California Transparency in Supply Chains Act

Under this Act from 2010 (SB 657), we disclose our policy to prevent slavery and human trafficking in our production chain

Inditex, as a socially responsible company, counts with policies and procedures aimed at defending and promoting Human Rights both in its operations and those developed by its stakeholders. Inditex commits in this sense to apply the Guiding Principles on Business and Human Rights developed by the United Nations “Protect, Respect and Remedy” Framework.

Accordingly, Inditex applies a zero tolerance policy on slavery, human traffic and any form of forced labour in its supply chain. Inditex Code of Conduct for Manufacturers and Suppliers (hereinafter Code of Conduct), created in 2001 and applied throughout its supply chain, establishes in its first section:

Inditex shall not allow any form of forced or involuntary labour in their manufacturers and suppliers. They may not require their employees to make any kind of “deposits”, nor are they entitled to retain employees’ identity documents. Manufacturers shall acknowledge the right of their employees to leave their employer after reasonable notice”.

The Code expressly specifies that “aspects related to such limitations will be governed by Conventions 29 and 105 of International Labour Organization (ILO)”. Equally, the provision of the Code of Conduct is inspired by the Base Code of the Ethical Trading Initiative.

Inditex is also a signatory since 2001 to the United Nations Global Compact and commits to respect and promote its ten universally recognized principles which include: (4) the elimination of all forms of forced and compulsory labor and (5) the effective abolition of child labor.

Based on the above, Inditex approved in 2013 a “Strategic Plan for a Stable and Sustainable Supply Chain”, which runs from 2014 to 2018 and which furthers the work that the Group has done for more than a decade. This strategy is based on two axes:

  • Lines of action which are based on the identification and thorough knowledge of the Group’s suppliers and manufacturers. An exhaustive assessment is then made of these suppliers and manufacturers to help them improve and make the best use of their own resources, ensuring their sustainability and adjustment to the standards required by Inditex.
  • Objectives on which the lines of action are based: monitoring, capacity building, continual improvement and stakeholder engagement.

This strategic plan is enhanced with a Global Framework Agreement with IndustriALL Global Union and long-term strategic cooperation with organizations and entities with a mission to promote Human Rights and eradicate human trafficking such as Ethical Trading Initiative, Better Work Programme (innovative partnership between ILO and IFC) and United Nations Global Compact.

It is within this framework that Inditex makes this disclosure under the California Transparency in Supply Chains Act (SB 657) on the company’s policy to prevent slavery and human trafficking from its supply chain for the products we commercialize.

Verification of product supply chains 

To evaluate and address risks of human trafficking and slavery, the Code of Conduct includes explicit prohibition of any kind of forced labour for all suppliers and manufacturers that form part of Inditex’s supply chain. All suppliers and manufacturers that form part of Inditex’s supply chain are subject to the provisions of the Code of Conduct.

Said Code, which also protects other fundamental labour rights such as freedom of association, right to legal employment or prohibition of child labour, among others, is enforced by Inditex’s Compliance Programme. In this sense, evaluation of risks human trafficking and slavery through the Compliance Programme is part of the company’s response to the “assessment of the real and potential impact of [its] activities”, presented in the UN Guiding Principles of the Ruggie Framework.

As part of the Compliance Programme, the ability to trace production is crucial to controlling compliance with Inditex's standards on fundamental labour rights and to evaluate actual risk of any kind of forced labour. Inditex incorporated the traceability of its supply chain into the Code of Conduct for Manufacturers and Suppliers in July 2012 and has developed different tools to ensure that no slavery or other form of forced labour is present in all tiers of its supply chain.

In particular, suppliers are obliged to disclose information of their complete supply chain through a comprehensive on-line, designed specifically to cover Inditex’s traceability needs and integrated with other company tools. Based on this information, Inditex utilizes different systems to verify the risk of the supply chain. 

Actually, the first verification occurs before the supplier has commenced its relationship with Inditex or in case a supplier proposes a new factory for our productions. The pre-assessment is and consists of a preliminary assessment of potential suppliers and factories in order to verify that there is no latent risk of human rights, including forced labour. These assessments are performed to all potential suppliers and factories 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. Inditex has performed  2,302 pre-assessment audits in 2016.

