INTEGRATION OF DUE DILIGENCE IN YONGO EUROPE

Sustainability must be embedded in our culture and our daily decision-making, at all levels of the company, in order to achieve the goals Yongo Europe has set for the present, and for the future.

Yongo Europe has established efficient processes, clear responsibilities and a direct reporting line to implement sustainability in the organization and along the supply chain. These are the measures to ensure the implementation of sustainability holistically and to reach every business level of the company.

Active due diligence is practised when sourcing new factories by their agents or purchase managers. A Producer Self Assesment Sheet is provided and requested for counter signature. Together with proof of compliance status (Amfori/BSCI, Sedex or other international standards) the new factory will be visited by the purchase/compliance manager during frequent travels. When sitting together and talking face-to-face with the Managing Director and compliance manager Yongo Europe judges actual performance on several areas of compliance and starts up a Corrective Action Plan CAP) on those non-compliance issues or low-rated performance areas (according Amfori/BSCI audit report).

ASSESMENT AND PRIORITIZATION OF BIGGEST RISKS IN THE SUPPLY CHAIN

Risk management 

 

Due diligence is a process to identify risks and manage actual and potential adverse impacts in Yongo Europe’s own operations and supply chains. Through this method Yongo Europe tries to prevent, diminish and eliminate risks in the supply chain. When Yongo Europe identifies negative impacts in the supply chain on both people and planet, Yongo Europe takes responsibility to mitigate and account for them. 

 

Due diligence not only is critical to compliance with labour or textile standards – it goes beyond the limitations of those standards. Due diligence is an on-going process that should be carried out for every order, production location, material and process. This is important because risks or harm may change over time. Due diligence is flexible and based on prioritisation, required of all enterprises, big or small, and includes looking at purchasing practices as well. Yongo Europe identifies and priorities 3 potential risks in their production countries Bangladesh, China, Vietnam and Indonesia. 

 

1. Occupational health and safety 

2. Raw materials 

3. Living wage 

 

1.Occupational health and safety 

 

According to ILO Convention 155 a safe and hygienic working environment shall be provided, and best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the industry and of any specific hazards. Appropriate attention shall be paid to occupational hazards specific to this branch of the industry and assure that a safe and hygienic work environment is provided for. Effective regulations shall be implemented to prevent accidents and minimise health risks as much as possible. Physical abuse, threats of physical abuse, unusual punishments or discipline, sexual and other harassment, and intimidation by the employer are strictly prohibited. Since 1973, Yongo Europe imports garments and textile products from Asian countries. From the start, management and purchasing have played an active role in the selection of and inspection of production locations. Since production has been shifted gradually to high-risk countries like Bangladesh, our purchase policy has been integrated in our general sustainability policy and, in co-operation with our major buyers, selection procedure of production locations based on social compliance has been implemented and developed. The Rana-plaza disaster in 2013 made Yongo Europe realize that compliance processes should be intensified and an international sustainable platform was required to co-operate with partners in the chain. Membership of BSCI (today AMFORI) in 2014 was a logical follow-up of the compliance process which Yongo Europe initially practised. The next step was the membership of The Bangladesh Accord, an independent agreement designed to make all garment factories safe workplaces. 

                                                    

