5. Sustainability

Inditex’s supplier clusters represent a valuable tool for introducing at the local level the global standards and principles set out in Inditex’s Strategic Plan for a stable and sustainable supply chain 2014-2018. The clusters offer spaces for cooperation and dialogue, and are designed to promote a sustainable productive environment in a geographic area that is strategic to the development of Inditex’s business model and compliance with human rights and fundamental labour rights. With the creation in 2015 of a new cluster in Cambodia, Inditex now has 11 clusters located in the Group’s most important production areas.

These 11 clusters (in Spain, Portugal, Morocco, Turkey, India, Bangladesh, Vietnam China, Brazil, Argentina and Cambodia) cover 91% of Inditex’s total global production. Detailed information on each cluster can be found on the next page of this report.

Cluster Internal team External team
Spain 13 17
Portugal 2 35
Morocco 3 13
Turkey 7 30
India 7 64
Bangladesh 8 24
Vietnam 2 17
Cambodia 1 17
China 8 347
Brazil 1 38
Argentina 2 11
Total 54 613

New cluster in Cambodia

In September 2015, Inditex created a new supplier cluster in Cambodia. As in the case of the Group’s other clusters, it comprises local professionals with a high level of experience in the sphere of sustainability. Following the creation of this specific platform for Cambodia, the work of the remaining countries that made up the former South East Asia cluster along with Cambodia, will continue to be developed from its hub in Vietnam.

Apart from developing global policies and programmes, the new cluster in Cambodia has focused on responding to the country’s specific needs.

The creation of this new cluster has also made it possible to continue developing different initiatives and programmes designed to ensure the sustainability of the supply chain in line with Inditex’s Strategic Plan for a stable and sustainable supply chain 2014-2018. For instance, in 2015 Inditex maintained and strengthened its collaboration with the ILO’s Better Factories Cambodia programme, which aims to improve working conditions in the textile and footwear sector. At year end, 30 Cambodian factories in Inditex’s supply chain had been registered.

Another of the activities carried out was developed within the framework of collaboration with the ACT (Action, Collaboration, Transformation) initiative promoting decent wages in the textile and footwear sector. In September 2015, Inditex took part in an ACT meeting in Phnom Penh along with a range of brands, trade unions and NGOs with the aim of raising awareness on the importance of cooperation when establishing potential measures to achieve decent wages in this sector in the country.

Likewise, in 2014 Inditex, other brands and the trade union IndustriALL Global Union, submitted a letter to the government of Cambodia and the textile employers’ organization Garment Manufacturers Association in Cambodia (GMAC), urging them to engage in negotiations for wage increases with the participation of all parties involved: the government, employers’ organizations, and workers’ representatives. As a result of negotiations between the parties, in October 2015 the government of Cambodia announced an increase to the national minimum wage in force as of 1 January 2016 of some 9.37% compared to the previous increase achieved in November 2014.

