Factories manufacturing merchandise that we designed are required to undergo periodic audits to ensure adherence to our Vendor Code of Conduct, which includes adherence to local laws. In conjunction with our third-party auditors, we conducted approximately 750 audits in 2018, and we accepted an additional 1,300+ audits from accredited, third-party sources, like Amfori’s Business Social Compliance Initiative (BSCI), Worldwide Responsible Accredited Production (WRAP), and Sedex Information Exchange Limited (SEDEX). We believe this industry trend of collaboration and accepting audits from accredited sources is beneficial in that it helps reduce audit fatigue among suppliers, while helping companies obtain important information to evaluate their supply chain. Factories are expected to cooperate fully with us and our auditors and to provide access to facilities and documents. We have developed comprehensive compliance program guidelines for our third-party factory auditors. We regularly review and modify these guidelines for consistency with evolving social compliance issues and trends.
On-site audits generally include one to two full working days at each audited factory, and include the following components:
- Interview with factory management (opening meeting)
- Policy, payroll, and documentation review, including confirmation that factory management has verified the ages of job applications before hiring to protect against potential hiring of child labor
- Factory walk-through
- Health and safety inspection
- Chemical and hazardous materials review, including usage information and verification of Material Safety Data Sheets, chemical safety, and hazardous waste programs
- Confidential worker interviews
- Debrief with factory management (closing meeting)
Our AVP, Global Social Compliance, and International Buying Office Associates participate in shadow audits with auditors. Shadowing is practiced to gain a better understanding of the compliance audit process and challenges, and to better aid TJX in our review of both our audit results and, more broadly, our program’s effectiveness.
Corrective Action and Remediation:
For factories in good standing, our goal is to conduct biennial audits. At the conclusion of an audit where it has been determined that corrective action is required, a Corrective Action Plan (CAP) is created and concerns are discussed by the auditors with factory management. A copy of the CAP is provided to factory management to assist them in resolving any violations or deficiencies detected during the audit. To encourage collaboration between our buying agents and vendors, a copy of the CAP is also forwarded to both parties’ attention shortly following the audit. TJX receives a copy as well. Factory management is requested to sign the CAP to verify their understanding of the findings.
For lower-risk deficiencies, our buying agents or direct vendors are expected to provide evidence to us demonstrating that remedial action has been carried out. However, where moderate to more serious violations of the Vendor Code of Conduct or the local laws are detected, we require that our third-party representatives re-audit the factory. Problems are tracked and factories are notified of the expectation of remedial action. Our goal is to have re-audits complete within six months of the prior audit.
We expect that continuous improvement is verified during the re-audit. Our general goal is that each re-audit demonstrates measurable improvement from the prior audit. If a factory receives several consecutive noncompliant grades, this pattern may suggest that required remedial action is not being undertaken.
Though we strive to work with vendors to address and resolve shortcomings in their operations, under extreme circumstances, we may conclude that our merchandise can no longer be produced in certain factories, or that they will be precluded from producing goods for us until they 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 because improving working conditions in factories in underdeveloped countries is an ongoing effort and TJX, like other retailers, continues to face this challenge. We believe this is preferable to ceasing use of these factories as it gives us the ability to influence positive change. 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, our ethical sourcing experts – UL, Intertek, and Omega, our buying agents, and vendors to address shortcomings identified in audits and to work toward improvement.
There are several issues that we consider to be “zero tolerance” issues. That is, we would immediately terminate use of a factory found to be in violation of certain aspects of our program, including for example, our prohibition of bribery/corruption; child, prison, or slave labor; human trafficking; maintaining a facility with all doors and/or exits locked; use of chemicals banned in that region; and failure to pay any wages.