Yongo Europe commits to the continuation of the Transition Accord in Bangladesh. In 2018 Yongo Europe signed the Bangladesh Transition Accord, with the aim to further strengthen the building and fire safety situation in Bangladesh. In the past 6 years the Bangladesh garment sector has much improved in building and fire safety, but also millions of Bangladesh workers have been trained on their rights to safe work. Yongo Europe appreciates the joint work of the signatories of the Bangladesh Accord and fully supports the aim to continue the work. Yongo Europe stands behind their new commitment under the Transition Accord to finalize the work of the first Accord, but also fully supports the Remediation Coordination Cell (RCC), a body from the Government of Bangladesh that will focus on managing the remediation process for garment factories, to be in a state to professionally take over from the Accord. Yongo Europe does not want to leave while a safe and responsible transfer to a competent national authority is not safeguarded. Yongo Europe is certainly aware of the hurdles that all parties involved have to take, as the negotiations regarding the graduate transfer of responsibilities back to the Bangladesh Government are ongoing. Yongo Europe has confidence in the work of the Accord Steering Committee, the Government of Bangladesh, the ILO and the good will of all concerned parties in their alignment, and hopes the negotiations will lead to a solution for the safety of workers. However, Yongo Europe realizes that there is still the possibility that there will be no extension and the Accord may not be allowed to further operate in the country. In the case of an discontinuation of the Transition Accord, the parties involved will have to re-consider the steps they will take. Yongo Europe would be prepared to join these efforts . As a brand, Yongo Europe hopes the hand-over of the work of the Accord to the Bengali Government will be successful. Yongo Europe confirms hereby that they continue to participate in the Transition Accord with the aim to complete the next term of 3 years.




2.Raw Materials The Material List of the Agreement on sustainable Garment and Textiles (AGT) gains insight of the raw materials and mainly the high percentage of cotton in the production process. It reaches over 80% in our annual report of metric tons. With the knowledge and expertise of the long tradition of importing garments Yongo Europe also realizes the big impact of cotton on the environment and on human beings. There is a big negative effect and impact of conventional cotton due to the extensive use of pesticides, water and land. 

For the next 2-3 years Yongo Europe has set a goal in their Action Plan 2018-2019 to have 5% of the product range made out of organic cotton. Further investigation is required which ‘label’ is suitable for our market as many certifications like GOTS, BCI and OCS are usuable. The question is whether the customer/consumer is willing to pay a higher price for clothes made of non-conventional cotton; Yongo Europe considers this a major challenge in a price-aggressive market. 



3.Living wage According to ILO Conventions 12, 26, 101, 102 and 131 wages and benefits paid for a standard working week, overtime hours and overtime differentials shall meet or exceed legal minimums and/or industry standards. Illegal, unauthorised or disciplinary deductions from wages shall not be made. Supplier companies are further encouraged to provide their employees with adequate compensation in situations in which the legal minimum wage and/or industry standards do not cover living expenses. A living wage should be earned in a standard working week (no more than 48 hours) and allow a garment worker to be able to buy food for him/herself and family, pay the rent, pay for healthcare, clothing, transportation and education and have a small amount of savings for when something unexpected happens. In this context, living wage has become a major topic over the last years and Yongo Europe has integrated this issue in her compliance strategy. Living wage is a tough subject that won’t be easy to tackle and be solved in an easy and satisfactory way at short pace. More knowledge of this issue has been collected by Yongo Europe by joining the AGT workshops as well as consultation of stakeholders in this field. An important initiative of AGT members to support the raising of the minimum wage in the Bangladeshi garment sector has (along others) resulted in an increase of 50% effective last December 2018 (from 5300 takka to 8000 takka = $95 per month). According to Asia Floor Wage the living wage standard in Bangladesh is 37661 takka per month (2017). Taken into account the complexity of the issue with political, cultural and economic factors involved Yongo Europe has set a long-term strategy on this particular goal in their Action Plan 2018-2019. 

PREVENTING OR REDUCING NEGATIVE IMPACT IN THE SUPPLY CHAIN

As a buying company of garments and sourcing from high-risk countries Yongo Europe is aware of the risks in the supply chain. In order to manage the risks, moreover prevent the risks that are caused by the business, Yongo Europe needs to have insight in all potential risks. Yongo Europe therefore asks all suppliers to notify of any risk of adverse impacts relating to human rights, labour rights, animal welfare and environmental hazards during the manufacturing, transportation and distribution of our products. By addressing any potential risks in the supply chain, in collaboration Yongo Europe can decide which actions are required to reduce these risks.


