EthicScan Canada Partnership Screening Research Report Prepared Exclusively for the Use of <SCREENED> Company Name: Pure Handknit Ltd EthicScan DataBase Number: Not in DataBase Contract Number: 07-014 (C) FINAL Concern Screen Topic Major Ethical Management Minor None Apparent X Employment Equity X Environmental Responsibilities X Progressive Management X Community Responsibilities No info Public Health Ethical Sourcing and Trading X X Background: Pure Handknit Ltd, a Thai corporation founded in 2002, operates a 14,000 square foot warehouse/office and textile fabric mill and factory in Chiang Mai, Thailand. The company is 51% owned by Mrs. Jampathong Chantrong, a Thai woman, and 49% by Mr. Sirois, a Canadian who owns a related company, Caravan Worldwide. Pure Handknit has its own Board consisting of seven directors. The company sells hand knit and hand loomed sweaters, garments and other goods to export/import companies in Canada and the U.K.. It sources cloth, sewing machines, and garment raw materials from Bangkok, makes use of traditional knitting skills and patterns, and employs sweater and clothing designs and orders supplied by Caravan Worldwide. The dollar value of sales at the Thai company in 2006 were not revealed. The workforce has three components. One are fifty one full time factory workers in Chiang Mai who are paid an hourly wage. The second are 3,500 homeworkers whose principal income is rice planting and harvesting or another activity, and who supplement family income through their hand knitting piece work. They live and work in Chiang Rai and Payao province in Thailand, which is some distance from the warehouse. Many of these homeworkers knit after their regular jobs or while taking care of their family. The Partnership Screening Report: Pure Handknit Pg 1 of 6 third are 12 supervisors or leaders who organize the work, and sub-contract production work to others, who in turn may sub-contract the work to others. Ethical Management: Pure Handknit has no written, formal or explicit code of business practices. Like many small enterprises, there are no written policies governing gifts, conflict of interest, slotting space in chain retail stores, or corporate social responsibility. The company, which insists it only hires adult workers with verified Thai work certificates, is not a member of the Thai Garment Manufacturers Association. The majority of village-based workers who prepare and deliver garments to the warehouse are said by the office manager to have Thai citizenship. They are Buddhist in terms of religion, and aren’t unionized. MSN, a Toronto-based labour rights group with extensive global contacts, has identified a concern among international labour rights advocates about use of workers in Thailand who may be unlicensed and/or citizens of the repressive regime in adjacent Myanmar (Burma). A spokesperson for the civil society group Thai Labour Campaign reports that wage rates vary widely within the sector. The company’s business model accepts the notion that offering work to people in their own home town is better than offering them work in a city factory since it helps them maintain their heritage and their land holding. Mr Sirois notes, “We offer a fair price among levels of difficulty of [garment] styles, but more importantly, we offer consistency and flexibility. We give homeworkers work all year round and we accept [a] lower level of production [seasonally] while they attend their primary income generating activity… In the past, we offered knitters the opportunity to become a leader and receive the same price we paid other leaders. The knitters calculated that it is more advantageous for them to receive a slightly lower amount from the leader than to be a leader themselves.” Are workers concerned about job displacement due to the recent introduction of looms at the factory? EthicScan wasn’t able to question any of them directly. Mr Sirois responds, “Yes and No. Many knitters have learned the skills of working on a loom and therefore [have] increased their income. We have promoted the financing of looms for the knitters as well as technical support for their own production…We believe that several styles are hybrid where they knit a section (for example, sleeves) by looms and do the rest by hand. Again, it is hard for us to control how they sub-contract their orders. However, a majority of styles (a crochet knit, for example) simply cannot be knitted by looms and therefore can only be knitted with needles.” Employment Equity: Pure Handknit employs over 3,500 women knitters in northern Thailand in a micro-enterprise style partnership in which “it offers these dedicated women the opportunity to continue with this rich [crafts] tradition.” Women who knit receive yarn from the factory/warehouse in