| Overview
At TJX, we are fully committed to operating our business with the highest standards of business ethics, not merely in accordance with applicable law. We expect our vendors to maintain these same high standards.
We strongly value the relationships that we have developed with our vendors – relationships that we believe have been a key factor in TJX's success. These relationships have been built on a foundation of honesty and trust and a commitment to ethical business practices. It is therefore important that our vendors respect the laws and the cultures of the communities in which they operate. Our vendors should also respect the rights of the workers who manufacture products for sale in TJX stores.
The TJX Vendor Code of Conduct
In order for our vendors to understand our standards and expectations, TJX has created its Vendor Code of Conduct. Our vendors are informed of our Code through our purchasing process. Our Code requires each of our vendors, at a minimum, to act in accordance with all applicable laws and regulations when manufacturing products to be sold to TJX. With respect to certain issues, our Code prescribes higher standards of performance.
High Standards
The Code reflects our own high standards, which embrace internationally recognized principles designed to protect the interests of the workers who manufacture products for us. The principles encompassed in the Code set forth our expectations with respect to health and safety, working conditions, child labor, forced labor, wages and hours, freedom of association, the right to bargain collectively, and prevention of discrimination and harassment. These principles have been informed by, and in many instances incorporate, human rights, labor rights and anti-corruption standards enunciated by the United Nations and other respected international bodies.
Continuous Improvement
The driving tenet of TJX's Vendor Code of Conduct and our Vendor Compliance initiative is continuous improvement throughout our supply chain. While we expect each of our vendors and agents to adhere to the expectations set forth in our Code of Conduct, we also work with our vendors to build corrective action plans and, of equal importance, to encourage them to make continuous improvements throughout their operations. In order to advance these objectives, we do more than simply audit suppliers to test compliance; we also provide education and training to our agents and vendors and factory management, so that they understand our expectations, and can develop meaningful processes to meet and exceed these expectations.
Third-Party Resources and Support
In pursuing our Vendor Compliance initiative, we have relied upon some of the best resources available:
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We have reviewed and incorporated many of the international human rights standards enunciated by international bodies such as the United Nations and the International Labor Organization. |
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We have received and incorporated valuable insights and suggestions from our investor community, specifically from socially responsible investor groups. |
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We have reviewed and benchmarked the programs of companies comparable to ours. |
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We utilize the services of outside ethical sourcing experts for guidance and assistance. |
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We have retained Cal Safety Compliance Corp. ("CSCC") and Intertek Group PLC (“Intertek”), organizations that have extensive experience and knowledge in the field of ethical sourcing, to assist us with program development, education and training, and compliance monitoring. |
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We are members of the Ethics and Compliance Officers Association. |
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We are active participants in industry conferences and training programs on the latest developments in vendor compliance and ethical sourcing. |
Global Vendor Compliance Program
TJX's Global Vendor Compliance Program is coordinated by its Manager of Global Social Compliance who has specific responsibility for managing and overseeing our ethical sourcing program. Our Manager of Global Social Compliance reports to the Vice President, Corporate Compliance Director, and works closely with representatives of the different purchasing functions across all of TJX’s businesses and with the Vendor Compliance Committee, discussed below. The Manager of Global Social Compliance interacts on a regular basis with CSCC, Intertek, and other internal and external resources on issues of program development and on vendor and buying agent training, monitoring, and remediation.
TJX has a Vendor Compliance Committee which is overseen by senior management. The Committee has management representatives from the relevant disciplines within TJX, including merchandising, sourcing, imports, compliance, legal and investor relations. The Committee meets on a regular basis, and oversees compliance with TJX’s Vendor Compliance initiative. Committee members work closely and cooperatively with the Manager of Global Social Compliance on responding to significant issues.
Private Label and Name Brand Products
Only a small percentage of the product sold by TJX in its stores is private label merchandise produced specifically for TJX. We do not own, operate, or control any facilities which manufacture the products we sell. Indeed, the vast majority of products sold in our stores are procured from name brand vendors. Many of these name brand vendors apply their own codes of conduct, ethical sourcing guidelines, and monitoring programs to the suppliers that produce their products. These vendors' programs for the most part incorporate the same universe of supplier expectations as does TJX's Vendor Compliance Program. Nevertheless, as part of the purchase order terms, our name brand vendors warrant that their goods have been manufactured and shipped in accordance with all applicable laws, regulations, and industry standards, including industry standards relating to, among other things, human rights and labor rights standards referenced above -- in other words, standards that replicate those found in TJX's Vendor Code of Conduct.
TJX's Vendor Compliance initiative focuses most of its resources on striving to assure compliance at overseas facilities producing private label products for sale in our stores. We believe that our finite resources are best devoted to those suppliers who produce our private label product because this is where we are most likely and most able to have a meaningful impact.
