Idh q3 2014 summary report final

SUMMARY REPORT Q3/2014

IDH, the Sustainable Trade Initiative (IDH), together with Dell, HP, Philips, Apple, Microsoft, ELEVATE, ERI and civil society organizations, has developed a program to improve the working conditions and environmental impact of over 75 electronics factories in China, reaching over 200,000 workers. A wide variety of training on labor, health & safety and environmental performance is being offered, however the innovative focus of the IDH Electronics Program is the development of effective worker-management dialogue to strengthen the ‘continuous improvement muscle’ of local manufacturers, as a prerequisite to addressing the root causes of social and environmental performance issues.

ELEVATE believes sustained, impactful improvement in social and environmental performance requires sincerity of intent and a responsible balance between maximizing financial return and meeting supplier responsibility requirements. We call this Business Driven Sustainability. ELEVATE’s mission is to help our clients design and implement customized programs that provide complete insight into risk and improve supply chain social, environmental and business performance. Within the IDH Electronics Program ELEVATE is responsible for the executive facilitation of the program as well as the implementation of the ‘non-dialogue’ (business performance) curriculum.

The Economic Rights Institute (ERI) is a non-profit organization, registered in Hong Kong, with a mission to support alliances of stakeholders to actualize economic development that respects the rights of all. Within the IDH Electronics Program, ERI is responsible for designing the methodology to promote worker-management (employer employee) dialogue, for support to service providers who implement this methodology and for appraisals of the evolution of dialogue and where this promotes wider enterprise improvements.

2

Index of Contents:       

Supplier uptake Comments on program progress (Q3 ’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

3

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

Dell

HP

Philips

Apple

Microsoft

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

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

4

Total Factories on board (by Sept. 30)

Geographic location, total factories (by Sept. 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 Q3 ’14 the program was closed for any new entrants, so the number of active factories is now locked down at 54 (47 full program and 7 fast track). All factories in the program have completed the EPA (Entry Point Assessment) and have an agreed work-plan, plus all factories are in the implementation phase of the program.

Implementation focus 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. For the WMD (worker management dialogue) curriculum, CC5 began rollout with the factories. The WMD curriculum has 7 modules in total, so the early entrant factories are now progressing into the later stages of WMD training and deployment. This has presented some challenges, especially consistency of team members for core curriculum training, related to worker turnover or the availability of representatives and team members. This is a key focus for the coaching organization and service providers, along with the brands and the factories, to try to maintain sustainable momentum on dialogue development.

Mid-term assessments During Q3 IDH began the deployment of the ‘Mid-Term Assessment’ (MTA) methodology. The assessment process for the MTA involves repeating some of the EPA (Entry Point) checkpoints (worker survey and WMD maturity assessment) and independently analyzing the data. The objective is to identify any measurable signs of impact (positive or negative) on the sample batch of factories so far.

The MTA involves assessment of approximately 15 factories, most of which are at least half way through the dialogue and non-dialogue implementation. The initial results of the MTA will be available and published in early Dec ’14, to be shared with the steering committee (SC) and wider stakeholders at the forthcoming program meetings.

KPI trend analysis As is visible in the later section of this report, IDH now has over 30 months of monthly KPI data reporting from the factories involved in the program.

5

(1) Worker turnover trend in Q3 ’14 shows a seasonality peak for worker turnover in August, which is normally related to temporary student labor turnover. However, there was a 20% reduction in worker turnover in August 2014 (17%) vs the turnover in August during the previous two years (21%).

(2) Rework rates increased in August & Sept, which is possibly related to the increased worker turnover, noted above. A similar increase in rework can be seen in Feb 2014, after the increased worker turnover in Jan 2014.

(3) Average salaries and working hours show some increase again in Q3, with the average WH’s in Q3 reaching 54 hours per week. This is likely to be related to high seasonal workloads.

Key Focus Points: 1) The program closed for new factories to join (including the Fast Track) at the end of Q2’14, focus shifted in Q3 onto completing implementation by end of Q2 ’15.

2) 17 factories, plus the new fast track factories, did not report KPI’s during Q3 (down from 19 in Q2).

IDH will continue to jointly review this with the brands to try and ensure maximum data collection.

