Risk prevention in Carrefour's non-food supply chains
Carrefour, one of the world's leading food retailers, generates approximately 15% of its revenue through the sale of non-food products (electronic goods, tableware, general merchandise, clothing, etc.)
Carrefour gives priority to sourcing its merchandise in the countries in which it operates. Some of its non-food purchases are made by dedicated local teams in the sourcing countries, mainly China, Bangladesh, India, Cambodia and Turkey.
In 1997, Carrefour introduced a process for monitoring working conditions among its suppliers in partnership with the International Federation of Human Rights (FIDH). The same year, Carrefour participated in a collective initiative within the French Trade and Retail Federation (FCD) designed to share audit results among suppliers – the Social Clause Initiative (ICS).
Contractual aspects regarding suppliers' social, environmental and ethical commitments
Every supplier, selected on the basis of numerous criteria, is required to sign specific social, environmental and ethical commitments which are incorporated into the supply contracts. Furthermore, they must undertake to ensure that these commitments are adhered to in their factories and by their own suppliers. These contractual terms were drafted in 2000 and are based in particular on the Universal Declaration of Human Rights, the ILO's main agreements, UN guidelines for companies and human rights and the OECD's guiding principles.
The supplier contractual terms include 9 commitments:
• Prohibition of the use of forced labour, bonded labour, debt bondage or prison labour
• Prohibition of child labour
• Respect for freedom of association and recognition of the right to collective bargaining
• Prohibition of all forms of discrimination, harassment or violence
• Healthcare and safety
• Decent salaries, benefits and terms of employment
• Working hours
• Business ethics
• Environmental protection
Procurement rules for non-food products
As a prerequisite for its being listed and before the supplier receives any orders, working conditions at manufacturing sites are audited.
Procurement rules for Carrefour products, which were formulated in October 2013 and applied to all countries in which the Group operates, lay out the necessary and compulsory conditions for sourcing Carrefour products. They are applied in different ways depending on the country of origin and the type of manufacturing process used. A risk analysis for each country is shared and discussed with our union and NGO stakeholders. This analysis is used to identify the sourcing countries which are the most high-risk in terms of respect for human rights. In countries where a particularly high level of vigilance is required, all suppliers of Carrefour products are audited prior to being listed in accordance with the ICS reference framework.
The support process implemented by Carrefour consists of several levels of inspection:
• Audit conducted by an outside company prior to listing: before any orders are placed, an outside company specialising in social audits carries out a full inspection to ensure that the factory is in compliance with the ICS reference framework. This reference framework is shared by several French retailers and incorporates the requirements of Carrefour's contractual terms (see above). The level of compliance determines whether a supplier is listed or not. A follow-up audit is carried out within a maximum of 2 years, depending on the level of compliance found and the deadlines set out in the corrective action plan.
In 2016, 1,344 audits were performed for Carrefour.
• Carrefour carries out "counter audits" at its suppliers’ premises in order to assess the performance of its auditors and the effectiveness of the audits carried out. Where needed, doing this enables the audit firms to implement processes to improve their methods.
• Direct inspections carried out by Carrefour's Global Sourcing teams: local teams tasked with identifying future suppliers carry out several inspections:
- A preliminary visual inspection of working and manufacturing conditions. A practical guide for applying Carrefour's requirements – the “Good Factory Standard” – has been developed by and for teams, and then adapted for use with 11 types of manufacturing processes (clothing, leather, garden furniture, etc.). This tool also serves as an opportunity for Carrefour to talk to the supplier and to raise their awareness of the importance of the contractual terms.
- Inspections during manufacturing: unannounced audits are carried out throughout duration of the business relationship to ensure that working conditions remain in-line with the requirements set out in the supplier charter. In the event of non-compliance, a corrective action plan is established in conjunction with the supplier and a new audit is carried out by an outside company to certify implementation;
- Production capacity verification: local teams carry out inspections on production volumes at factories in order to verify that the supplier has not accepted orders which beyond capacity of their facilities. These checks limit the risk of clandestine subcontracting.
As far as national brand products are concerned, suppliers sign a contract which includes a number of ethical clauses. Carrefour does not audit its national brand suppliers.
