1. finance
2. accounting and auditing

Improving Workers’ Lives Worldwide
H&M HENNES & MAURITZ AB ASSESSMENT FOR ACCREDITATION
October 2008
H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
Table of Contents
Introduction........................................................................................................................................... 1
H&M’s Corporate Social Responsibility Program ......................................................................... 1
Analysis of H&M’s Social Compliance Program Using the FLA Obligations of Companies
and Evaluation Working Group Benchmarks................................................................................ 3
Conclusion............................................................................................................................................16
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Introduction
FLA-accredited Participating Companies have demonstrated that they have the systems and
procedures in place to successfully uphold fair labor standards throughout their supply chains.
The complexity and ever-evolving nature of global supply chains make it impossible to guarantee
that a product is made in conditions free of labor rights violations. For this reason, FLA does
not certify brands. Instead, FLA evaluates companies at the headquarter level – in addition
to standard factory-level due diligence activities that are conducted annually – to determine
whether they have social compliance systems in place to proactively identify and address risks
or instances of noncompliance. Accreditation is the highest level of recognition for FLA-affiliated
companies, and is reevaluated every three years.
The FLA Board of Directors voted to approve the accreditation
of H&M’s China compliance program on October 28, 2008, based
on proven adherence to FLA’s Workplace Code of Conduct and
the Obligations of Companies. Details on FLA’s accreditation
methodology can be found at www.fairlabor.org/accreditation. H&M’s Corporate Social
Responsibility Program
H&M is a Swedish company producing mainly
apparel for women, men and children but also
producing cosmetics, footwear, and accessories.
Now headquartered in Stockholm, the company
was founded in 1947 when the first H&M store was
opened. As of 2007, the company had over 1,500
retail stores in 28 countries and employed 68,000
people. H&M had 20 production offices mainly in
Europe and Asia and worked with approximately
800 suppliers (2,500 factories).
H&M adopted a Code of Conduct and started its
Corporate Social Responsibility (CSR) program
in 1997. The CSR Manager, who reports directly
to the CEO, is the head of the CSR program. The
H&M Flagship store in Sweden.
CSR Manager is supported by Code of Conduct
Coordinators as well as by Regional Code of Conduct
Coordinators at regional offices (Europe, Far East, and South Asia). H&M relies mainly on its
internal compliance staff and, in a limited capacity, some third-party monitors to implement its
social compliance program. Currently H&M has 81 full-time employees engaged in CSR and Code
of Conduct work based globally in Europe and throughout Asia. H&M has been publishing an
annual CSR report since 2002.
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H&M was accepted as a Participating Company by
the FLA in 2005 with a two-year implementation
period. H&M began participation in the FLA effective
January 2006. H&M’s participation in the FLA at
such time was only for their sourcing in China. The
CSR team in China consists of 33 full-time dedicated
staff members. These include: (1) a Code of Conduct
Regional Coordinator based in Hong Kong, who
oversees the CSR activities in the Far East region
(which includes China, Indonesia, Vietnam, Thailand,
South Korea, and Cambodia); (2) three Code of
Conduct Managers (one each based in Hong Kong,
Guangzhou, and Shanghai); (3) eight auditors in
Guangzhou and 17 auditors in Shanghai; (4) two
Code of Conduct administrators; (5) one Global
Coordinator for Environmental and Health and
Safety; (6) one Global Fabric and Fiber Coordinator
based in Shanghai; and (7) one Controller/FLA
Coordinator in Hong Kong. Other H&M employees
have partial responsibilities to ensure H&M advances
in its CSR goals; thus, all production staff in China
are expected to communicate H&M’s CSR standards
to suppliers and sourcing staff are involved in presourcing audits as well as safety and health visits
Sewing facility of an H&M supplier in Shanghai.
The company is actively engaged in discussions with FLA staff at the headquarters and regional
levels. H&M attends at least one Board Meeting each year and actively participates in the
Monitoring Committee. H&M has also actively participated in FLA trainings in China, sending
staff to two FLA 3.0 Foundation Courses in 2007, enrolling one factory in 3.0 in 2007, and
participating in grievance procedure trainings (arranged in 2007 but only taking place in 2008).
Interviewing a worker at an audit of one of H&M’s facilities in
Bangladesh.
Workers at an H&M facility receiving training.
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The table below describes H&M’s supply chain over
the period 2006-2007, as reported to the FLA.
H&M sourced from 500 applicable facilities in 2006
and 453 facilities in 2007. During this period, H&M
factories were subject to a total of 42 unannounced
Independent External Monitoring events (IEMs)
conducted by FLA-accredited independent external
monitors. Information on the results of the IEMs, and
the remediation undertaken by H&M in response to
IEM findings, are provided in FLA tracking charts and
discussed, as appropriate, in the next section.
H&M jeans being sewn by a worker.
