Ethical Manufacturing in a changing landscape

ICTI Ethical Toy Program Webinar

18th March 2020

Welcome

Today’s webinar will cover:

• Brief introduction to the Ethical Toy Program

• Update on COVID-19 (Coronavirus) and our measures to support the toy industry to manage through the crisis

• Minimizing risks, maximizing opportunities in your supply chain

• Regulation, legislation and standards – how to respond to evolving regulation on ethical manufacturing

• Q&A

Presenters

Carmel Giblin

President & CEO

Mark Robertson

Senior Vice President

What we do

• Set the standard for ethical toy manufacture

• Social Audits and Toy Factory Certification

• Factory Training and Capability Building

• Programs for Worker Well-Being

• Worker Helpline and Support

• Collaboration to reduce duplication and tackle key challenges

Ethical Toy ProgramThe leading ethical sourcing program for toy, play and entertainment industries

factories in the program

1,200+workers covered

700,000+1,000+15year’s

experiencebrands and

retailers

Where we work

Already established in 13

countries and regions

New regions include: Europe,

UK, USA, Mexico

1200+ factories

What we cover

Toys & Entertainment (wooden, plastic, plush,

electronic, educational, stationery, board games, model)

Printing & packaging (books, magazines, packaging, cards,

puzzles)

Juvenile & Baby (prams, bikes, baby seats, garments, early education,

walkers crib)

Sports (bicycle, trampoline, skateboard, jump rope, balls, inflatable pools)

Hard goods (promotional items, pets, costume, gifts, furniture electronics)

Some of the brands we work with…

… and retailers

Covid-19 (Coronavirus)

Our Objective: to support the global toy industry and promote business continuity whilst ensuring our primary objective of ensuring workers’ rights are respected

• COVID-19 presents unprecedented challenges for our industry

• Production resuming in China, but progress undermined by the global spread of virus

• IETP has introduced the following special arrangements:

- Certification extensions and support for those factories whose onsite audit is delayed

- Self Declaration Process enables factories to voluntarily report issues and request exemptions ahead of audits

- Increased promotion of our Worker Helpline

- Responsible Recruitment Guidance issued to all factories

Minimizing risks, maximising opportunities

• Manufacturing costs rising in China and other countries, we support toy factories to increase business effectiveness and achieve efficiencies

• Labour intensive processes are moving to other countries, we offer global coverage and support in emerging centres for toy production

• Increasing legislation on human rights and sustainability, our program is continually updated to support compliance across these areas

• Growing demands for transparency for investors, customers, retailers, consumers, civil society, we offer reporting tools and support to meet stakeholder needs

Regulation, legislation and standards

Regulation, legislation and standards

• Raft of new legislation, regulation, and frameworks on modern slavery, human rights and business ethics

• Growing pressure from governments, civil society, media and investors to address these issue

• Beyond legal requirements and stakeholders expectations, there’s a clear business case for addressing these issues

01/2012California Transparency in Supply Chains Act

2010 20132011 2012 2014 2015 2016 2017 2018 2019 2020

Timeline Corporate Social Responsibility & The Law

07/2010Dodd-Frank Wall Street Reform andConsumer ProtectionAct

03/2015United Kingdom Modern SlaveryAct

03/2017Corporate Duty of Vigilance

01/2018Non-Financial Reporting EU Regulation

01/2019AustralianModern Slavery Bill

01/2020Dutch Child Labour Due Diligence Law

Coming soon?

