Ethical Sourcing Sunil Bhaskaran Vice President, Corporate Services Tata Steel Ltd. May 5th, 2017
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The TATA Group : Foundation of an institution
“The Tata philosophy of management has always been and is today more than ever, that corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the consumers of their products, of the local community and finally of the country as a whole”
J R D Tata
“In a free enterprise, the community is not just another stakeholder in the business but in fact the very purpose of its existence”
J N Tata – Founder of the Tata Group
2 2
The Tata Group: 146 years of Sustainable Growth
Cultural diversity: >6,00,000 people employed worldwide in ~100 companies, 80 countries in 6 continents
Unique business model: 2/3rd of Tata Group equity held by philanthropic Trusts
32%
36%
5%
16%
Engineering 39%
Materials 24%
Services 4%
IT & Comm 20%
Chemicals 3%
Consumer Products 4%
Energy 6%
$103.51
bn
Tata Group Turnover FY 16: $104 billion
India 30%
Asia excluding India 9%
Europe 57%
Rest of the World 4%
Turnover: $18.25 bn
Tata Steel Group: Spanning Geographies
11th largest steel company in the world, Fortune 500 company Operations in 26 countries 80,000 employees
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Delhi
Mumbai
I N D I A
C H I N A
M Y A N M A R
Arabian Sea Bay of Bengal
I N D I A N O C E A N
Tata Steel India Operating context : Major part of manufacturing value chain located in eastern India (mines to mills)
Jharkhand
Odisha
Major operating states: Jharkhand and Odisha
Large tribal and under-privileged population
Left Wing Extremism affected
Low social development S R I
L A N K A
Jamshedpur Kalinganagar
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With a Procurement of USD 1.6 billion across products and locations, including from unorganised sector
Scope of buy
Transport
RM
EPA
Services
MRO
Bulk
Locations
Jamshedpur
Mines & Collieries
Kalinganagar
Vendor Spread
1199
489 2155
Ltd CompaniesOverseas VendorsIndian Vendors
228 20
29
924
MSMENGOAA VendorsIndian Vendors
Organized Sector (3843 vendors)
Unorganized Sector (1201 vendors)
MSME- Micro, Small & Medium Enterprises, AA – Affirmative Action, NGO – Non Governmental Organization
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Supported by our “Responsible Procurement Policy”
We also expect our suppliers to contribute to the social, economic and institutional
development of the communities in which they operate.
Affirmative Action
HUMAN RIGHTS
LOCAL COMMUNITY
DEVELOPMENT
FAIR BUSINESS
PRACTICES
ENVIRONMENT
HUMAN RIGHTS
LOCAL COMMUNITY
DEVELOPMENT
Ethics & Values
Safety First !
Go Green !
SA 8000 Compliant
Senior Leadership @ Tribal Conclave
Supporting Livelihoods
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Vendor Base and local buying of Tata Steel : 1/3rd of our vendors are local to our operating areas, with increasing business
902 960
1376 1434
0400800
12001600
FY'12 FY'13 FY'14 Fy'15
Number of Jharkhand Vendors
214 199 465 495 544
0
1000
FY'12 FY'13 FY'14 Fy'15 FY'16
Business volume of Jharkhand Vendors – USD Million
5000 active vendors of TSL 4400 domestic vendors
1400 Jharkhand vendors
300 Odisha Vendors
2700 other domestic vendors 600 import vendors
61 92
146
299
050
100150200250300350
FY'12 FY'13 FY'14 FY'15
No. of Kalinganagar Vendors
Total Business to Odisha vendors: ~ USD 90 million
LOCAL COMMUNITY
DEVELOPMENT
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Achieved thru structured Vendor Capability Advancement Program
Strengthen the capacity, capability and management practice of Vendor Partners to meet increased requirements
To bring efficiency in the entire value chain and in the way of working to deliver quality goods and services
Impart targeted training for requirements at various levels in vendor ’s organization to promote inclusive development
Purpose of V-CAP
Training for only vendor
workmen through 3rd
party
Level 3
Level 2
Level 1
Tata Steel’s Supplier Development and Engagement Philosophy - through Vendor Skilling
Before FY-15 FY-15 & 16 FY-17
For Owners, Proprietors, Senior Management of Vendor Partners
For Site Managers and Representatives
For local distributors and retailers
Focused Group
Training (FGT) to address
pain points of inbound
supply chain e.g.
