PURCHASING PRACTICES

Purchasing practices are the way that global retailers & brands interact and do business with the manufacturers that supply their products. Purchasing practices encompass strategic planning, sourcing, development, purchasing (buying) and the underlying behaviours, values and principles which impact workers.

ACT GLOBAL PURCHASING PRACTICES COMMITMENTS

Achieving living wages requires collaboration between brands, governments, suppliers and trade unions to support a process ensuring continuous and substantial improvement of wages and working conditions. ACT member brands collaborate by improving purchasing practices and supporting collective bargaining processes at industry level in producing countries.

Improvements in purchasing practices and new forms of collaboration between all relevant stakeholders create the space for substantial and continuous wage growth, and a sustainable development of the garment, textile and footwear sector.

Download Global Purchasing Practices Commitments
Based on an internal assessment of purchasing practices and after consultations with IndustriALL Global Union (the global trade union federation of workers in the garment, textile and footwear industry) and suppliers in several countries, ACT member brands have adopted commitments on purchasing practices that will guide relationships with suppliers worldwide. The ACT member brands have committed to implement these changes progressively until the end of 2023.

ACT member brands are currently developing internal implementation plans to realise the necessary changes in their organisations. The implementation process will be accompanied by continuous dialogue and monitored involving brands, suppliers and trade unions.

ACT GLOBAL PURCHASING PRACTICES COMMITMENTS

1. Brands commit that purchasing prices include wages as itemised costs.

Implementation measures:

  1. Write compliance with collective bargaining agreements into purchasing agreements between brands and suppliers (manufacturers or intermediaries) terms and conditions of purchase.
  2. Adopt all direct and indirect labour cost components in costing calculations in line with the agreed ACT methodology
    (components to be fully defined and agreed).
  3. Provide guidance to suppliers (manufacturers or intermediaries) on labour costing for suppliers.
  4. Reflect increases in negotiated wages in the labour components of costing calculations.

2. Brands commit to fair terms of payments.

Implementation measures:

  1. Payment to suppliers is in line with agreed timeframe.
  2. Ensure the amount paid to suppliers is in line with the payment terms agreed and retrospective changes may only be made where it is mutually agreed and is not to the detriment of the supplier.
  3. Do not impose penalties that fall outside the terms of the purchase agreement.
  4. Ensure that the purchase agreement clearly references financial consequences for nonperformance.
  5. Implement an internal monitoring mechanism to track terms of payment, on-time payments as well as penalties issued and their root causes.

3. Brands commit to better planning and forecasting.

Implementation measures:

  1. Improve forecasting processes with suppliers.
  2. Give clarity and ensure communication with suppliers regarding key critical path stages.
  3. Determine dates and frequency of adjusted forecasts.
  4. Release excess booked capacity in a timely manner, where possible setting internal deadlines or reaching agreement with suppliers.
  5. Improve dialogue with strategic suppliers to balance volumes through peaks and troughs.

4. Brands commit to undertake training on responsible sourcing and buying.

Implementation measures:

  1. Design and implement a training programme with common guidelines on ACT commitments to purchasing practices.

5. Brands commit to practice responsible exit strategies.

Implementation measures:

  1. Consider reasons for and consequences of exiting.
  2. Conduct an impact/due diligence assessment (level of business).
  3. Allow appropriate phase-out time.
  4. Seek to avoid negative impact on workers.
  5. Take reasonable measures to assure that all wages and legally entitled severance payments are made.
“When we came together as companies in ACT to collectively work on the topic of living wage, we did so with the clear understanding that we, as businesses, have also contributed to the downward spiral on standards. Not necessarily intentionally, but as a consequence of the competitive and complex environment in which we have to operate. As businesses we have come to the conclusion that we also have to look internally at own commercial practices and behaviour. This is a pillar of ACT – responsible purchasing practices.

This is not a new insight. The OECD, for example, in their Guidance on Due Diligence in the Garment and Footwear Sector, has highlighted the importance of companies undertaking due diligence upon their own internal systems.

Our strategy is to develop a shared understanding on what responsible purchasing practices are, and how we can bring them into our own businesses as ACT brands, and the wider industry as a whole. This is because only if a large part of the business community starts operating according to such principles, will the bar be raised, without jeopardizing the competitive edge of those moving forward more quickly.”

Thomas Linemayr, CEO, Tchibo

Thomas Linemayr

Thomas Linemayr

CEO, Tchibo