Special Feature - Ethical Supply Chain Program

Twenty years of global improvement

October 12th 2024 marks the Ethical Supply Chain Program’s 20th year in operation. This incredible achievement for the non-profit presents an opportunity for Carmel Giblin, president & CEO to reflect on what has been accomplished over the past twenty years.

The Ethical Supply Chain Program was founded with an ethos of continuous improvement by the toy industry in 2004, to safeguard and improve ethical and sustainability standards in the global supply chain. Following a series of tragic incidents in factories in the 1990s, toy companies began to create their own codes of conducts to prevent future incidents and set clear standards suppliers needed to comply with in order to do business with them. This raft of standards did make progress to improve working conditions, but an estimated 70 varying standards made it difficult for factories to achieve compliance and increased costs due to audit duplication. Inconsistency of buyer requirements became a threat to progress continuing.

The International Council of Toy Industries (ICTI) created their unified Code of Business Practices in 1995, and in 2002 they unanimously agreed to support the creation of an organisation that would operate independently of ICTI to implement the code. The ICTI CARE Process, now known as the Ethical Supply Chain Program, was launched in 2004.

What the Ethical Supply Chain Program has developed since its beginning in 2004, is a holistic approach to improving the lives of supply chain workers globally whilst meeting the needs of employers and buyers. From robust supplier certification to trusted grievance mechanisms and employer-funded childcare facilities for workers; each service and solution has been developed in direct response to identified needs.

The dawn of a new approach

In 2007, the organisation launched its first factory management training program called the Continuous Improvement Program, the nine-month programme covered topics including changes in labour contract law, productivity and management. This approach of speaking with factories and stakeholders, understanding their issues and working together to find a solution remains core to ESCP’s approach and is the key to the success of the organisation today.

Supply chains are agile and fast changing, which means that companies are always onboarding new suppliers that need support in achieving the standards required. ESCP works with them to ensure they can be approved, with their products on retailers’ shelves quickly. Educating manufacturing suppliers on their customers’ requirements is an important part of ESCP’s work and an example of its beyond-audit approach. This commitment to education has seen a decline in noncompliances in key areas including Health & Safety and Wages & Benefits, where measurable declines in recent years are reported. Issues of child or forced labour are now very rare indeed.

This same year, ESCP launched a new database system making it possible for any stakeholder, including consumers, to access information about individual factories in the programme, enhancing transparency in the global supply chain. This commitment to transparency was further strengthened this year when ESCP published its Certified Supplier list on Open Supply Hub (OSH). Open Supply Hub’s mission is to make supply chain data open, accessible and trusted through its worldwide open data platform.

Data from ESCP certified factories was added to the Open Supply Hub platform in July 2024 and will be refreshed on a bi-annual basis. The collaboration will strengthen relationships across the supply chain; buyers benefit from a wider choice of ethical suppliers while factories which are doing business ethically can be found more easily.

Natalie Grillon, CEO and executive director at Open Supply Hub, says: “We’re thrilled to be hosting data from the Ethical Supply Chain Program. Leveraging a collaborative, open dataset, our aim is to help more suppliers see the value and business case for transparency and give them a free, public avenue to show that they are serious about making their supply chains safe and sustainable.”

Horizon scanning, ahead of legislative requirements

The Worker Helpline arrived in 2010, introducing a free and confidential grievance mechanism as a requirement of Certification. ESCP was the first labour standards programme to require workers be given access to such a mechanism and its continued achievements and value are recognized globally.

“Worker helplines and grievance mechanisms are essential tools for improving the lives of supply chain workers. By providing a safe and confidential way for workers to report issues and concerns, these mechanisms can help to identify and address systemic issues within supply chains. We are very impressed with the impact of ESCP’s Helpline and the impressive outcome of this work in addressing worker issues”, comments Matt Friedman, CEO, Mekong Club.

Fast forward to July 2024, the Worker Helpline has supported over 23,000 workers and resolved more 27,000 cases. We are pleased to see governments all over the world today requiring businesses have grievance mechanisms in place for the workers in their complete supply chain. As ESCP plans for the future, it will continue to invest in the Worker Helpline increasing access to it for workers and companies globally.