H&M Applicable Factories & IEMs, 2006-2007
Country
2006 Applicable
Facilities
2006 IEM
2007 Applicable
Facilities
2007 IEM
China
500
19
453
23
Total
500
19
453
23
Analysis of H&M’s Social Compliance Program Using
the FLA Obligations of Companies and Evaluation
Working Group Benchmarks
Information used in this assessment originates from annual reports submitted by H&M to the
FLA verified through: (1) visits to H&M’s headquarters by FLA staff in 2008 and meetings with
H&M at FLA offices in Washington, DC and Geneva; (2) visits to the Guangzhou office and an
H&M factory by FLA staff; (3) observation of a training session in July 2008; (4) shadowing of
a monitor in July 2008; (5) information gathered via in-person and/or phone interviews, and/
or email correspondence with H&M monitors and other key stakeholders; and (6) results of IEMs
and ensuing remediation.
1.
Adopts and communicates a code
1.1 Formally adopts a code that meets or exceeds FLA standards
Actions Taken:
H&M adopted their Code of Conduct (CoC) in 1997.
Verification by FLA:
Copies of the H&M Coc are available online and at the FLA offices. H&M’s CoC meets and exceeds the FLA
Workplace Code of Conduct in many respects. The H&M CoC proscribes discrimination based on race, gender,
religion, or ethnic background, and moreover states that all workers with similar experience and qualifications
should receive equal pay for equal work. The CoC does not currently recognize discrimination based on age,
disability, or political opinion, which are part of the FLA Workplace Code of Conduct. The CoC requires that
weekly working time not exceed national limits and overtime always be voluntary and properly compensated, but
there is no weekly ceiling placed on overtime. The FLA recommends that H&M review these points as it finalizes a
revision of its CoC that is currently in process.
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1.2 Informs all suppliers in writing
Actions Taken:
The H&M CoC is communicated to each new supplier during factory meetings. The suppliers, in turn, are
responsible for informing any subcontractors and workers about H&M’s Code. All suppliers receive the H&M CoC
and sign a compliance commitment form. Sourcing staff generally meet with new suppliers and inform them of
the requirements. H&M is also training sourcing staff to conduct pre-sourcing visits.
Verification by FLA:
H&M communicates the CoC to new suppliers. H&M also receives a signed commitment letter from each supplier
that acknowledges receipt of the CoC and attachments such as code of ethics, restriction on chemicals, and
safety issues as well as quality requirements. The FLA reviewed copies of signed letters during factory and office
visits. During the observation of internal audits in China, the findings were inconsistent. During the audit in South
China, the factory had not received any information from the FLA and in another visit, the factory had received
information.
H&M is developing a “Guidance for Implementation of Good Labor Practice” which provides details on the
expectations of suppliers for factory management. A copy of the document and corresponding attachments is
on file with the FLA. The document will soon be translated into Chinese and Turkish.
1.3Posts the code in a prominent place in supplier facilities in the local languages of workers and managers
Actions Taken:
H&M does not require its suppliers to post the company Code. The company’s view is that if a manufacturer works
with several buyers, different codes might confuse workers. They have tested posting a simplified version of the
Code in factories in Indonesia and in Latvia but this did not produce positive results. Instead of posting, H&M
places emphasis on encouraging supplier factories to set up internal policies that are in line with local labor law
and the H&M CoC, making certain that all workers know what their rights and obligations are.
Verification by FLA:
The IEMs confirm that the Code is not posted. H&M does not require suppliers to post the CoC because of
feedback they have received that: (1) the text is too long; (2) workers are generally reluctant to read; and (3)
codes remain posted even after a buyer has exited the factory. Instead, H&M encourages suppliers to create their
own internal management systems that incorporate labor standards.
During observation of 2 internal audits, interviews with H&M staff, and review of the audit instrument, FLA
found that the expectation of such internal management systems on awareness and worker education was not
being conveyed and implemented consistently at the factory level. In one factory in Guangzhou, the Code and
expectations about training had not been conveyed to the factory. In another factory, in Shanghai, while the
factory had received the H&M Code and understood the expectations, the handbook the factory had adopted
included a Code of Conduct that was missing some key provisions. H&M does not include in their audit process a
check on whether or not a factory has adopted a Code and educated workers on it.
1.4 Ensures that workers are informed orally and educated at regular intervals (to take account of labor
turnover)
Actions Taken:
As mentioned above, H&M encourages supplier factories to set up internal policies that are in line with local labor
law and their CoC and to make sure all workers know what their rights and obligations are.
Verification by FLA:
H&M requires suppliers to educate workers on factory policies and procedures incorporating H&M standards. The
Code is often provided to the vendor but there is no verification that the requirement for training is conveyed to
the production units. The audit instrument does not have any questions verifying that trainings to workers are
provided.
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34 of 42 IEMs cite findings that note: (1) workers were not aware of the Code; (2) workers had not received
training; or (3) factory management said they had not received a Code from H&M.
