Thousands of people are involved in producing our garments, a job that offers stable employment opportunities in countries where the textile industry is the biggest driving force for development. We guarantee the very best standards on human rights and working conditions and collaborate with our suppliers to continuously improve their practices and technology, so that we can help produce a positive impact in the countries where we operate.
Our supply chain spans 16 countries and more than 600 suppliers, with whom we are in constant contact through our sourcing offices. More than 90,000 workers are employed to produce our garments, and more than half of them are women. That being said, there is still a large gender gap in terms of supervisory and managerial roles, which are predominantly occupied by men.
You can see where our suppliers are located on the interactive Open Apparel Registry platform.
|Administration & Management||73%||27%|
From a social perspective, OVS' Supply chain (represented in the table above) shows more than half of the workers in the textile industry are women, but this majority is unbalanced in favor of high male percentages in supervisory and managerial roles.
Such a complex ecosystem requires high standards, measurement procedures, and control systems.
Our Code of Conduct lists the values that inspire all of our actions, as well as a set of operational guidelines on social, environmental and transparency issues. We only work with companies that share and abide by our values, with the hope that our guidelines are used as a tool for continuous improvement rather than a mere list of directives.
OUR CODE OF CONDUCT IS A SET OF BINDING GUIDELINES REGARDING THE ENVIRONMENT, COMMUNITY AND PERFORMANCE IN ORDER TO IMPROVE SUPPLIER TRANSPARENCY AND SUSTAINABILITY LEVELS OVER TIME.
Our Code of Conduct ensures that everyone takes responsibility in the creation of an ethical circle at an economic, environmental and social level, contributing to improving working conditions with positive effects on local communities.
All suppliers who work with OVS are required to sign the Code of Conduct.
Each supplier is sent a graphic document to hang on their company’s premises, translated into the local language, that summarises the main point of the code of conduct to be followed to so all workers are aware of their rights. (Link at bottom of page for download).
The actual placement of the document is verified by our staff during visits to the factory. The local language document sets forth the email address for workers to make reports. During 2020, one report was received from a generic email address and lacking of minimal information content for which additional information was requested. However, the reporter did not provide any further feedback. We received no reports in 2021.
When evaluating our suppliers, we give as much importance to sustainability as we do to our primary assessment criteria (Quality, Service and Cost).
With a view to transparency and collaboration, we openly share the results of our assessments with factories, in order to identify areas for mutual improvement. We pair our Vendor Rating system with an audit initiative, which is carried out in several different areas in order to verify effective compliance with our Code of Conduct and to measure our suppliers’ environmental and social performance.
In general OVS does not allow the use of sub-contracting except in cases where this is expressly authorized. In order to maintain control of this constraint, OVS each season collects from each supplier a map of the production sources used both for the packaging processes and for the main production phases and the most important raw materials. After that, OVS sends inspectors to check the quality and progress of production.
Since 2020, each new supplier is confirmed only if they share their data on the online HIGG Index.
Before starting the supply and then every 12/18 months (unless a higher frequency is required), every factory is evaluated with respect to its compliance with the code of conduct and its environmental / social performance. All of our audits (561 in 2021) are semi-announced, agreeing on a time window for audit activity but not specifying a visit date. When necessary, we also perform unannounced audits (3 in 2021) to investigate situations more thoroughly. The integrated supplier assessment is carried out using all available information gathered through certificates issued by independent third parties, analysing the performance data on HIGG and considering any reports received from trade unions or other associations.
This information is supplemented by direct checks by our staff and / or external auditors. If critical issues are identified, an action plan is agreed upon with the factory managers to fix them.
In any case, any critical issues identified are shared with workers' representatives to keep them informed of developments and to receive any feedback.
66% of suppliers covering 89% of our 2021 collections were assessed using the scheme in 2021. After being audited, OVS’s average aggregate scores for 2021 were 50% for the Higg Facility Environmental Module and 73% for the Higg Facility Social and Labour Module.
The average score of Tier 2 suppliers was 60% for the Higg Facility Environmental Module. Suppliers' commitment in monitoring social and environmental performance is a significant contribution to improve OVS's transparency and helping to achieve the sustainability objectives set out in the annual plan. In order to recognise the path taken and provide an incentive for continuous improvement, in 2021 we awarded the best performing suppliers with the "Best suppliers 2021" plaque. For 2021, Tier 1 suppliers chosen were: Montex Fabrics Limited in Bangladesh, Zhejiang Yige in China, Master Textile Mills Limited in Pakistan and KPR Mill Limited in India.