Although ESCP now operates in many categories, it does not forget its history and will always be committed to meeting the needs of the global toy industry. The commitment and collaboration of the toy industry is something to be proud of and in 2016, when the organization needed to better balance its income, Buyer Membership was launched, which has enabled the organisation to expand its services and grow geographically.

Organisations such as Walmart, Mattel, Hasbro, and Crayola were early adopters of the membership programme which provides manufacturers, vendors, retailers and licensors with a range of value-added services and support. These include unlimited access to Connect, dedicated account support, capability building services, insights and much more. Becoming a Buyer Member is a demonstration of a company’s commitment to ethical trade and responsible sourcing, and through this funding ESCP will continue to develop new products and services. If you are not yet a Buyer Member, get in touch with todd.merton@ethicalsupplychain.org to find out more.

More than an auditing standard ESCP has always focused on the positive impact that can be achieved through audit but simply requiring an audit is not sufficient. ESCP goes beyond audit and certifies factories, which means any issues found are remediated, and believes there is an even bigger opportunity to create supplier ownership and commitment to responsible business, free of exploitation and where workers can thrive.

To improve supplier capability in managing labour standards Progress Visits were launched in 2018. Progress Visits are announced factory visits to review and discuss progress in maintaining ESCP certification. They promote communication, enhance capability and build trust and transparency by providing opportunities for factories to openly share and discuss social compliance challenges. Data shows that Progress Visits have a positive effect and have reduced the number of critical non-compliances found on audit.

By working closely with suppliers, ESCP has unrivalled insights into the challenges and opportunities they face.

This insight led to the creation of the Family-Friendly Spaces Program (FFS). Since launch the FFS program has grown year-on-year, starting as a small-scale pilot at two factories in 2016 to supporting more than 2,000 children in 51 factories and four community spaces in China this year.

Worker Well-Being programmes at ESCP have gone from strength to strength with ESCP announcing an ambition at the end of 2023: to support 30,000 children through 100 Family-Friendly Spaces (FFS) and publicly recognising 50 factories as Family-Friendly. The programme has now expanded from China to Vietnam and Mexico and will continue to expand geographically. This October, ESCP will host its first Worker WellBeing Conference where plans to expand access to the programme will be on the agenda.

Responsive, agile and trusted

By being alert to the changing needs of its members ESCP has developed a raft of new services including the Social Impact Assessment programme, specifically designed for the licensing community, and the Environmental Assessment tool, enabling organisations of all sizes to kickstart their environmental reporting journey. In the coming months, the team at ESCP will introduce new solutions to help companies meet their regulatory obligations including for the Digital Product Passport and Chemical Safety Assessment requirements for Recycled Materials, alongside on-going support for companies to meet investor and consumers growing ESG expectations.

Collaboration is important to ESCP, it supports innovation and responsiveness. Earlier this year Licensing International announced that ESCP was its preferred social compliance partner. Through the newly formed partnership, more than 1,200 members of Licensing International will now have access to resources and programmes to support their ESG compliance journey and ensure they are adhering to the highest ethical standards.

Maura Regan, president of Licensing International, says: “Consumer demand for ethical and sustainable practices continues to grow and, with new regulations launching around the world, we are working to provide our members with the resources they need to continue to grow while meeting these demands. We look forward to working with ESCP to launch new content and programming in support of the global brand licensing industry.”

The Ethical Supply Chain Program was established with continuous improvement at its heart, this is exactly what the organisation has done over the past twenty years and what it will continue to do for the next twenty. We should take pride that labour standards have significantly improved, but we cannot be complacent. We all have a responsibility to play our part in making global supply chains better and to leave a legacy to be proud of.

My biggest hope is that companies change their mindset from thinking of how to cut compliance costs to grasping the opportunities presented by being a responsible employer and business partner. Improvements to the bottom line are achieved with this approach. The leadership shown by many in the global toy industry over the last two decades has been inspiring and delivered real improvements for millions of workers and their families. On behalf of the workers who have benefitted, the team at ESCP, and myself, I thank these leaders for their support, together we make a difference.

For more information visit: www.ethicalsupplychain.org