Meeting of the Brand Caucus

20 January 2015

Accord on Fire and Building Safety in Bangladesh | Brand Caucus Meeting |20 January 2015 Amsterdam

Agenda

Introduction

Remediation (Mel, Jochen, Santi) Tier 3 – legal situation and options De-listed & 30 day rule Wage payments Resources Financial communication to factories S. 23 issue

OHS Committees (Phil, Mel)

Caucus Governance (Jochen)

Update on Arbitration – time permitting (Mel)

Accord-Alliance Update – time permitting (Mel, Phil, Roger)

AppendixWorker Participation

Introduction

New Steering Committee:Roger Hubert, H&MUwe Hilker, TchiboSantiago Martinez-Lage, InditexJochen Overmeyer, OttoPhil Chamberlain, C&AMelanie Steiner, PVH

Remediation – Tier 3 and Delisted Issue

Tier 3 Issue

Scope Section of Accord, s. 3:Tier 3 factories are subject only to “limited

initial inspections to identify high risks”Can represent no more than 35% of a

signatory’s productionMeant to include facilities with occasional

orders and where the buyer has limited leverage with the factory

S. 3 includes a caveat that if a facility is determined, as a result of the initial inspection, to be “high risk”, then it “shall be subject to the same treatment as if it were Tier 2.”

De-listed issue – Disclosure Protocol After the initial disclosure list is provided, it will be updated

in the following manner:

1) Any factory which meets the definition of a covered factory will be added by that company to its disclosure list within one month of the date on which the factory first meets the relevant criteria (e.g., one month after the first order is placed), with the understanding, however, that the factory becomes a covered factory as soon as it meets the definition, whether or not it has been disclosed.

2) Any factory that ceases to meet the definition of a covered factory will be removed from the list within one month of the date on which it ceases to meet the definition, with the understanding that the factory remains a covered factory until it has been properly removed from the list.

Note: 30 day rule is not in the Accord but was agreed the SC.

Currently 120 factories have been inspected with no active brands.

◦ 92 have 1 or more brands under 30 day rule

◦ 28 have no brands responsible under 30 day rule

◦ 16 were tier 1 or 2

◦ 104 have no CAP approved yet

Wage IssueDuring the first 1,103 inspections, 26

factories had ‘critical closures’ and were submitted to the Review Panel.

6 of these factories did not provide wage payments as required under s. 12 of the accord, which we are told is approx. 2.5MUSD(Section 13: Brands shall require suppliers to pay all outstanding wages if the factory closes for renovations)

We are being asked our opinion on the setting up of a Factory Fund where all Accord signatory companies would participate based on an agreed level.

A proposal is being put to the SC tomorrow.

Tier 3 Issue, cont.At least 40% of Accord factory base is

purely Tier 3 (currently 781 factories are Tier 3 only)

At our last SC meeting, we were advised that the CSI declared ALL factories under the Accord to be high risk, and therefore, all factories are subject to “the same treatment as if tier 2”

The definition of high risk has not been agreed, and there is ambiguity around what “the same treatment” means in the scope section.

Tier 3 and de-listed issue, cont.There are 2 key issues:

◦The legal interpretation of s. 3 of the Accord. Definition of high risk Tier 2 “same treatment as” Tier 3 issue, including

whether ss. 22 and 23 apply

◦The practical issue. Regardless of the legal interpretation, we are in a situation where over 700 Tier 3, plus delisted factories have no remediation support and therefore it is unlikely that the CAPs will be fulfilled. The question is: what is our response to this?

Tier 3, cont.Options:Labor proposal: that all Tier 3 are now

“converted to” Tier 2 Brand legal interpretation – that ss. 22 and

23 do not apply to Tier 3 regardless of being defined as high risk

Agree to disagree on the legal interpretation, but come up with a practical solution, e.g.:◦ International institutional funding (e.g. IFC)◦ Assist with remediation (e.g., set up lead

brands for Tier 3), but falling short of s. 22 possible payment obligations

For discussion1. Brands’ proposal on how to deal with

Tier 3 issue? (Jochen to discuss in next slides)

2. Discussion of relief fund proposal 3. Position on de-listed factories?

Remediation – Tier 3 Options

Structure GLA

Proposed Tier 3 Structure

.Escrow

Gov.Buyer/Accord

Agent Bank

IFC

Tier 3 Supplier

Guarantee

Credit IFC Account

Loan

Compliance

Info

Alternative DEG Approach

Main Requirements creditor

General feasibility

Sovereign Role as Guarantors (Escrow body)

Credit Volume

Remediation Guidance

System of operational and financial compliance

Due Diligence Criteria

Fall-Out Consequences

Main Requirements Sovereign

Involvement of Governments (3-5-1 Group)

Financial Capacity, ODA Funds

Escrow Body

Due Diligence Level

Regress procedures

WTO Competition Rules

Main Requirements Accord

Auditing

Support remediation

Compliance

Workers Education

Corruption Prevention

Main requirements Suppliers

Audit Results

CAP Remediation Plan

Providing trustable Financial data, Transparancy

Supporting Due Diligence

Comply to disbursement requirements

Provide additional individual sureties

Ensure repayment

OHS Committees

OHS CommitteesS. 17 of the Accord states that OHS committees

shall be required by signatory companies in all Bangla factories that supply them, which shall function in accordance with Bangla law.