1.5 Obtain written agreement of suppliers to submit to periodic inspections/audits, including by accredited
external monitors, to remediate instances of noncompliances with FLA Workplace Standards that arise,
and to inform employees about those standards
Actions Taken:
Suppliers agree to submit to H&M and third-party audits and remediation when signing the H&M Code.
All H&M suppliers in China have been informed of the company’s participation in the FLA and how it affects them.
Verification by FLA:
H&M requires suppliers to sign a commitment letter during inspections. FLA staff has reviewed copies of these
letters at H&M’s office in China. During two audits observed by FLA staff, the factories claimed that they were
not aware of H&M’s affiliation with the FLA. H&M has been made aware of this issue and has adopted a policy of
informing suppliers annually about its affiliation with the FLA and the IEM process.
2.Trains internal compliance staff
2.1 Identifies the staff or service provider responsible for implementing their compliance program
Actions Taken:
The CSR team in China consists of 33 full-time dedicated staff members. These include: (1) a Code of Conduct
Regional Coordinator based in Hong Kong who oversees the CSR activities of the Far East region, which includes
China, Indonesia, South Korea, and Southeast Asia; (2) three Code of Conduct Managers (based in Hong Kong,
Gunagzhou and in Shanghai); (3) eight auditors in Guangzhou and 17 auditors in Shanghai; (4) two Code of
Conduct administrators; (5) one Global Coordinator for Environment, Health and Safety; (6) one Global Fabric
and Fiber Coordinator based in Shanghai; and (7) one Controller/FLA Coordinator in Hong Kong.
Verification by FLA:
The FLA has interacted with H&M CSR staff both at the headquarter level and in the China offices. FLA staff
visited the China office in April and September 2008, shadowed audits in April and September 2008, and
observed training in April 2008.
2.2 Ensures that they had training in all the areas under their responsibility, including, as appropriate,
international and national labor standards, local languages, occupational and production risk factors, and
techniques for monitoring, interviewing and remediating
Actions Taken:
H&M trains its own staff but will sometimes uses external trainers from organizations such as [monitoring
organizations and CSOs]. H&M’s internal training focuses on: (1) introduction to H&M CoC and the organization;
(2) internal guidelines and work tools (Full Audit Program or FAP, Management Action Plan or MAP, Follow Up
Program or FUP); (3) ILO core standards; (4) auditing techniques, including report writing and meetings with
suppliers and the production department; and (5) a one-hour training session with each department in the
production office (such as lab, merchandising, shipping, etc.).
The Global Environment, Health and Safety Coordinator is in process of training the auditors on a global basis.
The Fabric and Fiber Coordinator is running an evaluation project of fabric mills in China that will guide H&M on
how to select fabric suppliers. Moreover, auditors will be trained on the tool developed from the project.
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Verification by FLA:
The FLA confirms that H&M’s internal compliance staff has received training, particularly with regard to auditing.
FLA staff observed a training on environmental issues in Guangzhou. The FLA found the participation of the
audience to be very good and found the course to be well organized and structured. The trainer, from H&M’s
headquarters, also had an excellent knowledge of MSDS and was able to help the participants understand the
differences between toxic and harmful substances.
2.3 Updates that training at regular intervals
Actions Taken:
Each year H&M gives its auditors updated training in relevant fields. In 2007, the following internal trainings
were given to the auditors in China: (1) how to use the new IT system; (2) performance of follow-up audit; and
(3) environmental training with focus on metal plating. The China team also received the following external
trainings in 2007: (1) Media Training (by Swedish external consultant); (2) “Good CSR Auditors” training provided
by [monitoring organization]; (3) Training The Trainer, Productivity and Reducing Overtime, Labor Relations
Management, Workplace Environment, Health and Safety Management (EHSM); these trainings were given by
[consulting organization] for H&M suppliers, but some H&M auditors also participated; (4) Workers Engagement
and Social Responsibility in China, provided by [monitoring organization]; (5) update on new labor law; and (6)
session with [CSO] on consequences of the new labor law.
H&M has also identified areas or subjects for training and for follow-up and continuous training. For example,
during weekly meetings with the audit teams, the CoC Managers use the opportunity to assess the impact of the
various trainings and how the trainings can be applied to auditing or remediation. These meetings are also used
to identify different training needs and areas for further training.
Verification by FLA:
In the future, FLA staff recommends additional training on: (1) the FLA and FLA processes; (2) labor law and
international labor standards; (3) grievance procedures; (4) labor relations; and (5) additional training for auditors
on handling of chemicals and remediation. Trainings that have taken place – persons receiving training, subject
matter, feedback from training recipients, next steps – are currently tracked through H&M’s IT system.
