Idh q2 2014 summary report final (rev 10)

SUMMARY REPORT Q2/2014

Index of Contents:       

Supplier uptake update Comments on program progress (Q2 ’14) Progress status overview on supplier implementation Work-plan completion vs work-plan agreed timelines by supplier Program trend analysis KPI’s Appendix 1: Worker satisfaction index Appendix 2: Worker management dialogue maturity index

2

Supplier Uptake Overview of Supplier On-boarding Status by Brands Total 30/6/2014

Dell

HP

Philips

Apple

Microsoft (Nokia)

Regular Program

47

11

7

14

12

3

Fast Track Program

7

0

0

7

0

0

Geographic Location by Brands Program

Dell

HP

Philips

Apple

Microsoft (Nokia)

TOTAL

47 + 7

11

7

14 + 7

12

3

Guangdong Area

36 + 4

10

6

8+4

9

3

Shanghai Area

9+3

0

1

5+3

3

0

2

1

0

1

0

0

Other

Number of Fast Track Program suppliers is in blue lettering

3

Total Factories on board (by June 30)

Geographic location, total factories (by June 30)

Total: 54

Total: 54 3

12

2

11

12 7 40

21 Dell

HP

Philips

Apple

Microsoft

South

Shanghai Area

Other

Comment on Progress During Q2’14 the program supplier group has stabilized. After 1 factory left the program, there are 54 suppliers in total, including the new ‘Fast Track’ factories. All suppliers are now implementing workplans including the 7 Fast Track suppliers, who have already completed their Entry Point Assessments.

During Q2 most factories made good progress on implementation, and several factories have now caught up, or are ahead of, their work-plans.

Implementation focus During Q2 IDH focused on following up on implementation timelines, to ensure all factories and brands made progress on completing the work-plans, and resolving any bottlenecks with the service providers or factory alignment. The results of this can been seen in the improved implementation completeness graphs, which show the progress made since the Q1 report.

Mid-term assessments The IDH program team is reviewing the feasibility and considering conducting mid-term reviews and analysis with a sample of the factory candidates during Q3’14. The objective of this is to review and verify progress so far through on-site surveys, interviews and deeper data analysis of program impact with worker satisfaction indices and worker - management dialogue maturity. This activity is planned for Sept & Oct ’14.

KPI trend analysis As is visible in the later section of this report, IDH now has over 24 months of monthly KPI data reporting from the factories involved in the program. At this stage the IDH program team is starting to review the KPI data for trends and indicators of impact. Initial review of the high level KPI data starts to indicate the following; (1) Worker turnover trend is showing signs of decreasing in the IDH factory group. Initially the program average worker turnover was approximately 16%+, and now the program average is below 14%, a reduction to date of approximately 12%. If seasonality effect is considered (ie worker turnover at CNY) then the net underlying worker turnover reduction is actually even higher.

4

(2) Rework Rates are also showing a corresponding reduction in the program average from 2.6%+ to approximately 1.8%, a reduction of around 30% in rework rates reported. Potentially this reduction in rework could be related to the reduction in worker turnover.

(3) Average monthly net wages have increased from RMB2,200 to RMB2,800 over the period of the program reporting. An increase of around 27%. This can mostly be attributed to the increase in legal minimum wage requirements in China during this period. This observation is supported by the relatively flat-line on monthly wages during 2014, as there has been no increase in legal minimum salary rates.

(4) Weekly working hours have been relatively flat during the program reporting period, at between 51 and 52 hours per week on average. The increase in net wages therefore cannot be attributed to increased working hours, but equally there has been no reduction in working hours, even as average net monthly salaries have actually increased.

Key Focus Points: 1) The program closed for new factories to join (including the Fast Track) at the end of Q2’14.

2) During the Q1 progress reviews, and the steering committee meeting, the program team focused on highlighting any factories at risk due to implementation delays. This discussion helped to make key decisions on priorities, and has resulted in good progress on work-plans. This focus will continue in Q3.