Once suppliers have been identified and verified through the pre-assessment audit, they are subject to periodical social audits and other evaluation tools for the entire duration of their commercial relationship with Inditex.

Also, production audit are carried out in order to guarantee the traceability of the supply chain.

In 2016, Inditex conducted 2,776 traceability audits to verify traceability.

Verified aspects Verification method Auditing tools
Processes Verification that the supplier has reported all the processes it needs to manufacture a product Factory Management System, visit to facilities
Amounts Verification that the amounts ordered correspond to the workshop's production capacities

Factory Management System, visit to facilities, documentary check

Times Verification that the required manufacturing times can be assured with the resources available to the supplier Factory Management System, visit to facilities, documentary check
Management systems Assessment of the management systems the company has for dealing with its production Interviews, documentary revision
Other aspects Supervision of other critical aspects of the Code of Conduct related to its compliance with labour and environmental issues Visit to facilities, interviews, review of documentation
 

Evaluation of suppliers's compliance

Conducts audits of suppliers to evaluate supplier compliance with company standards for trafficking and slavery in supply chains. The disclosure shall specify if the verification was not an independent, unannounced audit.

Each and every supplier and factory in the Inditex supply chain is subject to periodic social audits, including all processes and all tiers of production. 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, including the prohibition of human trafficking and forced labour.

Social audits are carried out according to Inditex’s own methodology (Tested to Wear), which was jointly designed in 2007 by the International Trade Union Federation, ITGLWF (now integrated within the industry's new international federation, IndustriALL Global Union), the Cambridge Centre for Business and Public Sector Ethics and Inditex. This methodology was extensively reviewed in 2014 so as to include all the modifications and experiences accumulated over the last few years.

In order to work more efficiently and quickly on the ground, Inditex has local CSR offices in Spain, Portugal, Morocco, Turkey, India, China, Bangladesh, Vietnam, Argentina and Brazil.

The audits are performed mainly by independent certified external auditors and also by internal auditors, without prior notification of the date the visit is to be performed.

All active suppliers and factories are audited at least once every 24 months, and the frequency of the audits is determined by the degree of compliance with the Code of Conduct. In 2016, Inditex performed 10,883 audits, 67% of them carried out by independent third party auditors.

Social audits include specific and detailed sections to identify any form of forced labour using all sources of information available to the auditor.

Social audits include inspections of the installations, document reviews (management systems, payroll, hours worked, production, worker documentation and permits among others), interviews with factory managers, employees, trade union representatives and health and safety representatives, to name but a few.

Conduct of an audit
Interviews Meetings with the managers of the workshops, employees, trade union representatives and health and safety representatives
Documentary review Systems of management, payrolls, hours worked, productions, documentation of workers and licences
Visit to facilities Review of work spaces and communal areas
The environment Management of wastes, emissions and consumption resources
Corrective Action Plan Breaches, plan of action and date of putting into effect
Communication of results To the internal purchasing teams and clusters
 

As a result of the audit, a complete report is issued, which includes any non-compliance found and the proposed action plan. In case of forced labour being identified, this remediation plan is prioritized, involving supplier, Sustainability and buying team and any relevant local NGO if applicable.

Materials in compliance

Inditex requires a direct supplier to certify that materials incorporated into a product comply with slavery and human trafficking laws in the country or countries in which that supplier is doing business.

All our direct suppliers, once they start working for Inditex, are subject to Inditex Minimum Requirements, which include the compliance with the Code of Conduct for Suppliers and Manufacturers which prohibits slavery and human traffic and is complemented by national laws and international standards.

Suppliers are also obliged to ensure compliance of the same throughout their own supply chain, as established in section 10 of said Code:

"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".

Suppliers from raw material to finished garment are therefore subject to the Code of Conduct and Inditex verifies and evaluates all processes and tiers to guarantee that no forced labour or any other Human Rights violations occur in the manufacturing of our products.