3. Provides employees with confidential reporting channels
3.1 Encourages the establishment of grievance procedures at supplier facilities
Actions Taken:
H&M uses the Management Action Plan tool to investigate issues such as worker-management communication
and grievance systems in greater detail. The tool serves to examine what routines are in place, and how they
function. The results are discussed with the supplier, and the supplier takes responsibility for preparing a
remediation plan.
H&M has also started to train its auditors in China on grievance systems and procedures based on initial feedback
from the FLA. They view this as one of the root causes of noncompliance throughout the supply chain and have
started to train staff by sending them to the FLA Grievance Procedure trainings.
H&M also formed a working group of 3 CoC team members to develop a grievance system model and devise a
method to introduce it to the factories. While the model will continue to be developed in 2009, the first phase
identified systems and procedures, along with timelines and goals. During the next phase they will work out
practical ways of implementing these projects and thereafter put these ideas into effect.
Verification by FLA:
During the audits observed by FLA staff, the auditors demonstrated a very good ability to assess unfair
disciplinary practices and convey the principles of a fair disciplinary practice procedure during the closing
meeting with management. During the audit observed in Guangzhou, the FLA notes that the auditor did not
communicate to the factory management about the need to establish a grievance procedure and what such a
procedure might look like. However, during a subsequent audit observed in Shanghai, the auditor demonstrated
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very good knowledge of grievance procedures and was able to advise the factory on missing elements in a
functional grievance process as well as on practical solutions to establish a system. The FLA can verify that
H&M arranged for a training course for its compliance officers focused on grievance procedures and they also
participated in FLA trainings on Grievance Procedures.
3.2Provides channels for Company employees and workers at those facilities to contact the Company
directly and confidentially if warranted
Actions Taken:
Workers that are interviewed in connection with factory audits receive H&M business cards with the number to
the internal H&M workers’ hotline, a direct and confidential line to H&M auditors. This system is functioning in
Shanghai and will be operational in Guangzhou soon. Workers can also contact the CSR department via their
website. Finally, auditors hand out business cards with contact information so that workers can raise issues to
them. Mostly, H&M takes a position to support the factory in the development of functional grievance procedures
and internal complaints mechanisms.
Verification by FLA:
The IEMs reveal that the confidential noncompliance reporting mechanism has limitations. Out of 42 IEMs, 35
noted that no channel existed or workers were not aware of it.
During a factory audit observed by FLA staff, the H&M monitor passed out her business card to each worker
interviewed. H&M is considering developing a hotline for workers but it is not yet functional. The FLA encourages
H&M to continue development of the hotline.
The company received 10 concerns/complaints from workers from July to December 2007, most of them
focusing on unpaid wages and unfair dismissals. H&M stated that it is discussing options to strengthen worker
communication channels, including displaying posters with contact details so that all workers have access and
exploring the possibility of working with other external service providers so that all workers have access to a
channel for contacting H&M. The FLA encourages H&M’s efforts in this area.
Based on the Guangzhou audit observed by the FLA, the FLA recommended that H&M track the grievances
received and their disposition more closely and provide staff with more training on the handling of grievances
and complaints to ensure they are addressed promptly and consistently. At a later visit to the Shanghai office,
H&M had already implemented a sound system of documenting all grievances. H&M offered to meet each worker
outside of the workplace to understand the concerns if the worker is willing. The FLA encourages this practice be
applied to all offices.
3.3 Ensures the channel is secure, so workers are not punished or prejudiced for using it
Actions Taken:
H&M plans to create a worker hotline and provides auditors’ number to workers during worker interviews.
Workers can also contact H&M directly via their website. Both of these channels allow workers to report concerns
confidentially.
Verification by FLA:
H&M plans to create a hotline for all workers and is in discussion with local NGOs for staffing it. FLA staff
observed H&M auditors giving out business cards during worker interviews. The H&M auditor also verbally
conveyed H&M’s non-retaliation policy to the workers. The company has started to offer to meet workers offsite to collect more detailed information about any complaints and to protect the workers from retaliation. The
FLA encourages the off-site worker interviews in order to get a better picture of worker concerns with regards to
wages and other more elusive issues.
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4. Conducts internal monitoring
4.1 Internally monitors an appropriate sampling of suppliers to assess compliance, which includes worker
interviews, records review, occupational safety and health review, practices of suppliers in relation to the
FLA Workplace Standards
Actions Taken:
All potential new factories have to pass an H&M CoC Audit prior to receiving the first order. As of the end of
2007, H&M had sourced from 527 facilities in China, all internally audited by FAP/FUP system described further
below. Factory auditing levels are based on risk criteria including: (1) country risk; (2) size of factory; and (3)
business significance to H&M.
The audits comprise the following elements: (1) worker interviews; (2) data collection about production capacity;
(3) factory walk through (including effluent treatment plans and dormitories); (4) document review; and (5)
management interviews. All documentation reviewed is cross-referenced and information is corroborated with
interviews and data collected through the factory walk through.
H&M has also created an internal CoC working group to look at how worker interviews are conducted and if there
are more effective techniques.