The analysis of the FSLM module on Higg allowed us to identify some specific risks, in particular those concerning gender-related violations of workers' rights. Using this performance assessment tool, by analyzing some indicators, we identified that 3% of production sources reported cases of gender-related violations, in particular cases of physical abuse and failure to protect labour rights of female workers during maternity leave.
OVS adopts responsible purchasing practices throughout its supply chain to reduce any negative social or economic impact on the industry workers, always paying attention to agree conditions with the supplier so that they operate safely and consistently with the various compliance requirements (for example: avoiding changes of orders when in production, paying the amount due with the agreed terms, etc.)
Due to Covid-19, we changed the payment terms for 16% of orders that had already been sent to suppliers in 2021.
The 67.7% of the volume purchased is paid through Letter of Credit, opened at the same time as the order is issued and therefore in advance of production activities, which allows the supplier to finance itself at banking institutions to cover the cost of purchasing materials. On average, the number of days in which the payment is completed was 116 days in 2020.
On a seasonal basis, we analyze the main cost trends related to raw materials, transport, duties, etc. in order to take them into account when defining the target costs, so that we can always ensure proper negotiation. Over the last twelve months, to take into account these changes in purchasing conditions, the average percentage increase of FOB prices was 7.5%.
OVS has defined its own Responsible Purchasing Policy, which serves as a guide in procurement activities. (See annex)
During the last survey on the level of satisfaction in the commercial relationship with OVS (considering payments, timely payments, ease of communication and proper production planning) 93% of suppliers declared themselves Satisfied or More than satisfied.
By using the online HIGG platform we can effectively analyse the performance of most of our suppliers, with the aim of acquiring 100% of our products from suppliers on HIGG, by 2022. In 2021, the production volume from Tier 1 suppliers on HIGG was 98,7% of the total value of the collections.
Thanks to the information provided in the platform we can identify priorities for action and support them in making positive changes, with the help of third party verification and the definition of action plans where necessary.
At OVS, we know that we have a duty to act responsibly during the product purchasing phase, even though we don’t pay our suppliers directly. That’s why we regularly analyse wage conditions along our supply chain. At present, from our analyses, it results that 79% of workers are paid by bank transfer, no worker is paid below the legal minimum wage and, in addition, 70% of workers are paid an average of 33% more than the minimum guaranteed by law.
However, in some countries there is still a gap between the living wage and the legal minimum wage.
The living wage guarantees employees and their families a decent standard of living and is a human right recognised by the United Nations. The living wage is earned in a standard 48-hour working week and covers necessary expenses such as food, accommodation, education, health care, transport, and small savings for unforeseen events.
OVS is working to improve the quality of available data in order to allow for a more accurate analysis of wage conditions in its supply chain.
We are aware that in some situations this salary threshold may be lower than the Living Wage benchmark, and for this reason we have taken specific steps to analyze the data more effectively, integrating into our supplier assessment program an analysis dedicated to the salaries actually paid to workers and comparing them to the Global Living Wage Coalition benchmark. In addition, when negotiating with new suppliers, OVS analyses the impact of labour costs on the overall product cost to make sure there are no critical wage issues.
In 2021, we conducted wage analysis on more than 430 factories employing a total workforce of 415,000 people. We assessed average wages by job category compared with the Global Living Wage Coalition's Living Wage benchmark.
We found that the wages of 40% of workers involved in the supply chain were below the living wage threshold, despite widespread compliance with national minimum wage requirements.
Approximately 98% of workers in China, 99% in Pakistan, and 65% in India receive the living wage, as a minimum.
The most significant difference, however, occurs in Bangladesh where only 13% of workers receive a living wage. The remaining 87% receive a wage, which, although higher than the minimum wage, is still lower than the living wage by about 40% on average.
Although there is still a long way to go, we have been witnessing a steady increase in wages for some time now, as well as a rapid improvement in working conditions in our manufacturing countries. This is a consequence of the textile industry maturing to become increasingly responsible and capable of involving its suppliers in development schemes.
The annual increase in average wages since 2019 has been 13% in Bangladesh, 34% in India and 31% in Pakistan.
The figures above represent a challenge that OVS is ready to take on, fully aware that our responsible business approach has had an important positive impact on the geographical region and its social fabric, also thanks to the consolidation of commercial relations with the most socially aware suppliers.
Unfortunately, buyers can only indirectly affect wages, as they tend to depend on local government choices, manual labour productivity, and labour market dynamics.
Although this is partly the result of economic policy, one of the main reasons for below-minimum wages is the lack of trade union agreements due to poor worker representation in wage bargaining. As such, we believe that these mechanisms can help progressively raise wages to the living wage.