Chiang Mai together with garment orders for that pay period, and then each reports back with sweaters to one of the 12 team leaders (who teach design and organize the work) two weeks later. Each team leader is responsible for 100-400 knitters. Each knitter can make on average between one garment a week up to two per week. Husbands typically drive their hand knitting wives from the leader’s house to the Chiang Mai warehouse. When the garments are brought back, they are quality controlled, sewing finished, with labels and button holes added at the factory, and finished in preparation for shipping, after which the worker is paid by the piece, and the cycle repeats. Many home-based workers knit in teams, making sleeves or collars or another Partnership Screening Report: Pure Handknit Pg 2 of 6 part of each garment, rather than make a whole individual garment. This home-based work allows these Thai women, most of whom are in their mid 30s to mid 40s, to live at home with their children, doing knitting at off times, rather than have to migrate to cities like Chiang Mai and work as domestics or sex trade workers, and leave their children under care of a relative Pure Handknit Ltd’s office manager, Pornpimong Wongpitak, reports that the employer has a policy on re-hiring factory workers who become pregnant. “Staff can take six months of maternity leave with full salary paid. Normally [this would be] 90 days under Thai Labour law and without pay.” A non-Thai Caravan employee who joined the company in 1998, reports that “No-one leaves. We’ve had the same girls working for us for years.” Many team leaders, each of whom have responsibility for between 100-400 knitters, have faxes and computers. Another non-Thai Caravan employee notes that “Hill Tribe workers typically had little before they started; and now many have cars, houses and access to private schools…They love working for them.” In initial research into Caravan Worldwide, some of these village-based home workers were called Hill Tribe. From activists in Thailand, EthicScan learned and pointed out that Hill Tribe persons may not have Thai citizenship, and could lack proper work permits. Subsequently, the company clarified its comments, noting that “We don’t really work with Hill Tribes, just with regular Thais. We have a few Hill Tribe staff working in our warehouse however. They are all legal and have work permits. They are also better paid than many other Thai staff because of their knitting skills.” Environmental Responsibilities: The company’s stucco-walled, open concept, 14,000 square foot factory/warehouse in the community of Chiang Mai, Thailand, includes a 300 square foot office. The factory has electricity. Outside the glass walled air conditioned office, many fans cool the loom, tables and shipping areas. The office manager at Pure Handknit makes no mention of efforts to buy or use more environment-friendly, non-bleached or organic cotton. No mention is made of environmental conditions put on suppliers of raw materials like yarn (Rama Textile Industry Co), buttons (Hong Dong Inc), snaps and zippers (YKK Thailand Co, Ltd), sewing machines (Confederate International), fabrics (Krungthon Fabrics), and coconut. Questions about supply chain, eco-standards for garments, and the sourcing of raw materials like wool, cotton, coconuts, zippers and other goods have been only partly answered by the management of Pure Handknit Ltd. The company’s line of hand knit and hand loomed sweaters uses cotton (100%) – a separate reference in this text to the use of synthetic (100% Tercel) raw materials was deleted by the company. Caravan’s literature makes no mention of efforts to buy or use organic, pesticide-free, cotton. Bleached cotton, buttons, wool, snaps and zippers, and coconut are apparently all sourced from suppliers based in Thailand. Because the Chiang Mai factory largely involves quality control and shipping, garment production wastes are minimal. Paper and office waste are handled by municipal services, not a private contractor. There is little food waste as most workers eat outside the warehouse/factory. Post-production wastes generated by village-based homeworkers are said to be minimal. Partnership Screening Report: Pure Handknit Pg 3 of 6 Hand looms are used to produce certain styles of garments. They carry the same label since they are also hand loomed, not part of an automated system. When asked about the proportion of loom to hand production, Mr Sirois responded that the figure was 25%. Progressive Management: The Pure Handknit Ltd factory employs 51 inside workers, primarily female, who work at quality control, order entry, pick and pack, and office work, in addition to three males who do shipping. Thai female management – Ms Wongipak and other staff from different