Throughput,Delivery, Safety
etc.
Gap-based training to a
mix of Level I & Level II
participants
Skill Assessment for Maintenance Service Providers
Way Forward Deployment at RM locations, KPO
and Profit Centres
8 8
With specific focus on “Affirmative Action” (AA) Vendor Development
Vendor Selection
Team Formation
Base Lining
Development Plan
Review
1.0 1.9 1.9
4.6 4.9 5.2
8.8
0.0
2.0
4.0
6.0
8.0
10.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17
Business Volume of AA Vendor in USD Million
10
23 29 29
44 47
0
10
20
30
40
50
FY12 FY13 FY14 FY15 FY16 FY17
No of AA Vendors
1000 entrepreneurs to be created with the help of Bharatiya Yuva Shakti Trust (BYST) at Kalinganagar
Rural livelihoods project involving 5500 tribal households at Kalinganagar / Bamnipal, in partnership with CINI (Collectives for Integrated livelihood Initiatives) of the Sir Ratan Tata Trust
Federation / producer company of cashew growers at Baharagora / Chakulia with the help of MART
Market yard for tomato growers at Patamda with the help of MART
Entrepreneurship – Future Plans
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Specific measures to engage local vendor base for Kalinganagar (Odisha) operations
Vendor Connect Day
- Participation by
50+ Odisha based Vendors
- Preliminary evaluation conducted
Engaged with Local Industry Associations
- CII Bhubaneswar,
Balasore, MSME Cuttack, Bhubaneswar, Utkal COC, etc
- List of vendors prepared with their support
Visit to nearby industrial hubs
- Mancheswar, Cuttack, Rourkela
- List of service and drawing items vendors prepared with their support
Local Entrepreneurship
development
- Local entrepreneurs identified for development
- Visit to JSR plant to illustrate scope of jobs and use of equipment
- RFQ for manpower based jobs
Joint Committee with Industry Associations
- To promote
inclusion of Odisha Based entrepreneurs
- CII Odisha, MSME Cuttack, Utkal Chamber of Commerce, OSSIA and OYEA
- To boost further the development of local vendors & entrepreneurs
1 2 3 4 5
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Acceptance to TCOC must for vendor registration Non-compliance may result in black-listing Vendor Whistle Blowing Protection Policy to
prevent unfair practice being adopted against the Whistle Blowers
Tata Code Of Conduct
• Mandatory for new suppliers External Audit by DNV-GL
• Audit protocol, vendor training, assessment & counselling
• Assessment carried out against SA 8000:2008 standard requirements and TCOC
• Partners with high value & long term contract considered for assessment
SA 8000
A foolproof system to prevent child labour
Employees age proof maintained by contractors
Minimum wages paid by all assessed companies
Social benefits e.g., PF, ESI, Bonus etc. paid accurately
No case of forced labour e.g., deposit of money
All the contractors follow Tata Steel Safety norms
No case of Discrimination noted
FAIR
PR
ACTI
CES
H
UM
AN R
IGH
TS
Human Rights and Fair Business Practices
Positive indicators from audit report
FAIR BUSINESS PRACTICES
HUMAN RIGHTS
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ENVIRONMENT
Green Buy Initiatives
5 R’s
Reduce
Consumption Refractories
Lime
Carbon footprint Rail vs. Road Transport Reuse
Recycle Water TCO based contracting
Replace Fuel Use of bio-diesel
Organic material Metal pellets instead of wood
Repair Refurbishment Bearings
Valves
Principle Major Projects
16 projects with an overall buy value of USD 26 mill underway
Projects worth USD 16 mill implemented upto March, 2017
Additional projects being identified and added to the pipeline
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Thank You
India’s Textile Production
Woven 62 Knits 22
Handloom, 12
Mills, 4
Source: NSDC- HR & Reqmt. in Tex Sector
• 4.8 % of woven Textiles • 45 % of Indian Knitwear Textiles • Overall 20.2 % of Country’s clothing
and textile production takes place in Tiruppur District
Contribution by Tiruppur
Employment Share of states in Textile Sector
Current T&C employment ~33 to 35 million Expected ~ 60 to 62 million by 2022.
Source: NSDC- HR & Reqmt. in Tex Sector
Tamilnadu 28% ~ 10 million people
• Tirupur was a small village about three decades ago.
