Traceability

Production traceability is the first step towards developing all the policies and activities involved in the sustainable management of the supply chain. In 2014, the establishment of production audits in supplier clusters was Inditex’s primary objective in the sphere of traceability. An emphasis on traceability promotes the correct management of supply activities by purchasing teams, and increases product safety.

Based on an analysis of the information entered by suppliers into Inditex’s online Manufacturer Management System, production audits allow an assessment of capacities, processes and time frames, and ensure that all production units are correctly declared and approved. This method guarantees that all workers involved in Inditex’s production are covered by the programmes set out in the Code of Conduct, designed to protect their rights.

Thanks to the consolidation of the online Manufacturer Management System designed by Inditex in 2013 to meet the Group’s needs in traceability, during 2014 more than 2,400 production audits were performed; that is, triple the number carried out in the previous year. All of the suppliers in the supply chain manage their portfolio of manufacturers and exchange updated information on manufacturers with Inditex.

Production audits performed in 2014

As a result of the 2,463 production audits performed in 2014, 266 breaches were detected, giving a compliance rate of 89%. Most of the breaches entailed that the supplier did not properly report to Inditex all the factories that took part in its production. Each and every case is analysed by Inditex’s CSR teams, who apply the maxim used throughout the Strategic Plan: opportunities are given for improvement, but there is zero tolerance in the case of repeated non-compliance.

(*) Suppliers of fashion items, mainly clothing, footwear and accessories, with a production of over 20,000 units. Suppliers with smaller production account for 0.43% of total production.
(**) Textile, footwear and accessories factories declared as active by suppliers of fashion items – mainly clothing, footwear and accessories – with a production of over 20,000 units.

The Inditex supply chain in 2014

Breaches detected in 2014:

As of 2015, the aim is to perfect this methodology, incorporating the best practices for analysing manufacturer capacities, making it possible to obtain better technical information on all processes and product types, thereby gaining a realistic vision of the productive capacities of each factory.

Training for auditors

In 2014, some 46 internal auditors and 827 external auditors have worked to ensure that all suppliers comply with the Code of Conduct and to establish corrective plans to deal with any breaches of the Code of Conduct.

Auditors have an important role in verifying compliance with the Code in all factories: this means that their training and capacity building is key. Inditex’s CSR teams regularly train new auditors and provide specific training on certain provisions of the Code of Conduct.

In 2014, some 361 external and internal auditors received training in all supplier clusters. This included various internal auditors working for Inditex who gained qualifications related to Social Accountability International’s SA8000 standard.

Auditors trained in 2014

Training courses are designed to strengthen concepts or further explore aspects that lead to better quality audits and ensure that Inditex’s methods and requirements are applied systematically in all assessments.

Audit quality management

Inditex is conscious of the fact that suppliers are subject to a great number of social audits involving various companies and standards (audit fatigue syndrome), and seeks to provide supply chain control solutions that go beyond the sphere of auditing. One essential step in this process is ensuring the quality of audits, guaranteeing that they are carried out correctly and that results are used for actions as part of sustainability and improvement programmes. Moreover, the scope of auditing extends to all tiers of production, providing exhaustive knowledge on the supply chain.

In 2014, Inditex’s methods of performing social audits were updated in order to simplify the process and improve the quality of information obtained. The methodology employed until now, designed in 2007 in conjunction with the International Textile, Garment and Leather Workers' Federation (ITGLWF) – which has now been integrated into the new international industry trade union federation IndustriALL Global Union – and the Cambridge Centre for Business and Public Sector Ethics, is regularly revised in order to bring in all the changes and experiences accumulated over time.

The new methodology gives auditors more independence, allowing them to provide a realistic and complete overview of each factory, covering concepts such as decent wages, worker health and safety, and management systems, in greater depth.

Main advances in the new methodology for social audits

Audits performed on manufacturers in 2014 by geographic area and type

(*) Special audits include health and safety checks, and visits to verify the level of compliance with Corrective Action Plans, among others

Pre-assessment audits

Pre-assessment consists of a preliminary evaluation of potential suppliers and factories performed by internal and external auditors without prior notice. Only those meeting the requirements established by Inditex in its Code of Conduct can enter the supply chain. From that moment forth, they are subject to the Code of Conduct and to the standards set out in the Inditex Minimum Requirements.

In 2014, of the 2,367 pre-assessment audits performed on potential suppliers, 76% were considered to be suitable to produce goods for Inditex, 10% more than in 2013. This increase, compared with the previous year, demonstrates the trend for increasing awareness among textile suppliers and manufacturers of the minimum sustainability standards that they must respect, as well as the internal awareness among Inditex’s purchasing teams when selecting suppliers.

Social audits

Each and every one of the suppliers and manufacturers in the Inditex supply chain is subject to regular social audits. There is always an initial audit when a supplier begins working with Inditex, as well as follow-up audits. The aim is to verify their compliance with the Code of Conduct and to establish Corrective Action Plans (CAPs) intended to ensure that fundamental labour rights are respected.

A supplier or factory that has gained the maximum classification (A grade) is always subject to an audit at least every two years. Audit frequency increases progressively according to the level of breaches of compliance detected.

The audits are performed on all levels of production and are carried out both by internal auditors and certified external auditors, without prior notification of the date the visit is to be performed. In 2014, some 3,893 social audits were performed on potential suppliers and factories.

Special audits

The more than 1,500 special audits performed in 2014 consisted of visits and inspections related to specific issues such as worker health and safety, and competence visits to ensure compliance with the Corrective Action Plans. These audits include, for instance, the inspection of laundry processes to ensure that the sandblasting process, which is prohibited by Inditex, is not in use.

Production audits

Production audits are intended to guarantee the traceability of the supply chain from the analysis of the information gathered in the Manufacturer Management System.