Traceability

Identifying the components of the supply chain is crucial to its responsible management. In this respect, Section 10 of Inditex’s Code of Conduct for Manufacturers and Suppliers establishes that “Manufacturers and suppliers shall not assign any work to third parties without the prior written authorization of Inditex. Those who outsource any work shall be responsible for the enforcement of the Code by these third parties and their employees.”

The application of this Section of the Code of Conduct is vitally important, not only in order to protect human rights but also to ensure the health and safety of products and minimize the environmental impact. The traceability of production is a first step towards the implementation of all sustainable management policies and activities throughout the supply chain. Helped by technological innovation, the training of suppliers and audit quality management, Inditex is able to meet its stakeholders’ demands for transparency of its manufacturers.

Inditex has a Manufacturer Management System developed internally which supports the Group’s business model and is integrated with other corporate tools such as those used in logistics and administration. All of the Group’s suppliers are obliged to manage their portfolio of orders in conjunction with Inditex.

Based on the analysis of information entered into Inditex’s Manufacturer Management System by suppliers, traceability audits are able to evaluate production capacity, processes and timeframes, and ensure that all production units are correctly declared and approved. This methodology 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.

Inditex continually incorporates good practices identified in this area into its methodology in order to perfect monitoring and control processes. To this end, Inditex’s sustainability team employs engineers specializing in production systems and processes, production planning methods, and so on. In this way, traceability management is supported by experts who are able to assess a factories’ true capacity to protect against the risk of unknown outsourcing.

Purchasing teams also have a fundamental role in traceability management. They engage in ongoing collaboration with sustainability teams because sustainability criteria are a fundamental component of Inditex’s business model, and purchasing decisions depend on the fulfilment of these criteria. Only those suppliers and manufacturers that comply with Inditex’s social, environmental, and product health and safety policies can be hired by the company. Corrective plans are established in the case of non-compliance or, if required, business relations are terminated.

In 2015, Inditex’s supply chain was made up of 1,725 suppliers, compared to some 1,625 suppliers in the previous year. This evolution highlights the way the business has expanded, creating the need for a greater number of suppliers both due to production volume and production type.

In 2015, a total of 2,886 traceability audits took place in which internal and external Inditex teams worked in situ to verify that production of the Group’s brands was taking place in correctly declared and authorized factories.

The Inditex supply chain in 2015 (*) *

(*) Suppliers of fashion items, mainly clothing, footwear and accessories, with a production for Inditex of over 20,000 units/year. Suppliers with smaller production account for 0.37% of the total production.

Traceability audits held in 2015

The number of audits performed was up by 16% from 2014, demonstrating that production control tools were strengthened during this period. During the more than 2,800 visits that took place, some 325 breaches were detected, including mainly lack of information. This means that the vast majority of audits were able to confirm the transparency and traceability of the Group’s suppliers, a testament to their overall commitment to transparency.

In cases of non-compliance or a lack of transparency, sustainability and purchasing teams worked together with the supplier to obtain a commitment from them on implementing the measures required to correct the issue. Trade relations with the supplier may be terminated should they fail to collaborate in this area. Relations were severed with seven suppliers on these grounds in 2015.

Training for auditors and audit quality management

Audits are the basis for identifying the conditions employed by each manufacturer and their adherence to the standards established by Inditex.

Following an update of the method used for social audits at the end of 2014, Inditex’s sustainability teams have continued to train external auditors belonging to certified, independent companies with an international reputation, with whom Inditex maintains close relations based on collaboration and continual improvement.

In 2015, Inditex employed 799 auditors in its audit procedures, of which 745 were external auditors. Of these auditors, a total of 209 received training covering the accreditation of new auditors in Inditex’s own methods, as well as on the standardization of procedures, updates to comply with new legislation, and audit processes.

Moreover, five internal auditors on the sustainability team were accredited by Social Accountability International (SAI) as SA8000 auditors able to verify compliance with the SA8000 standard, which is based on standards such as those established in the Conventions of the International Labour Organization, the United Nations Universal Declaration of Human Rights, and International Convention on the Rights of the Child. Internal auditors in Turkey and Portugal also received specific training on health and safety of workers.