Audits and improvement plan
Social audits are assessed by a score (made up of a number between 0 and 100 and a letter from E to A), and generate a report and an action plan which is shared with the supplier. Under the ICS reference framework, Carrefour only lists products with audits with scores of 60C and above and which have no warnings. A warning is point of critical non-compliance in which workers are endangered. Products with warnings are sanctioned by Carrefour as ineligible for listing, or – for suppliers which have already been listed – by a requirement for immediate action.
Follow-up audits are carried out every 3 to 24 months, depending on the compliance of the previous audit and the deadlines set out in the action plan.
In 2016, Carrefour performed 1,344 supplier audits, including 547 listing audits. 23% of these audits resulted in a warning being issued. The main warnings issued in 2016 concerned hygiene and safety non-compliance (43%), failure to adhere to working hours (20%) and failure to pay overtime or the minimum wage (18%).
Social audits result in the implementation of corrective action plans, whose content and deadlines are agreed upon by and committed to by the suppliers in question, who commit to them. Sourcing teams monitor implementation, which is then certified by a follow-up audit. Whenever issues of non-compliance require, special support from a competent third-party is advised or provided to the supplier (awareness training regarding freedom of association, information about non-discrimination, support in relation to building safety, etc.).
To encourage suppliers to implement corrective actions, Carrefour provides two types of support:
• Carrefour offers suppliers long-term sales contracts, larger volumes and early payments
• Carrefour joins other local purchasers to issue the same request so as to weigh more effectively on the company's management.
Carrefour works alongside the main international organisations in supporting the creation of an international level playing field, harmonising audit standards and implementing local solutions in partnership with authorities, suppliers, employees and their representatives.
• Level playing field: International rules which are applicable to all stakeholders along the supply chain would turn the ILO's norms into a benchmark standard for all contracting. Stakeholders would compete in relation to quality and innovation, without compromising their employees' working conditions.
• Harmonising standards: There are more than 1,000 different audit standards – a given supplier can be audited more than 10 times a year in accordance with different standards. However, there is actually little difference between these standards. Carrefour supports their convergence into a unique standard supported by an international organisation such as the ILO. In 2007, Carrefour started harmonising the standards used to inspect our suppliers and is calling – via the Consumer Goods Forum – for the standards used by buyers to be converged. In 2016, Carrefour looked into the possibility of bringing the French ICS standard and the International Business Social Compliance Initiative (BSCI) standard closer together. The BSCI has agreed to make significant improvements to the way it works so that a common audit standard can be used in 2017.
• Local multi-stakeholder solutions: Carrefour is convinced that initiatives involving buyers, local authorities and all local stakeholders in the sector can lead to significant progress in improving working conditions.
Carrefour, the first French signatory of the new agreement on safety in textile factories in Bangladesh
In 2013, following the Rana Plaza catastrophe, a five-year agreement was signed between entities placing supply orders in the country and the main international unions under the aegis of the ILO. Today it comprises over 200 brands and aims to ensure worker safety in the factories through fire, electrical and structural inspections. Any issues of non-compliance detected during inspections must be corrected and employees of the factories must be trained to ensure the long-term application of these safety measures through health and safety committees.
The three-year extension of the “FIRE AND BUILDING SAFETY” agreement to improve safety conditions in textile factories in Bangladesh – or Agreement 2.0 – was finalised in June 2017 and follows the main principles of the first agreement signed in 2013, while reinforcing certain points. The previous agreement addressed over 100,000 safety problems identified by inspections in 1,800 garment factories employing a total of more than 2.5 million workers.
All of the operational factories working with Carrefour were inspected and 87% of the improvement actions recommended have been implemented, compared with an average of 78% for the other signatories of the agreement. Furthermore, more than half of these factories are involved in the process of raising awareness and training the “health and safety committees” provided for by the agreement.
The new agreement, which will come into force in June 2018, will complete the previous agreement’s compliance programme and, in time, will see the Bangladeshi government take over responsibility for the inspection system.
This commitment forms part of the action programme being led by Carrefour teams in Bangladesh to improve working conditions at factories, as well as protect the environment with the “Clean Water Project”.Download our Social and Ethical Charter (pdf 3.29 MB)
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