ACNE STUDIOS SOCIAL REPORT 2012 MEMBER OF FWF SINCE 2008 ACNE STUDIOS SOCIAL REPORT 2012 1 / 10
ACNE STUDIOS The head office of Acne Studios is located in Stockholm, Sweden and employs around 100 people. The following departments are operated from the head office: Design and Production, Distribution (Wholesale and Retail), Logistics, Finance, IT and PR & Marketing. In addition to the head office in Stockholm there are country offices in France, UK, Germany, Denmark, Norway and USA, as well as concept stores in Amsterdam, Antwerp, Bergen, Berlin, Copenhagen, Gothenburg, Hamburg, London, Melbourne, New York, Oslo, Paris, Stavanger, Stockholm, Sydney and Tokyo. Acnes CSR operations are directed by our CSR Manager and organized within the Design and Production Department. This department includes three functions: design, product development & production, and business. These functions are arranged into one women s and one men s team. While designers, product managers, pattern makers and assistants in most cases are attributed to one of the two teams, the CSR manager and the other staff within the business function work across both teams. ACNE STUDIOS SOCIAL REPORT 2012 2 / 10
CONTENTS 1. SUMMARY: GOALS & ACHIEVEMENTS 2012... 4 2. SOURCING STRATEGY... 5 2.1. SOURCING STRATEGY & PRICING 2.2. ORGANISATION OF THE SOURCING DEPARTMENT 2.3. PRODUCTION CYCLE 2.4. SUPPLIER RELATIONS 2.5. INTEGRATION MONITORING ACTIVITIES AND SOURCING DECISIONS 3. COHERENT SYSTEM FOR MONITORING AND REMEDIATION... 6 3.1. CHINA 3.2. TURKEY 3.3. ROMANIA 3.4. ALBANIA 3.5. ITALY 3.6. OTHER 4. COMPLAINTS PROCEDURE... 9 5. TRAINING AND CAPACITY BUILDING... 9 5.1. ACTIVITIES TO INFORM STAFF MEMBERS 5.2. ACTIVITIES TO INFORM AGENTS 5.3. ACTIVITIES TO INFORM MANUFACTURERS AND WORKERS 6. TRANSPARENCY & COMMUNICATION... 10 7. STAKEHOLDER ENGAGEMENT... 10 8. CORPORATE SOCIAL RESPONSIBILITY... 10 ACNE STUDIOS SOCIAL REPORT 2012 3 / 10
1. SUMMARY: GOALS & ACHIEVEMENTS 2012 In 2012 the knowledge on our complete supply chain and presence at our suppliers has increased in several ways. Our CSR Manager has attended a number of monitoring visits and FWF audits. In total we have done five FWF audits; two in China, two in Turkey and one in Romania. In addition around ten factories in China, Turkey and Romania have been monitored in shorter audits and follow-up audits by FWF auditors and our CSR Manager. Further, our internal quality auditor has started to inspect our suppliers regularly during production, which means we keep better control of our subcontractors. The increased presence in the factories results in closer contact with our suppliers. In August we also arranged a Supplier Conference with our most important suppliers at our Head Office in Stockholm where, among other topics, our CSR commitments and FWF membership were discussed. All suppliers were also evaluated on the basis of different criteria such as quality, communication, lead-times, price, CSR and Acne dedication. The aim is to perform this evaluation on an annual basis. The CSR criteria are also going to be developed and strengthened even further during 2013. Improvement of working conditions during 2012 was notable in two of our Chinese suppliers, where we saw higher wages and more correct payment of overtime. The current labour shortage in China seems to have a positive effect on wage levels and working conditions in general, as workers have the possibility to place more demands on their situation than before. However, we still see findings of excessive working hours, incorrect payment and health and safety problems that need to be improved. Turkey is our third largest production country based on order value. There, one concern is the use of unapproved subcontractors. This has been in focus during the monitoring activities of 2012, and we have learned more about our complete supply chain and discussed this in great detail with our suppliers. As a result one supplier will quit working with their subcontractor as the factory is unwilling to work according to our Code of Labour Practices. At two suppliers we have also experienced some reluctance against being audited. One of these suppliers also works with another FWF member and we have been cooperating with this brand to find a solution. When it comes to other countries, we conducted our first audit in Romania during 2012. We were very satisfied to learn that things seemed to work very well and that this first audit showed few findings. Audits were also planned for our denim suppliers in Albania but were unfortunately postponed until 2013 because of difficulties in finding matching dates for everyone involved. These audits will be performed by local representatives from Fair Labour Association as FWF does not have any audit teams in Albania. In terms of communication regarding CSR, a presentation was held for all Acne employees at a conference in Barcelona in April. This conference also included employees from our international offices. Since 2012 our Social Plan is also available on our website. Goals for 2013 include the starting with seasonal meetings in the beginning of a new collection where we discuss current status of our suppliers. During 2013 we will also perform at least five FWF/FLA audits, which means that we at that point will have audited more than 90% of our current suppliers based in high-risk countries. In 2013 we will also focus on suppliers in Italy as they are becoming increasingly important to us. Together with our most important suppliers in the country, our CSR Manager will attend a workshop on labour conditions in Italy hosted by FWF. Last but not least, we will during 2013 also perform research on living wages to learn more on how we, together with our most important suppliers, can work with implementation of this requirement in our Code of Labour practices. ACNE STUDIOS SOCIAL REPORT 2012 4 / 10
