Pactics CSR Magazine #2 by Pactics

PACTICS Innovation you can trust

Better together Siem Reap, Cambodia

Corporate social responsibility report

Colophon Editors-in-chief Julie Bijlstra and Martijn van Rijnsoever Managing editor Danielle van Gils, Synergos Communicatie The following people contributed to this magazine: Piet Holten, Boris Ploum, Julie Bijlstra, Martijn van Rijnsoever, Maartje Smeets, Swen Rothman, Miranda Minassian, Peter Olszewski and Lina Goldberg

Photography John McDermott, Antal Gabelics and Yolanda vom Hagen Design Janneke Holten Printing Indrukwerk, Huizen, The Netherlands

Well on our way Foreword When the previous issue of this magazine appeared we had just embarked on a new adventure. I described the building of the Pactics organization as a thousand decisions that led to the creation of a factory that was good for its customers and good to its employees as well. A factory we could be proud of. Since then we have maintained our momentum and have been able to lift our company to the next level. Although our factories set the industry standard in our market when it comes to Corporate Social Responsibility, we are not perfect and each audit is a learning experience. After a long and instructive series of audits I am very proud to say that we have won approval from adidas’ Social and Environmental Affairs (SEA) team, which means we can start producing for adidas. Piet Holten What we promised to do in our last magazine we are now doing. This is why I chose “Well on our way” as the title of this foreword. Our Cambodian factory celebrated its official opening in March 2014 and is now going full steam. This means that we can truly offer high-volume production to our customers with very competitive prices, while providing very flexible and fast deliveries from our Shanghai location. Looking ahead, I see things changing in the right direction. Where once we sometimes felt we were a bit too far ahead of the curve, offering a level of supply chain that was not yet in big demand from our customers, we now see very stimulating developments in the market. That helps us feel confident that most of the thousand decisions we’ve made have been the right ones, and that we are now a company whose multiple production locations offer the supply chain of the future. On behalf of Pactics management and staff,

Piet Holten President

4 | PACTICS ma gazine

Table of content

10 11 12

Innovation you can trust

Smart production design

Opinion Peter Olszewski

In search of people

Our definitions

Portrait of Wave

Portrait of Yan Vanna

A factory thatâ&#x20AC;&#x2122;s both sustainable and low-cost

Training our people

Portait of Chhoat Makara

Pactics and SA8000

31 33 36

Living wage project

Facebook timeline: Building the factory

Portait of Kong Chanrotha

TI Cambodiaâ&#x20AC;&#x2122;s Business Integrity Program

39 43

Better together

Corporate social responsibility Report 2013

Innovation you can trust Pactics manufactures premium cloths and pouches for the world’s leading brands in sports and fashion eyewear. Its goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business in a socially and environmentally responsible way.

The combination of product/process innovation and an

move forward by continuously challenging what is possible

international sales and service department offers unique

to ensure their leading role in microfiber for eyewear. The

opportunities for Pactics’ clients to work directly with the

unique properties of microfiber offer benefits in other markets,

factory and get the best results in quality, on-time delivery, new

too. Says Bijlstra, “We are the market leaders in what we do.

product development, and brand protection.

Our expertise enables us to explore other markets as well. Our approach–trying new things–gives us the confidence to

Knowledge and innovation in microfiber

expand.” At the moment, most of their clients are eyewear

Pactics’ customers are assured of products made of consistently

brands, but Pactics also has begun entering other markets.

high-quality microfiber fabrics. Because of their knowledge

Microfiber ensures scratch-free cleaning and protection, which

of the microfiber material, Pactics is able to source the right

makes the products perfect for protection and packaging for,

raw material to match clients’ needs. “Microfiber comes

for instance, jewelry and electronics products as well.

in a lot of varieties. We advise our client which variety best matches their designs and brand image,” explains Business

The Pactics factory in Shanghai is equipped with the newest

Development Manager Julie Bijlstra. “We advise our clients on

printers and sublimation machines. Complicated designs can

what techniques we can use to create the look and feel they

be printed professionally on fabrics. This in combination with

need. In this way the accessories help not only to safely clean

the well-trained staff makes Pactics perfectly able to create

and protect eyewear, but also to strengthen their brands.”

a product that not only protects or cleans, but also, as an accessory, enhances our clients’ products. Unique designs and

Commitment to their current products has not stopped Pactics from looking towards the future. The company continues to 6 | PACTICS ma gazine

great prints strengthen the brand message.

Furthermore, Pactics is not limited to manufacturing products

Two wholly owned production locations

made of microfiber materials.

With the opening of its production plant in Siem Reap, Cambodia, in March 2014, Pactics now operates two wholly owned

New materials are being explored and Pactics connects with

factories. Pactics' overseeing of the complete manufacturing

universities, for instance in the Netherlands, to work with

process has multiple advantages for their clients. Bijlstra:

students in projects related to product development and

â&#x20AC;&#x153;We manufacture all products in our own production facilities

material development. For example, projects have been started

in Shanghai and Siem Reap. We fully control the production

with the Industrial Design faculty of Delft Technical University to

environment where the branded products are manufactured.

develop different kinds of eyewear cases, different in both form

This means clients can trust that their brands are secure,

and material. What if the product is not only used for protection

can count on consistent high quality and can rely on on-

and cleaning, but as an information carrier as well? Can it be

time delivery at a competitive price. We fully understand the

used for presentation in retail? Thinking out of the box like

importance of brand protection and brand security. We have

this is typical of Pactics. Pactics is very aware of the growing

been working with premium brands now for many years.â&#x20AC;?

interest in doing business in a more sustainable way. We focus on production techniques and use of materials that have less

Pactics can promise their customers consistently high-quality

impact on our environment. To fully investigate alternatives,

products. At the same time, with the whole production in their

last year Pactics began collaborating with students from the

own hands Pactics can ensure products are made in an ethical

University of Amsterdam. This assures that Pacticsâ&#x20AC;&#x2122; clients will

and environmentally friendly way.

benefit from the latest developments, creative solutions, and a professional approach. Innova tion you can trust | 7

Bijlstra: “Doing business with Pactics means you deal directly

final delivery, Pactics works to maintain the highest standards.

with the factory. Consequently, lines are short and direct

Vice President for Business and Product Development Erwald

and Pactics is able to be very responsive in development of

Boer says,“We believe in a constant dialogue with our clients.

new products and in meeting the needs and demands of our

Communication goes both ways.” To fully understand the needs

clients.” Pactics controls the complete cycle of manufacturing.

and demands of their clients, Pactics employs a wide range of

They develop, manufacture, and test their products and do it all

international employees. They are able to speak with clients

themselves. Turn-around times are short and communication

in their native language and also understand their business

is easy.

“world”. In this way Pactics can make sure that the details of each request are accurately conveyed.

The growing interest in sustainable materials and a responsible way of manufacturing them is a key focus of Pactics’

Boer: “Clients feel like they get a special treatment when we give

manufacturing process. In this way of doing business, not only

them our undivided attention and make sure we understand

Pactics’ employees, also their clients gain major benefits from

what they exactly want. But to us this is the only way to interact

the responsible process of production. Brands are secure and

with clients. We don’t do business with abstract companies,

products have consistent quality. Bijlstra: “We offer our clients

but with the people who work there.” Part of the interaction

a facility in Cambodia that can manufacture high volumes at a

between Pactics and their clients is to think along with their

very competitive price and a very flexible and creative facility

clients. Advice on which fabric is the most advantageous for

in Shanghai that offers small runs, quick turn-around times,

a particular order helps the client to benefit from Pactics’

design capacity, and innovative techniques and materials.”

expertise. Understanding a client’s business enables Pactics to provide their expertise already in the design phase of new

All-around service

projects. This brings in creative ideas and saves their clients a

In Pactics’ view, delivering a high-quality product also means

lot of extra work in later stages of development.

following through with precision service. From first contact

Pactics’ Quality Control Department provides professional

through the ordering process, prototype development, and

quality control in all stages of production, from incoming raw materials to finished products. With a professional and

8 | PACTICS ma gazine

internationally staffed sales and service desk in Shanghai and sales offices in Europe and the United States, Pactics makes sure they are close to their customers. Being close makes communication easy and the personal way of doing business guarantees good understanding of the customers’ business. Boer adds, “In this way we are very flexible. We're able to act proactively and are available at short notice in all time zones.”