• Emerged as a major player in world apparel Market.
Tirupur – Evolution
1st Knitting Unit set up
in 1937
First Merchant export of knitted garments to US
1972
Became the Knitwear
Capital of India in 2004
Export Turnover Zoomed to Rs.
25000 Cr during 2017
Number of Knitting units increased to 450 in 1960
In 1987, export turnover from
Tirupur increased to Rs. 75 Cr
In 2010, Export Turnover zoomed
to Rs.11,000 Cr
Vision to achieve a turnover of 1 lakh crore by
2020
Tirupur – Cluster Business Tirupur Business Growth Scenario
36,000 Crores 16,000 Crores 19 Crores
1985 2010 2017
$ 15 Mln $ 3.40 Bln $ 5.53 Bln
• Naturally formed cluster; • 7500 Units operating; • Micro, Small and Medium
segments of MSME work in tandem complimenting each other
• Almost all top international brands are sourcing from Tiruppur
Specialty of Tirupur Cluster
“Outperforming But Unrecognized Giant”
Eligible to be declared as ‘Carbon free Cluster”
Sustainable Manufacturing Green Power – Carbon Neutral Cluster
• More than 85 % of Water recycled and
reused in manufacturing
•100 Million Litres recycled every day
•Minimum Possible Carbon Footprint due to
green energy and water recycling
Sustainable Manufacturing Water Conservation / Recycling
Social Compliance – Role of TEA 1. Bridge between industry and labour unions 2. Operates based on periodical tripartite wage
agreement since 1990 3. No labour unrest for last 27 years 4. Mediplus 365 – ensures complete medical coverage
for labourers’ & dependants - 5. By paying USD 6/- per annum, entitled to a
coverage of USD 1500/- mediclaim 6. Enlightening members on ‘Visaka’ guidelines
against the sexual harassment in the work place 1997 to prevent sexual harassment in any form
Tirupur Stakeholders Forum
1. Established in 2010 2. Comprising of association, Brands, Trade Unions and
NGOs 3. Main objective is to collectively address challenges
pertaining to the workforce & working conditions 4. Released a booklet on “Guidance for Migrant Women
workers in Hostel and the Recruitment process spinning / garmenting factories”
5. Meeting periodically to address the issues then and there
Environmental Audit
1. Only ZLD compliant cluster in the entire globe 2. Appreciated by Swedish parliamentary delegation,
Canadian environmental minister, environmental delegates from Denmark and Netherland
3. 18 Common Effluent Treatment Plants and many Individual ETPs operating
4. No discharge of effluent into the environment 5. Online Monitoring by Pollution Control Board
Challenges
1. Different Standards by different buyers/ countries
2. In addition to inspection by governmental agencies
3. Major cost for MSME units 4. Hostile Media Propaganda – BBC Example 5. Uniform Code – need of the hour 6. DISHA (Driving Industry towards Sustainable
Human Capital Advancement) prepared by our Apparel Export Promotion Council (AEPC), set up by Ministry of Commerce, Government of India
Invisible Factors
1. Today’s labour tomorrow’s entrepreneur 2. No forced / bonded labour like conditions 3. Each individual possess minimum 1 mobile
Phone 4. Evidence of free information flow to all 5. Voluntary flocking of labour force from all across
the country 6. Every south bound train into Tiruppur unloads
thousands of new entrants 7. Demonstrative of their wellbeing
Concluding Thoughts
1. Note of appreciation for accomplishing invisible factors
2. Urgent need to implement universally acceptable common Code
3. To be implemented all manufacturing nations uniformly without discrimination
4. Shift from rule bound to handholding 5. Collective friendly approach to create ‘Win-Win’
for all stakeholders
billion US $ of export in 2015
largest supplier in the world
largest supplier in EU
largest in socks export
largest in knitwear
argest in denim
PHASE 2. AUDITS
In the beginning an internationally qualified auditor visits every participating companies production facilities
VISIT
The internationally qualified auditor conducts two full day inspections to evaluate whether the trainee has implemented their know-how acquired from the ‘auditor trainings’ to their companies production structure.
EVALUATION
Evaluation is made according to the Workplace Conditions Assessment Program (WCA)
A report is shared with the organizations including a future improvement plan.