3) 19 factories did not report KPI’s during Q2. IDH will jointly review this with the brands to try and ensure maximum data collection.

5

Progress Status – Summary of the status of the active suppliers in the program and the WMD service providers they are working with.

No.

By Brand

1

D1

2

D2

3

D3

4

D4

5

D5

6

D6

7

D7

8

D9

9

D10

10

D11

11

D12

12

H1

13

H2

14

H4

15

H5

16

H8

17

H9

18

H10

19

P3

Status

EPA

Implementation Starting Point

Work Plan

KPI Collection

Involving WMD SPs

On Track

Completed

Jan. 2013

On Track

Submitted by Jun. 2014

TUV, TIMELINE

On Track

Completed

Jan. 2013

On Track

Submitted by Jun. 2014

TIME LINE

On Track

Completed

Jan. 2013

On Track

NOT SUBMITTED

CLSN, TIMELINE

On Track

Completed

Jan. 2013

On Track

Submitted by Apr. 2014

TIMELINE

On Track

Completed

Jan. 2013

On Track

NOT SUBMITTED

LESN, TIMELINE

On Track

Completed

Mar. 2013

On Track

Submitted by Dec. 2013

TIMELINE

On Track

Completed

Oct. 2013

On Track

NOT SUBMITTED

TIMELINE

Move to new location On Track

Re-doing EPA

May 2014

To be revised

-

TBD

Completed

Jan. 2014

On Track

NOT SUBMITTED

Taos

On Track

Completed

Jan. 2014

On Track

NOT SUBMITTED

Taos

On Track

Completed

Jan 2014

On Track

NOT SUBMITTED

TUV

On Track

Completed

Jan. 2013

On Track

Submitted by Jun. 2014

TUV

On Track

Completed

Jan. 2013

On Track

Submitted by Jun. 2014

Timeline

On Track

Completed

Sep. 2013

On tract

Incomplete

Timeline

On Track

Completed

Jun. 2012

On track

NOT SUBMITTED

TUV

On Track

Completed

Oct. 2013

On track

Submitted by Jun. 2014

TUV

On Track

Completed

Jan. 2014

On track

NOT SUBMITTED

Taos

On Track

Completed

Jan 2014

On track

Submitted by Jun. 2014

TBD

Re-joined

Completed

Aug. 2013

On Track

Submitted by May 2014

TAOS

6

20

P5

21

P6

22

P7

23

P8

24

P9

25

P10

26

P11

27

P12

28

P13

29

P14

30

P15

31

P16

32

P18

33

PFT19

34

PFT20

35

PFT21

36

PFT22

37

PFT23

38

PFT24

39

PFT25

40

A1

On Track

Completed

Jan. 2013

On Track

Submitted by Jun. 2014

Timeline

On Track

Completed

Mar. 2013

On Track

Submitted by Jun. 2014

TUV

On Track

Completed

Mar. 2013

On Track

Not Submitted

TUV

On Track

Completed

Mar. 2013

On Track

Submitted by May 2014

LESN

On Track

Completed

Sep. 2013

On Track

Submitted by Apr. 2014

TUV

On Track

Completed

Oct. 2013

On Track

Submitted by Jun. 2014

TUV

On Track

Completed

Oct. 2012

On Track

Submitted by Apr. 2014

SUSA

On Track

Completed

Oct. 2013

On Track

Incomplete

TUV

On Track

Completed

Oct-. 2013

On Track

Submitted by May 2014

E&T

On Track

Completed

Nov. 2013

On Track

Not Submitted

BLC

On Track

Completed

Oct. 2013

On Track

Submitted by Jun. 2014

BLC

On Track

Completed

Oct. 2013

On Track

Not Submitted

TAOS

On Track

Completed

Mar. 2014

On Track

Submitted by Jun. 2014

E&T

On Track

Completed

May 2014

On Track

Not Submitted

Timeline

On Track

Completed

May 2014

On Track

Not Submitted

Timeline

On Track

Completed

May 2014

On Track

Not Submitted