Strong CSR policy in production and sourcing Clients as well as consumers are increasingly interested in where products are made and how they are made. Pactics believes there is only one way to guarantee a high-quality product: ensure safe and fair labor practices and do business in an ethical and environmentally responsible manner. Says Bijlstra, “We prioritize the social and environmental impact of manufacturing. The needs of our planet and our people–partners, customers and staff–are of primary importance to our business.” Pactics’ commitment to sustainable production arises from the belief not only in a better world, but in making a better product. Erwald Boer notes, “Our clients invest heavily in their brand image. You see a growing demand for decent supply chains, especially for the major brands. In our market we are currently

Pactics believes in being a decent and responsible company.”

the only one offering this. We see the growing importance of sustainability policies among our customers. Pactics wants to be a partner in realizing sustainability objectives for these customers. And should they not find this a top priority, we are still the best low-cost manufacturer around.” To make sure Pactics’ supply chain is in line with their own policies, Pactics regularly audits their suppliers, has strict agreements with suppliers, and works in partnership to continuously improve collaboration.

Innovation you can trust Pactics believes in being a decent and responsible company that provides their employees with a safe and pleasant working environment and serves their clients with reliable and consistent high-quality products.

Innova tion you can trust | 9

Smart production design High volume high mix Boris Ploum, Vice President Production & General Manager, Pactics Cambodia

second production facility in Cambodia We make 50 million products per year and in over 400 variations.

More flexibility

Some products are made in high volumes, but many others are

Looking to further increase the companyâ&#x20AC;&#x2122;s flexibility, we

made in small volumes and highly customized. Our two facilities

have taken reorganizing a step further. We are moving the

are specifically designed to offer both.

Shanghai factory from traditional factory line production to more responsive individual teams called cells. This allows the

Looking to keep costs down and stay ahead of main competition

Shanghai factory to create faster turnaround times for specialty

in China, Pactics has invested in streamlining its business. In our

items. The company-wide shift in production systems has of

production design the bulk production now goes to Cambodia

course presented challenges for us. Changing workersâ&#x20AC;&#x2122; habits

and the specialty products and product development stay in

takes time. The cultural and geographical differences between

Shanghai.

the two locations require separate planning for each country. Since we are a company with high social standards, we always

Since the cost of labor is lower in Cambodia, high-volume

have to be innovative to keep our prices low. The flexibility

orders will now be rerouted to the new Siem Reap factory.

to deal with these changing conditions is in our DNA. The

This redirection of simple, bulk contracts frees up the veteran

efficiencies that have been created through smart planning and

production center in Shanghai to handle more technically

organization, whether production -related or institutional, we can

demanding orders, specialty pieces, and rush requests.

pass down to the customer. We have taken fundamental steps to stay cost-effective while operating ethically in the niche market

By choosing a specialization per factory, each factory is able

of microfiber products. It is very rewarding to see how a good

to develop according to future needs, creating efficiencies

production strategy creates benefits for our customers and for

for the company as a whole in the process. Our production

our employees.

strategy allows us to also make use of the preferential import arrangements between Cambodia and the European market. 10 | PACTICS ma gazi ne

CSR & SA8000

CSR - Corporate Social Responsibility

SA8000 basic auditor training course

Pactics works in a very volatile market. We are a low-cost

So far two Pactics managers have successfully completed the

supplier in a global supply chain. Cost is an important driver

SA8000 basic auditor training course. We are implementing

for our customers and therefore also for us. Corporate Social

SA8000 in our factory in Cambodia. For Shanghai we are

Responsibility for us is a very clear definition of the bottom

talking with customers about whether we can use a BSCI

line. We do not exploit human capital or natural capital

auditing program to monitor social compliance in Shanghai.

to make a profit. For Pactics this is a matter of common decency. CSR refers to agreed frameworks that regulate this bottom line across the supply chain. Pactics stays ahead of the game to offer our customers (and ourselves) long-term reliable supply chain solutions.

SA8000 and BSCI SA8000 is a certification standard. It is based upon the ISO methodology and the SA8000 certification uses the same approach as ISO. SA8000 requires a set of policies, tools, reports, monitoring, and review mechanisms that enables a company to set a standard and then maintain it. SA8000 certification has to be earned and is offered for a period of three years with in-between checkups. SA8000 is generally perceived as the highest standard in social compliance. BSCI is one of the fastest growing auditing schemes and is based upon the SA8000 standard. BSCI auditors need to follow SA8000 training and become SA8000 certified auditors to do BSCI. Innova tion you can trust | 11

Portrait of

opportunity for those able to adapt. Well suited to meet the challenges of a changing landscape, Naing Vannoeun has a skill set that was recognized and recruited by Pactics President Piet Holten.

Wave

Known as Wave, and running a small but highly entrepreneurial

After heading to Shanghai for machine maintenance training,

taxi company, he impressed Holten, who used the young man’s

Wave has gone on to manage the shipping systems and deal

services whenever he was in Phnom Penh.

with day-to-day logistics.

Recognizing Wave’s potential, Holten coaxed the enthusiastic

“It is very different to run a small taxi company than to be

Khmer to relocate to Siem Reap and take a job with Pactics

standing in front of 100 people to have a meeting,” Wave says

in 2010.

about his progression within the company. “I am very happy to work with a team with high knowledge that comes together.”

Wave’s responsibilities have developed since he was initially tasked with helping prepare and maintain the company’s first

Smiling as he talks about the business and personal

converted shophouse-factory in Cambodia.

development that he has experienced over the last three years, Wave is now looking forward to the future. “I want to have a

Over the last three years, the 31-year-old has used a positive

family and a small house to live in in Siem Reap,” he says,

attitude and a knack for problem solving to develop a well-

adding. “I want to work for Pactics for as long as they need me.”

rounded understanding of Pactics operations.

12 | PACTICS ma gazi ne

brand-

new factory Siem Reap, Cambodia

Innova tion you can trust | 13

Portrait of

Yan Vanna has her in the classroom, where she has always wanted to be. Yan Vanna has been working with Pactics ever since their

Now the mother of two young boys, Vanna has spent the

first small-scale shophouse was opened in Siem Reap. The

past three years working full time to provide them with the

dedicated mother of two was among the company’s first

educational opportunities and stability her own childhood

employees when Pactics first started production in Cambodia.

lacked. With a stable job–one that offers insurance and public holidays off–Vanna says that she has been able to carve out a

An orphan before her eighth birthday, Vanna’s future didn’t

life for her family.

seem so bright. She was sent to live with a family friend in Siem Reap. But with little money to go around and a guardian

Completion of Pactics’ new factory, complete with a day-care

who didn’t believe in education for women, she was forced

room, has Vanna hoping to spend more time with her children.

out of school in the third grade, a common fate for girls in

Smiling broadly as she talks about providing for her sons,

Cambodia. Approximately 65 percent of women do not receive

Vanna is equally excited about her own future. Company-

an education beyond grade school and future employment

wide workplace and labor regulation training have her in the

opportunities can be limited for women who find themselves

classroom, where she has always wanted to be. Learning

without schooling.

about employee rights and obligations as well as labor laws, has renewed her dedication to her job.

14 | PACTICS ma gazi ne

A factory that’s both sustainable and low-cost Pactics works to minimize the impact on the manufacturing process. It seemed Together Piet Holten and architect Stuart Cochlin created cost and sustainable. Pactics’ decision to build a factory in Siem Reap—a small town

Holten says it was the architect who came up with many of

that’s also Cambodia’s most popular tourist destination–created

the specific sustainable elements for the building. Cochlin had

the ideal opportunity to apply the company’s commitment to

previously worked on social housing projects in the United

corporate social responsibility to this new arena. Piet Holten,

Kingdom and has long had a deep interest in sustainability. He

Pactics’ president, was convinced that sustainability and ethical

found a willing partner for his ideas in the Pactics management.

working conditions would actually enhance the bottom line. As a result, Pactics’ new Siem Reap factory will include such “To us it made business sense,” Holten explains. “We are doing

features as solar panels that provide electricity, a well-water

a lot with our products to make them in a way that minimizes

filtration system, and toilets that are flushed with harvested

the impact on the environment. So it is a small step to make

rainwater.

them in an environmentally friendly building.” Cochlin saw the Pactics factory as an opportunity to To realize this vision he enlisted the help of Stuart Cochlin, a

create a blueprint for responsible, sustainable factories in

British architect based in Siem Reap. Together, their goal was to

Southeast Asia.

create a factory that would showcase Pactics’ commitment to its customers, its employees, and the wider community.

Innova tion you can trust | 15

16 | PACTICS ma gazine

It was important to create a pleasant place to work in. That has real and very positive business implications.” “Having worked in Cambodia for a number of years, I had a good

“In the early stages of research, I came across the

understanding of local construction issues, the culture and the

recommendations of the International Labour Organization

climate,” the architect says. “I tend to try and find simple, low-

‘Better Factories Cambodia,’” Cochlin recalls. “They called for

tech, cost-effective and practical solutions, much as NGOs do. I

designing facilities with a focus on the well-being of employees.

think this approach fits well with Pactics’ requirements.”