Based on the data we have analyzed, we estimate that in 2021, 15% of our suppliers had democratically elected trade union representation in the workplace, and if we also consider internal workers' representative committees (WPCs), 80% of our suppliers have at least one form of representation to protect workers' rights. 57% of suppliers had collective labour agreements in place, covering around 30% of the workforce.
Based on the data we have analysed, we estimate that in 2021, 80% of our suppliers had workers’ representative organisations (trade unions or WPCs), and 57% of suppliers had collective labour agreements in place, covering around 30% of the workforce.
For this reason we are committed to ensuring that all our suppliers, by 2030, have adopted programmes for the activation of democratically-elected worker representation bodies and a system of collective bargaining that gives workers the opportunity to align their pay to a wage level consistent with the actual cost of living.
Thanks to these actions, workers' pay conditions will gradually improve over time and we aim for all workers in our supply chain to receive a living wage by 2040.
To achieve these objectives, we have identified the main levers that can be exploited by OVS and its suppliers.
|OVS's influence on suppliers||OVS’s areas of intervention|
ADDRESSING HUMAN RIGHTS IN KEY AREAS OF SUPPLY CHAIN
Forced labour in Xinjiang
OVS has joined the call to action launched by the Clean Clothes Campaign to End Uyghur Forced Labour and other forms of abuse against Uyghur people in the Xinjiang region of China.
The program provides for the suspension of all activities in the region of Xinjiang with the aim of raising awareness and requesting the Chinese government and Chinese companies concerned, the implementation of significant changes regarding the protection of Human Rights and the permanent cessation of forced labor.
OVS has identified four potential situations that could cause the company to trigger exit procedures and terminate its supply contracts:
- the supplier is located in the Xinjiang region;
- the supplier has branches in the Xinjiang region;
- the supplier is located outside the Xinjiang region but employs Uyghur workers under labour 'export' programmes. In this case, contracts will be terminated following due diligence;
- the supplier is located outside the Xinjiang region but uses materials from the Xinjiang region for production.
Political crisis in Myanmar
Following the coup d'état in Myanmar in early 2021, OVS decided not to stop operations in the country because withdrawing production would have caused a further negative impact on workers.
The political crisis situation negatively impacted on the effectiveness of the due diligence process, so we decided to continue operations only with production sites that would ensure full visibility of procedures through multi-stakeholder initiatives (e.g. HIGG) and third-party audits.
We are currently updating the list of suppliers we will work with next year since we are closing our evaluations to plan the next year's production.
Contributing to profound change in the sector means embracing a team logic that involves all market players, promoting development projects that affect the entire fashion industry.
With this in mind, we were the first Italian company to join the Sustainable Apparel Coalition.
The Sustainable Apparel Coalition is a progressive clothing, footwear and home-furnishing alliance, founded with the aim of promoting sustainable production.
We work with the Sustainable Apparel Coalition to create tools that measure environmental and social performance in the supply chain and raise transparency standards for the benefit of all stakeholders.
Since 2017, OVS has adopted HIGG Facility Tools, the digital platform of assessment tools in the clothing and footwear industry, developed by SAC to encourage the sharing of information with other companies in the supply chain.
Through the HiGG Facility Tools FEM (Facility Environmental Module) and FSLM (Facility Social Labour Module) online questionnaires, we measure the social and environmental performance of our suppliers’ facilities in order to improve the impact generated during production.
In line with our own principles, the Group's Code of Ethics and a range of global sustainable development goals, we’re attempting to build a reliable supply chain that respects the basic principles of dignity, health and safety of workers in countries where we operate, but primarily in Bangladesh, where OVS's main production site is located.
In addition to our standard supplier practices, we have participated in drafting an agreement (Accord) on fire and building safety in Bangladesh in order to ensure the necessary safety conditions for our workers.
Accord is a legally binding agreement between brands, manufacturing companies and local trade unions in order to promote greater health and safety in Bangladesh’s clothing industry, helping to create a safer working environment and prevent risks.https://bangladeshaccord.org/
During 2021, we launched new traceability systems along our supply chain, which allow us to analyse our suppliers in more detail.
The process of migrating to our new platform is still ongoing and our data are being updated as we speak. Missing information will be included in monthly updates based on the information we collect and cross-reference.
In addition, we are seeing some discrepancies emerge compared to data we had previously published. This is due to our improved classification system for production sources and different supply levels.
Shops are our window onto a better world, built on respect for the environment and care for the people around us.
We are aware of the role that we can have in taking care of a more sustainable future for the environment.
With this inaugural sustainability report, OVS begins an important journey of sharing.