Bangladesh passed a new labor law which requires an OHS committee at every workplace with more than 50 employees:◦ 90(A) Formation of the Safety Committee: “Where In a

factory, 50 or more workers are employed, there shall be a Safety Committee formed and functioned in the manner as prescribed by the Rule”

Problem is that the GoB has not issued the implementation rules which detail how this will happen e.g., how to elect/form the committee.

OHS Committees, cont.SC has put forward a proposal for discussion as

follows:◦ Intensify efforts with GoB-MoLE including a letter from

Accord SC.◦ Involve Ambassadors, High Commissioners and ILO◦ Start with the 45 factories that have a registered union◦ Continue with the nomination of ‘high performing’ factories◦ Brands to support outreach and prep work

Points for consideration:◦ Are we ok to proceed before the Bangla implementation

laws are passed?◦ Likely to be claims that we are violating the sovereignty of

Bangla and imposing rules ahead of the law◦ Possible stand-alone position as the Alliance has indicated

they may wait for the implementation rules to be passed

Caucus Governance

Roles and Responsibilities in information and decison- making process between Signatories and Company SC Representatives

Situation today 196 company signatories to the Accord in

more than 20 countries in Europe, North America, Asia and Australia

3+3 brand representatives in the Steering Committee

Only 4 caucus meetings p.a. 5 regional brand meetings only with

management One joint email-address to directly address

SC Comp. Members No structures for “brand only” information

sharing, discussion and decision building process

Objective Clear, and structured process and platform for

information and decison building process between brands and brands and SC representatives.

Pragmatic structure and short reaction times

Easy to access intermediate level for exchange of information, questions and feed back between brands prior to involving SC Reps.

Structuring and Summarizing of opinion forming process

Structure Clustering of Signatories in area

groups Appointment of liason colleagues Communications matrix for opinion

forming process

Possible Cluster Criteria: - countries ? - size and type of signatory ? - common language ?

Structure proposal countries

Cluster 1 Austria, Germany 31Cluster 2 Austria Germany 31Cluster 3 UK, USA, Canada, 21Cluster 4 UK, USA, Canada 22Cluster 5 Belgium, Netherlands 30Cluster 6 France, Switzerland 10Cluster 7 Spain, Italy 10

Cluster 8

Australia, Sri Lanka, Hong Kong, Japan,

Turkey 16

Cluster 9

Poland, Norway, Sweden, Finland,

Denmark, 25

CoordinationEach area group with an own cluster liason

colleagueVice-versa communication Information and requests from companies

via liason colleaque to SC Corp. Reps (Caucus Coordinator) and reverse

Opinion finding, discussions and information sharing among area group,

Aggregated transfer by liason colleaque to

Comp.Reps.

Further ideas?

APPENDIX

Results of the Working Group on Worker Participation

(published February 21st, 2014)

4 main topics:

• The right to refuse unsafe work• Joint Occupational Health & Safety Committees• A complaint mechanism• Training programmes

The Right to Refuse unsafe work

• Builds on the Accord commitment to ensure that workers have the right to refuse unsafe work by providing a clear definition of the term "unsafe work", together with a detailed process for both factory management and workers to follow

• Allows for both individual and collective refusals

• Makes a link to the complaint mechanism in cases where reprisals are alleged to have been taken against workers for using this right

Joint Occupational Health & Safety Committees + Complaint Mechanism

• Outlines the composition of the committees including the election of worker members, the selection of management members, recognising the need for a gender component

• Establishes the mandate of the committees

• Sets rules for the effective functioning of the committees

• Establishes clear links between these committees, the training programme and the inspectorate

• The complaint mechanism establishes a process for filing, evaluating, investigating and resolving complaints by workers which conforms to the Ruggie Principle for grievance handling

Next Steps

The introduction of the Complaints Mechanism and

the Right to Refuse

Dangerous Work are

being put into operation

A pocket guide for workers on

the same 2 elements is

being prepared

A complaints form has been developed and

shared with the IBC RMG federations

Rob Wayss will provide a more comprehensive

update this afternoon

• The goal of the training programme is to empower factory managers and workers to take ownership over the implementation of key Accord provisions, including remediation of inspection findings, running H&S Committees, making use of the complaint mechanism, and exercising the right to refuse unsafe work, where necessary

• The training programme applies a dialogue and empowerment orientated methodology, which is derived from classic change management approaches

• The core principles of the training programme include action learning, change orientation, integration and peer learning, dialogue and trust building, participation in decision-making, trade union involvement, transparency and quality

• The main target groups are factory managers and workers, with an emphasis on H&S committee members who will receive training on rights and responsibilities, the election of worker representatives, the right to refuse unsafe work, the complaint mechanism and issues linked to discrimination ( including social, gender, cultural) plus Freedom of Association

• Trainers to be selected according to quality standards and to be evaluated through a practical assessment

A Comprehensive Training Programme