This approach helped inform part of the strategy for the Pactics factory.”

Just as important as environmental sustainability was the environment for the factory’s workers. Piet Holten is convinced

A typical Cambodian factory is little more than a metal shed with

that a workplace that is good for the employees is also good

artificial lighting and poor ventilation. Holten and Cochlin were

for business: “It was important to me to create a pleasant

determined to build a very different kind of facility. One goal

place to work in.” “That has real and very positive business

was to use natural rather than artificial light and to have natural

implications.”

cross-ventilation. Natural daylight is not only more pleasant for employees, but also minimizes the cost of electrical power.

A good environment can help lower staff turnover and increase

Another goal was to include areas where employees could eat,

retention, he notes, as well as reduce sick days and enhance

learn, care for their children, and relax.

productivity. Even the factory’s location in Siem Reap would have a positive Holten and Cochlin wanted to design a factory that treated

impact. Siem Reap is in a rural part of Cambodia from which

its employees well and followed best practices for health

much of the country’s industrial labor force is drawn, and a

and safety, while at the same time being financially viable.

large portion of Cambodia’s factory workers are women.

That meant finding smart solutions that would simultaneously

Locating in Siem Reap, rather than in the more industrial capital

benefit the company’s employees, the environment, and the

city of Phnom Penh, would allow these women workers to stay

company’s bottom line.

with their children rather than leave them with family while they seek employment far from their home province. Ultimately, this would help with staff retention. Innova tion you can trust | 17

Cochlin believes that part of good design is achieving design goals within a stated budget. Staying within budget targets wasn’t always easy, however. Nonetheless, Cochlin says that he enjoyed the challenge of trying to set a positive benchmark for building a new kind of factory in Cambodia. In the end, the building cost about $250 USD per m2 compared to the typical cost of $150 to $200 per m2 for a factory with no insulation, no natural light, and poor ventilation. The additional building cost is offset by the savings on electricity by utilizing sunlight and natural ventilation. But building costs aren’t the only thing that matters, says Holten. “What is more important is that we believe that our productivity is higher and that our staff

Corporate social responsibility can be achieved without sacrificing financial success.”

turnover is lower by offering a pleasant work environment.” The structural engineering of the buildings was designed to Pactics’ Siem Reap factory is bright and cool, featuring natural

French standards and includes disabled access throughout, as

light and plenty of outside green space. It’s a world apart from

well as disabled toilets. Fire safety was also considered critical,

the hot, stuffy factories typically found in Cambodia.

and the one-story factory design allows for multiple fire exits that lead directly to the outside.

Where most factories consist of a single large structure, the Pactics Siem Reap plant is broken up into several smaller

In addition, the factory has an on-site crèche and nursing room,

buildings. “This brings the natural landscape into the heart

so that young women who work there can spend more time

of the master plan,” Cochlin explaines. The buildings are set

with their children and are less likely to quit when they become

around a large, landscaped courtyard garden that helps reduce

mothers. The factory also has an open-air canteen, a library

ambient temperatures in the hot subtropical climate. The

and computer room, a dedicated medical room, and a kitchen

garden also provides a relaxing spot for employee breaks.

that feeds the staff a subsidized, nutritious lunch each day.

Lit by indirect sunlight, the buildings are positioned in a north/ south direction to take advantage of Cambodia’s natural wind

Piet Holten believes that Pactics’ Siem Reap factory will be

patterns, while shaded windows on the south sides and roof

recognized as a model of sustainability and good business

ventilation on the north encourage a natural cross breeze.

practice. “I think we’ve proven that it can be done,” he says.

What

makes a better

factory? 18 | PACTICS ma gazi ne

s s s s s s s s s s s s

#LEAN AND SUFlCIENT DRINKING WATER -ULTIPLE EASILY ACCESSIBLE EMERGENCY EXIT DOORS 0ROPER VENTILATION AND FRESH AIR .UTRITIONALLY BALANCED MIDDAY MEAL #RÒCHE FOR EMPLOYEES CHILDREN .URSING ROOM FOR NEW MOTHERS 3OLAR PANELS TO PROVIDE ELECTRICITY 7ELL LIT ROOMS WITH NATURAL LIGHT !N ABUNDANCE OF OUTSIDE GREENERY $EDICATED MEDICAL ROOM ,IBRARY AND COMPUTER ROOM FOR STAFF USE $ISABLED ACCESS AND DISABLED ACCESSIBLE TOILETS

Acknowledge improvements in the garment sector Opinion Peter Olszewski Is Cambodia’s garment industry so bad that it’s beyond redemption, or are there encouraging signs that the industry is in fact redeeming itself with an agenda set on reform? The public’s perception, due mainly to media coverage, is that

according to the English-language print media, which ignored

the industry is a greedy exploiter happy to ruin workers’ lives

the ILO’s positive spin and zeroed in on one of the negative

by condemning them to slave in dark satanic mills. But to many

aspects revealed in the database. “Factory Flaws Go Live”

industry observers, there are positive signs that the garment

headlined the Phnom Penh Post, which said, “Unionists and

trade is in a vigorous reformist stage, albeit marred by slow

labour rights officials are applauding a website scheduled to go

progress.

live today that will hold to account garment factories that flout Cambodia’s labour law.”

The opening of Pactics Cambodia’s new worker-friendly factory on March 22 is undeniably a good news story (especially for the

The unionists may have applauded the outing of bad factories

employees), but good news is certainly not “sexy news” in the

on the website, but unions involved in strikes also came up

garment industry sector media coverage.

wanting on the database–not one of the nine unions and federations named in the Union Compliance List passed

Perhaps nowhere was this more evident than in news reports

compliance with legal requirements for strikes, with all of

about the March 17 launch of the International Labour

them failing to provide the required seven days’ notice to

Organization’s Better Factories Cambodia group’s online

management and to the ministry. It’s also interesting to note

transparency database. This was the first report of factory-

that on March 7 the Garment Manufacturers Association in

level compliance data, and the ILO News press release was

Cambodia applauded the Ministry of Labor’s decision to start

headed “Transparency drives improvements in factory working

requiring union leaders to prove they have a clean criminal

conditions.” That sounds remarkably like good news–but not

record before registering new branches. Innova tion you can trust | 19

But with the database, The Cambodian Daily also headlined

Compare this to statements released by the ILO in a March

the negative aspect of the report, zeroing in on the ten errant

17 press release and attached documents. The press release

workplaces in an article headlined “ILO Names Factories with

stated, “One third of the 51 factories included in the ‘Critical

Poor Conditions.” The Daily article did fleetingly note that while

Issues’ database made improvements on 21 basic legal

ten factories were named and shamed, “30 factories were

requirements in anticipation of their inclusion in this initial

found to have met all of BFC’s 21 ‘Critical Issues,’” and the

report. The total number of Critical Issues violations in the

article gave some coverage of the unions’ low compliance. But

group of factories fell from 59 to 34 between December 2013

in a subsequent article on March 21, the Daily again focused on

and February 14—a 42 percent improvement.” In fact, as the

the naming of the “worst factories,” seemingly suggesting that

release pointed out, more than half the factories assessed

the outing of poor performing factories was the driving agenda

scored full points, racking up no Critical Issue violations at

of the database. The article said, “The initiative seeks to name

all. That constitutes 30 factories, or 59 percent of all factories

companies that persistently fail to comply with Cambodian

assessed.

labor law and international standards…”

20 | PACTICS ma gazi ne

A data-based fact sheet stated that the objectives were firstly

2014 made improvements, and the number of Critical Issues

to “Build the Cambodian garment industry’s reputation for

violations fell from 134 to 87 between April and June 2014—a

decent working conditions and keep pace with competing

35 percent improvement. Twenty-four factories were already in

industries where disclosure of ILO factory compliance will soon

compliance on all 21 of the basic Critical Issues requirements,

be the norm.”

and a further 19 factories moved into this group, meaning that 43 factories listed no violations.

The press release also featured two pie charts illustrating solid improvements in performance on some critical issues. One

While the improvements showed in the transparency reports

pie chart showed that in relation to emergency evacuation

do reveal that positive measures have been taking place,

drills, a July 30, 2013, report showed compliance was 55

it is certainly not the time to project that all the industry’s

percent, while the March 2014 transparency report showed

considerable failings are on the mend. And it must be noted

that compliance had risen to 77. A July 2014 report showed

that two-thirds of Cambodia’s garment factories are not

this figure has edged up to 79 percent. As for the payment

included in the reports.

of seniority-related benefits, compliance was 71 percent in July 2013, and an admirable 94 percent in the March 2014

But it would certainly be helpful if media coverage, in particular,

transparency report. With the release of its second report

did at least acknowledge improvements are being made

of factory-level compliance data dated July 3, 2014, the

instead of constantly reiterating horror stories emanating from

database more than doubled to 151 the number of factories

the sector.

in the program, totaling nearly one-third of Cambodia’s export garment factories. Of the 12 factories originally included in the

Peter Olszewski

low compliance group, three made 33 verifiable improvements

Siem Reap Bureau Chief

in recent months and have moved off the list. One third of

Phnom Penh Post

the 92 factories added to the Critical Issues database in July Innova tion you can trust | 21

In Search of People handful of employees in Siem Reap to more than 300. Despite scaling quickly, Pactics has made their priority right people to become part of the Pactics family.