SHARING
INSPECTION
TEXTILE EXPORTE
RS CHINA INDIA USA EU-28 TURK
EY
CAMBODIA
APPAREL EXPORTE
RS
79.0
12.1
55.2
15.6
S.KOREA
10.8
173.5
125.7
BANGLADESH 30.8
CHINA EU-28
TAIWAN
VIETNAM
24.9
INDIA
12.1
TURKEY
HONG KONG
10.4
15.2
16.7
9.0
7.6
HONG KONG
7.5
PAKISTAN
JAPAN
7.5
7.5
USA
12.1
INDENOSIA 10.4
TEXTILE EXPORTE
RS CHINA INDIA USA EU-28 TURK
EY
CAMBODIA
APPAREL EXPORTE
RS
79.0
12.1
55.2
15.6
S.KOREA
10.8
173.5
125.7
BANGLADESH 30.8
CHINA EU-28
TAIWAN
VIETNAM
24.9
INDIA
12.1
TURKEY
HONG KONG
10.4
15.2
16.7
9.0
7.6
HONG KONG
7.5
PAKISTAN
JAPAN
7.5
7.5
USA
12.1
INDENOSIA 10.4
BOTH
YARN
9.5 BlLLlON $
FABRICS
12.5 BlLLlON $
GARMENT
22 BlLLlON $
RETAILING/ BRANDING
COTTON CULTIVATION
400
FIBRE
MlLLlON $
FINISHING
4 MlLLlON $
Firstly being a principal company is required to be pioneer and leader in; export, investment, employment, added value, fashion and brand
Sustainability in CSR activities • through international
partnerships, • through developing practicable
projects Supporting the members with awareness and enhancement programmes
IHKIB IS ACTIVE
ON;
Engaged with other international CSR Bodies; IndustriALL, FLA (Fair
Labor Association), FWF (Fair Wear Foundation), etc.
OECD Working Group on responsible supply chain
management for apparel and footwear sectors
EURATEX Working Group and organizations on social
responsibility and sustainability
Ethical Trade Platform - Coordinated by ETI and in cooperation of international brands, exporters’ and employers’ associations, Trade Unions and NGOs - Aims to strengthen the Turkish clothing and textile sector’s ability to implement the UNGP (Guiding Principles on Business and Human Rights) through the establishment of a local platform
Association with public authorities for lobbying activities and regulatory requirements
LOBBYING
ETHICAL TRADE PLATFORM
OECD
EURATEX
OTHER INTERNATIONAL CSR BODIES
Turkey hosts the largest refugee population (3,3 million) in the world, including 2,9 million Syrians. According to UNHCR (United Nations Refugee Agency) the total number of Syrian refugees registered has increased significantly from 40,954 in August 2012 to approx. 2,9 million Syrians in March 2017 While 247,437 refugees reside in 20 camps, almost 90 % of the refugees are self-settled and sprawled in urban areas rather than living in a camp. Approx. 10 percent of them are mostly located in 20 camps in 10 cities
1. FACTS & FIGURES ABOUT REFUGEES AND INTEGRATION TO THE SECTOR
Objective was to improve the livelihoods and social security of refugees, in particular the youth and women, by providing them skills for (self) employment in Textile and Apparel sector
2. VOCATIONAL TRAINING FOR SYRIAN YOUTH AND WOMEN REFUGEES
INSTITUTIONS OF THE PROJECT ARE;
AFAD (Disaster and Emergency
Management Agency of Turkey)
MEB (Turkish
Ministry of Education)
İHKİB (Istanbul Ready-Made Garment
Exporters’ Association)
UNIDO (United Nations
Industrial Development Organization)
OUTCOMES OF THE PROJECT
Project Budget: 1 million US $ by
Japanese supplementary
budget
Project Period: 21 Months (31
March – 31 December 2016)
1.000 youth and women have been
vocationally trained.
Sewing and mold training
workshops were established in 3 refugee camps.
Apparel goods (esp. Traditional clothing – galabeya) needed in
Camps are still produced by trainees under the supervision
of MEB
The mapping study in cooperation with ILO, UNDP and UNIDO consisting 3 dimensions: Sustainability on Harnessing Linkages, by IHKIB
Environment and Clean Manufacturing, by ILO Women Workers, ILO CSR Practices Working Models, by IHKIB
The report which includes Politic and Strategic CSR recommendations on micro, meso and macro levels for Textile and Apparel Strategy, was distributed to all members and also shared with policy makers.