Commitment

We are committed to support our suppliers to meet the required labour rights standards:
• Continuously working to improve our policies and practice to enable our suppliers to be able to meet their commitments as outlined in this code of conduct.
• Treating suppliers with respect and consideration in all our dealings and communications.
• Communicating clearly, promptly and accurately on all issues concerning orders.
• Never negotiating a price that is below the cost of production, as this will likely impact on the wages and working conditions of workers.
• Staying with our current supplier if a higher price will ensure decent wages and working conditions for workers, rather than moving our business elsewhere purely on the basis of price.
• Placing orders with lead times that do not trigger excessive working hours or sub-contracting.
• Refraining from changing orders repeatedly and with short notice. If changes are unavoidable, amending target delivery times accordingly.
• Providing material and practical support to our suppliers in striving to meet their obligations under this code of conduct.
• Sharing the cost of implementing and monitoring improvements in working conditions.
• Taking pay and working conditions of workers into consideration when reviewing our business relationship, rather than ending a business relationship purely on the grounds of price or quality

Together, we should:
• Carry out risk-based due diligence to identify, prevent and mitigate actual and potential adverse impacts and account for how these impacts are addressed.
• Avoid causing or contributing to adverse impacts on matters covered by the OECD Guidelines, through our own activities, and address such impacts when they occur.
• Seek to prevent or mitigate an adverse impact where we have not contributed to that impact, when the impact is nevertheless directly linked to our operations, products or services by a business relationship.
• Strive for best-practice performance throughout all activities involving our operations, products and services

GRIEVANCE MECHANISM

A grievance can be defined as any concern, unhappiness or discontent that a worker might have in the workplace. Grievances can be related to:
• Infrastructure (e.g. the working room does not have sufficient lighting or ventilation; the space assigned to the worker is not sufficient to safely conduct the work)
• Personal relations (e.g. a supervisor has used physical or verbal harassment; there is a conflict between co-workers)
• Contractual rights (e.g. payment is systematically delayed; there are illegal deductions; overtime is not paid in premium rate or it is paid in a lower amount than initially agreed)
• Human and labour rights (e.g. a worker has suffered discrimination based on gender; religion; place of origin; a worker has been punished because of attending a trade union meeting; the water available during working time is not drinkable)
• Others: customary rights (e.g. requesting time to pray or to participate in community activities)

Yongo Europe commits to follow the UN Guiding Principles on Business and Human Rights. In order to meet the responsibility to respect the human rights Yongo Europe institutes a clear policy commitment as stated above.

The implementation and effectiveness of the grievance mechanism is part of the Amfori/BSCI audit scope. Yongo Europe has recently introduced a Producer Self Assesment sheet where, among others, producers register how workers and their representatives are involved in workplace issues and how information will be exchanged among management and workers.

Agents and business partners of Yongo Europe have obligation to notify and address all kind of abusive situations; they are the eyes and ears in the field.

INVOLVEMENT OF STAKEHOLDERS

Stakeholder consultation is one of the major instruments to bring due diligence into practise; Yongo Europe acknowledges the importance of the stakeholders’ contribution in signalizing risks (at local production side) besides the audit reports or feedback from agents/local partners.

Yongo Europe has actively approached specialists and taken consultancy of CNV-International in a non-compliance issue with one of their RMG-producers. As reported in Action Plan 2018-2019, the social dialogue has been started up and step by step factory management tries to make improvements by training, participating in workshops and creating facilities for workers. Due diligence, an on-going process.