Timeline

On Track

Completed

On Track

Completed

On Track

Completed

On Track

Completed

On Track

Completed

Mar. 2013

On Track

Submitted by Jun. 2014

LESN

7

41

A2

42

A3

43

A4

44

A5

45

A6

46

A7

47

A9

48

A10

49

A11

50

A12

51

A13

52

N1

53

N2

54

N3

On Track

Completed

Mar. 2013

On Track

Submitted by Jun. 2014

LESN

On Track

Completed

Mar. 2013

On Track

Submitted by Jun. 2014

CLSN

On Track

Completed

Mar. 2013

On Track

Submitted by Jun. 2014

LESN

On Track

Completed

Aug. 2013

On Track

Submitted by Mar. 2014

TAOS

On Track

Completed

Oct. 2013

On Track

Submitted by Jun. 2014

Timeline

On Track

Completed

Oct. 2013

On Track

Not submitted

Timeline

On track

Completed

Oct. 2013

On Track

Submitted by Jun. 2014

Taos

On Track

Completed

Jan. 2014

On Track

Submitted by Jun. 2014

E&T

On Track

Completed

Jan. 2014

On Track

Submitted by Mar. 2014

BLC

On Track

Completed

Jan. 2014

On Track

Not submitted

Timeline

On Track

Completed

Mar. 2014

On Track

Submitted by Jun. 2014

BLC

On Track

Completed

Completed

On Track

Not submitted

TBD

On Track

Completed

Completed

On Track

Submitted by Mar. 2014

Taos

On Track

Completed

Completed

On Track

Submitted by Jun. 2014

Timeline

8

Program Status Overview: Work Plan Completion VS Work Plan Timeline Summary showing the progress of each supplier on their WMD and Non-Dialogue WP (work plan) vs the agreed project timeline from the EPA (Entry Point Assessment).

Nokia

Apple

Dell

HP

Philips

0% P3 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15 P16 P18 H1 H2 H4 H5 H8 H9 H10 D1 D2 D3 D4 D5 D6 D7 D10 D11 D12 A1 A2 A3 A4 A5 A6 A7 A9 A10 A11 A12 A13 N1 N2 N3

20%

40%

60%

80%

100%

WP Timeline WMD Completeness Non-D Completeness

9

Trend Analysis - KPI’s measuring worker and productivity data to indirectly link social factors with business performance.

Worker Turnover (%)

Worker turnover is now showing a clear downwards trend, which is even more significant if seasonal spikes at CNY and summer workers are considered.

Worker Turnover 35 30 25 20 15 10 5

Program Average

Rework Rate (%)

Program Leader

jun-14

apr-14

mei-14

mrt-14

jan-14

feb-14

dec-13

nov-13

okt-13

sep-13

aug-13

jul-13

jun-13

mei-13

apr-13

feb-13

mrt-13

jan-13

dec-12

nov-12

okt-12

sep-12

jul-12

aug-12

jun-12

apr-12

mei-12

mrt-12

feb-12

jan-12

0

Linear (Program Average)

Program trend is reducing overall and rework rates stabilized in Q2 after the peak in Q1, possibly realted to worker turnover at CNY.

Rework Rate (%) 4,50 4,00 3,50 3,00 2,50 2,00 1,50 1,00 0,50

Program Average

Program Leader

jun-14

apr-14

mei-14

mrt-14

jan-14

feb-14

dec-13

nov-13

okt-13

sep-13

aug-13

jul-13

jun-13

mei-13

apr-13

mrt-13

feb-13

jan-13

dec-12

nov-12

okt-12

sep-12

aug-12

jul-12

jun-12

mei-12

apr-12

mrt-12

feb-12

jan-12

0,00

Linear (Program Average)

10

Average Monthly Net Wages (RMB)

Program trend has increased slowly, which mostly reflects the adjustments of legal minimum wage. Q2’14 wages stabilized at RMB2,800 on average.