Verification by FLA:
FLA randomly selected a sample of H&M factories and found that they had received regular audits and followup visits. All audits are generally announced, although unannounced audits may also be conducted. All first tier
production units are covered by internal audits.
H&M has also recently started to categorize its suppliers/units into four groups (key, important, profile and new
factories) and is developing different CoC strategies with the factories. During the Shanghai visit, FLA staff
confirmed that H&M is using this approach to prioritize factory focus and auditing. With key suppliers, H&M
focuses on quality remediation and system improvement and announced visits focused on building transparency
as opposed to a traditional audit. With the “Important Group” and “Profile Group,” traditional auditing is still the
main means of CoC monitoring.
The FLA observed two internal audits conducted by H&M auditors and confirmed that standard audit
procedures were followed. The monitor at a factory in Guangzhou handled the audit very well, both in dealing
with management and workers as well as with regard to health and safety and document review. The monitor
displayed very good analytical skills in identifying ways to corroborate noncompliances and was very skilled in
interviewing workers and attempting to safeguard their interests. More detailed feedback about the audit has
been provided to the company in a separate document. At a factory in Shanghai, the monitoring team was very
strong, comprising a Chinese-speaking Swedish national and an English-speaking Chinese national; the two
monitors had complementary cross-cultural communication skills and practical knowledge about factories that
resulted in a constructive discussion with factory management.
4.2 Collects, verifies and quantifies compliance with workplace standards
Actions Taken:
H&M has created a comprehensive audit instrument to evaluate compliance conditions in its supplier factories.
Beside each question on the audit instrument is a symbol that indicates the appropriate method for verification.
After the audit, the auditor will collect the audit findings and verify them against the H&M Code requirements. The
noncompliance findings are submitted into the H&M audit finding summary document and communicated to the
supplier.
Verification by FLA:
A copy of the FAP audit instrument is on file with the FLA. The FLA recommends that additional questions
verifying training on worker rights and on company obligations, aligned with the H&M CoC, be added to the audit
instrument.
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4.3 Analyzes the monitoring results and implements remediation plans to address noncompliance issues
Actions Taken:
Upon receiving the audit findings summary, H&M’s auditors discuss compliance results among themselves and
then with the supplier. The supplier takes responsibility for determining suitable methods for remediation. The
suppliers are requested to respond with their own corrective action plan within one week. If their remediation
plan is insufficient, H&M will initiate a dialogue with the supplier on how to best remediate the noncompliance in a
sustainable manner.
Verification by FLA:
The FLA reviewed monitoring report summaries and remediation plans provided to the factories. FLA staff also
observed the closing meeting during two factory audits. The FLA recommends that auditors explain findings
to the factory in a more detailed fashion or provide a more detailed written summary of the analysis so that the
noncompliance can be remediated sustainably. FLA staff has conveyed this feedback to H&M and H&M is aware
of the need to strike a balance between summary reports that are too dense and reports that are too general.
4.4 Tracks the progress of remediation
Actions Taken:
Between FAP audits, H&M conducts follow-up audits, at least once a year, or even more often. The frequency or
need for follow-up visits is based on the kind of noncompliances identified. Follow-up visits may be announced or
unannounced depending on the types of noncompliances raised in the original audit.
H&M tracks the remediation process in connection with the follow-up visit. During such visits, H&M auditors seek
to determine whether the activities undertaken by the supplier will contribute to resolving the problem at hand.
During the first follow-up visit, H&M will discuss the remediation plan with the supplier. During the second followup visit, the H&M auditors will check on whether there are improvements and how the remediation is progressing,
in order to assess whether the remediation plan has produced the desired outcome. After approximately 3 followup visits, H&M will conduct a new full audit.
Verification by FLA:
FLA staff confirmed that follow up visits to track the progress of remediation are conducted regularly, depending
on the issues raised and the importance of the supplier.
5. Remediates in a timely manner
5.1 Upon receiving the internal and independent external monitoring reports, contacts the supplier
concerned (within a reasonable timeframe) to agree to a remediation plan that addresses all compliance
issues identified by the monitor
Actions Taken:
Upon receiving the IEM, the CoC Manager will contact the supplier for a meeting to discuss the audit findings and
suitable remediation. After that, H&M will formulate a remediation plan, and the factory will formulate a response
that H&M will add to the tracking chart. During internal audits, H&M will ask the factory to develop a remediation
plan on their own and will enter into dialogue with the factory about the plan only if it is insufficient.
Verification by FLA:
H&M does not always discuss remediation plans with the factory. Given that the factory reports are often very
general, entering into a dialogue with the factory may result in more sustainable remediation and allow H&M
auditors to identify the root causes of the noncompliances.