German Human Rights Due Diligence law

EU legislation on Human Rights Due Diligence

01/2015

Modern Day Slavery / Human rights due diligence requirements

The Trade Facilitation & Trade Enforcement Act

Modern Slavery

Low skilled labor such as toy manufacturing is at risk

Slavery is illegal in almost every nation, but risks persist almost everywhere

21 million people

victims of forced labor

Vast majority of victims are exploited by businesses

56% are in forced

labor in their home country

Over half of victims of slavery are female

UK:Modern Slavery Act

• Applicable to any commercial organizations, based inside or outside the UK, and carry on business within that supply goods or services

• Threshold: £36 million (annual turnover) in United Kingdom (including part of a business)

• Covered business activities: any part of own business and any part of supply chains

• Minimum reporting requirements: “steps taken to ensure that slavery and human trafficking is not taking place, if any”

• Reporting period: Financial year, reports recommended within 6

months after fiscal year end

Effective since 2015

US:Trade Facilitation and Trade Enforcement Act (TFTEA) of 2015

TFTEA key points:

• Bans imports of goods suspected of being made using forced/child labour

• Gives the US Customs and Border Protection (CBP) the authority to issue Withhold Release Orders (WROs) which prevent goods suspected to have been made with forced labour from entering the US.

• The CBP has defined a list of countries/product categories which are high risk for modern slavery and child labour. Toys made in China are on that list.

• Toy companies risk having their goods impounded at the border if produced in a “high risk country” but are unable to demonstrate they

were produced in a forced/child labour free environment

Enforcement: • 13 WROs issued by US

Customs and Border Protection since 2016

• Some of these target specific factories, others target entire regions

Toy example: • March 2018, the CBP

issued a WRO against toys manufactured by Huizhou Mink Industrial Co. Ltd, China

UN Guiding Principles on Business and Human Rights

All business regardless of size are expected to conduct human rights due diligence

1,200+

1,000+

15

Actioning the UN Sustainable Development Goals (SDGs)

IETP supports businesses to achieve progress in implementing SDGs across a number of areas, including:

Safe Working Environment

Worker Well-Being Programs

Worker Helpline

Workplace Safety

Human Rights

Empowerment

No Discrimination

Gender Focus on Checklist

Empowerment Programs

• Freedom

Choice

Pay, hours & benefits

Collaboration

Partnering

Influencing & Sharing

3 GOOD HEALTH AND WELL-BEING

4 QUALITYEDUCATION

5 GENDER EQUALITY 8 DECENT WORK AND

ECONOMIC GROWTH 17 PARTNERSHIPSFOR THE GOALS

Employer Pays Principle No worker should pay for a job – the costs of recruitment should be borne not by the worker but by the employer.

Responsible Recruitment: Employer Pays Principle

Migrant Worker Recruitment Fees - the increasing debt burden

The Employer Pays Principle and IETP

New IETP audit checklist requirements regarding recruitment fees:

• Edits to existing checkpoints prohibiting the charging of recruitment fees

• Additional protections for directly-recruited workers• New requirements governing the use of labour brokers• Factories required to declare if they use labour brokers• Recruitment fees must be reimbursed to directly hired

foreign migrant workers

Vast majority of workers are recruited directly by the factory

Data from 688 Progress Visits conducted between October 2018 and Sept 2019

96%

3% 1%

Direct recruitment

Labor broker

Dispatched labor

Source: Ethical Toy Program

SN

AP

SH

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RT

Recruitment paths

Majority of toy production workers are female

42%

58%

17%

83%

34%

66%

ChinaVietnam Indonesia

This split varies geographically

Source: Ethical Toy Program 2019

SN

AP

SH

OT

RE

PO

RT

Workforce composition

SN

AP

SH

OT

RE

PO

RT

Worker well-being

Focus on worker well-being

• Factories are seeing workers as an asset not a commodity

• Recruitment & retention is a priority• Factories focussed on creating better

environments for workers• Workers are more aware of their rights

and won’t tolerate bad working environments and look for positive benefits such as childcare.

Looking ahead: future updates to IETP

Redesigning certification

model in 2020:

Maintain the Standard

Improve Accessibility

Grow participation & acceptance

Improve standards at factories

Expansion Beyond China Ensure program globally

available: Vietnam & India

expansion / UK & EU

Extension to new sectors Adjacent to toys

New ServicesEnvironmental Module, Social

Impact Assessment, Supply

Chain Reporting Tool

Thank you,

Contact us to find out more about how Ethical Toy Program

membership can benefit your business:

carmel.giblin@ethicaltoyprogram.org