DUE DILIGENCE IN PRACTISE

Yongo Europe enters the fifth year of AGT process and in the past 4  years Yongo Europe has been working hard to implement the goals and level up the compliance strategy. What did Yongo Europe achieve so far:

• Compliance has become a topic of conversation during our meetings with agents and producers and is not a forbidden word anymore
• Signatory of the Bangladesh Accord and active support of the continuation of the Accord, see link.
• Participation in workshops Due Diligence, Transparancy Risk Management, Living Wage among others
• Publication of Producers Location List
• Nomination of one of our China dying mills to join the “Dye House Improvement Program”
• Addressing a non-compliance issue of one of our RMG producers consulting with our stakeholders
• Active monitoring of auditing processes, taking RSP, analyses of scores in BSCI/Amfori reports on single Performance Area (PA) and discussing with agents/compliance managers how to realize improvements
• Procedure of selection/nomination of new suppliers has been sharpened and is judged on state of compliance/certification as well as outcome of Producer Assessment Sheet
• First mapping/evaluation of Tier-2/3 suppliers
• Inventory of organic cotton, BCI, GOTS and Oekotex suppliers
• Updated our website on CSR policy.
• Introduction of Clevercare logo in our care labels
• Reduction of packing materials, mainly plastics
• Renewal of our Supplier Manual



UPDATE NOVEMBER 2020



Major steps has been made forward in the process of due diligence. Based on SMART-actions taken on themes as stated above Yongo Europe is pleased to communicate on proven successes:
• “Dye House Improvement Program” in one of our China mills, an update of last June report shows significant improvement in several areas mainly in ‘energy and water saving’;
Yongo Europe nominated this mill as priviliged supplier and committed to dye all their solid fabrics in this mill
• Subsequently, Yongo Europe has applied for participation in a multi-stakeholder initiative from Solidaridad to start up a similar project in Bangladesh in partnership with other AGT-members
• After finalizing an inventory on sustainable materials Yongo Europe has become member of BCI, the Better Cotton Initiative.

BCI exists to make global cotton production better for the people who produce it, better for the environment it grows in and better for the sector’s future. BCI works with a diverse range of stakeholders to promote measurable and continuing improvements for the environment, farming communities and the economies of cotton-producing areas. BCI aims to transform cotton production worldwide by developing better cotton as a sustainable mainstream commodity –link. Introduction of BCI cotton in Yongo program has strengthened the goal to have at least 25% of the product range made out of sustainable cotton in the years 2020-2022; Yongo Europe considers still a challenge to create a sustainable impact in a market where conditions are getting worse due to the most severe Covid-crisis since the global financial crisis of 2008; nevertheless promotion of BCI and appealing major customers on purchase practices have resulted in first BCCUs (Better Cotton Claim Units). 
• On the issue of living wage more knowledge has been gathered by participation of the Sustainable Apparel Forum in Dhaka and following, a Supplier Seminar of Fair Wear Foundation about Labor Minute Costing, sharing the opportunities and impediments towards a living wage module.
• In communication to representatives and agents Yongo Europe uses a "sales handout" with information about the new collection and related matters; in the sales handout for summer 2020 there is an additional CSR flyer In doing so, Yongo Europe informs sales agents of its CSR policy in a nutshell to remind them again of the path Yongo Europe started towards a sustainable purchasing policy under the AGT membership. Responses to this flyer were encouraging and prompted Yongo Europe to hold discussions about this and raise the sustainability theme with customers. At the same time, Yongo Europe see virtually no interest on the part of our customer (retailer) in our CSR policy and the sustainability of our products. If the topic is raised in a sales meeting, a frequently heard comment "as long as you don't get more expensive"; it is expected that as a result of the Covid-19 virus our customers will look even more critically at their budgets, will (significantly) reduce them and in the worst case will shift in their portfolio of suppliers, the risk that Yongo Europe will be removed from the portfolio is a real option, our customer will expect stable pricing policy from Yongo Europe and do not accept price increases.
• Following the participation of a webinar and survey on the Purchasing Practices Self Assessment (PPSA) tool in 2019, a certificate was provided to Yongo Europe by the Bündnis fur nachhaltige Textilien.
As a result, more insight was gained in the own purchasing practices compared to other participants, and positively showed that our scores corresponded to the 'average scores' or above those scores were in the 'highest scores'. From the results of the survey Yongo Europe obtained from the PPSA tool that purchasing policy is internally coordinated and styling, logistics and sales departments are well aware of company 'buying practices'.
• Production location list has been supplemented with links deeper in the chain. With this overview in hand Yongo Europe will make a risk assessment of all (sub)suppliers in the chain using the high-level assesment (DHIP Assesment Tool V01).
• The latest CAP issue reports of The Accord show a clear progress, putting the rating at 98% of factories in Bangladesh.
Frequent reporting takes place and the CAP remediations are mainly in the field of electricity, fire proof measures and technical facilities that are topic in various workshops and training sessions (video conferences) for the workers/managment representatives of the Safety Committee.
In the Covid-19 era, Yongo Europe takes responsibility for the health of the workforce in all factories and the measures taken through an inventory list. See further chapter “Corona impact and due diligence”.



