STATE OF ETHICAL TRADING 2018 / 19

/ APRIL 2019

3State of Ethical Trading 2018/2019State of Ethical Trading 2018/2019 PREFACEPREFACE

The Sustainable Development Goals (SDGs) can be seen as value-based leadership at both large and small scale. The large scale is about regulations and legislation at the highest level, and the small scale is about what I and every other human on earth do every day.

The global and the local. Values can be common. As an example, we have a long tradition of respecting the Universal Declaration on Human Rights from 1948, but does this mean that all values of the Declaration are respected everywhere in the world? No! However, no one will claim that the values are insignificant or that the declaration has not contributed to global development.

Value-based leadership is possible – and necessary. Values such as justice, equality, health, good products, water, and biodiver-sity are all part of the 17 Sustainable Development Goals and increasingly respected around the world.

The ground-breaking resolution of the 17 Sustainable Development Goals and corresponding 169 targets were adopted by the UN General Assembly on 26 September 2015 with an aim to not only adjust, but to fundamentally transform the world. The only way to make transformative change is by setting clear goals and targets for both the result as well as for the process.

The SDGs fundamentally visualise the future society that – over the next ten years – will be shaped by deliberate political and managerial processes. The goals are a vision for a different and a better world. And the goals provide instructions as to how political and managerial processes should look and how they should take place. Even though democracy is not addressed directly, the goals emphasise justice, partnerships, collaboration and dialogue. Thus, the direction of the Goals is clear.

The Goals call for regulation at the highest management– and political levels, for information and dissemination activities, for activism and involvement at all levels, for collaboration and partnerships - locally and globally - and for new approaches and thoughts on financing.

Formally, the Goals address the period 2015-2030. There are ten years to go. In ten years revolutions can happen – and sustainability revolutions will take place, which only few will have the imagination to envisage. But it will happen, and it will happen fast. It is about ethics and values, about the use of resources in its broadest definition; trash, waste, construction, transportation, food production, circular thinking, sharing and co-creation – just to mention some important terms.

It is about words – and action. No one can question that some-thing is happening in terms of language and actions globally. I almost said: “We can feel safe and secure; we are on the path of realising the Sustainable Development Goals”. That is one point of view. The other point of view is that it is moving too slow. We are moving forward, but not sufficiently fast. Too many of us understand the urgency, but not the urgency of the urgency.

We need more knowledge when it comes to three main themes of the SDGs. Firstly, knowledge about the world here and now. What is the state of health, education, biodiversity, etc.? Secondly, how should and will the world look if we presume that the SDGs are realised? And thirdly, what does it take to bring us from where we are now to reaching the Goals? What concrete changes, initiatives, decisions, etc. must be made and implemented in the USA, China, municipalities, companies, households and more?

We need to raise these three questions across all levels in order to work consciously, determined and competently towards real-ising the SDGs. It applies to the entire world as well as individual countries, companies, municipalities, institutions, and families.

It is about behaving properly, about ethics, and also about how we trade with each other, both across physical borders as well as cultural and religious borders. This report, ´State of Ethical Trading´ together with the organisation behind it, the Danish Ethical Trading Initiative (DIEH), represents an important contribution to the realisation of the Goals and the values concerning ethical behaviour, which are implicitly in the SDGs. DIEH plays a key role in this context, by gathering companies, organisations, trade unions, business organisations, and public institutions, who all play a role to enable us to realise the Sustainable Development Goals.

The Sustainable Development Goals as a turning point

Af STEEN HILDEBRANDT Professor, Ph.D. og formand for Folketingets 2030-Panel.

DIEH members

5State of Ethical Trading 2018/20194 State of Ethical Trading 2018/2019CONTENTS WELCOME

Contents Welcome to State of Ethical Trading 2018/2019

90 >400 billion >150 89%Current number of DIEH members

DIEH company members’ total annual revenue

Countries in which DIEH civil society members are present

Of DIEHs companymembers areintegratingsustainability intotheir core strategy

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Mikkel Stenbæk Hansen, Director

We extend our sincere thanks to all DIEH members for your willingness to share knowledge, expertise and experiences with us ...