PROGRAM SUMMARY
TJX sources its private label products from vendors in countries around the world. The majority of this purchasing is placed through our buying agents, who bear considerable responsibility for helping assure that our expectations are met. We have put significant effort into working with our primary agents, familiarizing and training them with respect to our Vendor Code of Conduct and our Vendor Compliance Program, and reviewing their audit protocols. We intend to continue and to improve upon these training efforts, both with our buying agents and with our vendors. We believe that our emphasis on training, coupled with our factory monitoring efforts and the terms of our purchasing documentation, underscore for our agents and vendors our commitment and seriousness of purpose with respect to the ethical sourcing of our products.
Although our program encompasses all the products we purchase for sale in our stores, we target our principal attention and resources on those areas of the world where we believe the challenges associated with achieving our Code expectations are the greatest. We work closely with experts both in the United States and in the relevant markets to assess where these challenges are the greatest, and to develop our auditing, remediation, and training plans and schedules based upon what we believe will best enable our vendors to satisfy our expectations.
Some of our program details are discussed below:
Monitoring and Compliance
Our vendors are expected to cooperate fully with TJX and its auditors, and to provide access to facilities and documents. We and our representatives work closely with our vendors and agents so that they understand our Vendor Code of Conduct and our Vendor Compliance Program. While remediation and continuous improvement are our goals, if we find that our standards are not being met, we reserve the right to take action – up to and including cancellation of purchase orders and termination of our business relationship.
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Vendor
Compliance Audit Guidelines: TJX requires our international buying agents and vendors to confirm that our policies are followed and our expectations are met. Our buying agents and our vendors understand that TJX requires access to factories in which our goods are being manufactured in order for us to make such determinations.
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Independent
Third Party Audits: TJX has engaged CSCC and Intertek, both of which have offices throughout the world, to conduct factory inspections on behalf of TJX, and liaise with TJX to develop recommendations for necessary corrective action items identified as a result of these inspections.
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CSCC and Intertek audits generally entail one to two full working days at a factory. The auditing team includes fluent native speakers and readers of the manufacturing country's language. During the course of an audit, we require that CSCC and Intertek inspectors have the opportunity to interview factory management, as well as to conduct private interviews with factory workers. The auditors also review factory policies and documentation, and conduct a factory walk-through to assess compliance with labor, health and safety regulations, industry standards and TJX's Vendor Code of Conduct.
Each audit concludes with a closing meeting, at which time the auditor’s findings are communicated to the factory management. If necessary, a preliminary corrective action plan is provided, and appropriate follow-up is planned. For the benefit of those working in the factory and to effect social change, it is our goal to work with our vendors to help them understand and comply with our standards and to inform them of the steps they need to take to meet our standards. However, in extreme cases, we will terminate vendors for noncompliance.
Management Systems and Program Design
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We hold periodic meetings with CSCC and Intertek to (a) assess program status; (b) set monitoring priorities; (c) discuss training initiatives; (d) get updates on industry best practices; and (e) refocus strategic direction for our program. We also rely on input from other experts and stakeholders at various stages of this process. These include groups of interested investors, who have helped us by sharing their thoughts, ideas and suggestions. These discussions help us refine and improve these processes on an ongoing basis. |
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Our Manager of Global Social Compliance has regular, ongoing and systematic interaction with CSCC and Intertek to develop, orchestrate and implement TJX’s Vendor Compliance Program. This process also includes the involvement of TJX internal buying staff and others involved in the day-to-day management of sourcing issues for TJX. |
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We communicate on an ongoing basis with our buying agents to explain our expectations and to understand how their processes and management systems conform to those expectations. |
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We have initiated similar dialogues and processes with vendors from whom we source directly. |
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CSCC has conducted reviews of the internal compliance programs of several of our principal buying agents so that we might fully assess our reliance on their monitoring efforts conducted on our behalf. |
Operational Overview
We require our buying agents who produce private label goods for us to identify active factories that are used or that they intend to use to produce such merchandise. Our third-party monitoring resources focus on those factories in countries that we believe present the greatest risk of noncompliance with our Vendor Code of Conduct or the local law.
The TJX Global Social Compliance Manual, which was created with the help of CSCC and other external experts, contains, among other important guidance, an audit procedure outline and factory evaluation checklist to help prepare the factory for the audit process. This tool offers detailed information designed to help our vendors and agents better understand the expectations of our Vendor Code of Conduct, as well as the monitoring and corrective action processes. We have required our buying agents to disseminate this manual to their entire TJX vendor base.
We also have developed comprehensive compliance program guidelines for factory auditing. These guidelines help our third-party auditors assess factories used to produce our private label merchandise. We regularly review and -- as appropriate -- modify these guidelines to try to ensure that they are consistent with emerging vendor compliance issues and trends.
On-site audits conducted by our independent monitors and principal buying agents generally include one to two full working days at each audited factory, and include the following components:
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Interview with factory management (opening meeting) |
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Payroll and documentation review |
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Health and safety inspection |
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Confidential worker interviews |
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Debrief with factory management (closing meeting) |
Our Manager of Global Social Compliance participates in shadow audits with TJX's independent auditors and with our buying agents' in-house compliance programs (in other words, she attends and participates in the audits themselves, assessing the audits and the quality of auditors who are, in turn, assessing TJX's private label supply base). She does this in order to gain a better understanding of the compliance audit process and challenges, and to better aid TJX in our review both of audit results and, more broadly, of our program's effectiveness.