3. MAPPING FOR CSR ISSUES IN TURKISH TEXTILE AND APPAREL INDUSTRY
• High level awareness about the necessity of
CSR practices • Stress between purchasing practices and the
cost of CSR. • Standard of CSR practices is lower in
subcontractors • Companies are relatively good at complying
with national regulations but they are not taking “proactive” measures to adapt to potential regulations
• Companies’ focus is on environmentally-friendly products rather than environmentally friendly production processes.
Report is available in web; https://www.ihkib.org.tr/fp-icerik/ia/d/2017/01/17/mdgf-csr-report-onapparelindustry-2012-201701171639340887-C14EA.pdf
MAPPING STUDY FINDINGS
• Publishing books, booklets etc. o In the cooperation of Ministry of
Labor and Social Security, 7 main labour rights booklets have published and distributed to all our member companies
• Internet; Book, booklets and reports in our web page & Movies about CSR
• Press; Press releases & Press meetings
Booklets are available in web; https://www.ihkib.org.tr/tr/bilgi-bankasi/isci-haklari-kitapciklari/k-333
4. MASS INFORMATIVE PUBLICATIONS ON CSR
Measuring Firms acc. to these basic parameters; Scale of the enterprise (Small, medium or macro scale according to no. of employees and endorsement/turnover) Implementation level of CSR issues in terms of policy and capacity (capabilities with respect to labour, environment and other CSR challenges) Position in supply chain (supplier for international brands or internal market and scale of customer)
5. DEVELOPING CSR MANAGEMENT & IMPROVEMEN TECHNIQUES MODEL
o First link of brands’ supply chain (Especially international brands)
o Tier 1 companies (major/final exporters)
o Orderly audited by brands o Scale: Macro Enterprises
o Suppliers for macro scale companies or the one manufacturing for internal markets
o Aware of CSR principles but insufficient capacity to implement them
o Scale: SME
DEFI
NIT
ION
S O
F LE
VELS
AI
M BETTER
PERFORMANCE IN SELF-ASSESSMENT
CAPACITY & INFRASTRUCTURE BUILDING
o Final apparel-tier in supply chain
o Having difficulty in also obeying national rules and regulations
o Lack of CSR awareness o Scale: Micro Enterprises
RAISING AWARENESS AND CAPABILITIES
ADVANCED INTERMEDIARY BASIC
Implementation of Supplier-Specific CSR Programmes • Social Compliance Improvement and Total Quality
Management through these tools; o Grading&Scoring, Evaluation, CSR
Guides/Manuals, Training Programmes, Certification, Self-Auditing
• Differentiation of scope and methodology of the tools with respect to the level of supplier
5. DEVELOPING CSR MANAGEMENT & IMPROVEMEN TECHNIQUES MODEL
o Conducting internal social compliance audit in companies
o Certification of employees as social compliance auditors
o Grading social compliance grade by companies itself
o Evaluation of companies by professional auditors
o Improvement of quality control processes
o Master monitoring procedures (quality, measures, comformity, packaging)
o Start to use the same standards as their clients
1. CSR IMPROVEMENT PROGRAMMES (internal + secondary supplier)
2. QUALITY CONTROL AND STANDARDIZATION PROGRAMMES
• IHKIB has begun implementing the CSR management model for its ongoing sub-sector clusters
• Lingerie and Homewear BrandsCluster • Socks Manufacturers Cluster • Denim Exporter’s Cluster • Knitwear Exporter’s Cluster
MODEL IMPLEMENTATION IN CLUSTER PROJECTS
• Implementation tools is assigned for each cluster, based on the needs of companies;
o Two representative from each company attend a four-day training on international audit standards and audit processes
o Participants partake in two examinations; successful participants will be rewarded with an international chief auditor certificate.
CSR IMPROVEMENT PROGRAMME
o Social Compliance Management Systems,
o Child & Forced Labour, o Discrimination, o Maltreatment, o Freedom of Association, o Working Hours, o Payment and Related Rights, o Regular Employment, o Environment, etc.
AUDITOR TRAINING
SUBJECT MATTERS
PHASE 1. AUDITOR TRAININGS
o 6 man/days per company
COMPANY COMMENTS
TUGCE IYIKULAH ARIK EXPORT MANAGER – HOBBY
SOCKS
MURAT YAZICI EXPORT MANAGER – ULTRA
SOCKS