5.2 Implements a remediation plan regarding the noncompliances and the actions taken to prevent the
recurrence of such noncompliances
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Actions Taken:
As described above, H&M discusses the remediation during the first visit, checks on progress and improvements
during the second visit, and uses the third visit to assess the sustainability of the remediation. H&M tracks the
remediation process in connection with follow-up visits. During such visits, the auditors aim to determine whether
the activities undertaken by the supplier will contribute to resolving the problem at hand.
Verification by FLA:
H&M seeks to develop sustainable remediation plans where possible. Remediation plans for FLA IEMs are
posted on the website. H&M has improved the quality of its remediation plans and is seeking to implement
more sustainable and preventative remediation strategies. In one instance, H&M was very responsive to findings
regarding discrimination of workers with Hepatitis-B and took action across factories. H&M also followed up
regularly on a noncompliance regarding an under-age worker to ensure that the issue does not recur. H&M
has worked with factories to develop a child labor prevention procedure in their hiring practices and Human
Resources systems.
5.3 Within sixty (60) days, supplies the FLA with the remediation plan citing all progress made and a
timeline for outstanding items
Actions Taken:
H&M has aimed to meet time guidelines for submitting remediation plans to the FLA but has sometimes fallen
short of the mark. H&M aims to strengthen internal organization in order to improve the speed and quality of
remediation.
Verification by FLA:
H&M experienced delayed submission of their tracking charts in 2006 and 2007. However, in 2008 H&M recruited
a coordinator in Hong Kong to oversee FLA work and the tracking charts were promptly submitted. During the
FLA’s visit to the Shanghai office, the coordinator gave a presentation to the FLA on how the IEM process will be
handled. Tracking charts for all 42 IEMs conducted at H&M factories in 2006-2007 have been completed.
5.4 Confirms the completion of remediation
Actions Taken:
All remediation is confirmed through a follow-up inspection or series of follow-up visits. The duration of time
between an initial audit and the various follow-up visits may vary depending on the issues found during the initial
audit.
Verification by FLA:
The FLA recommends that H&M develop a better system to track open noncompliances in cases where there is
no Management Action Plan or no progress being made. Based on the remediaton plans for some IEMs, it is not
clear if the remediation of serious noncompliances has been completed (even in cases where H&M has terminated
the factory relationship), e.g., in the case of non-payment or under-payment of wages, it is not documented if the
remediation is complete and workers have received back wages.
5.5 Conditions future business with contractors and suppliers upon compliance standards
Actions Taken:
H&M seeks to condition future business with suppliers upon compliance standards. The company conducts a preproduction assessment of any new supplier and if the factory does not meet the H&M minimum requirement, the
orders are not placed.
If noncompliances occur in a factory that is producing for H&M, H&M auditors will meet with the factory to
identify the root-causes of the noncompliances and may temporarily cease orders until the minimum standards
are met. If a factory producing for H&M meets only the minimum requirements without achieving compliance with
all code elements, the factory will have to produce an action plan for improvement. If there is no improvement,
the orders may be decreased. Similarly, if a factory makes progress, more orders may be placed with the factory.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
If H&M finds repeated cases of serious noncompliance, such as falsified documents or undeclared production
units, H&M may permanently reject the factory, meaning that it can never produce for H&M again. H&M also has
defined zero-tolerance issues such as child labor, unauthorized subcontracting, and falsified documents. If such
a noncompliance is found at the factory level, the factory will receive a warning and is expected to remediate
the issue in a preventative and sustainable manner. In the case of child labor, the factory relationship will be
terminated if the noncompliance recurs. Other termination decisions are taken on a case-by-case basis but
if systematic violations of H&M standards occur, H&M may work with its production units to end production
permanently.
Verification by FLA:
FLA staff has confirmed, and has retained sample documentation to support, that H&M’s current system of
sourcing is based on the following steps:
1.
The CoC auditor, together with sourcing staff, visits the potential supplier at an early stage of communication,
whereby, in addition to issues such as quality, capacity, prices, etc., CoC compliance is also pre-assessed.
2. A pre-audit meeting takes place between the supplier and CoC management, during which H&M’s CoC,
among other documents, is submitted and signatures received.
3. An initial audit FAP, of at least 2 man-days, is conducted. If the factory is rejected, it may be reconsidered
later if it can demonstrate improvement.
The FLA verified the warning system H&M has in place. H&M staff discussed some CoC zero-tolerance areas: (1)
child labor; (2) undeclared production units; and (3) faked documents, which are well documented in the FAP
guidelines. These issues are not in reality zero-tolerance as they activate the warning system and the factory is
given an opportunity to remediate them. During the IEM process, the FLA has witnessed the warning system in
operation.
During the visit to the Shanghai office, FLA staff learned that CoC is not fully integrated into considerations
regarding factory exits. The FLA encourages H&M to integrate sourcing and CoC functions and recommends
that H&M develop a formal exit strategy along with its sourcing units to ensure that, at minimum, egregious
noncompliances are addressed prior to ending a business relationship. Documentation of H&M’s efforts to
remediate noncompliances should be maintained. H&M has stated that the CoC department is taking steps to
develop an exit strategy working closely with their sourcing counterpart.