The responsibility of the suppliers towards the enforcement of the Code is developed in section 14:

Manufacturers and suppliers shall implement and maintain programmes to set in motion this Code. They shall appoint a senior member of Management who shall be responsible for the implementation and enforcement of this Code. Manufacturers and suppliers shall communicate the Code to all employees and those in any way involved in the Inditex Supply Chain. A copy of the Code, translated into the local language, shall be displayed in accessible locations to all workers

Inditex works collaboratively with its suppliers, organizing training and awareness sessions for the prevention of forced labour and other prohibited practices. Our teams in the field (in 12 markets that represent around 95% of Inditex’s productions) are in constant contact with the suppliers to inform them about the application of the Inditex standards and to help them comply with these standards. 927 suppliers received training in 2016.

Inditex also engages in beyond auditing initiatives to control its direct and direct supply chain, such as a Global Framework Agreement with IndustriALL Global Union, which allows joint actions with local trade unions to enforce the workers’ rights, including the right to work freely. In the last years, Inditex has specifically engaged with IndustriALL in markets such as Portugal, Morocco, Tunisia, Turkey, Cambodia or Bangladesh, key to Inditex’s productions. 

Inditex has also been actively working with other organizations such as Ethical Trading Initiative in programmes dedicated at eradication of any kind forced labour practices in sourcing countries.

Internal accountability standards and procedures

Maintains internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking.

Inditex's continual improvement pledge places both remedial and preventative measures at the heart of the company's Sustainability strategy. The aim of the corrective action plans designed by Inditex is two-fold:

  • establishment of measures intended to mitigate and/or remedy breaches of the Code of Conduct for Manufacturers and Suppliers detected during the CSR audits; and, in parallel,
  • the prevention of repeated breaches in the future.

Discovery of a compliance breach triggers the immediate rollout of a corrective action plan that imposes stringent targets and timelines. If a supplier wants to preserve its business relationship with Inditex it must carry out these corrective plans, to which end it can count on the full support and engagement of Inditex's CSR teams.

Inditex's philosophy is to grow and improve alongside its suppliers, meaning that the audits undertaken are always followed- up on with constructive proposals for remedying any shortfalls detected. As part of its promise to suppliers, Inditex's Sustainability teams support all suppliers that express their desire to continue work with the Group by providing corrective action plans designed to address any shortcomings in the working standards. In addition to Inditex's teams, other stakeholders such as factory managers, suppliers, NGOs and local and international unions participate in these remedial action plans.

Nevertheless, and following Inditex’s zero tolerance on forced labour and human trafficking, if the breach is not corrected, the company will immediately cease business relationships with the supplier. 

We also count with a whistleblower channel accessible for all Inditex employees and all manufacturers, suppliers or other interested third party that might have any direct relationship or commercial or professional interest with Inditex. This Whistleblower channel is managed by the Committee of Ethics, composed of the General Counsel and Code Compliance Officer, who chairs it; the Human Resources Director; the Sustainability Director and the Internal Audit Director.

For the sake of transparency, Inditex reports on the activities of the Committee of Ethics in its Annual Reports, externally and independently verified by auditing companies SGS and KPMG.

Training

Provides company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products

Training and awareness is one of the cornerstones of the Compliance Programme. Our Sustainability professionals are accredited by Social Accountability International (SAI) as SA8000 auditors. This standard is one of the certifications of reference in terms of fundamental labour rights, including forced labour and human trafficking. It is based on the Conventions of the International Labour Organisation (ILO), UN parameters as well as other national legislation.

Inditex has organized 12 clusters in the main areas where the supply chain is based: Spain, Portugal, Morocco, Turkey, India, Bangladesh,  Vietnam, Pakistan, Cambodia, China, Brazil and Argentina. Our work in these clusters of suppliers with relevant stakeholders, specialized NGOs and international platforms ensure that the members of the Sustainability department fully dedicated to the promotion and respect of Human Rights within the supply chain are informed and involved in the best practices of the sector. Also, it assures that the right policy is implemented after hearing all parts involved, in the consciousness that the improvement of conditions in any sector is the result of a joint effort of all the parts involved, from Government authorities to NGOs.

Buying teams and other relevant departments are also involved in specific trainings necessary to generate awareness of the importance of a supply chain free of slavery and human traffic. More than 729 local buyers were trained by CSR teams in the field and 500 new employees received in 2016 training on Human Rights in the supply chain.