2. SOURCING STRATEGY 2.1. SOURCING STRATEGY & PRICING Acne Studios designs, markets and distributes high-end fashion. Our product range includes men s and women s clothing, shoes, bags and accessories. Below is the distribution of our production per country in 2012. PRODUCTION PER COUNTRY 2012 35% 30% 25% 20% 15% 10% 5% 0% Percentage of orders (value) The above graph shows the percentage of production per country based on purchase costs. For instance, compared to 2011, the order value for China has increased by around 10%, while the order value for Italy has increased by around 5% and the order value for Lithuania has decreased from around 10% to 5%. The order value for Turkey remains almost the same as the year before. Our production is made on CMT, CM or full price terms. Price negotiations are undertaken both at an early development stage but also with the order figures in hand. We are always looking for good value for money; that said, we are never willing to compromise on our design or product quality and we always strive for prices to be reasonable in both parties perspective. In general, we have direct business relationships with our suppliers, but in case of working through agents, we always strive to have direct contact with the factories as well. The reasoning behind this is to keep control of everything from development and production to CSR conditions. Our goal is to have a supplier base that can meet all our different requirements. We are always open to find new suppliers to work with, but we never initiate a collaboration before we feel secure that the supplier in question is one we can trust and want to establish a long-term relationship with. We continuously evaluate our suppliers based on different parameters such as communication, prices, deliveries, CSR, etc. 2.2. ORGANISATION OF THE SOURCING DEPARTMENT The Design and Production department is organized in one Men s and one Woman s Team respectively. Each team consists of a team leader and designers, product managers, pattern makers and assistants. The design work is organized by a Studio Manager. One responsibility of the team leaders is to coordinate the sourcing of fabric and garment suppliers together with the product manager concerned. 2.3. PRODUCTION CYCLE Each year we produce two Main collections for men s and women s wear respectively, as well as two Pre-collections for women s wear. In addition to these collections, we also make two smaller Capsule collections per year and other smaller external collaborations. ACNE STUDIOS SOCIAL REPORT 2012 5 / 10
The production orders are placed based on external and internal (our own stores) orders of the collections and only include a small element of stock ordering for in-season orders. In addition to the large seasonal orders that are placed at the end of each selling period, we are also working with reorders within the store seasons and never out of stock (NOS) programme with continuous reorders. The production lead-times vary between just a few weeks up to half a year and are dependent on internal planning, the capacity of our suppliers and fabric lead-times. 2.4. SUPPLIER RELATIONS Every season usually brings some new suppliers. This process usually starts with a meeting where our product idea is presented to the supplier. Following this meeting, the supplier is asked to produce prototype samples that are sent to us. If we approve these samples, the next step is the production of sales samples. Parallel to this product sampling, the supplier is informed about our FWF membership and given a questionnaire on accepting our Code of Labour Practices, our Restricted Chemical List and a business contract. We always ask new suppliers for reports from previous CSR audits conducted at the factory, to get an initial idea of their CSR status. 2.5. INTEGRATION MONITORING ACTIVITIES AND SOURCING DECISIONS All employees at the Design and Production department have great interest in producing our garments in factories with working conditions that are in line with our Code of Labour Practices. The outcome of our audits, together with other aspects such as prices, lead-times and communication skills of suppliers are always considered when deciding which suppliers we want to continue working with and to what extent. If we for some reason would like to quit working with a supplier, we always explain the reason to the supplier. We never discontinue our collaboration with a supplier that we have been working with for a long time right away if problems occur; instead, we decrease our orders gradually if the problems persist and keep a dialogue with the supplier on our reasons for doing so. We do not automatically terminate a business relationship based on audit findings that are in conflict with our Code of Labour practices. We always give our suppliers a chance to improve in order to meet our standards. However, if we realize that they, after repeated requests, still are not willing to make improvements, we will terminate the business relationship. During 2012 we started to work with a new supplier in Portugal that works with five factories. In addition we started to work with two new suppliers in Turkey whereof one worked with four factories during 2012. In China we quit working with a factory that we worked with through an agent due to CSR reasons, as they were unwilling to follow our Code of Labour Practices. In addition we also quit working with a factory in Turkey due to quality- and lead-time related difficulties. During 2012 we have also worked with smaller and specialized suppliers in Italy to make hats and seamless garments. During 2013 the CSR Manager will have scheduled meetings with the team leaders and product developers at the start of each new season to report and discuss our suppliers CSR performance. Earlier meetings have been held when there have been issues or critical findings at a certain supplier, for example following an audit, but from now on meetings will be held on a more regular basis. This together with more detailed evaluation criteria for suppliers will lead to a better integration of our sourcing and monitoring decisions. 3. COHERENT SYSTEM FOR MONITORING AND REMEDIATION As described above a new supplier needs to sign and fill in our self-assessment questionnaire on our Code of labour practices in the beginning of the business relationship. The questionnaire includes several questions where the supplier needs to confirm acceptance of our Code of Labour Practices. At this time, we normally also ask for previous audit reports especially if the ACNE STUDIOS SOCIAL REPORT 2012 6 / 10