The company has embraced the challenges of recruiting for a

a social responsibility program. There is a disciplinary system

brand-new factory and has focused on hiring locally. In order

in place, and employees are not terminated unilaterally (and in

to have a positive effect on the surrounding community, the

fact the company has not yet had to lay off any production staff

company must hire from within that same community. Just

since opening in 2010).

as the company canteen sources locally grown foods, Human Resources focuses their recruiting effort in the communes

“Pactics provides job security, a fair salary, and a lot of benefits,”

nearest to the factory.

Corporate Social Responsibility and Human Resources Manager Jack van Dokkum explains. “That is very attractive in a province

In Cambodia, garment factory workers often work far from

that is the second poorest in Cambodia, and that has otherwise

home, commuting under unsafe conditions. Flatbed trucks

limited opportunities for fair wages for those who really need

filled with dozens of women packed in shoulder to shoulder

that extra bit of income.”

barrel along Cambodia’s roads, taking employees to and from work. Workers complain that commuting costs are excessive,

Despite its large tourist industry, Siem Reap is one of

and serious accidents are not uncommon. Pactics frees

Cambodia’s poorest provinces and talented locals often

employees from this sort of commute, and also participates in

head to the capital, Phnom Penh, to seek employment. As a

a safe travel program for employees.

result, Siem Reap has a large pool of low-skilled and unskilled labor, but finding skilled employees can be more difficult. For

Company compliance with local labor laws is not a given in

lower-skilled jobs, the company advertises through word of

Cambodia. In fact, it is a rarity. Pactics, by contrast, scrupulously

mouth—many new hires are friends or relatives of current

follows local labor laws concerning salaries, working hours,

employees—as well as through a network of local NGOs and

holidays, and annual leave. The company also provides sick

on the company’s Facebook page.

leave and health insurance as well as subsidized lunches and

22 | PACTICS ma gazi ne

When production line jobs are offered, there are, on average, ten applicants for every advertised position, a testament to Pactics’ reputation in the local community. Skilled positions can be more difficult to fill. Hospitality is the primary employment sector in Siem Reap, and there are few candidates with production or technical experience. To fill positions in these areas, Pactics must recruit more aggressively. This includes looking for candidates in Phnom Penh who are originally from Siem Reap and might want to move back to be closer to their families. For example, Human Resources Administrative Assistant

Pactics is also committed to hiring from within. Van Dokkum:

Chanthou Hay was tapped for the job while working on

“We prefer to find the right people on our own production

the production floor. After earning a bachelor’s degree in

floor and assist them in stepping up to more responsible

management in Battambang, Hay had moved back to Siem

jobs.” Another example is Sokha Soem, who joined Pactics in

Reap to be with her mother and sister. Initially unable to find

February 2014 and was promoted to Housekeeping Supervisor

a job, she removed her degree from her CV and applied for a

in July. Before she came to Pactics her career options and

job at Pactics packing boxes on the production floor. When the

earning potential in Cambodia were limited due to a disability

management team discovered her qualifications, they asked

that makes walking difficult. The promotion to supervisor was

that she apply for a job in the office and she was promoted to

a great achievement for Soem and her family. And Pactics

Human Resources.

benefited as well, since she was the best of the applicants for the role.

Often, though, it makes more sense to find a candidate who might not have previous experience, but does have the right

Once hired, new employees are put through a rigorous training

skill set and company fit, and train them for their new role.

program that includes modules ranging from occupational

“One of our production managers used to be a bartender,” van

safety and job-specific training to leadership development and

Dokkum reveals. “Now he is organising the production lines

health and hygiene. “It’s all part of giving people the right tools

with a hundred employees.”

to be successful,” van Dokkum explains. “Because if they are successful, they will also bring success to the company.” The employees at Pactics Siem Reap come to the company with a varying range of skills, experience, and motivations

It’s all part of giving people the right tools to be successful.”

for working there. But it does not take long for new hires to become members of the Pactics family. “Many Cambodians want to do something good for their country,” van Dokkum says, explaining the appeal of working at Pactics in Siem Reap. “Our factory offers excellence in efficiency and quality, together with social responsibility for employees and community. That is very rare in Cambodia.”

Innova tion you can trust | 23

to locate a factory in Siem education program has been

Training our people

is taking their position as

The local Siem Reap population has little or no experience

procedures necessary to work towards the accreditation from

working in a large production facility. To close the broad gap

the get-go—a fact the company was eager to take advantage

in the current workforce’s knowledge base, Pactics makes an

of. “It is an investment, but it has a return,” van Dokkum

effort to school individuals on all aspects of employee life – from

explains. “In a construction company with a good company

the importance of arriving on time and maintaining a clean work

culture, people automatically wear a safety helmet. Culture is

environment to basic health and safety practices.

much stronger than rules. As we are starting up a whole new

community trailblazers to heart.

company, training is essential for us to ingrain awareness on In addition to basic employee training, the company has also

health and safety but also on quality and productivity issues

invested in SA8000 standards education. (For more information

in the company’s culture.” SA8000 certification would further

on SA8000 see p. 27). The training aims to create a widespread

secure Pactics’ position as responsible pioneers in Cambodian

understanding of fair labor practices and their ability to secure

factory ownership. Pactics expects the Siem Reap factory to

basic human rights,while benefiting business. “To me, SA8000

meet the necessary criteria and be certified by 2015—a move

criteria are really a matter of common decency. The standards

they hope gives them a competitive advantage in an industry

and criteria of SA8000 are an excellent guideline for us,” says

that has been marred by workplace abuses.

Jack van Dokkum, the corporate social responsibility and human resources manager at Pactics in Cambodia.

The training is administered by a local non-governmental organization based in Siem Reap and familiar with Cambodian

The construction of the new Pactics facility in Cambodia created

culture. Van Dokkum believes the investment in training is a

the unique opportunity to implement the training, policies- and

natural step for the growing company. The company’s plan

24 | PACTICS ma gazi ne

moving forward takes into account that, at least in the first year,

The training is expected to prepare staff for working in a

10 percent of the workforce will be in the classroom receiving

manufacturing company, streamline factory processes, and

additional education at any given time.

ensure that Pactis’ rigorous workplace standards continue to be met. As a bonus, the added education has had the unexpected

While teaching the importance of labor laws, workers’ rights and

consequence of helping with employee retention.

responsibilities, and safety regulations is vital to Pactics’ long-

When they were children, many of the Pactics employees were

term plans, the process is not always easy. Adhering to proper

either denied or couldn’t afford primary or secondary education,

precautions is time-consuming, which presents a conflict for

a shared history that means they appreciate the opportunity to

workers who are paid by the piece. Longer production times

learn as adults.

mean that individuals aren’t able to maximize their earnings, an issue the company continues to address. In addition, extra

Many employees cite the educational opportunities as a reason

supervision is required for new employees to ensure compliance

for staying loyal to the company.

with the outlined rules, since many workplace concepts are new to them.

“When I say to my friends what I am doing, they are surprised that a company has this class,” explains 25-year-old Yan Vanna,

“To date, staff have been overwhelmingly receptive to the new

who has been with the company for three years. “They like to

information, though it will take time for the company to assess

hear more about it and tell me they would like to join a company

how well the new concepts work in practice,” says van Dokkum.

that offers that kind of education.”

Innova tion you can trust | 25

26 | PACTICS ma gazi ne

Innova tion you can trust | 27

Portrait of

Chhoat Makara There are new things to learn every day.” Chhoat Makara knows an opportunity when he sees one.

for making sure the sewing machines were kept running—a

Originally hired at Pactics to knot the end of the drawstrings

position that gave him the opportunity to study in Phnom Penh.

that pull eyewear bags closed, the 28-year-old has since used his natural curiosity about how things work to create for himself

“It was difficult for me in the beginning because I could only see

a position with both promise and growth.

how to do some of the repairs and it was hard to find solutions for new and more complex problems,” Makara said about his

“When I was a sewer, I saw how difficult it was to find people

assumed responsibility. “Now I know more; I try new solutions.

to repair the machines,” he explained. When the company

There are new things to learn every day.”

was finally able to find technicians to make the much-needed repairs, Makara keenly watched as the solutions unfolded.

