Co-prosperity with Suppliers

JAQC was established to contribute to the development of the apparel industry.

Q. JAQC is not a joint-stock company but a general incorporated association, right?

A. Yes. In the course of its history of over 40 years, Onward Kashiyama's quality control department accumulated expertise in various aspects, such as quality check before commercialization (Photo 1), cause analysis in the event of product failure (Photo 2), and feedback to prevent recurrence. We thought it would be a good idea to utilize this valuable expertise as the shared assets of Japan's apparel industry, rather than keeping it within a single enterprise, and thus contribute to the development of the entire industry. Therefore, JAQC was set up as a general incorporated association, which is a not-for-profit organization.

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  Photo 1. Discussion on quality merchandising

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  Photo 2. Testing lab

Q. Were there any objections to making Onward's expertise available to other companies?

A. Changes in the environment in which the Japanese apparel industry operates were already underway in 2017 when JAQC was established. Whereas sales in physical stores had been the mainstream for apparel products, cross-border e-commerce was growing. Environmental and human rights issues in the supply chain were brought into focus by criticism originating overseas. Our idea was that apparel companies in Japan should pool their efforts as Team Japan to deal with these issues, rather than each company addressing them on its own. So, there were no objections.

Factory audits launched in 2007

Q. You mentioned human rights in the supply chain. What is JAQC doing on this front?

A. CSR audits of factories became mandatory at Onward Kashiyama in 2007 owing to the requirements of international brands with which Onward Kashiyama had licensing contracts. At that time, CSR was not such a familiar concept and we tried to figure out what should be required in order to pass the audit and what should be corrected and how.

Q. How do human rights issues relate to factories?

A. It may change with the times, but when we started CSR audits to satisfy the requirements of international brands, child labor figured prominently among their concerns. As for wages, issues included payment below the minimum wage required by law or insufficient overtime payment. Although circumstances improved due to the guidance following the audits, there were factories with poor working environments, such as lack of fire extinguishing equipment or with unsanitary cafeterias, toilets, and dormitories.

Q. What was your impression of factory audits by international brands with which Onward Kashiyama had license agreements?

A. I felt that the way in which audits were conducted for international brands left much to be desired. Firstly, representatives of the brands requiring the factory audits were not present at the audits. Auditors from local audit firms conducted factory audits but they were not in a position to explain the purpose of the audit to the factory management or to directly provide guidance to the factory about improvements to be implemented in accordance with the actual situation at the factory. From the perspective of the factory, if it failed the audit, it lacked a clear understanding of what the audit findings entailed and clues as to how it could set about making improvements. Whether a factory passed or failed, was at the discretion of the brand based solely on the audit report prepared by local auditors. If the audit results were bad, the brand would notify the factory that it would stop placing orders unless improvements were made within several months. Findings might include problems attributable to the apparel companies placing orders with the factory, such as excessive overtime or insufficient holidays taken by the workers. There might be findings that could not be remediated in the short term, such as those involving refurbishment of facilities and burdensome costs.

Audit for fostering factories, rather than rejecting them

Q. What are the characteristics of JAQC's audits and how is it done?

A. CSR is the abbreviation of corporate social responsibility. CSR audits should not be a means of terminating transactions with factories that do not satisfy the standards. Rather, we think brands have a social responsibility to point out problems concerning human rights and help factory management understand the significance of the issues and raise their performance to a higher level. JAQC staff are always present (Photo 3) together with local auditors when factory audits are conducted. We explain the purpose of the audit and the reasons for the requirements to the management of the factory being audited. Moreover, in light of the factory's unique circumstances, we provide guidance for improvement action plans. Provided an audit detects no serious deficiencies, we issue a certificate of compliance (Photo 4) to the factory. All factories owned by Onward Kashiyama or by our suppliers have been subject to audit since 2016. As of March 2021, JAQC had conducted audits of a cumulative total of 335 factories. The coverage of our audits is 79% (Photo 4) in terms of the number of factories and 93% in terms of the production output. We also conduct quality control (QC) audits of factories, taking the opportunities of CSR audits.

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  Photo 3. Factory audit

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  Photo 4. Certificate of Compliance

Q. What has been the response of the factories?

A. We think the factories have responded very positively. To cite one example, the management of a factory commented that although they had not understood the purpose of the audits previously, they now understand that the audits are useful for helping them enhance the quality of their operation.

Q. Human rights due diligence does not seem to be common practice among Japanese apparel companies, unlike in the case of European or American brands.

A. That's right. Whereas certain SPA brands and retailers developing business globally are already conducting human rights due diligence, very few Japanese apparel companies conduct human rights due diligence of factories.

Initiatives as Team Japan

Q. "Sustainable fashion" is a big theme for companies now. How do you think Japanese apparel companies should address this?

A. When we think about realizing sustainability, the environment and human rights loom large. Regrettably, when it comes to management of supply chains with respect to human rights, Japanese apparel companies trail European and American brands. Japanese apparel companies are starting human rights due diligence, albeit as latecomers. In my opinion, human rights due diligence should be conducted based on common rules. This is also JAQC's objective. Rather than each company addressing this issue in its own way, Japanese apparel companies should implement initiatives as Team Japan. Many factories currently receive audits for several different brands, which is troublesome for them. For example, requirements and criteria differ from one brand to another or factories may have to receive audits almost weekly at certain times of the year.

Q. What is JAQC doing to achieve initiatives as Team Japan?

A. JAQC formulated the CSR Audit Guidelines that include audit requirements and evaluation procedures, which is posted on the website of the Japan Apparel-Fashion Industry Council for use throughout the industry. The CSR Committee established within this industry organization is raising awareness about CSR factory audits among apparel companies that have yet to conduct such audits and is updating the CSR Audit Guidelines to reflect the needs of the era. We would like to develop these initiatives into a platform for human rights due diligence by Japanese apparel companies.

Q. I see. But doesn't terminology such as "audit" and "due diligence" have negative connotations, such as for the detection of fraud?

A. Yes. In recent years, we are using the term "surveillance," rather than "audit." As I mentioned earlier, our objective is not to pass or fail factories but to identify items requiring improvement, remediate them, and continue transactions with the factories far into the future, that is, to establish sustainable relationships.