supplier is based in a high-risk country. If the supplier is expected to be a long term supplier with us either the CSR Manager or the team leader normally visits the factory as well to get a better knowledge of the facilities and the conditions there. The next step in our monitoring program includes either a monitoring audit conducted by our CSR Manager and a FWF auditor or a full FWF audit. If the CSR Manager has not visited the factory before, and if the supplier is new, it is normally better to start with a monitoring visit to get an initial idea of the working conditions and what needs to be improved. The visit also gives us information on possible subcontracting. A thorough audit is better to conduct after a while, when a mutual understanding and trust between us and the supplier has been established. A Corrective Action Plan (CAP) on findings and what needs to be improved is established after each audit. Normally a time frame for improvements is discussed during the end of the audit, as our CSR Manager always attends all audits. Follow-up on improvements is conducted through the CAP documents via e-mail or in follow-up audits on site. An important part of the monitoring system is ensuring that our Code of Conduct, including the contact details to the complaints handler, is posted visibly at our suppliers. In addition to these procedures with audits, CAPs and complaints handling, we encourage suppliers to attend the trainings offered by FWF. In 2011, for instance, five Acne suppliers attended training in Turkey. We were placing production with around 80 factories during 2012. Below statistics shows the percentage of our suppliers based on order value that are in countries classified as low-risk and suppliers in high risk countries. China, Turkey, Romania and Albania are example of countries classified as high-risk when it comes to violation of our code of labour practices. In 2012 we had made full FWF audits in over half of our suppliers in high risk countries. In addition we have made several shorter monitoring audits at suppliers in these countries. Our goal for 2013 is that we should have made full FWF audits at over 90% of our suppliers in high risk countries. RISK DISTRIBUTION AND PERFORMED AUDITS Production in low risk countries 32% Production in high risk countries 68% Audits performed in high risk in 2012 56% Audits performed in high risk after 2013 94% 3.1. CHINA China is one of our three main production countries. During 2012 we had relationships with 16 factories. For 2013 we have quit working with five of them in two cases due to CSR reasons. One factory is used through an agent and one is a subcontractor that a knitwear supplier has been using. The reason is because these factories have showed little interest in working according to our Code of Labour practices. The other three suppliers have been cancelled because of other reasons such as lead-times and design preferences. None of the factories we left have been suppliers where we were a major customer. During 2012 we conducted two full FWF audits and four monitoring visits together with a FWF auditor. At one supplier we also made additional off-site interviews with workers. Improvements of findings were notable at two of the suppliers where we conducted full FWF audits compared to the audits made in 2011. We saw improvements in terms of wages and compensation and reduced overtime. For example the mode wages in the 2 biggest departments (sewing and cutting was found to be above living wage level estimated by Asia Floorwage. These are important suppliers for us and we work more or less directly with the factory. Still there are findings that need to be improved. For instance, one factory is going to ACNE STUDIOS SOCIAL REPORT 2012 7 / 10
quit working with a subcontractor that we dismissed after a monitoring visit and one needs to improve on health and safety issues. This is currently being discussed with the supplier. At three other suppliers where we conducted monitoring visits, we found they are using double bookkeeping to conceal information on actual wages and working hours. We have noticed that this is common in the Guangdong area where excessive social auditing is performed by different auditing firms. Two of these three suppliers have admitted to using double book keeping and will improve until the next audit, and the third one we are still discussing with, as they also had other issues. In addition we also made a monitoring visit at a silk dye house which included inspection of water use and waste water treatment according to our membership in Sweden Textile Water Initiative (STWI). During 2013 we are planning to conduct a FWF audit at one of our most important suppliers in China and follow up CAP with our other suppliers through e-mail discussions and shorter monitoring visits. We will also encourage the most important suppliers to join the workplace training programme offered by FWF. 3.2. TURKEY Turkey is currently our third largest production country based on order value. We work with around 15 factories in the country. Some are new and while others suppliers that we have been working with for many years. During 2012 we conducted two FWF