With the opening of the new, much larger factory, the eager

Slowly he gained enough knowledge to solve some of the

technician is looking forward to his growing future and the

smaller, more commonplace problems encountered by the

challenges that working with new machines will bring. “The

other machines.

new machines, with the new factory bring worries, but I know I can learn about them,” said Makara. “You just try until you find

Eventually, it became apparent to management that his skills for repair work could be put to better use. He became responsible

28 | PACTICS ma gazi ne

the solution.”

Pactics and SA8000 Martijn van Rijnsoever, Chief Sustainability Officer, Pactics Group

Opening a factory in a poorly regulated country such as Cambodia simply requires us to take a high level of responsibility

SA8000 is the leading certification for corporate social responsibility (CSR). You could call it the ISO standard in CSR. What SA8000 does beyond what most normal auditing systems do (such as BSCI and FLA) is not merely take a one-pointin-time measurement, but look at the ability of a company to manage and maintain a high level of social compliance. Like the ISO9001 quality system, it requires a strong focus on our management system.

Why pursue SA8000 certification in Cambodia? For us the implementation of SA8000 is an investment in the future. It is the highest available standard and acts as a guide for the industry. We donâ&#x20AC;&#x2122;t take a back seat in these developments. We want to be out in front. Moreover, opening a factory in a poorly regulated country such as Cambodia simply requires us to take a high level of responsibility ourselves. SA8000 is very good at defining that responsibility. For our customers this means that we offer them a first-class production facility in a low-cost location. The Siem Reap factory meets the highest demands in supply-chain management and compliance for our brand customers.

Innova tion you can trust | 29

For us it is one of the most rewarding projects to be involved

lot of all our employees, as it is a lot about culture and behavior.

in, in this line of work. The motivation, enthusiasm, and positive

is why in the start-up phase we invest so much in training (see

effects both inside and outside the company make us incredibly

p.24)

proud of our work. All this is required at a level that one would normally not expect

Implementation in Cambodia

from a start-up factory. SA8000 is for us a strong push for

Implementation of SA8000 in a brand-new factory has both

professionalism that has a good spin-off in all aspects of

advantages and disadvantages. Amongst the advantages is

management.

that we do not have an existing culture and existing habits that we need to change. We started with a clean slate, and

So what about Shanghai?

implementing the SA8000 standards is foremost a matter of

In Shanghai we never rest. Although we are not (yet) pursuing

building and less of changing. Building generally is perceived

SA8000 certification in Shanghai, we are constantly improving

as a more rewarding and positive activity than changing.

our social compliance. We get audited very regularly, and each time we learn a little bit more. Besides that, we keep close

The disadvantages are that SA8000 is a huge amount of work.

alignment with the developments in our Cambodia factory. Very

It requires policies, knowledge of laws and regulations, all kinds

recently we got approved as an adidas supplier, which is like

of procedures and management tools, monitoring and reports.

a certification in itself. We are currently talking to some of our

It requires a high commitment of management and a strong

customers about whether the BSCI auditing scheme would

management review system that makes sure that we can

be an option to manage and monitor our social compliance.

maintain and update the policies, tools, and procedures that

BSCI is based on the SA8000 standard, so for us it would fit

together realize our social compliance. In addition, it requires a

perfectly.

30 | PACTICS ma gazi ne

Pactics enlisted ConCERT to execute a local living wage research Cambodia’s garment and textile industry is ripe for change: poor work conditions and low wages led to increased labor

Being a responsible employer is key to Pactics’ way of

be used to guide appropriate pay rates for entry-level factory

doing business. To ensure they are offering decent and fair

labor. Offering a wage that allows employees to meet their

employment to the local community, Pactics has engaged a

basic needs supports the company’s commitment to being a

local non-governmental organization (NGO) to help direct wage

responsible employer while helping develop the community.

levels and provide an expert, objective opinion. ConCERT has been active in Siem Reap since 2008, working In an effort to learn more about the cost of living in Siem Reap,

to direct tourist dollars in the most positive and sustainable

Pactics is cooperating with ConCERT, a social enterprise based in

way possible. Siem Reap is the place where Cambodia’s most

Siem Reap. ConCERT is closely connected to local communities,

famous temples are located and the Angkor Wat complex

the environment, and responsible businesses. ConCERT

receives around 3 million tourists per year. Most tourists only

gathers data on cost of living in the city. This information will

stay for a couple of days, but they see the enormous poverty Innova tion you can trust | 31

and want to offer help to the local communities. It is ConCERT’s

are no mechanisms to enforce this. There is thus no guarantee

mission to turn people’s good intentions into the best possible

that employees will be compensated fairly. Private industry

help for the most vulnerable people in Cambodia. Michael

partnerships with experienced NGOs could help ensure that

Horton, the chairman and founder of ConCERT, sees working

industry transforms for the better, Horton noted.

with Pactics and the first factory to open in Siem Reap as a win-win scenario.

ConCERT has designed and distributed a survey to study how cultural differences such as family living situations and

“You can’t help but be impressed with how they go about trying

shopping and saving habits affect required income levels.

to be fair and equal employers. Their whole way of operating is socially responsible,” said Horton. “It is an opportunity to add

“We are here to present Pactics with the data to make a

another dimension to what we can offer the local communities.”

decision,” said Horton, who feels it’s a positive step to be collaborating with the private sector. “Pactics is the first and so

With no standard in Cambodia to help guide salary levels,

far only company with a factory in Siem Reap. I would love to

it can be difficult to gauge what is appropriate for unskilled

see more partnerships with NGOs and responsible companies.

laborers. The government set the unenforced minimum wage

We are happy that Pactics reached out.”

at $100 during the election in 2013, but at this moment there 32 | PACTICS ma gazi ne

PACTICS Cambodia October 21, 2013 Our new factory near the Cambodian Cultural Village is almost ready. It looks great already, but once the landscaping is done, it will be fabulous!

OKT 2013

Pactics Cambodia PACTICS Cambodia November 22, 2013 Operations are starting in the new factory hall in Siem Reap. A small team is already working in our brand new factory. Proud to see it all happening!

NOV 2013

PACTICS Cambodia October 27, 2013 The magic of the new factory is that you can actually see the palm trees when you are in the factory halls. And, the natural ventilation is working in this season, it remains pretty cool inside.

PACTICS Cambodia December 2, 2013 DEC 2013

On Sunday, December 1st, 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km. They were sponsored by the company to raise funds to help the victims from this yearâ&#x20AC;&#x2122;s flooding in Siem Reap. Together they collected over $1000!

PACTICS Cambodia December 4, 2013 Trying out the new cleaning machine for the factory floors... Itâ&#x20AC;&#x2122;s a bit strange in the beginning, but our cleaners seem to get the hang of it quickly.

PACTICS Cambodia December 9, 2013 Today we started our Helmet Action: we pay 50% of a quality helmet for everybody on a motorbike. The helmets have a nice colour, so soon The Blue Helmet is conquering Siem Reap!

PACTICS Cambodia December 13, 2013 At Pactics, we have our own water filtration system, to provide safe drinking water to our staff.

Innova tion you can trust | 33

PACTICS Cambodia December 17, 2013 Currently, all 150 employees of Pactics Cambodia receive a basic training on Social Accountability. Awareness is the first step in the process of SA8000 certification, and in the training (created by The YES Center in Siem Reap, Cambodia.) We discuss mutual responsibilities on different topics, like health, safety, working hours, representation, and many more...

PACTICS Cambodia January 2, 2014 The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders! We hope that in 2014, the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon.

DEC 2013

Pactics Cambodia

JAN 2014

PACTICS Cambodia January 15, 2014 We have officially been “stickered” for using Biodiesel. The blue monster now runs on reused cooking oil, that previously made fried bananas!

PACTICS Cambodia January 16, 2014 Next Monday, the office will move to the new factory. On the last day that we will work in the old office at Psar Kraom, some staff decided to give the GM (formerly CEO) his own official parking space. And yes, he liked it!

PACTICS Cambodia January 31, 2014 One last picture of the blessing last Sunday: the tuktuk (driven by the future husband of one of our HR staff!) goes back to Wat Damnak with its revered passengers.

34 | PACTICS ma gazi ne

PACTICS Cambodia January 30, 2014 Even in our new factory, some things are slightly off balance. But that’s just reality: not everything in life is straight and balanced.

PACTICS Cambodia February 5, 2014 Our latest recruitment resulted in over 200 interested candidates. We spent two whole days informing and selecting to find the 43 new staff that started working this week. We welcome them and wish them a productive career at Pactics Cambodia!

FEB 2014

PACTICS Cambodia February 7, 2014 The new notice board seems to be working... :)

PACTICS Cambodia February 12, 2014

PACTICS Cambodia February 16, 2014

The garden is starting to grow and flower: we already have two roses near the canteen! We hope next year the factory will resemble a botanical garden in spring time...

