In March 2020, Ethical Consumer contacted the Fung Group for information on its supply chain management. Its website was also searched, and its Supplier Code of Conduct and 2018 Annual Report for its Li & Fung brand was viewed.
SUPPLY CHAIN POLICY - rudimentary
The code contained acceptable clauses on child and forced labour, discrimination and freedom of association. Its policies on wages and working hours did not meet Ethical Consumer’s minimum standards as they did not mention limiting overtime to 60 hours, nor did they define a fair wage. The company was considered to have a very rudimentary supply chain policy.
STAKEHOLDER ENGAGEMENT - poor
No evidence was found that the company was a member of a multi-stakeholder initiative, or that it had systematic input from NGO's or trade unions into verifications of labour audits, or that it had a complaints process for workers in its supply chain. The company was considered to have poor stakeholder engagement.
AUDITING AND REPORTING - reasonable
The company appeared to be conducting some level of auditing and reporting. Li & Fung’s 2018 Annual Report stated that, “suppliers are periodically subject to compliance auditing to ensure their compliance with our Supplier Code of Conduct.” It also stated that: "Compliance against the Code is assessed by one of our designated third-party audit firms. All of our direct suppliers (tier 1) are audited on a schedule, which varies according to their level of risk...We audit beyond tier 1 when requested by a customer or in high risk instances such as child or forced labor.”
The results of these audits were reported in the same report. Alongside a statement detailing the company’s staged approach to non-compliances.
However, there was no mention of who paid the costs of audits. Thus the company were rated as reasonable in this category.
DIFFICULT ISSUES - reasonable
The company also appeared to be aware of auditing fraud, saying, “We also rotate audit firms who conduct our onsite audits to maximize the various strengths of each firm and to reduce the risk of corruption.” This was considered to be addressing a difficult supply chain issue.
The company had also trained over 2,000 staff on modern slavery and child labour. The company did not mention a systematic approach to difficult issues such as homeworkers, or living wages. It was considered to have a reasonable approach to difficult issues.
Overall Li & Fung received Ethical Consumer's middle rating for Supply Chain Management and lost half a mark in this category.
Li & Fung AR 2018 (11 March 2020)