audits at two important suppliers, as well as six shorter monitoring visits and follow up audits together with a FWF auditor. One concern in Turkey is the use of unapproved and unregistered subcontractors. This has been in focus during the monitoring activities of 2012, and we have learned more about our full supply chain and discussed this in great detail with our suppliers and agents. As a result one supplier will quit working with their subcontractor as the factory is unwilling to work according to our Code of Labour Practices. At two suppliers we have also experienced some reluctance of being audited, and we are still discussing with the suppliers on the attitude they showed during the audits. One of these suppliers also works with another FWF member and we have been cooperating with this brand to find a solution. In 2013 FWF will conduct a verification audit at this supplier. Furthermore, in 2013 we are planning to conduct an audit at our main denim supplier in Turkey, as well as follow up on earlier audits. 3.3. ROMANIA In Romania we are currently working with two factories, whereof one was audited for the first time in 2012. In general it is a well-functioning factory and the audit showed few findings based on our Code of Labour practices. For example the factory has a collective bargaining system in place but quite low wages compared to living conditions in Romania. 3.4. ALBANIA In 2012, we had production at four factories in Albania through an Italian agent. Two audits were planned for the most important factories but they had to be postponed until 2013 due to difficulties to find a suitable date for everyone involved. These audits are going to be conducted by auditors from Fair Labour Association (FLA) as FWF does not have any audit teams in Albania. ACNE STUDIOS SOCIAL REPORT 2012 8 / 10
3.5. ITALY Italy is our second largest production county based on order value. As it is classified as a low risk-country we are not conducting any social audits there. However, in 2013 we are going to participate in a training held by FWF on working conditions together with some of our Italian suppliers. 3.6. OTHER We only have production at one factory in Morocco. This factory is going to be audited for the first time in 2013. In Lithuania we are working with several factories through an agent. As Lithuania is classified as a low-risk country we are not conducting any social audits there. The situation is the same for our production in Portugal, UK, France and South Korea. The factory that we work with in Bulgaria in 2012 has been cancelled for 2013. 4. COMPLAINTS PROCEDURE During 2012 there was no complaint reported from any of our suppliers. In case of any complaints, it is handled by our CSR Manager who will take immediate action according to recommendations from FWF. Acne s Code of Labour practices, together with the phone number to the complaints handler, must be posted on the walls in the factories. Acne ensures that this requirement is met through e-mail conversations where a photo is attached, audits where this is inspected, and through visits by other Acne employees where they will control this on behalf of the CSR Manager. Information on the function of the complaints procedure is communicated during FWF audits by the auditor responsible for worker interviews. 5. TRAINING AND CAPACITY BUILDING 5.1. ACTIVITIES TO INFORM STAFF MEMBERS In 2012, at a conference in Barcelona, a presentation on CSR was held to all Acne staff around the world (around 200 employees) by our CSR Manager. In addition, information on our CSR work and FWF membership is available in our Retail Manual which is used by the staff working in our stores. Audit results, results of the FWF performance check and the goals in our annual work plan are presented during weekly meetings with the Production and Design department. As described earlier, there are also additional meetings being held with team leaders and product developers about audit results on specific suppliers they are working with. 5.2. ACTIVITIES TO INFORM AGENTS All the agents that we are collaborating with are well informed of Acne s membership in Fair Wear Foundation and are always present when FWF audits are conducted. They are also encouraged to join trainings arranged by FWF. Occasionally they also help us follow up corrective action plans after an audit has been conducted. 5.3. ACTIVITIES TO INFORM MANUFACTURERS AND WORKERS As a part of the FWF audits workers are being informed on our Code of Labour practices by the auditor responsible for worker interviews. In 2011 five of our suppliers took part in a seminar arranged by FWF in Turkey. The plan is to invite our most important suppliers in China to a FWF workplace training program in 2013. ACNE STUDIOS SOCIAL REPORT 2012 9 / 10
6. TRANSPARENCY & COMMUNICATION Our aim is to be as transparent as possible regarding our CSR activities. Our annual social report is given to FWF and is made available on both their website and our own. We also have information on our website regarding our membership in FWF, together with our Code of Labour Practices. From time to time we receive emails from customers or students with questions on our CSR work, and we always reply to these as quickly and accurately as we can. 7. STAKEHOLDER ENGAGEMENT The problems related to sandblasting have been discussed with the Swedish NGO Fair Trade Centre, as they were making a report on this topic during 2012. Our CSR Manager is receiving information from various newsletters by stakeholders, for example the China Labour Bulletin on current labour issues in China. The country studies that FWF is offering are sometimes used before and after audits in specific countries. 8. CORPORATE SOCIAL RESPONSIBILITY Please see www.acnestudios.com for more information on our Environmental Strategy and other CSR related activities. ACNE STUDIOS SOCIAL REPORT 2012 10 / 10