The ACT Purchasing Practices Self-Assessment: A tool for engagement

Based on existing research, ACT has created the Purchasing Practices Self-Assessment tool (PPSA), an online questionnaire for brands to assess their purchasing practices, pioneer change and support the move towards living wages on an industry level.

The PPSA is a tool for brands to assess the weaknesses and strengths of their purchasing practices. This assessment can be a starting point to identify the need for change to support the move towards living wages on an industry level, and thus pioneer change. ACT member brands are committed to “ensure that their purchasing practices facilitate the payment of a living wage” (ACT Memorandum of Understanding).

Purchasing practices are the way that international retailers and brands interact and do business with the manufacturers that supply their products. They encompass strategic planning, sourcing, development, purchasing and the underlying behaviours, values and principles which impact workers. Good purchasing practices of international brands and retailers are essential to promote better working conditions. Poor purchasing practices can have a negative impact on suppliers and workers in the global supply chain and can contribute to poor working conditions, unauthorised subcontracting, labour disputes and strikes and wages which do not cover the basic needs of workers and their families in garment producing countries. The member brands of ACT recognize the strong link between purchasing practices, working conditions and the payment of a living wage.

ACT has developed a practical tool to enable internal cross-departmental information sharing on purchasing practices.

Critical actors within brands are not only those doing the buying and sourcing, but also for example those working in product design, HR recruiting and training, and management with regards to strategy.

ACT member brands have conducted internal meetings with a wide range of departments to present the ACT approach and train staff on the link between purchasing practices and living wages. More than 800 staff members of ACT member brands were introduced to the concept and objectives of the PPSA before being asked to fill in the online questionnaire.

The data collected were processed confidentially by The Hague Institute for Innovation of Law (HiiL), a change catalyst, to ensure that brands cannot obtain data about the Purchasing Practices of their competitors. All ACT member brands received a report with average scores across all brands as a benchmark. Individual reports were provided to each member brand to allow internal comparison with the current ACT benchmark.

The PPSA contains 55 questions across 16 areas of purchasing practices. For the items with a “policy character” respondents were asked whether a certain practice was: in place, in place but needs improvement, planned but not yet in place, or not existing. Questions about the actual conduct during purchasing interactions can be answered with: always, usually, as often as not, rarely or never.

The survey results identify a number of good purchasing practices that are generally followed by the 14 brands which accomplished the questionnaire in 2017. It also reveals major differences between and within brands regarding some purchasing practices. Focus areas for improvement have been derived from the average rating by respondents and the number of respondents who do not know about the policy or the practice. For each of the 55 questions percentages of responses have been weighted in accordance with the number of respondents per brand. Additionally, the distribution of brand scores was calculated to be able to see the variance among brands.

The scales in Figure 1 show the distribution of brand scores for each question. These values are calculated based on the averages of the responses per brand. The minimum and maximum reflect the lowest and highest brand scores respectively. Changes to orders are managed well according to the respondents.

For question 8.1 it seems that management is not always fully involved in changes to orders. This does not apply to all brands, but there are some brands where the level of involvement from management in changes to orders is substantially lower and has room to improve. Hence, the difference between the lowest brand average and the highest brand average is quite high.

The diagrams in the second part of Figure 1 show the percentages of responses for each answering option. The answers have been weighted in accordance with the number of respondents per brand. So, if the brand had a higher or lower number of responses than another brand, the results shown have been corrected for this. 64% of all respondents say that costs prices are always  adjusted and agreed with suppliers and factories when changes are made to orders.

Figure 2 shows that 58% of respondents do not know whether an effective confidential grievance mechanism is in place. 25 % of respondents know about it, 11 % report a need for improvement.

Other examples reveal that roughly 60% of respondents from the Design departments do not know or are unaware of trainings on responsible purchasing practices. 69% of respondents report that before orders are placed supplier’s agreement on lead-times is always confirmed.

Some brands report that their suppliers are trained on product costing and require a product cost breakdown.

Knowing the differences among and within brands is helpful to engage and essential to improve purchasing practices.

ACT PURCHASING PRACTICES COMMITMENTS

1. Brands commit that purchasing prices include wages as itemised costs.
2. Brands commit to fair terms of payments.
3. Brands commit to better planning and forecasting.
4. Brands commit to undertake training on responsible sourcing and buying.
5. Brands commit to practice responsible exit strategies.

The next step is for each brand to internally review its individual results and compare them to the ACT benchmark provided by the average outcomes in the PPSA. The findings of the PPSA helped the ACT members to identify five key areas that are most relevant to support the payment of living wages. In November 2018, ACT members have agreed on five purchasing practices commitments. The commitments are one of the specifications of the ACT Memorandum of Understanding (MoU) which each member brand has signed with IndustriALL Global Union ACT.

In the ACT MoU, member brands have committed themselves to ensure that their respective purchasing practices facilitate the payment of a living wage. They have also committed themselves to develop a mechanism to link their Purchasing Practices to collective bargaining at industry level so that manufacturers are able to meet the negotiated terms of agreements on wages and working conditions.

This requires continuous dialogue and collaboration with manufacturers, trade unions and governments at country-level to support the social and economic upgrading of the national textile, garment and footwear industry.