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.
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.
Accountability & Monitoring of Purchasing Practices
The ACT Accountability and Monitoring framework provides ACT member brands with an agreed set of indicators and monitoring instruments to implement their purchasing practices commitments. ACT member brands will ensure that their purchasing practices facilitate the payment of a living wage. To identify in which areas the change of purchasing practises is most essential for achieving better working conditions and higher wages, ACT has analysed existing research, surveyed brands and suppliers and created a joint expert working group of brands and IndustriALL.
As a result, ACT member brands have adopted purchasing practices commitments in five essential areas: fair terms of payment, full coverage of wage increases in FOB prices, better forecasting and planning, training and responsible exit. The newly adopted ACT accountability and monitoring framework with common indicators and monitoring instruments will measure progress towards full implementation of these brand commitments on an annual basis. It specifies and operationalises the purchasing practice commitments of the Memorandum of Understanding ACT member brands have signed with IndustriALL, the global trade union federation of garment and textile workers.
A purchasing Practices Self-Assessment (PPSA) by brands and an anonymous Purchasing Practices Assessment (PPA) by suppliers are the regular monitoring tools. Communication with suppliers and workers as well as a confidential channel to raise concerns and complaints will ensure continuous external feedback. The PPSA survey among brands and the PPA survey among suppliers will be rolled-out simultaneously for all ACT member brands and suppliers in ACT priority countries in 2020. The results of these surveys together with further documentation and dialogue with national actors will serve as a baseline, followed by the release of the first ACT Accountability and Monitoring Progress Report in 2021.
ACT GLOBAL PURCHASING PRACTICES COMMITMENTS
1. Brands commit that purchasing prices include wages as itemised costs.
- Write compliance with collective bargaining agreements into purchasing agreements between brands and suppliers (manufacturers or intermediaries) terms and conditions of purchase.
- Adopt all direct and indirect labour cost components in costing calculations in line with the agreed ACT labour costing protocol.
- Provide guidance to suppliers (manufacturers or intermediaries) on labour costing for suppliers.
- Reflect increases in negotiated wages in the labour components of costing calculations.
2. Brands commit to fair terms of payments.
- Payment to suppliers is in line with agreed timeframe.
- 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.
- Do not impose penalties that fall outside the terms of the purchase agreement.
- Ensure that the purchase agreement clearly references financial consequences for nonperformance.
- 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.
- Improve forecasting processes with suppliers.
- Give clarity and ensure communication with suppliers regarding key critical path stages.
- Determine dates and frequency of adjusted forecasts.
- Release excess booked capacity in a timely manner, where possible setting internal deadlines or reaching agreement with suppliers.
- Improve dialogue with strategic suppliers to balance volumes through peaks and troughs.
4. Brands commit to undertake training on responsible sourcing and buying.
- Design and implement a training programme with common guidelines on ACT commitments to purchasing practices.
5. Brands commit to practice responsible exit strategies.
- Consider reasons for and consequences of exiting.
- Conduct an impact/due diligence assessment (level of business).
- Allow appropriate phase-out time.
- Seek to avoid negative impact on workers.
- Take reasonable measures to assure that all wages and legally entitled severance payments are made.
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