related to how you best can collaborate with your supplier about improvements. A membership in IEH gives you access to more resources and tools in addition to ongoing counseling and follow-up in your work with ethical trade.