Co-prosperity with Suppliers

Factory audits launched in 2007

Q：Could you share with us what sort of efforts the Onward Group is making concerning human rights in the supply chain?

A：Our efforts started when CSR audits of factories became mandatory at Onward Kashiyama owing to the requirements of international brands with which Onward Kashiyama had licensing contracts. That was in 2007. At the time, we didn't even know the term CSR and were feeling things out, asking ourselves what we should do to score passing marks in the audit in the first place and what we should rectify 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 once observed an international brand's typical audit underway. That event led me to thinking something just didn't fit. How didn't it fit? 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 holders based solely on the audit report prepared by local auditors. If the audit results were bad, the brand holders 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.

Not an "audit that eliminates" but an "audit that fosters"

Q：Could you share with us the characteristics of the audit that the Onward Group conducts and the status of its implementation.

A：CSR stands for Corporate Social Responsibility, meaning that a business has a responsibility to the society that exists around it. I would say that the true meaning of the CRS of a brand holder is to point out problems that are likely to lead to human right issues, make such problems understood and prompt the factory to take itself to a higher level, instead of following the outcome of audits and eliminating factories that are not up to standard. In our auditing methodology, we attend all audits with local auditors, and clearly explain to the auditee about the objectives of audits and the meaning of requirements. Moreover, we make suggestions such as on how to start improvements in a manner that suits the unique situation of the factory as we proceed with audits. In the event that a factory satisfies the prescribed standard, we will issue a certificate. Additionally, we simultaneously conduct the Onward Group's original quality control (QC) audits in parallel.

• 
• 

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. In my personal opinion, and it is our goal as well, the human rights audits of Japanese apparel companies, which will start belatedly, should be implemented according to common rules under the flag of "Team Japan," rather than having each company engage on its own separately. Even now, lots of factories are going through multiple brand audits. They are dealing with difficulties such as requirements varying from brand to brand, criteria not being the same, and, what is worse, factories having to receive audits almost every week in some cases depending on the season.

Q：What do the efforts toward "Team Japan" look like?

A：We prepared and have already publicized the "Supplier Code of Conduct: CSR Audit Requirements" (see link below) to an apparel industry association in Japan. Our proposal is available on the website of the association to ensure everyone uses it.
Additionally, we have set up the CSR Committee in the industry association in an effort to inform apparel companies that have not adopted it yet and to improve the "CRS Audit Requirements" to stay relevant. I would like to develop this activity into a human rights audit platform for Japan's apparel industry.

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.