Corrective Action and Remediation
It would be ideal if our training and audits resulted in a clean slate for every factory. However, the reality is that improving working conditions in factories in underdeveloped countries is an ongoing effort, and TJX like other retailers is facing this challenge. Our goal when possible and reasonable is continual improvement of conditions at factories. This is preferable to pulling out of factories, and gives us the ability to influence positive change.
At the conclusion of an audit, a Correction Action Plan (CAP) is created, if necessary, and all concerns are discussed by the auditors with the factory management. Factory management is requested to sign the CAP to verify their understanding of the findings. A copy of the CAP is left with management to assist them in resolving the violations or deficiencies detected during the audit. A copy is also transmitted to TJX’s Manager of Global Social Compliance.
In an effort to encourage collaboration with our buying agents and vendors, a copy of the audit report and corrective action plan is forwarded to their attention shortly following a third-party audit.
TJX requires that our third-party monitors re-audit any factory where moderate to serious violations of the Vendor Code of Conduct or the local law are detected. For less severe deficiencies, our buying agents or direct vendors are to provide evidence to us demonstrating that remedial action has been carried out.
We expect that with each subsequent re-audit, continuous improvement is verified. Our general goal is that each re-audit must demonstrate measurable improvement from the prior audit. If a factory receives three consecutive noncompliant grades, this situation will be considered evidence that required remedial action is not being undertaken. While the reasons for this situation will vary from case to case, TJX reserves the right to suspend or terminate business with any factory.
Though we strive to work with vendors to address and resolve shortcomings in their operations, under extreme (though quite limited) circumstances we must conclude that we can no longer do business with certain vendors, or that they will be precluded from producing goods for us until such time that they can demonstrate that they have addressed the situation and have put management systems in place to prevent a recurrence.
Our preferred approach, however, is to work with vendors whenever possible to address and resolve issues identified during audits of their facilities. We believe that this “continuous improvement” model is in the best interest of the workers in the facilities from which we source goods.
Integral to the success of our compliance program is ongoing involvement and partnerships between TJX, CSCC, Intertek, our buying agents and vendors to address shortcomings identified in audits, and to work towards improvement.
Training
During the past three years, we conducted 30 training sessions for our buying agents, vendors and factory management. Sessions were held in China, Korea, Taiwan, Turkey, India, Indonesia, Philippines, Thailand, and Vietnam. These training sessions were conducted by either CSCC or Intertek and accompanied by our Manager of Global Social Compliance. We believe that the presence of our Manager of Global Social Compliance at each of these sessions in each of these countries demonstrates to factory management, buying agent management, and vendors that TJX is committed to its Vendor Compliance Program. To date, our training sessions have included the following topics:
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Review of TJX’s Vendor Code of Conduct and of the expectations contained in our Code |
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Review of local labor laws |
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Open discussions with vendors and factory management on compliance challenges |
Because of the strong, positive feedback from our agents and vendors, we will continue to devote resources to these important training initiatives and to review and update these initiatives as appropriate.
We also organize formal internal vendor compliance training for TJX Associates involved in the procurement of our private label merchandise. Through informal meetings and discussions, our Manager of Global Social Compliance continues to update TJX’s buying personnel on the requirements of TJX’s Vendor Compliance Program.
Overview of Program Effectiveness/Continuing Challenges
Over the past eight years, we and our agents have conducted thousands of audits of factories producing goods for TJX. Based on the knowledge learned from these audits and the program in general, we continue to revise and enhance our program.
TJX believes deeply in our need to drive ethical sourcing throughout our supply chain, yet this effort is a challenging one. Our main challenge is unique to TJX. Because of the small percentage of private label purchases, we generally do not represent a large enough or consistent enough percentage of a specific factory's business to exert meaningful influence on their business practices. Indeed, our business model demands that our sourcing efforts be spread over many factories at any one time. Moreover, the goods we source and our factory base is constantly shifting. This is one of the reasons that we focus our Vendor Compliance initiative so heavily on the cooperation, support, and leadership of our buying agents, whose relationships with production facilities through multiple purchasers tend to be more extensive than our business alone.
We have, on limited occasions, been forced to sever relationships with suppliers over issues discovered during our audit and compliance processes. But we have also had the opportunity to work with the vast majority of our private label suppliers to define and explain our expectations, so that we might work together to improve conditions in facilities producing goods for TJX.
This is a tremendously challenging undertaking, and we know that we do not have all of the answers. Indeed, no company does. But we feel we are responding to the challenge by making our commitment clear to our vendors and agents, by our auditing and training efforts, and by reporting about our efforts on our corporate website.
Vendor Code of Conduct |