6.Takes all steps necessary to prevent persistent forms of noncompliance
6.1 Analyzes compliance information to identify persistent and/or serious forms of noncompliance
Actions Taken:
H&M uses the CoC web-based system to get a picture of the most prevalent and most serious code violations in
the different production countries. This information helps the CoC department to direct their efforts towards the
most critical issues.
Verification by FLA:
H&M provided the FLA with a sample analysis of their reports. Critical issues being addressed currently are child
labor, faked documents, and undeclared subcontractors. The FLA also reviewed audit findings showing trends that
demonstrate whether remediation is progressing or not based on the various follow-up interventions the company
is making.
6.2 Establishes and implements programs designed to prevent the major forms of such noncompliance
Actions Taken:
H&M seeks to implement preventative remediation plans in response to serious noncompliances.
H&M works to develop internal trainings and identify external training directed towards the most important
compliance issues and direct these to suppliers with such noncompliances. H&M has arranged for supplier
trainings on increasing productivity and reducing overtime, labor relations, health and safety, and workplace
environment.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
Verification by FLA:
The FLA confirms that H&M has sought to implement preventative remediation plans in many instances such
as the actions taken in response to under-age workers found in the IEMs and hepatitis discrimination issues. In
some remediation plans, however, H&M’s approach does not address the root causes of the noncompliances. The
FLA recommends that H&M investigate the root causes of the noncompliance and target training programs and
remediation plans towards prevention.
H&M demonstrated through interviews at the Shanghai office and observations of the audits, that staff does not
have a good strategy for how to remediate or respond to freedom of association issues in China. They have asked
for FLA guidance on how to address these issues.
6.3 Takes steps to prevent recurrence in other Applicable Facilities where such noncompliance may occur
Actions Taken:
H&M works to develop internal trainings and identify external training on the most important compliance issues
and directs these to suppliers where such noncompliances are likely to occur.
Verification by FLA:
H&M has enrolled 1 factory in FLA 3.0, a sustainable compliance initiative that is open mainly to companies with
accredited compliance programs. H&M also applied the child labor prevention procedures across all factories as a
preventative measure. H&M should emphasize an analysis of root causes as the basis of remediation strategies.
7. Submits to Independent External Monitoring
7.1Provides the FLA with an accurate, up-to-date factory list, factory profile, access letters, etc.
Actions Taken:
H&M provides FLA with quarterly updates of its factory base. In between quarterly updates H&M informs the FLA
if a factory ceases to produce for them. The FLA is granted access to H&M’s data system in order to find contact
details and addresses of the factories. H&M provides FLA documentation as required.
Verification by FLA:
By agreement between the FLA and H&M, the latter does not provide complete factory information to the FLA.
H&M provides the FLA with encoded information regarding the name of factories and their location. For the
factories subject to IEMs, FLA staff visits the Beijing or Shanghai office to collect complete information from the
master lists. H&M provides access letters and other IEM documents promptly.
7.2 Ensures that the suppliers selected for IEMs cooperate with the FLA monitors
Actions Taken:
H&M informed all of its suppliers of its affiliation with the FLA and are now sending a reminder on an annual basis.
Verification by FLA:
The FLA can verify that H&M suppliers cooperate with IEM monitors.
7.3 Cooperates with FLA requests for information, clarification and follow-up in the IEM process
Actions Taken:
H&M cooperates with FLA requests for information and follow-up during the FLA process.
Verification by FLA:
H&M has promptly responded to the FLA with regard to information requests and other requests for clarification.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
8. Collects and manages compliance information
8.1 Maintains a database
Actions Taken:
H&M has recently developed and implemented a new and more sophisticated CoC web-based system which is
used by the CoC Department. It functions as a tool for planning audits, and as a database collecting and updating
data for each supplier and their subcontractors (including audit results, follow-up, and communication). It also
enables H&M staff to gather statistics and analyze audit data in order to collect more quantitative and qualitative
information about noncompliances. The CoC system communicates with the order placement system and other
relevant production related systems, in order to enable the CoC department to lock production units who do not
meet the CoC standards for order placement.
Verification by FLA:
According to H&M staff, the new database is still not fully operational. As a result, the older supplier database
management system is still being run alongside the new CoC database, and local staff has to implement updates
manually when there are changes.
8.2Generates up-to-date lists of its suppliers when required
Actions Taken:
All information regarding the suppliers and their subcontractors are entered into the company database.
Verification by FLA:
The new database for suppliers is well-designed and, once it is fully operational, will be able to generate up-todate lists of suppliers. The older database is being used in the interim to fulfill FLA requirements.
8.3 Analyzes compliance findings
Actions Taken:
H&M uses the CoC system to analyze recurring and serious code violations in the different production countries.