Average Monthly Net Wages 5.300 4.800 4.300 3.800 3.300 2.800 2.300 1.800

Program Average

Average Weekly Working Hour (Hours)

jun-14

apr-14

mei-14

feb-14

mrt-14

jan-14

dec-13

okt-13

nov-13

sep-13

jul-13

Program Leader

aug-13

jun-13

mei-13

apr-13

mrt-13

jan-13

feb-13

dec-12

nov-12

okt-12

sep-12

jul-12

aug-12

jun-12

apr-12

mei-12

feb-12

mrt-12

jan-12

1.300

Linear (Program Average)

Working hours are showing a marginally increasing trend over the course of the program, But generally flat around 51 hours per month on average.

Average Weekly Working Hours 60 50 40 30 20 10

Seasonal Adjusted Average

Program Average

Program Leader

Linear (Program Average)

jun-14

mei-14

apr-14

mrt-14

feb-14

jan-14

dec-13

nov-13

okt-13

sep-13

aug-13

jul-13

jun-13

mei-13

apr-13

mrt-13

feb-13

jan-13

dec-12

nov-12

okt-12

sep-12

aug-12

jul-12

jun-12

mei-12

apr-12

mrt-12

jan-12

feb-12

0

11

Program average and leader KPI data points KEY PERFORMANCE INDICATORS – Comparative Analysis (LATEST QUARTER) *Compared to last quarter data in bracket Factory Name

Program Average

Leader

WMD Benchmarks (Non-rep comm systems) in EPA

6.1

9.2

WMD Benchmarks (Rep systems) in EPA

4.3

6.5

6.0

8.4

# of work-related injuries

0.74

0.00

# of days lost due to work-related injuries

33.34

0.00

Average weekly working hours in the calendar month

51.16

18.09

Average # of rest days

5.07

9.67

414,466.44

N/A

18.81

0.00

Average monthly net wage (RMB)

2,803.84

4,043.67

Average monthly gross wage (RMB)

2,972.11

4,346.33

Ratio of OT Premium to Gross Wages

38.55

N/A

1st quartile of monthly net wage (RMB)

2,377.44

3,597.53

2nd quartile of monthly net wage (RMB)

2,896.51

5,068.50

1st quartile of monthly gross wage (RMB)

2,603.99

4,792.67

2nd quartile of monthly gross wage (RMB)

3,101.68

5,181.50

411.21

0.00

25079.62

549154.45

Rework Rate (%)

2.09

0.29

Turnover (%)

12.89

4.78

Worker-Management Dialogue

Worker Satisfaction Worker Satisfaction Indicator from EPA Working Condition

Total monthly working hours in the calendar month % of workers working more than 60h in the week

Environmental Condition Kilowatts used per product unit Business Impact Unit Produced Per Hour (UPPH)

12

Appendix 1 Worker Satisfaction Index Comparison by Supplier: Measured at Entry Point Assessment & repeated at Exit Point Assessment (no suppliers completed exit point as yet). Directly measuring program impact through 6 dimensions on worker satisfaction before & after. (Remark: 1 means unsatisfied/not living up to expectations, and 10 means satisfied/living up to expectations. Overall scale is generated by the 6 dimensions score in even weight)      

Working Relationships Wage Fairness and Transparency Working Hours Facilities Health and Safety Career/Personal Development

Overall Scale

Working Relationships

Wage Fairness and Transparency

Working Hours

Facilities

Health and Safety

Career/Person al Development

(1-10)

(1-10)

(1-10)

(1-10)

(1-10)

(1-10)

(1-10)

