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.

Reference:

Li & Fung AR 2018 (11 March 2020)

In March 2020, Ethical Consumer searched the Li & Fung 2018 Annual Report. This report listed the company's subsidiaries, including a number in countries listed on Ethical Consumer's list of oppressive regimes. Namely, China, Bangladesh, Cambodia, Egypt, Mexico, Pakistan, Philippines, and Turkey. As the company had subsidiaries in six or more oppressive regimes it lost a whole mark under Human Rights.

Reference:

Li & Fung AR 2018 (11 March 2020)

In March 2020, Ethical Consumer searched the Fung Group's website for a cotton sourcing policy. Although the company's subsidiaries sold a range of products which included cotton, no policy could be found.
According to Anti-Slavery International (ASI) website viewed by Ethical Consumer in August 2018, Uzbekistan and Turkmenistan were two of the world’s largest exporters of cotton, and every year their governments forcibly mobilised over one million citizens to grow and harvest cotton. Due to the high proportion of cotton likely to have come from Uzbekistan and Turkmenistan and the prevalence of forced labour in its production, the company lost half a mark in the Workers Rights category.

The Organic Trade Association website, www.ota.com, stated in July 2018 that cotton covered roughly 2.78% of global arable land, but accounted for 12.34% of all insecticide sales and 3.94% of herbicide sales. Due to the impacts of the widespread use of pesticides in cotton production worldwide the company lost half a mark in the Pollution & Toxics category.

According to the International Service for the Acquisition of Agri-Biotech Applications (ISAAA), a non-profit pro biotech organisation, genetically modified cotton accounted for 80% of cotton grown in 2017. Due to the prevalence of GM cotton in cotton supply chains and the lack of any evidence that the company avoided it, it was assumed that some of the company's cotton products contained some GM material. As a result it lost half a mark under the Controversial Technology category.
Overall the company received Ethical Consumer's worst rating for its cotton sourcing policy.

Reference:

https://www.funggroup.com (11 March 2020)

In March 2020, Ethical Consumer searched Fung Group's website. A number of the companies owned subsidiaries were apparel companies which manufactured products for other brands, including Calvin Klein Jeans. These websites showed many images of jeans which were distressed.

The company's website was searched for a policy on sandblasting but no information could be found.
In order to achieve a distressed look companies often used sandblasting techniques which had been heavily criticised due to the risks to workers' health. Due to the fact the company had no policy it lost half a mark in the Workers’ Rights category.

A report by IHLO, SACOM, Clean Clothes Campaign and War on Want in June 2013 called 'Breathless for Blue Jeans: Health Hazards in China's denim factories' found that despite promises by brands to end the practice of sandblasting, workers in the factories revealed that the practice continued behind closed doors. In addition, many factories had introduced other methods of distressing denim which brought their own health risks, and workers were rarely given the necessary training in how to use the new techniques safely
.
Sandblasting involved firing abrasive sand onto denim under high pressure, whether in a machine booth or simply via an air gun attached to a hose. Often performed without proper ventilation, safety equipment or training, the practice exposed workers to serious risk of silicosis, the deadly lung disease caused by inhalation of silica dust.

Reference:

https://www.funggroup.com (11 March 2020)

In February 2019 Ethical Consumer viewed the 2018 KnowTheChain report which had assessed 43 Apparel & Footwear companies to capture the key areas where companies need to take action to eradicate forced labour from their supply chains.

Li & Fung Ltd. was one of the companies assessed. The report stated that KnowTheChain chose to benchmark the largest (publicly traded) global companies in several at-risk sectors, as these companies have a large workforce in their supply chains, as well as significant leverage.

The report stated:
“Li & Fung Ltd... ranks 24th out of 43 companies. Its score of 33 out of 100 is below average; however, the company scores significantly higher than other suppliers in the benchmark. Suppliers are the lowest scoring subsector covered in the benchmark. The company's score is based on its stronger performance on the themes of Commitment & Governance. The company has an opportunity to improve its performance and disclosure on the themes of Purchasing Practices, Recruitment, and Remedy."

The company scored the following in the report's themed scores:
Commitment and Governance 82 out of 100
Traceability and Risk Assessment 25 out of 100
Purchasing Practices 16 out of 100
Recruitment 0 out of 100
Worker Voice 28 out of 100
Monitoring 40 out of 100
Remedy 38 out of 100

As the company did not score more than 70/100, it lost half a mark under the Workers’ Rights category.

Reference:

KnowTheChain 2018 apparel and footwear ranking (13 February 2019)