Verification by FLA:
FLA staff reviewed compliance findings with H&M staff. In 2007, for example, analysis of monitoring activities
in China revealed that 25% of the potential new suppliers were rejected at initial FAP, and 77% of the ones that
had undergone the first FUP upgraded to temporary status. All of the 5 FAP/FUP audits where under-age
workers (10 such workers) were found were in Hong Kong/Guangzhou jurisdiction. There were no cases where
egregious issues were found in follow-up audits that could have resulted in permanent rejection of the suppliers.
The FLA also has on file samples of other factory analysis H&M has done to measure the progress and impact of
remediation taken at the factory level.
8.4 Reports to the FLA on those activities
Actions Taken:
H&M reports on activities upon request from FLA and in the annual report.
Verification by FLA:
The FLA has on file samples of H&M reports analyzing compliance findings.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
9. Consults with civil society
9.1 Maintains links to organizations of civil society involved in labor rights and utilizes, where companies
deem necessary, such local institutions to facilitate communication with Company employees and
employees of contractors and suppliers in the reporting of noncompliance with the workplace standards
Actions Taken:
H&M has continuous dialogue with other brands, organizations and service providers in production markets.
Verification by FLA:
The Global Project Coordinator manages the programs related to CSO collaboration. H&M is in the process of
creating local Project Coordinator positions in the three operational regions, including East Asia. Among others,
H&M is discussing with [consulting organization] and [CSO] regarding worker trainings and communication of
grievances. The FLA recommends H&M staff in China also engage more regularly with local CSOs in Hong Kong
and in China.
H&M is actively involved in several programs run by [consulting organization] and by [consulting organization]
that include CSOs, but direct contacts with CSOs in China are relatively limited. H&M has not specifically
organized stakeholder engagement events in China, although there is a plan to create a “Monitoring Matrix” by
bringing local staff and Chinese NGOs together to jointly develop approaches to compliance issues.
9.2 Consults knowledgeable local sources as part of its monitoring activities
Actions Taken:
H&M has continuous dialogue with other brands, organizations and service providers in production markets.
Verification by FLA:
H&M has extensive dialogue and communications with CSOs on a global scale. For example, H&M has engaged
with CSOs in Europe at events organized by various [CSOs],. The FLA has participated in several multistakeholder dialogue activities at which H&M has also participated.
9.3 Consults periodically with the legally constituted unions representing employees at the worksite
regarding the monitoring process and utilize the input of such unions where appropriate
Actions Taken:
During 2007 H&M participated in [CSO] meeting on consequences of the new labor law.
Verification by FLA:
FLA staff reviewed documentation showing that H&M staff met with the [CSO] regarding implications of the
newly issued Labor Contract Law.
9.4 Assures the implementation of monitoring is consistent with applicable collective bargaining agreements
Actions Taken:
The audit instrument requires that monitors check whether or not there is a collective bargaining agreement in
place and is being implemented.
Verification by FLA:
FLA has verified that the audit instrument requires monitors to check on CBAs.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
10. Pays dues and meets its other procedural requirements
10.1Pays annual dues
Actions Taken:
H&M has paid its annual dues to the FLA.
Verification by FLA:
H&M is up-to-date on its annual dues. Documentation is available at the FLA offices.
10.2Pays IEM administrative and monitoring fees
Actions Taken:
H&M is up-to–date on all relevant fees to the FLA.
Verification by FLA:
H&M has paid all relevant fees to the FLA. Documentation is available at the FLA offices.
10.3Signs and honors required FLA contracts
Actions Taken:
H&M has signed and honored required FLA contracts.
Verification by FLA:
The FLA confirms that H&M has signed and honored required FLA contracts.
10.4Submits factory lists, a standardized annual report and other information in complete form and on time
Actions Taken:
H&M submits factory lists, annual reports and all requested information in a complete and timely manner.
Verification by FLA:
H&M submits the factory list without the name and address of factories and other information and instead uses
a coding system to identify factories. This arrangement was agreed between the FLA and H&M at the time of
affiliation. H&M’s Shanghai Office is trying to improve accuracy of the address of the suppliers and production
units in the database by adding a section with the Chinese address and contact information as well as a map. It is
anticipated that this effort will greatly improve the quality of its factories address in China in 2009 and beyond.
.
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H&M HENNES & MAURITZ AB: ASSESSMENT FOR ACCREDITATION
Conclusion
Accreditation of H&M’s compliance program in China should not be interpreted as a guarantee
against issues and risks in the supply chain. Rather, accreditation indicates that the company
has the systems in place to proactively identify and remediate those risks. Accreditation is
not granted automatically, and is only renewed every three years following a satisfactory FLA
evaluation of labor compliance systems and activities during the timeframe. FLA will continue to
conduct standard due diligence activities on H&M. To check an affiliate’s accreditation status, visit
www.fairlabor.org/accreditation.
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