departments—are said to handle the hiring of staff. The rights of regular employees or contingent workers at Pure Handknit are not protected by collective bargaining rules. The legal minimum age to work in Thailand, according to the Labor Protection Act of 1998) is fifteen years. There is a dorm at the Pure Handknit Limited factory/warehouse in Thailand where some four couples live for a nominal fee. “Inside” workers at the factory handle rush orders, operate 5-6 older technology hand loom machines, add labels and button holes to garments, and make garment samples. There are no time punch cards, according to Ms Pornpimon Wongipak, the office manager at Pure Handknit Ltd. Mr Sirois comments, and she confirms, that salary-based factory workers work 8:30AM-5:00 PM with one hour for lunch, and are paid overtime of 1.5, when that occurs. Bonuses are paid based on performance. Ms Ying advises that these performance bonuses are paid to individual knitters, not teams of home-based workers, even though production of garments are often shared among teams. Pure Handknit Ltd organizes and encourages education, including free English (three hours a week) and Thai (twice a week) language lessons, computer classes, and driver education. “Outside” home-based knitters who live and work in Chiang Rai and Payao province and who maintain a B average are eligible for grants to allow them to pay their expenses while attending public school through, and in Thailand tuition is free. The education programs include English for three hours a week, for both homeworkers and office staff. According to Ms Wongipak, seventy per cent of employees have been there for three or more years. All team leaders at the warehouse/factory are entitled to maternity leave, as well as health care. Doctors’ bills are reimbursed when submitted. A non-Thai Caravan employee notes that, “After child birth, we always get staff coming back.” Employee turnover is said to be less than 1.0%. The minimum amount paid per style or design is between 150 BT (Thai baht) and 375 BT. Experience knitters can knit several times faster than others. Knitters for Pure Handknit are said by Mr. Sirois to receive 150% of the going rate paid in other establishments. Workers receive wages of 5,000-20,000 baht a month. According to Ms Wongipak, wages at other companies in Chiang Mai start at 4,000 BT per month. Mr Sirois says the company has no way of controlling how much money actually goes to a knitter. “We pay a leader an agreed amount based on the difficulty of the knit. They in turn can pay whatever they want to a knitter. If the amount is high enough, the knitter will sub-contract part of the order to another knitter at a lower price. There can be several levels of entrepreneurship, and it does not stop at the leader level.” The company spokesperson says that it isn’t possible to translate work into an hourly wage, as the company says it has never studied how many hours it takes to knit a sweater. Partnership Screening Report: Pure Handknit Pg 4 of 6 The wages and benefits that rural handknitting homeworkers receive are not the same as those paid to hourly-wage-based factory workers, where costs of living are greater. Workers are paid by the piece, but we don’t know roughly what that would translate into as an hourly wage. The company says that it does not know what are the legal requirements for homeworkers as opposed to factory workers. Children are said not to work with their parents. In answer to the question, “Are the homeworkers registered with the government”, Mr Sirois responded, “We don’t know.” Community Responsibilities: Pure Handknit does not make charitable donations in ways that we think of this in Canada. The company’s owners see its community support expressed not in terms of donations or philanthropy, but rather as welcome wages and education to factory and home based workers, as well as offering micro-financing to allow the latter to purchase knitting equipment and sewing machines. Caravan Worldwide has dedicated a $25,000 flow through payment toward a microenterprise program in Thailand that will sponsor Canadians working there. Mr. Sirois describes this as “the right thing to do.” In 2006, Caravan Worldwide investigated 10 prospective non profits that it potentially might wish to support, and decided to make an initial or starting contribution of $25,000 to CUSO, with a plan to contribute perhaps $100,000 a year toward fundraising and marketing for good or suitable workplace projects in Thailand. In return Pure & Co. hopes to publicize the projects in which CUSO and the Chiang Rai Mirror Group are involved. CUSO, which sends cooperants abroad to work in countries like Thailand, says that this initial money likely does not allow for branding and formal partnering, but