KPI: Factories with Zero-Tolerance Violations

Indicator

This measures the number of MEC-label factories that have egregious, or "zero-tolerance," Code of Conduct violations. We focus our primary remediation efforts on these factories.

Zero-tolerance violations for MEC are: practices that impede an audit, unauthorized subcontracting, involuntary overtime, withholding passports from migrant workers, child labour, forced labour, and egregious work conditions that could cause serious injury to workers. To help manage the issues captured in audits, we code our factories using a black (zero-tolerance), red (major infraction), orange (poor practices) and yellow (minor infraction) colour scale.

Target

Our goal is to improve workers' lives. Our annual target is to remediate or eliminate factories with zero-tolerance violations.

Performance

We expanded our definition of outstanding zero-tolerance violations to include factories that have partially resolved their issues because we believe this new approach is a better reflection of our supply chain performance. At the end of 2011, 22% of our audited factories (13 of 60) had zero-tolerance violations. This number is higher than 2010 (3 factories), partially because of the change in our definition.

Audited MEC-Label Factories with Zero-Tolerance Violations (#)

• Number of factories
• Target: Zero factories with zero-tolerance violations

2011 began with seven factories that had zero-tolerance violations from past years. Over the year, our audits identified new issues in seven additional factories, one of which we managed to fully resolve.

The majority of zero-tolerance violations we encountered are related to forced labour. Nine of the thirteen factories are withholding passports of migrant workers, thereby restricting workers' movements. We are currently working with these factories to develop a consent letter that guarantees workers access to their passports.

Three of the thirteen factories restricted MEC auditor access. We are phasing out our business with two of these factories, as these issues have been ongoing from previous years. We are continuing to work with the third factory to change their zero-tolerance status. Lastly, one factory had a zero-tolerance issue with mandatory overtime. We are currently working with this factory to strengthen their policies and procedures to ensure any overtime is voluntary.

From a management perspective, we are satisfied with our progress (of course, we would still like change to happen faster). However, our zero-tolerance rating system requires review to ensure we continue to focus on issues most important to improving workers' lives. For example, we currently classify some issues that do not pose immediate harm to workers as zero-tolerance (such as withholding of passports). On the other hand, some violations currently classified as "potential harm" are more severe (such as lack of secondary exits).

Path Forward

Our 2012 target is to continually eliminate zero-tolerance violations. We'll continue our remediation efforts on zero-tolerance issues through our direct factory relationships, as well as collaborations with other brands that share our factories. Given that bicycles are a new product category for us, collaboration with the cycling industry and associated brands will be an ongoing focus to achieve progress. And finally, we'll review our Code of Conduct violation priorities.