Welcome to State of Ethical Trading 2018/2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Chapter 1:

The business case for ethical trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Chapter 2:

Danish consumers increasingly want ethical trade! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Chapter 3:

Supply chains under pressure: hot topics and trends in ethical trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Chapter 4:

Embedding ethical trade: a systematic approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Chapter 5:

The road towards responsible value chains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Good practice cases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Collaborating towards 2030 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

The findings presented in State of Ethical Trading 2018/19 are based on DIEH members’ mandatory annual reporting to DIEH

undertaken in January / February 2019 as well as external publications and articles related to the topic of ethical trade in Denmark.

The member data and percentages are based on a 90% response rate before the reporting-deadline (78 out of 85 members

falling within the scope of reporting). Graphs and percentages in this publication may be based on fewer respondents, as not

every question in the reporting framework was of equal importance for each of our member groups. DIEH is not responsible

for, and cannot be held liable for, any misleading or incorrect reporting on behalf of its members.

DIEH Secretariat: Mikkel Stenbæk Hansen, Director

Janine Dortmundt, Project Manager and SDG Advisor

Julie Bundgaard, Project Coordinator

Sarah Dieckmann, Project Manager

Elisabeth Moltke, Administration and Communications Officer

Nina Storgaard Albertsen, Student Assistant

Jacob Lykke Andersen, Student Assistant

Photographers: DIEH, Bestseller, H&M, Neutral A/S, WWF India,

Shutterstock, Unsplash, thenounproject

Design and graphics: KathArt Interactive

Printing: KLS Pureprint

A REPORT BY THE DANISH ETHICAL TRADING INITIATIVE;

BASED ON ANNUAL REPORTING BY DIEH MEMBERS IN 2018/2019

We are very proud to present you with the fourth State of Ethical Trading report published by the Danish Ethical Trading Initiative. This year’s report contains more new data, informa-tion and examples than ever before. Based on information provided by our members as well as third party analysis, the report provides an evidence-based analysis of why and how Danish businesses, organisations, public institutions and other stakeholders work to promote responsible trade that respects human and labour rights, environmental and climate consid-erations and contributes to global sustainable development.

The winds of the sustainable development goals blow strong, have transformative power and offer hope for positive change at scale towards the future we want. Yet, this report demon-strates that while substantial progress has been achieved, the sustainability challenges of today are greater than ever before. In the era of the Sustainable Development Goals it is more clear than ever that dialogue, collaboration and partnerships are the means by which we can address these challenges and turn them into opportunities. Ethical trade is an undeniable lever for practical implementation of the 17 Goals at large. In par-ticular, ethical trade is a prerequisite for achieving responsible consumption and production and as well as creating decent jobs and prosperity at a global level. In other words: there can be no fulfilment of the Sustainable Development Goals without ethical trade.

State of Ethical Trading 2018/2019 will take you through the status of ethical trade in the Danish context. The why? The what? And not least the how? Firstly, it is investigated how Danish businesses, organisations and public institutions –DIEH members in particular – view ethical trade and the Sustainable Development Goals and what drives their efforts in this area. We then look into the perspectives of the Danish consumers on ethical trade and sustainability at large. Following this, the report takes a dive into hot topics and trends in ethical trade, including human rights, labour rights and environment and climate. Finally, the report describes different practical ways of working towards more responsible global value chains. Along the report you will find numerous examples of how the Danish Ethical Trading Initiative’s members work to strengthen their efforts on ethical trade.

We extend our sincere thanks to all DIEH members for your willingness to share knowledge, expertise and experiences with us – and for your efforts to enhance ethical trade more broadly. You contribute to making DIEH a unique Danish multi-stake-holder initiative on ethical trade and sustainability, providing an important convening space for us all.

In DIEH, we share a common vision of a better and more sus-tainable future for all. To achieve this, we share knowledge, collaborate with others and continuously take steps to improve our efforts. We hope this report provides you with new and inspiring insights.

7State of Ethical Trading 2018/20196 State of Ethical Trading 2018/2019 THE BUSINESS CASE FOR ETHICAL TRADETHE BUSINESS CASE FOR ETHICAL TRADE

The business case for ethical trade2018 was a year where sustainability and responsible business gained momentum more than ever. Driven amongst others by a growing demand from customers, consumers, investors, public buyers and their own employees, companies have increasingly been integrating sustainability and responsibility into their core missions.