Sustainability balance sheet

Activities in clusters in 2015

Spain Portugal Morocco Turkey India
IDENTIFICATION
Traceability - 33 traceability audits 542 traceability audits 40 traceability audits 142 traceability audits
The teams at Inditex’s head offices are responsible for coordinating traceability control in each of the countries, sharing good practices and working in conjunction with purchasing teams. Traceability audits are carried out following the analysis of information provided by suppliers. During audit processes, the auditor gathers information on the production capacity of the factory and makes the necessary checks to verify the traceability of production. Two types of traceability audits are performed. The first type focuses on the verification at the factory itself of the information provided by the supplier. The second type of audit is a process that monitors production. The production monitoring is carried out via specific traceability audits and each visit to the factory. The information provided by the supplier on orders is compared with the corresponding documents at the factory. The traceability verification process has various stages, including the preliminary analysis of factory capacity and monitoring of the raw materials and other elements required in production.
Training for auditors - 24 auditors trained - 60 auditors trained/td> 77 auditors trained
Global coordination of audits and audit management As part of the collaboration between the cluster and the Catholic University of Porto, training was provided for 19 new auditors. Coordination with local auditors and ongoing training to ensure audit quality. Apart from training on the audit process, specific sessions were also given on worker health and safety. The seven training sessions held in 2015 focused on guaranteeing compliance with Inditex standards by auditors.
Audit quality management
Pre-Assessment 87 239 43 587 246
Social 43 707 144 507 324
Special 4 59 375 20 459
ASSESSMENT
Compliance programme
A suppliers 109 114 48 92 77
B suppliers 69 49 48 70 44
C suppliers 9 4 7 6 8
CAP suppliers 2 2 3 7 4
Worker participation Coordination of the global implementation of the Framework Agreement with IndustriALL Global Union and all of the activities it develops in the range of clusters. Programmes with visits to textile and footwear factories in conjunction with the Portuguese Federation of Unions for Textiles and Footwear Industries (FESETE) in order to establish future channels for collaboration with a view to improving conditions in the sector. Development of a specific worker health and safety programme to improve working conditions in factories. Completion of the final phase of the Joint Turkey Programme, which included a productivity analysis and the identification of areas for improvement. A manual was also created on the introduction of improved management and dialogue systems. Programmes with visits to the factories in the supply chain to get to know the management systems employed to manage worker rights and introduce projects in which Inditex participates designed to eradicate the sumangali labour practice.
Corrective Action Plans n/a 59% successful 100% successful 50% successful 77% successful
OPTIMIZATION
Effective auditing Some 434 Inditex employees in Spain participated in training sessions on sustainability and 184 new employees were trained on sustainability. Coordination and collaboration with purchasing teams via the Spain cluster. Communication of audit results and the development of Corrective Action Plans to purchasing teams in Spain. Thirteen local purchasers trained on social and environmental sustainability. Three specific training sessions on traceability with 33 attendees from purchasing teams and specific training on specific projects developed by the cluster, with 20 attendees.
Training and capacity building for suppliers Daily management of training for suppliers and coordination of the training activities carried out in the clusters. 17 suppliers trained 3 suppliers trained 98 suppliers trained 344 suppliers trained
STAKEHOLDERS’ ENGAGEMENT
Representation of Inditex in international platforms such as the Ethical Trading Initiative, UN Global Compact, the ILO or participation in the Better Work Global Buyers Forum. Agreement with the Portuguese Catholic University of Porto on the training of young professionals on social auditing. Projects with Medicus Mundi to improve worker health and safety in Inditex’s supply chain. Collaboration with entities such as the Refugee Support Centre on the protection of migrant workers, or with KADAV on research into and measures to combat workplace harassment. Shaki Health programme to create good practices in health, hygiene, nutrition, menstrual and reproductive health with St. John’s Medical School, and participation in the Freedom Fund to raise awareness and implement coordinated activities to combat employment schemes such as the sumangali practice.
Bangladesh Vietnam Cambodia China Brazil Argentina
IDENTIFICATION
Traceability 28 traceability audits 89 traceability audits 137 traceability audits 213 traceability audits 561 traceability audits 1,081 traceability audits
Management of the suply chain traceability by implementing a specific mechanism to monitor suppliers and manufacturers. This will contribute to the compliance with requirements laid down by Inditex, as one of the signing companies of the Accord. The monitoring of traceability requires various documents from the factory, which are compared with the information registered on Inditex’s traceability systems, as well as a visit to analyse all of the processes involved in production. The method used in traceability audits involves the analysis of information registered on Inditex’s traceability systems and comparison with the documents supplied by the factory. In situ verification of real production in the factory is also carried out. The analysis of information on orders and production processes enable the identification of those factories that might require a traceability audit. Moreover, all social audits and factory visits include monitoring of production. In Brazil, 100% of orders are monitored in order to ensure that all production comes from authorized companies. To make sure this is the case, an auditor is assigned to each supplier that works for Inditex. Every two weeks, monitoring takes place of every order, ensuring a reasonable surveillance of all phases of production. Traceability audits verify that the quantities recorded correspond with those requested on the order, that the processes employed in factories are those required, and that the allocated production times are in line with factory capacity.
Training for auditors 25 auditors trained 2 auditors trained - 3 auditors trained 2 auditors trained 16 auditors trained
Specific training sessions were held on the country’s labour legislation. Shadow audits were performed in which a member of the internal team accompanied an external auditor to observe and evaluate performance. Coordination with local auditors and ongoing training to ensure audit quality. The three training sessions held in 2015 were targeted at strengthening and refreshing auditors’ knowledge of audit processes. The cluster ran a session to train auditors in the methodology used in pre-assessment audits. During 2015, some 16 auditors were trained on the methodology used both in traceability and social audits.
Audit quality management
Pre-Assessment 67 67 70 896 80 30
Social 207 82 58 1,114 300 157
Special 198 102 137 173 40 17
ASSESSMENT
Compliance programme
A suppliers 24 2 1 39 15 19
B suppliers 55 1 - 230 - 7
C suppliers - 2 - 50 - 2
CAP suppliers 2 - - 8 - 1
Worker participation Implementation of a project with the objective of empowering workers through the creation of participation committees. Collaboration with IndustriALL on two visits to factories with the aim of evaluating working conditions and promoting social dialogue. During the meeting of the Executive Committee of IndustriALL, held in Phnom Penh in December, two factories were visited with members Inditex’s local cluster in order to observe the country’s system of labour relations in Cambodia. Implementation of the pilot phase of the LEAN project, which aims to improve working conditions of workers by means of improved factory management and the inclusion and participation of workers in the process to drive productivity. Collaboration with the trade union Conferação Nacional dos Trabalhadores nas Indústrias do setor Textil, Vestuário, Couro e Calçados (CONACCOVEST) to improve labour relations. Identification and adjustment of job classifications to their corresponding trade union to guarantee better pay for employees and better control for factories.
Corrective Action Plans 91% successful 93% successful 75% successful 54% successful 69% successful n/a
OPTIMIZATION
Effective auditing Training for 43 local purchasers on the Code of Conduct for Manufacturers and Suppliers and training for 16 local purchases on traceability. Ongoing surveillance by purchasing teams of the working conditions experienced by employees. Ongoing surveillance by purchasing teams of the working conditions experienced by employees. Eleven training sessions for 56 members of purchasing teams on sustainability practices and the Code of Conduct, as well as training on specific projects developed by the sector. Coordination of sustainability activities with all other business departments. Coordination and communication with purchasing teams on issues of sustainability.
Training and capacity building for suppliers 296 suppliers trained Ongoing work with suppliers in the cluster 1 supplier trained 501 suppliers trained 10 suppliers trained 30 suppliers trained
STAKEHOLDERS’ ENGAGEMENT
Founding member and presence in the Steering Committee of the Accord on Fire and Building Safety in Bangladesh (Accord). Fourteen factories registered to the Better Work Vietnam programme, and participation in regional forums. Thirty factories registered to the Better Work Cambodia programme, and participation in regional forums. Collaboration with the China Corporate Caucus of the ETI on social security and social dialogue for harmonious industrial relations in Chinese supply chains Implementation in Sao Paolo of an immigrant integration centre (Centro de Integración a la Ciudadanía del Inmigrante). Collaboration with the National Institute of Industrial Technology (Instituto Nacional de Tecnología Industrial, INTI) to develop competencies in aspects of traceability.