Above Average Below Average

6.0

6.9

6.3

4.1

5.8

6.5

6.3

1

A1

6.0

2

A2

5.2

6.5 6.3

6.4 6.4

6.0 2.3

5.6 4.7

5.6 5.9

5.8 5.5

3

A3

5.9

6.8

6.8

3.7

5.9

6.0

6.4

4

A4

5.9

6.8

6.0

2.5

6.5

7.0

6.5

5

A5

6.5

6.6

6.8

6.5

6.2

6.8

6.3

6

A6

6.0

6.5

5.8

5.3

5.1

6.7

6.4

7

A7

6.3

6.9

6.4

4.7

5.6

7.0

7.3

8

A8

6.2

6.5

6.5

4.5

6.0

7.1

6.6

9

A9

5.8

6.3

6.1

5.4

4.7

6.7

5.8

10

A10

5.9

6.6

5.8

6.0

5.2

6.4

5.2

11

A11

4.8

6.3

5.3

1.5

3.1

6.4

6.0

12

A12

5.7

6.7

6.7

2.8

6.0

5.8

6.2

13

A13

5.6

6.9

6.0

1.8

6.0

6.2

6.6

14

D2

7.3

7.8

7.8

5.8

7.0

8.2

7.2

15

D3

5.2

6.3

5.4

3.2

5.1

5.8

5.5

16

D4

6.3

7.0

7.1

4.5

6.2

7.2

6.0

Factory Name

13

17

D5

4.9

6.4

5.4

2.9

4.9

4.6

5.2

18

D6

6.3

6.8

7.4

4.6

6.0

7.0

6.2

19

D7

5.2

6.5

5.5

3.7

4.4

5.1

5.9

20

D8

5.1

6.3

5.1

2.7

4.2

6.2

5.8

21

D10

5.5

6.7

6.0

3.3

4.6

6.3

5.9

22

D11

5.4

6.7

6.4

2.0

4.8

5.7

6.4

23

D12

5.2

6.6

5.6

1.8

5.6

6.1

5.7

24

H1

5.1

6.5

5.4

3.1

5.0

4.5

5.8

25

H2

5.8

6.7

6.0

2.8

6.0

7.5

5.8

26

H3

6.1

6.6

7.2

4.8

6.7

6.1

5.4

27

H4

5.8

6.3

5.8

6.0

5.7

6.0

5.3

28

H5

5.3

6.3

5.8

3.4

5.6

6.1

4.5

29

H6

6.3

6.7

7.0

4.2

6.3

7.3

6.4

30

H8

7.5

7.9

7.3

6.5

7.1

8.2

8.0

31

H9

4.9

6.3

6.4

1.4

4.4

5.8

5.3

32

H10

4.9

6.9

5.1

2.6

4.0

4.4

6.3

33

N1

6.3

6.7

6.0

6.0

6.5

6.5

6.3

34

N2

5.5

6.4

5.8

5.2

3.6

6.3

5.9

35

N3

7.1

7.6

7.1

5.0

7.2

8.3

7.6

36

P3

7.7

7.9

7.7

7.7

7.2

8.6

7.1

37

P4

8.1

8.4

8.3

6.7

8.1

9.1

7.8

38

P5

5.6

6.6

6.5

1.0

6.5

6.8

6.2

39

P6

5.8

6.7

6.6

2.9

6.1

6.4

5.8

40

P7

6.7

7.0

7.1

5.9

6.1

7.8

6.3

41

P8

4.7

6.5

4.9

1.8

4.7

4.2

6.3

42

P9

7.0

7.8

7.1

3.8

8.6

6.6

7.9

43

P10

5.4

7.0

4.1

3.0

5.1

6.3

6.7

44

P11

5.5

6.8

5.3

3.1

6.4

5.0

6.6

45

P12

6.4

7.1

6.7

3.8

6.2

7.9

6.8

46

P13

5.0

6.8

4.7

3.7

4.1

4.8

6.1

47

P14

5.7

6.6

6.2

3.9

4.6

6.4

6.4

48

P15

7.2

7.8

7.7

5.8

6.8

7.5

7.8

49

P16

8.4

8.6

8.3

6.8

9.2

9.0

8.7

50

P17

6.3

7.4

6.9

3.6

6.2

7.1

6.7

51

P18

7.1

7.3

6.2

6.8

7.4

7.8

7.0

14