could facilitate mention on the Caravan Worldwide web-site and would help fund a Canadian to set up a micro-finance project in the area. Public Health: It would appear, and the office manager confirms, that Pure Handknit is not involved in the manufacture or sale of tobacco, nuclear energy, gambling or military products. When asked about safety procedures and accidents in the Chiang Mai factory, the Pure Handknit Ltd office manager reported that factory inspections are not regular in Thailand and that “we don’t have anything”. When asked for assurance that underage neighbours or family members could be involved in piece work, Mr. Sirois noted that, “We have never seen children involved in our trade and we don’t believe that Thai communities where we work would support this.” Ethical Sourcing and Trading: This is an area of Major Concern because the company has not adopted voluntary international standards, nor is there independent data about Pure Handknit Ltd’s supply chain. There are questions about working conditions, the legal status of the entire home-based workforce, and the ethics of contingency-based and performance-based wage rates. There are further, unverified answers to questions about wages—specifically the relation of second income “supplemental” wages relative to a principal occupation wage, and the issue of a living wage, as well as working conditions for women and other family members. The Pure Handknit factory has never been audited by a buyer or auditing organization working on behalf of the buyer. If that had been done, the findings could be instructive in terms of whether any corrective action was required. The usefulness of any such audit is complicated by the proportion of garments that are produced off-site, rather than in the factory. Partnership Screening Report: Pure Handknit Pg 5 of 6 Pure Handknit has no policy that restricts either procurement or sale of garments. It does not subscribe to any voluntary standards involving human rights, fundamental freedoms, or living wages. Nor does the company commission third party organizations to conduct independent audits of working conditions. It only sells garments to companies like Caravan Worldwide (who sell them to retailers in Canada), Pure and Co USA Ltd (to retailers in the United States), and Flax (the U.K.). There has been a change in the international garment industry with the end of quotas. In the last year, Bob Jeffcott of Maquila Solidarity Network (MSN) notes that smaller countries like Thailand and Cambodia have been losing jobs, as pressure mounts for transnational companies to source in India and China. A typical example is the Hong Kong based Clover Group which recently closed its progressive factory operations in Thailand. Mr. Sirois, head of Caravan Worldwide, comments that his company has made a conscious decision not to source in China, which would be more cost effective. He could or would not answer whether or not supplier contracts have ever required independent monitoring and surprise site visits. Ms Wong confirms that no labour practices certification (such as SAI 8000 standard) has been prepared on the business by an independent auditor. Among workers rights advocacy professionals workers in this field, there is some concern about employment of illegal workers from adjacent Myanmar, which is cited by Freedom House as a repressive regime. With respect to “inside” workers, Ms Wongpitak writes that, “We only hire legal workers. Employees must have Thai ID and has [sic] to be 18 years old or more (based on Thai Labor Law). [The correct figure is fifteen years] Our youngest staff is 20 years old.” A company employee in Canada reports that two or three workers had their papers held by a third party in Bangkok, but the company intervened to ensure these social insurance-like work cards were returned to individuals. The Asia Monitor Resource Centre, which operates the Campaign for Labour Rights, did not respond to our request to provide comments. Reference Details PSR Report Commissioned By: <SCREENED> Date Prepared: March 2007 Corporate Spokesperson: Pornpimong (Ying) Wongpitak President: Jampathong Chantrong EthicScan Researcher: Bart Astor, David Nitkin Companion Document Sent: Profile Fact Sheet __ Company Contacted Prior to Sending: Yes X No ___ Transmission Mode: Mail Courier ___ Facsimile ____ E-Mail _X__ Caution The research contained above is correct to the best of EthicScan Canada's knowledge. It typically includes interviews with corporate executives, labour officials, and a thorough review of our DataBase. Where there is sufficient time allotted by the client to contact the company to verify the data, the preferred methodology, this information is noted above. Partnership Screening Report: Pure Handknit Pg 6 of 6