Welcome to all our new employees! After our February recruitment, this is the result in the New Factory at Phum Kruos. We wish you a happy time at Pactics..!

PACTICS Cambodia February 16, 2014 And of course welcome to all new employees in the Old Factory at Psar Kraom. We wish you a happy time at Pactics too..!

PACTICS Cambodia January 24, 2014 Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project, Siem Reap, as security guards. The parade was a big success and afterwards we all had a late dinner.

Innova tion you can trust | 35

Portrait of

Kong Chanrotha Before Kong Chanrotha started at Pactics, she wasn’t happy. She was a trained Apsara dancer, but her previous employment as a housekeeper left her too tired to perform the evening shows she speaks so passionately about. After quitting the hotel job, she moved in with her brother outside of Siem Reap. It was there that she was presented with the opportunity to learn basic sewing—a skill she picked up and used to turn her life around. Returning to Siem Reap with her new skill set, Chanrotha was able to secure a job with Pactics. Immediately drawn to the positive work environment, she found herself thriving in the

Sometimes I am still tired, but it is better now. There is something that motivates me inside.”

supportive team atmosphere.” “I focused on the best things. I can share while working with

credits regular visits from her colleagues—or her work family,

friends and every day I am happy to come to work and see the

as she calls them—with raising her spirits and helping her get

other girls,” she said. “This is a great experience.”

better. Gainfully employed with Pactics for the last three years, Chanrotha has found herself able to return to her first passion

After an illness landed her in the hospital, the 23-year-old

36 | PACTICS ma gazi ne

—classic Khmer dancing.

TI Cambodia’s Business Integrity Program International Cambodia is now working directly with businesses that want to take action to stop corrupt practices other risks associated with bribery and corruption.

Transparency International Cambodia exists in order to promote

legislation that can apply to their operations in Cambodia, even

integrity and fight corruption, for the benefit of individuals and

if there are only relatively minor links back to the enforcing

businesses alike. This represents a critical task in a country

country. The US Foreign Corrupt Practices Act and the UK Bribery

where corruption and bribery are perceived to be amongst

Act are the most well-known laws, but all OECD countries, and

the worst in the world. In Transparency International’s 2013

increasingly other countries, are adopting similar laws. Penalties

Corruption Perceptions Index, Cambodia ranked 160 out of 177

can be severe, and companies are also responsible for offenses

countries and territories surveyed. While Cambodia is a signatory

committed by third parties and agents.

to the UN Convention on Combating Bribery (UNCAC) and has anti-corruption laws in place, these have been inadequately

As part of its recently initiated Business Integrity Program, TI

implemented and enforced to date. Considerable evidence

Cambodia is helping businesses adopt appropriate policies and

points to the fact that corruption is a significant impediment to

procedures to comply with local and international anti-bribery

doing business in Cambodia.

laws and to clean up corrupt behavior within their operations. These services are also being offered by other Transparency

According to TI Cambodia’s recent consultation with business,

International chapters in the region, led by a pioneering initiative

key areas of concern in relation to exposure to bribery and

from Transparency International Malaysia, which continues to

corruption are broadly consistent with those in other developing

engage a rapidly expanding number of companies that want to

economies around the world. These include dealing with

take action to eliminate corrupt practices.

third parties and agents, facilitation payments, gifts and entertainment, and unseen costs in procurement and human

TI Cambodia is excited to work with Pactics and welcomes

resources management. Companies in Cambodia are also

the company’s enthusiasm for implementing policies to tackle

increasingly concerned about complying with foreign bribery

corrupt practices throughout its operations in Cambodia. Innova tion you can trust | 37

38 | PACTICS ma gazi ne

Better together: Pactics Pactics’ original production facility in Shanghai, long the company’s headquarters, is taking on a new role.

Now that Pactics Siem Reap is fully scaled as a high-volume factory, the Shanghai operation is evolving into a nimble and innovative center of excellence and expertise. Shanghai’s development is, in turn, scaling up the capabilities of the entire company. When Pactics was founded, Shanghai was the one-stop hub for all Pactics manufacturing, large- or small-scale. The Siem Reap factory, first opened in 2010, has since evolved into a mature facility capable of taking over much of the company’s large-volume output. That has allowed Shanghai the flexibility to grow into a specialist facility focused on production development, speed, technological development, and high levels of customization. Pactics is leveraging the Cambodia factory’s strength—lowcost, high-volume production of simpler products—to allow Shanghai to focus on more complex tasks.” Shanghai acts as the brains of the operation,” explains Ralph Wu, operations director in Shanghai.

Innova tion you can trust | 39

40 | PACTICS ma gazi ne

The people here take responsibility for their work and embrace teamwork.” “We’ve established one flat organization, with experts from

Asked how Pactics Shanghai was able to tackle such a daunting

different fields—for example, material development and

transformation, the management team credits the hard work

sourcing, automation, new product development—and a

and commitment of the employees.”We’ve gone through a lot

continuous-improvement culture.”

of change, and dealing with change isn’t always easy,” says Vice-President of Business and Product Development Erwald

While the Siem Reap facility is taking over the mass production

Boer. “We are very fortunate that we have been able to keep

side of the business, Shanghai’s small project teams and

an experienced group of people, and further improve the team

advanced technologies can handle shorter lead times, smaller

with new, enthusiastic people. Together they form the core of

quantities, and new methods. “Here we focus on product

our Shanghai factory.”

development, supply-chain management, new-product trial runs, and new and customized equipment,” Wu says.

Wu says he is particularly proud of the collaborative spirit that has fueled the Shanghai facility’s evolution. “Our staff has built

Over the past year the Shanghai factory has risen to the

a culture of continuous improvement into their daily work,” he

challenge of change as it turned from being a low-cost

says. That means a commitment to constantly challenge each

manufacturing unit into an increasingly specialized and

other to question processes and seek improvements while

technically oriented operation.

maintaining high quality standards. “The people here take responsibility for their work and embrace teamwork.”

Today Shanghai not only oversees sourcing, quality control, account management, and sales for all of Pactics, but it also

The Shanghai factory, smaller, leaner, and more seasoned than

handles production of more complex products and small custom

its younger Siem Reap sister, can provide quick turnaround

orders, as well as new product development involving a variety

times for specialized, small-batch samples. It can readily

of cutting-edge printing and other high-skill technologies.

handle orders for products such as microfiber gloves and jewelry pouches that require more complex processes and equipment, such as digital printing and sublimation. Innova tion you can trust | 41

Its location offers first-class logistics, allowing rush orders to

Most of all, Pactics Shanghai’s evolution has been made

reach U.S. and European customers within only a few days.

possible by the experience and technical skills of its employees.

The Shanghai factory and its staff can also draw on a wealth

That in turn allows Pactics Shanghai to support the Cambodia

of know-how. Years of involvement with transfer printing, plus

factory as it scales.

constant efforts to seek out improvements, have allowed Pactics Shanghai to put together the best set of variables for its

“Shanghai sets themselves apart with their knowledge of

processes. Those include biodegradable inks, the newest, most

equipment operation and maintenance and of production

agile software, and the newest and fastest printer on the market.

processes,” says Boris Ploum, the general manager of Pactics

“Shanghai is an experienced factory. It has been operating for

Cambodia. Boer agrees. “In Shanghai we can benefit from the

many years and is strong in engineering new products,” says

easier access to talented people, the access to materials, and

Martijn van Rijnsoever, the deputy general manager of the

a great infrastructure,” he says. “This allows us to focus on

Shanghai factory. “So we implement innovations in materials,

product development, small series, and a quick set-up of first

products, and production processes quite easily.”

series of bulk production which we can eventually move to Cambodia.”

While employees in Cambodia may be assigned to groups that work on the same product for several days, Shanghai

Thus sample products developed in Shanghai may later be

now has the expertise and flexibility to handle rapid changes

produced in mass quantities in the Cambodian factory. When

in production. Each team member in Shanghai may work on

process improvements are initiated in Shanghai, that expertise

different products every few hours, or even change job roles

is then shared with Siem Reap. Certain safety initiatives, such

completely. Operations may vary day to day and change on

as the move to ban all carcinogenic content by switching to

short notice, particularly when time-sensitive rush custom

biodegradable inks, are initiated in Shanghai as well. The

orders come in, an arena that is becoming one of the Shanghai

Shanghai facility is becoming a learning and testing center

facility’s specialties.

that will, over time, transfer training and knowledge to its Cambodian counterpart.