Appendix 2 Worker Management Dialogue Maturity Index Comparison by Supplier: Measured at Entry Point Assessment & repeated at Exit Point Assessment (no suppliers completed exit point as yet). Directly measuring program impact on WMD before & after by covering below criteria:  

Non-rep comm systems System & roles  Rep structures  Depth of worker rep role Representation & participation  S/election of employee reps  Employee reps & employees  Scope of discussion Resources  Time  Funding  Peer network





(Remark: 1 means no functioning systems/ no resources available; 10 means well functioning systems/ required sources available. The overall score of Rep. system is generated by 8 KPIs divided in 3 areas weighing 25% (system & roles), 37,5% (representation & participation) and 37,5%(resources))

Rep systems

Non-Rep Supplier/ Factory Name

Above Average Below Average 1

A1

2

A2 A3

3 4 5 6 7 8 9 10 11

A4 A5 A6 A7 A8 A9 A10 A11

comm systems Representa tion & participa tion (1~10)

Overall (1~10)

System & roles (1~10)

Resources (1~10)

6.1

3.2

4.3

5.1

4.3

4.8 5.6 5.6 6.0 6.4 5.2 6.4 6.8 5.6 6.8 4.0

3.0

6.7

5.3

5.0

4.0

8.7

3.0

6.0

4.7

2.0

2.0

4.7

3.0

2.0

7.3

3.0

4.7

4.0

3.0

4.7

5.3

3.0

5.3

5.3

2.0

2.7

3.3

3.0

4.7

4.0

5.0

7.3

4.7

5.3 6.0 4.8 3.0 4.3 4.0 4.5 4.8 2.8 4.0 5.8

Overall (1~10)

15

12

A12

13

A13 D6

14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

D7 D8 D9 D10 D11 D12 H6 H7 H8 H9 H10 N1 N2 N3 P3 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15

42

P16 P17

43

P18

41

6.8 6.0 6.4 4.4 4.0 4.4 5.2 5.6 4.4 6.4 5.2 8.8 5.2 4.8 7.2 4.8 8.4 8.4 6.4 6.0 6.4 4.8 8.0 5.6 5.6 6.4 4.8 5.2 8.4 9.2 7.6 7.6

4.0

6.7

8.0

2.0

3.3

5.3

3.0

8.0

4.0

4.0

6.0

8.0

3.0

4.0

3.3

4.0

2.7

3.3

3.0

4.0

6.0

3.0

5.3

4.7

3.0

5.3

5.3

4.0

6.0

7.3

3.0

5.3

5.3

3.0

4.0

4.0

2.0

2.7

2.7

3.0

2.0

3.3

4.0

6.7

6.0

3.0

5.3

4.0

5.0

5.3

6.0

3.0

2.7

4.0

2.0

2.7

3.3

2.0

2.0

5.3

2.0

2.7

4.0

2.0

2.7

4.0

4.0

6.7

5.3

3.0

4.0

5.3

4.0

2.0

4.7

5.0

4.7

8.0

3.0

6.7

4.7

2.0

3.3

5.3

3.0

2.7

5.3

4.0

4.0

6.0

2.0

2.7

3.3

4.0

2.0

4.7

6.5 3.8 5.3 6.3 3.5 3.3 4.5 4.5 4.8 6.0 4.8 3.8 2.5 2.8 5.8 4.3 5.5 3.3 2.8 3.3 3.0 3.0 5.5 4.3 3.5 6.0 5.0 3.8 3.8 4.8 2.8 3.5

16