CORONA IMPACT AND DUE DILIGENCE



In the earliest of 2020, the world has been confronted with a virus that had (and still has) an unprecedented impact on life here on Earth.
Factories have come to a standstill and the shopping landscape is radical changed; that has led to a critical situation for many brands in the clothing industry.
It is not yet clear what the consequences are for Yongo Europe, the first indication in presales for summer 21 collection shows that the budgets of customers have been reduced. At the moment, however, Yongo Europe can see that the government's subsidy and support for the companies affected by the Corona crisis prevented high number of bankrupcies. However, the effects on (medium)long term can’t be predicted for the clothing stores.
In order to take responsibility in due diligence policy, Yongo Europe approached agents at an early stage and communicated directly with the CEOs and CSR managers of factories . In the feedback it appeared that the impact of the Corona virus was quite noticeable and the manufacturers are faced with order cancellations or postponement. Securing running and outstanding winter orders was priority of Yongo Europe and the excellent relationships with producers meant that Yongo Europe could take full responsibility and order extension nor cancellation was topic.
In order to obtain a detailed overview of the Corona measures taken by our producers, we have used the Inventory list of The Bangladesh Accord. This list has been sent to all factories in Bangladesh and China.
The price pressure remains a huge obstacle to create sufficient financial room in the chain to source CSR-responsible. But the wider public in the Netherlands and Europe still seems to have an unrealistic view of what an "honest" textile product costs. Without the SER or the government moving in the competitive field, there must be opportunities to make the public aware that a low price for a product is being "paid" somewhere. A tricky message at a time of a mega-recession, but perhaps the "global economic reset" is just a time to break the "race to the bottom" and put it in a different perspective.


ANNUAL REPORT OF DUE DILLIGENCE PROCESS



Due to enormous Covid-19 crisis, Yongo Europe and all their partners have been challenged in the past year as never before. Yongo Europe is fully aware of its position in the chain and together with the parties in the Dutch Agreement on Sustainable Garments and Textiles it has been – and it will be- a major task to protect the income, health and employment of all workers, and support the employers to survive during the Covid-19 crisis.

As stated in previous reports Yongo Europe could secure running and outstanding orders as a first priority and the excellent relationships with producers meant that Yongo Europe could take full responsibility, order extension nor cancellation was a topic. Neither was the renegotiation of prices.

Despite all challenges Yongo Europe has made big steps forward in its due diligence process.

In order to be transparent on taken steps forward Yongo Europe likes to share the Smart Risk Assessment Procedure that has been developed to mitigate and prevent risks in the chain that has been a handheld over the past 4 years and will be a ‘work in progress’ in the years to come.

By implementing SMART actions and goals on prioritized themes Safe and Healthy Working Place, Raw Materials and Living Wage, and in sub areas WECH and Freedom of Association Yongo Europe publicly communicates about its progress on the way to more sustainable business in the chain, see link.

In conclusion, Yongo Europe recognizes the importance to communicate about their stance on Corporate Social Responsibility in a clear and transparent way. In case you would like to support us by giving your suggestions and advice, or even in case you have complaints or questions, feel free to contact Mrs S.Y. Hwang or Mr F. Bruin at info@yongo.com.