That agility reflects China’s more developed manufacturing environment. “In China everyone and everything is nimble,”

This ability to work in tandem and develop parallel workstreams

says van Rijnsoever. “Nobody expects next year to be the same

benefits both facilities and is building a stronger company.

as this year.” It also reflects Pactics’ long-term investment in its

“Urgent small orders with a special design—for example, for

processes and its people, he adds. “We are investing strongly in

a short-term sales campaign—are rush shipped by air out

our systems to be ever more flexible and ever more responsive

of Shanghai,” says Ploum. “At the same time a full container

to our customers.”

of high-volume standard products is being shipped from Cambodia.” By letting Shanghai and Siem Reap each play to their strengths, Pactics achieves better outcomes for all stakeholders, from customers to production-floor employees.

42 | PACTICS ma gazi ne

PACTICS CSR Report

planet - people - profit - principles Set up according to the reporting guidelines of the Global Reporting Initiative Innova tion you can trust | 43

Strategy and Analysis Pactics produces a low skill labor intensive product. Production of these products takes place in low wage countries. There is a constant pressure to move to even cheaper locations. That is an undeniable dynamic in our industry. We ourselves have already moved from Mexico to China. And with rising wages here, there is again pressure on our business. Pactics does not compromise to its bottom line, so the pressure cannot be translated in lower wages, more working hours, or other savings on basic working conditions. Our strategy to stay in business and keep our CSR level up is threefold. First of all we invest in a more efficient production. Both in actual productions as in management systems we try to automate as much as possible. Secondly we look for clients that want a higher added value product. As this is our competitive advantage. Either they are more complicated products, or products appreciated for its CSR compliant production. The third is that are already moving part of the most labor intensive processes to Siem Reap, Cambodia. Life in Siem Reap is much cheaper than Shanghai, which translates in lower wages. This allows to remain faithfull to our bottom line. In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production. Our Shanghai facilities see year-over-year improvements. We improve on elements like policy, training and awareness. We use the developments in Siem Reap to the advantage of Shanghai. Moreover we see our customers are taking steps to more sustainability in the supply chain, which we consider as proof that our strategic focus on CSR is the right focus for the future. Piet Holten President

Organization Profile

Name of the organization

Headquarter s 0RATEX (ONGKONG Subsidiaries s 0ACTICS 3HANGHAI #O ,TD s 0ACTICS #AMBODIA #O ,TD NB this CSR report covers the Pactics Shanghai CO. Ltd subsidiary

Primary brands, products, and/or services. The reporting organization should indicate the nature of its role in providing these products and services, and the degree to which it utilizes outsourcing.

The worldâ&#x20AC;&#x2122;s largest manufacturer of microfiber products for the eyewear industry. We also develop and produce (microfiber) products for the jewelry, fashion, sports and electronics industry. Examples of products we make: s #LEANING CLOTHES E G FOR EYEWEAR ELECTRONICS jewelry etc) s "AGS AND POUCHES E G FOR EYEWEAR JEWELRY SHOES electronics etc. s 'LOVES E G FOR JEWELRY INDUSTRY s #ASES OUTSOURCING METAL CASES SOFT CASES %6! cases etc.)

44 | PACTICS ma gazi ne

Imaging techniques s $IGITAL PRINTING AND SUBLIMATION s 3CREEN PRINTING AND PAD PRINTING s %MBOSSING AND DE BOSSING Materials s -ICROlBER RECYCLE MICROlBER s #OTTON AND POLY COTTON s "AMBOO s .EOPRENE RECYCLED NEOPRENE s %YEWEAR CASES METAL ALUMINUM PLASTIC %6! AND soft cases (outsourcing)

Location of organizationâ&#x20AC;&#x2122;s headquarters

Headquarter s 0RATEX (ONGKONG Main office s 0ACTICS 3HANGHAI #HINA

Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report

s #HINA (ONG +ONG 0RATEX HEADQUARTER s #HINA 3HANGHAI 0ACTICS 3HANGHAI production and sales s #AMBODIA 3IEM 2EAP 0ACTICS #AMBODIA production

Nature of ownership and legal form

Privately owned, limited company (Pactics Shanghai Co. Ltd has a WFOE status)

Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries)

Luxury and sport goods Eyewear, garment, electronics, jewelry Geographic breakdown 1. USA 51% 2. Europe 34% 3. Asia 15%

Scale of the reporting organization, including: s .UMBER OF EMPLOYEES s .ET SALES FOR PRIVATE SECTOR ORGANIZATIONS OR NET revenues (for public sector organizations); s 4OTAL CAPITALIZATION BROKEN DOWN IN TERMS OF DEBT and equity (for private sector organizations); and s 1UANTITY OF PRODUCTS OR SERVICES PROVIDED

1. Employees: 143 (end 2013) 2. Operations: 1 in Shanghai 3. Quantity of products (total 2013): 39 million products (25 million cloths and 14 million bags)

a. Report the total number of employees by employment contract and gender b. Report the total number of permanent employees by employment type and gender c. Report the total workforce by employees and supervised workers and by gender d. Report the total workforce by region and gender

Measure point end 2013 Total workforce: 143 Male: 29 Female: 114 Fulltime: 140 Parttime: 3 Urban: 16 Migrant: 119 Foreigner: 8

Innova tion you can trust | 45

e. Report whether a substantial portion of the organizationâ&#x20AC;&#x2122;s work is performed by workers who are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors f. Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)

Over 2013: Min Max

143 workers 269 workers

Region: Chongqing : Shanxi province: Sichuan province: Shanghai: Shandong province: Neimenggu : Guangxi province: Jiangsu province: Jiangxi province: Jilin province: Hunan province: Hubei province: Anhui province: Henan province: Gansu province: England: Italy: The Netherlands:

1 2 11 5 1 1 1 8 4 1 6 5 66 22 1 2 1 5

Report the percentage of total employees covered by collective bargaining agreements

No collective bargaining agreement in force

Describe the organizationâ&#x20AC;&#x2122;s supply chain

Pactics has the following material suppliers Fabric suppliers: 13 Cord suppliers: 5 Label suppliers: 5 Packaging suppliers: 13 Ink and paint suppliers: 11 Thread supplier: 1 Generally our suppliers are small. Except for one Japanese ink supplier they are all local companies.

Significant changes during the reporting period regarding size, structure, or ownership including: s 4HE LOCATION OF OR CHANGES IN OPERATIONS INCLUDING facility openings, closings, and expansions; and s #HANGES IN THE SHARE CAPITAL STRUCTURE AND OTHER capital formation, maintenance, and alteration operations (for private sector organizations)

We have changed our production setup from two facilities and moved all our production into the same location.

Awards received in the reporting period

No rewards received

List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

s 0 ACTICS USES THE 3! STANDARD TO MODEL ITS CSR policies and activities. s 7E ARE MEMBERS OF THE %UROPEAN #HAMBER #32 group

46 | PACTICS ma gazi ne

List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization:

We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events.

s (OLDS A POSITION ON THE GOVERNANCE BODY s 0ARTICIPATES IN PROJECTS OR COMMITTEES s 0ROVIDES SUBSTANTIVE FUNDING BEYOND ROUTINE membership dues s 6IEWS MEMBERSHIP AS STRATEGIC This refers primarily to memberships maintained at the organizational level

Identified Material Aspects and Boundaries

a. List all entities included in the organization’s consolidated financial statements or equivalent documents b. Report whether any entity included in the organization’s consolidated financial statements or equivalent documents is not covered by the report

We have not created a consolidated financial statement for Pactics group

Explain the process for defining the report content and the Aspect Boundaries. Explain how the organization has implemented the Reporting Principles for Defining Report Content.

Pactics chooses the ‘in accordance’ - core option. As a small company we found the reporting burden of more extensive options too high.

List all the material Aspects identified in the process for defining report content

We believe our main impact is social and not environmental. Good CSR practice is important for both our employees and our brand customers. Although we believe our main impact is social and not environmental. our customers require a larger focus on environmental management and reporting this year. s -ATERIAL ASPECTS s 7ORKER #OMPENSATION s 7ORKER (EALTH AND 3AFETY s 3USTAINABLE 3UPPLY #HAIN -ANAGEMENT s %NVIRONMENTAL MANAGEMENT

20 21 22 23

Not included in report

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Stakeholder Engagement

24, 25

Provide a list of stakeholder groups engaged by the organization

For the writing of this report we did not engage stakeholders

26, 27

Report the organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group, and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process

Pactics is situated in an industrial area in Pudong, Shanghai. We have no active engagement with the community

Report Profile

The reporting period of this report is 1st Jan. 2013 to 31st Dec. 2013

This is the second CSR report Pactics publishes. The previous report was published on 1st October 2012.

