How VF are pursuing a collaborative responsible sourcing strategy
VF Corporation isn’t your average garment or footwear manufacturer. Most obviously, it’s huge. Two dozen or so major brands (including icons such as Wrangler, Lee, The North Face and Timberland); 60,000-plus staff; nearly 1,000 contract factories producing over 1.3 million items per day across almost 50 countries.
Second, it still makes stuff. While most won’t admit it publicly, the majority of the world’s big clothing brands are essentially logistics and distribution outfits. In contrast, VF takes a hands-on approach throughout the product cycle, from procuring the raw materials right through to providing customer service. It’s old-school in that respect.
“We’re not just a buy-sell organization. We’re not just a logistics organization. We’re a fully connected supply chain,” says Tom Glaser, vice-president of VF and president of supply chain.
So when a company of such a magnitude, with such a close grip of the manufacturing process, starts taking responsible supply chain management seriously, it sends ripples through the sector as a whole.
As one of the pioneers of outsource manufacturing, the garment sector has had to do more than most over the years to fend off accusations of ‘sweatshop labour’. VF was no exception, with various well-meaning but disparate policies designed to stamp out underage working, forced labour and similar egregious abuses in supplier factories.
Rana Plaza effect
With Rana Plaza, everything changed. When the eight-story factory building in Dhaka collapsed in April 2013 killing 1,129 people, VF jumped straight away into “emergency” mode. The company donated $400,000 to a trust fund for the victims – despite having no relationship with any of the garment firms in the building.
The US clothing giant went further and became a founding member of the Alliance for Bangladesh Worker Safety. Among other measures, the Alliance has helped to equip over 1.2 million workers with fire training and has supported a confidential hotline for workers to report concerns. Most impressively, perhaps, it has earmarked $100m in low-cost loans to help factory owners make their premises safer.
A year or so after the tragedy, Glaser and his colleagues took time out to reflect on the lessons learned. “Rana Plaza was an industry-changing event,” he reflects. “As we stepped back as a management team, it seemed that if we integrated all that work together we could get a lot more done.”
From that timely observation, the idea for a comprehensive Responsible Sourcing programme was born. Launched in November 2014, the strategy aims to bring all’s VF’s responsibly focused supply chain activities – both new and old – under one roof. Responsibility for managing what happens under that roof falls to Sean Cady, who sits in the newly created position of vice-president of responsible sourcing. But the buck ultimately stops with Glaser, who describes himself as the “throat to choke” should anything go wrong.
VF’s Responsible Sourcing programme has four main focus areas: worker well-being, sustainable living environments, environmental sustainability and product stewardship. Each comprises a substantial work-load. Take VF’s environmental sustainability efforts, for instance, which encompass a wide range of activities to make supplier factories more water and energy efficient. Or consider product stewardship, which comprises an ambitious programme to promote safe chemistries as well as to trace raw materials such as cotton, leather and rubber back to their original source.
Glaser defines himself as a “numbers man” and providing measurable metrics for each focus area therefore forms a guiding principle of VF’s supply chain management. As the company beds down its new strategy, its effort to collect data on key performance indicators is mostly geared towards internal improvements – the necessity of which Glaser is at pains to point out. (“We’re on a continuous journey to improve”, “We have a long way to go”, “We can’t know it all”…You get the idea).
That said, demands for external transparency cannot be ignored. Consumers, factory workers and VF employees all have a legitimate interest in knowing how the company is using its vast influence to promote better, safer working conditions in its supply chain. As an initial step, VF issued its first sustainability report in 2014, a portion of which is dedicated to responsible sourcing. The company has also launched a stand-alone website that details its supply-related policies and practices in more detail here
With transparency comes a dilemma, however: just how much information should VF give about the performance of its suppliers? Nike sets the bar, providing regularly updated information on accident rates, instances of child labour and other examples of non-compliance – albeit in aggregated formats. Glaser is cautious about going quite so far. Better to allow suppliers the opportunity to improve than “name and shame” them, he reasons.
The same rationale undergirds the company’s reluctance to immediately cancel contracts with poorly performing factories. Instead, if VF’s extensive audit team finds major problems, time is given for the factory management to make the necessary changes. If those changes are extensive, VF has a separate Sustainable Operations Team that advises factory owners on a remediation plan. Only when owners prove themselves unable or unwilling to make changes does VF give them the boot.
“If you have a plant where you can improve worker conditions and give that worker the dignity of a job, then that’s a good thing for our business and it’s a good thing for that worker. Just walking away from a plant could in some cases make the workers’ ability to be employed less secure,” says Glaser.
The argument fits with the long-term “partnership” approach that VF seeks to develop with its first-tier strategic suppliers. The policy of close cooperation with this crucial cohort – many of which are multinational companies in their own right - is inspired by business logic as much as corporate values. This “Third Way” approach, as VF defines it, leads to better product quality and higher worker retention – two outcomes that every garment brand around the world would ideally like from their supply base.
As part of its Third Way programme, VF engineers and trainers work closely with factory owners to implement manufacturing best practices. In several cases, the company has gone as far to help a supplier build a state-of-the-art, eco-efficient facility. The first such factory, in Bangladesh, came on stream in late 2014 and is expect to produce 7 million pairs of jeans each year by 2019. In the future, VF hopes to source 40 percent of its total manufacturing from Third Way facilities.
Complex journey ahead
With so many suppliers, in so many different jurisdictions and product categories, the idea of VF “arriving” at some kind of fully compliant final destination is unrealistic. Not only are supplier relationships hugely complex, but they are dynamic too. Right now, VF sources over $1 billion worth of goods from China and Vietnam, respectively. As wage levels change and new markets open up, VF’s global manufacturing matrix will inevitably shift and reshape in coming years.
"Our industry is extremely global. We’re in developing nations that don’t have the infrastructure we’re used to in Western countries…just managing this complexity is a very big challenge for us. Getting the cooperation [of other brands] and harmonising our standards as an industry represents a real challenge too,” says Glaser.
VF’s supply chain president is not naïve about the size of the task ahead, nor the distance it must still travel. But he and his substantial team (the Sustainable Operations unit alone has 36 personnel in 13 countries) are clear on the trajectory ahead: more integration both inside VF and across its supply chain, more constructive partnerships with suppliers, and, ultimately, more sustainable and safer working conditions for everyone in VF’s supply chain.
If he could have one wish for the industry as a whole? Answer: making responsible supply chain management a “pre-competitive issue”. The Alliance for Bangladesh Worker Safety is a good example of what can be achieved when companies collaborate. That means going against their natural instinct: after all, garment and footwear brands are accustomed to battling it out on the high-street day in, day out. The fact that there’s a parallel scheme (the Accord on Fire and Building Safety in Bangladesh) shows just how difficult pan-industry cooperation can be.
Going forward, that needs to change. “We have plenty of things to compete on. We can compete on product. We can compete on marketing. We can compete on consumer experiences,” says Glaser. “We should not compete on making sure that workers are treated with respect and are safe.”
Tom Glaser is speaking at the 5th Responsible Business Summit New York, sharing VF's responsible sourcing journey. Other brands sharing their strategies include; PepsiCo, Salesforce, Ecolab, Elanco, Timberland, Interface, Heineken, Firmenich and many more. Click here for more information