6

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

On Track

Completed

Jan. 2013

On Track

Submitted by Sept. 2014

TUV, TIMELINE

On Track

Completed

Jan. 2013

On Track

Submitted by Aug. 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

Submitted by Jul. 2014

LESN, TIMELINE

On Track

Completed

Mar. 2013

On Track

Submitted by Sept. 2014

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

Submitted by Aug. 2014

Taos

On Track

Completed

Jan 2014

On Track

Submitted by Aug. 2014

TUV

On Track

Completed

Jan. 2013

On Track

Submitted by Jul. 2014

TUV

On Track

Completed

Jan. 2013

On Track

Submitted by Sept. 2014

Timeline

On Track

Completed

Sep. 2013

On tract

Submitted by Sept. 2014

Timeline

On Track

Completed

Jun. 2012

On track

NOT SUBMITTED

TUV

On Track

Completed

Oct. 2013

On track

Submitted by Sept. 2014

TUV

On Track

Completed

Jan. 2014

On track

Submitted by Aug. 2014

Taos

On Track

Completed

Jan 2014

On track

Submitted by Jun. 2014

TBD

Re-joined

Completed

Aug. 2013

On Track

Submitted by Sept. 2014

TAOS

7

Involving WMD SPs

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

41

A2

On Track

Completed

Jan. 2013

On Track

Submitted by Sept. 2014

Timeline

On Track

Completed

Mar. 2013

On Track

Submitted by Sept. 2014

TUV

On Track

Completed

Mar. 2013

On Track

Not Submitted

TUV

On Track

Completed

Mar. 2013

On Track

Submitted by Aug. 2014

LESN

On Track

Completed

Sep. 2013

On Track

Submitted by Aug. 2014

TUV

On Track

Completed

Oct. 2013

On Track

Submitted by Sept. 2014

TUV

On Track

Completed

Oct. 2012

On Track

Submitted by Jul. 2014

SUSA

On Track

Completed

Oct. 2013

On Track

Submitted by Sept. 2014

TUV

On Track

Completed

Oct-. 2013

On Track

Submitted by Aug. 2014

E&T

On Track

Completed

Nov. 2013

On Track

Not Submitted

BLC

On Track

Completed

Oct. 2013

On Track

Submitted by Sept. 2014

BLC

On Track

Completed

Oct. 2013

On Track

Not Submitted

TAOS

On Track

Completed

Mar. 2014

On Track

Submitted by Sept. 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

Jun. 2014

On Track

Not Submitted

Taos

On Track

Completed

Jun. 2014

On Track

Not Submitted

TUV

On Track

Completed

Jun. 2014

On Track

Not Submitted

Hengyi

On Track

Completed

Jun. 2014

On Track

Not Submitted

Hengyi

On Track

Completed

Mar. 2013

On Track

Submitted by Sept. 2014

LESN

On Track

Completed

Mar. 2013

On Track

Submitted by Sept. 2014

LESN

8

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 Sept. 2014

CLSN

On Track

Completed

Mar. 2013

On Track

Submitted by Sept. 2014

LESN

On Track

Completed

Aug. 2013

On Track

Submitted by Mar. 2014

TAOS

On Track

Completed

Oct. 2013

On Track

Submitted by Sept. 2014

Timeline

On Track

Completed

Oct. 2013

On Track

Submitted by Jun. 2014

Timeline

On track

Completed

Oct. 2013

On Track

Submitted by Sept. 2014

Taos

On Track

Completed

Jan. 2014

On Track

Submitted by Sept. 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 Jul. 2014

BLC

On Track

Completed

Completed

On Track

Not submitted

TBD

On Track

Completed

Completed

On Track

Submitted by Sept. 2014

Taos

On Track

Completed

Completed

On Track

Submitted by Sept. 2014

Timeline

9

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).

0%

20%

40%

60%

80%

100%

P3 P6 P8 P10

Philips

P12 P14 P16 PFT19 PFT21 PFT23 PFT25

HP

H2 WP Timeline

H5

WMD Completeness

H9

Non-D Completeness

D1

Dell

D3 D5 D7 D11 A1

Apple

A3 A5 A7 A10

Micros oft

A12 N1 N3

10

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

Worker Turnover (%)

Rework Rate (%)

The worker turnover seasonality peak of 17% in August 2014 shows a 19% reduction vs 2013 & 2012. Average turnover rate is <15%.

Program trend is reducing overall, but rework rates were higher in August & September, possibly related to the increased worker turnover above.

11

Average Monthly Net Wages (RMB)

Average Weekly Working Hour (Hours)

Program trend has increased slowly, which mostly reflects the adjustments of legal minimum wage and seasonality. Average program net wages are now at RMB3,000 per month.

Working hours are showing a marginally increasing trend over the course of the program, and increased again during Q3. Average WHâ&#x20AC;&#x2122;s are now 54hours per week.

12

Program average and leader KPI data points KEY PERFORMANCE INDICATORS â&#x20AC;&#x201C; 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

0.84

0.00

# of days lost due to work-related injuries

8.43

0.00

Average weekly working hours in the calendar month

54.43

34.00

Average # of rest days

5.00

9.00

527,056.44

N/A

18.74

0.00

Average monthly net wage (RMB)

2,995.17

4,048.23

Average monthly gross wage (RMB)

3,195.96

3,907.00

Ratio of OT Premium to Gross Wages

36.54

N/A

1st quartile of monthly net wage (RMB)

2,474.67

3,145.67

2nd quartile of monthly net wage (RMB)

3,045.06

3,911.15

1st quartile of monthly gross wage (RMB)

2,691.71

3,504.38

2nd quartile of monthly gross wage (RMB)

3,270.42

4,196.73

434.36

0.000098

Unit Produced Per Hour (UPPH)

48.59

429.85

Rework Rate (%)

2.27

0.00

Turnover (%)

14.23

5.90

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

13

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

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

Factory Name

14

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

15

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 2 3 4 5 6 7 8 9 10 11 12

A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11 A12

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

Overall (1~10)

System & roles (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 6.8

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

4.0

6.7

8.0

5.3 6.0 4.8 3.0 4.3 4.0 4.5 4.8 2.8 4.0 5.8 6.5

16

Resources (1~10)

Overall (1~10)

13

A13

14

D6 D7

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

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

41

P15 P16

42

P17

43

P18

40

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

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

17

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