Pactics plans to publish its CSR report on an annual basis

For further information on Pactics CSR policies, please contact: Martijn van Rijnsoever Chief Sustainability Officer, martijn.vanrijnsoever@pactics.com

GRI ‘in accordance’ - core option s 3TRATEGY AND !NALYSIS s /RGANIZATIONAL 0ROlLE s )DENTIlED -ATERIAL !SPECTS AND "OUNDARIES s 3TAKEHOLDER %NGAGEMENT s 2EPORT 0ROlLE s 'OVERNANCE s %THICS AND )NTEGRITY s %CONOMIC %# %# s %NVIRONMENTAL %. %. s 3OCIAL ,! 02

No external assurance was sought in writing this report

Governance

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Ethics and Integrity

Ethics Pactics has a code of ethics that describes the general company Values. These company values are in line with CSR standards that refer to ILO conventions. Our values are reflected in our policies and company culture.

Specific standard disclosures economic A. Economic Performance

NC#

Content

Comments

EC 1

Direct economic value generated and distributed

We choose not to report our financial data

EC2

Financial implications and other risks and opportunities for the organizationâ&#x20AC;&#x2122;s activities due to climate change

Our operation has no material impact from Climate Change

EC3

Coverage of the organizationâ&#x20AC;&#x2122;s defined benefit plan obligations

We have no benefit plan in place besides the required social benefits we pay

EC4

Financial assistance received from government

We have not received any government assistance

B. Market Presence EC5

Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation

s 5 NSKILLED OPERATIONS PACKING AND lNISHING ARE paid at 120% of minimum wage - No Gender distinction - overtime paid according to regulations. s 3KILLED OPERATIONS SEWING ARE PAID AT OF minimum wage - no Gender distinction - overtime paid according to regulations. s 3IGNIlCANT LOCATIONS OF OPERATION 4HE PEOPLE ON our production lines are compensated based on a minimum wage + skill premium standard. This standard determines what our piece rate is set to. So the average skilled worker will be able to earn 130% of minimum wage. 100 out of 134 people in our operations department are working according to this arrangement Innova tion you can trust | 49

EC6

Proportion of senior management hired from the local community at significant locations of operation

25% of significant are Chinese 75% of significant are foreigners

C. Indirect Economic Impacts EC7

Development and impact of infrastructure investments and services supported

Not applicable

EC8

Significant indirect economic impacts, including the extent of impacts

Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai. We employ mostly migrant workers that have moved from other parts of China to Shanghai. The objective is often to stay in Shanghai for several years to earn money and then return to the home town. Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits. This way we reduce their susceptibility to risk due to â&#x20AC;&#x153;livesâ&#x20AC;&#x2122; eventsâ&#x20AC;?, like sickness and accidents. Moreover we hope to set a standard for the local labor market, and judging by the people that return to us after trying different jobs, we succeed in setting a higher standard.

D. Procurement Practices EC9

Proportion of spending on local suppliers at significant locations of operation

Environmental

EN1

Materials used by weight or volume

Usage of microfiber cloth: 387,366 kg recycled microfiber: 290 kg string: 5,389 kg printed labels: 5,022,051 pcs Polybags: 288,961 pcs

EN2

Percentage of materials used that are recycled input materials.

<1% of material used is recycled

EN3

Energy consumption within the organization

Pactics used 457,751.33 KwH electricity during the reporting period

EN4

Energy consumption outside of the organization

No data available

EN5

Energy intensity

Energy ratio: 0.85 kg of processed material per KwH of electricity

50 | PACTICS ma gazi ne

Pactics Shanghai procures most of it materials (> 90%) locally. We define local as in the same or directly adjacent provinces in China.

EN6

Reduction of energy consumption

Energy ratio last report: 0.46 kg of processed material per KwH of electricity. So no reduction.

EN7

Reductions in energy requirements of products and services

No data available

EN8

Total water withdrawal by source

In total, Pactics used 686 cubic meter water during the reporting period

EN10

Percentage and total volume of water recycled and reused

No data available

EN15

Direct greenhouse gas (GHG) emissions

No data available

EN16

Energy indirect greenhouse gas (GHG) emissions

No data available

EN17

Other indirect greenhouse gas (GHG) emissions

No data available

EN18

Greenhouse gas (GHG) emissions intensity

No data available

EN19

Reduction of greenhouse gas (GHG) emissions

No data available

EN22

Total water discharge by quality and destination

In total, Pactics used 686 cubic meter water during the reporting period. It was all discharged into the sewer.

EN23

Total weight of waste by type and disposal method

1. The waste of Pactics includes inks, paint, fibers. paper, etc. 2. Pactics classifies waste by hazardous and nonhazardous 3. Method of disposal: - hazardous waste: is send back to original suppliers - non-hazardous waste: is sold to recycling agents

EN28

Percentage of products sold and their packaging materials that are reclaimed by category

We are a supplier company, the recycling of the finished products is not in our control

EN29

Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

We have not received any fines or sanction

EN30

Significant environmental impacts of transporting products and other goods and materials for the organizationâ&#x20AC;&#x2122;s operations, and transporting members of the workforce

We make use of sea and are shipments between our locations and to our customers in the EU and US. We have no data available on the environmental impact.

EN32

Percentage of new suppliers that were screened using environmental criteria

None

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EN33

Significant actual and potential negative environmental impacts in the supply chain and actions taken

The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed. This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy â&#x20AC;&#x2DC;finishedâ&#x20AC;&#x2122; microfiber. We believe the dye factories that are used by our microfiber supplier are of low quality and compliance. We have found alternative dying techniques in south-east Asia, but these will come with a cost. Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain. We are in contact with our main customers about this issue. Actual impact assessments are beyond our business scope

EN34

Number of grievances about environmental impacts filed, addressed, and resolved through formal grievance mechanisms

None

EN9, EN11, EN12, EN13, EN14, EN20, EN21, EN24, EN25, EN26, EN27, EN31,

Not applicable

Social Labor practices and decent work

LA1

Total number and rate of new employee hires during the reporting period, by age group, gender and region

Employee number: 143 (end of 2013) Interns: 2 The total number of new employee hired during the reporting period is 190, 19 of them (10%) are male and 171 of them (90%) are female. The total number of new employee leaving during the reporting period is 127, 9 of them (7%) are male and 118 of them (93%) are female.

LA2

Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation

We offer all people working for the company the same benefit package

LA3

Return to work and retention rates after parental leave, by gender

We have not received any parental leave requests. Although we offer this option, employees choose to resign and return to their hometown.

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LA4

Minimum notice period(s) regarding operational changes, including whether it is specified in collective agreements

Pactics strives for active communication between management and workfloor. Changes that impact wages are always notified one month in advance.

LA5

The percentage of the total workforce represented in formal joint management-worker health and safety committees

Pactics has no formal health and safety committee

LA6

Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender

1. 5 injury cases during the reporting period (injury rate (IR): 3.5%) 2. No occupational diseases occurred, and Pactics provides employees a free physical examination every year. 3. Injury reports are discussed in the MT, corrective actions are defined and executed

LA7

Workers with high incidence or high risk of diseases related to their occupation

No such risks exists in our operations

LA8

Health and safety topics covered in formal agreements with trade unions

None

LA11

Percentage of employees receiving regular performance and career development reviews, by gender and by employee category

Total employees: 143 70 piece rate operators receive a productivity bonus (piece rate) 23 time wage operators receive a monthly bonus based on a mix of quantitative and qualitative performance objectives. 28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives 11 office administration employees get reviewed but no bonus 11 managers and senior managers get annual reviews and performance bonusses

LA12

Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity

29 male 114 female Under 30 years old: 70 (48%) 11 of them (16%) are male 59 of them (84%) are female 30-50 years old: 69 (47%) 15 of them (22%) are male 54 of them (78%) are female Over 50 years old: 4 male (3%)

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LA13

Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation

The basic salary is the same between male and female employees. The ratio is 1:1.

LA15

Significant actual and potential negative impacts for labor practices in the supply chain and actions taken

Most of the production companies in our supply chain have a low level of compliance to general CSR standards. Health and safety is not well managed, remuneration and other labor rights are mostly not up to par. We see this is a general issue in the textile supply chain.

LA16

Number of grievances about labor practices filed, addressed, and resolved through formal grievance mechanisms

We donâ&#x20AC;&#x2122;t have any complaint records

Sub-category: human rights HR12

Number of grievances about human rights impacts filed, addressed, and resolved through formal grievance mechanisms

None

Society SO11

Number of grievances about impacts on society filed, addressed, and resolved through formal grievance mechanisms

None

Product responsibility PR9

Monetary value of significant fines for noncompliance with laws and regulations concerning the provision and use of products and services

54 | PACTICS ma gazi ne

None

Contact www.pactics.com info@pactics-cn.com www.facebook.com/pactics.kh Locations Siem Reap, Cambodia Shanghai, China Hong Kong Velp, The Netherlands Tucson, USA