Furthermore, the Sustainable Development Goals have gained substantial ground by providing a new paradigm and framework for driving responsible business. In the area of responsible supply chains and ethical trading, however, there is still long way yet before we reach the fulfilment of the goals.

1 Danish Chamber of Commerce, 2019, Alle ombord? Status på virksomhedernes arbejde med CSR og FN’s Verdensmål

Figure 1

According to DIEH members, ethical trade is prioritised:

89% of DIEH’s company members state either that they have integrated or are in the process of integrating sustainability into their core strategy.

Front-runners Every year DIEH monitors developments in ethical trading in Denmark and the trend is clear – ethical trade is an agenda prioritised higher than ever before. This year, as much as 89% of DIEH’s company members state either that they have inte-grated or are in the process of integrating sustainability into their core strategy.

Looking more broadly among 328 surveyed members of the Danish Chamber of Commerce, a little more than half of the businesses report that they 'work with CSR' 1. Notably this number is as high as 80% among large businesses.

When asked among which stakeholders or at what level ethical trade is prioritised, the percentage of DIEH mem-bers stating that large companies prioritise ethical trade has steadily increased since 2017. For SME’s, this percentage has more than doubled, going from 16 to 35 %. DIEH’s members also experience ethical trade to be increasingly prioritised at EU-level as well as at national political- and municipal policy level.

Agenda increasingly pushed by top managements CSR and sustainability have commonly been anchored in companies’ CSR, communication, public-affairs, HR- and pro-curement departments. While this is still the case for many 0

20

40

60

80%

2015 2016 2017 2018

In the company or organisation

By our primary stakeholders

Among larger Danish corporations

Abroad

At the EU level

Among smaller Danish companies

At the national policy level

At the municipal policy level

DIEH member survey, 2018

9State of Ethical Trading 2018/20198 State of Ethical Trading 2018/2019

UN’s Sustainable Development Goals have contributed to an increased awareness

of sustainabilityAdam Hey, Head of Department, Frederiksberg Municipality

35% of DIEH’s company members report that their company is in fact defined by sustainability; i.e. it is integrated into their mission

We have set ourselves the goal that everything we do in Letz Sushi must contribute to ensure

a sustainable transformation towards a better worldAnders Barsøe, CEO of Letz Sushi

Driven by the SDGs, sustainability and ethical trading are also becoming more important elements in safeguarding businesses and organisations for the future, whether this is by rigorously moving away from traditional business models, by developing more sustainable solutions or products or simply by taking step-by-step measures to push continuous improvements. The urgency is there, fuelled by increasing awareness, personal motivation of management and by the interest and expecta-tions from investors, consumers and employees.

Danish companies, organisations, institutions and municipal-ities have, since the adoption of the SDGs, to an increasing extent referred to the 17 goals in their CSR-, sustainability or strategic plans. The Danish Chamber of Commerce anal-ysis reports that two out of three companies are ‘working with’ the Goals, although often implicitly or indirectly. Only 7% of the companies report to have a ‘thorough strategy’. Among these are –again- mostly large companies. Moreover, the majority specifies that they primarily work with the SDGs at the national level 3. These numbers demonstrate that while we see an increase in companies referring to the Goals, there is still plenty of room for more engagement as well as for the SMEs to enter the SDG arena.

companies and organisations, we also see a shift in this ten-dency: one third of DIEH’s company members report that top management is now the leading driver of their ethical trade and sustainability efforts, while 27% have integrated the efforts into all departments of the company. Finally, 35% of DIEH’s company members report that their company is in fact defined by sustainability; i.e. it is integrated into their mission.

The SDGs: a new paradigm – still in its infancy Companies and organisations are continuously recognising that global challenges such as urbanisation, population growth,

Safeguarding for the futureThe percentage of DIEH company members that have a plan or strategy in place for working with the SDGs, has increased from 22% in 2016 to 57% this year. This is a strong indication that the Goals are increasingly providing DIEH members with a guiding framework to improve and interact on activities related to sustainability and ethical trade. In that respect, companies can distinguish themselves from others by making use of the SDGs to support and strengthen not just their local activities but especially their international work – including export, choice of materials and energy, and supply chains.

Creating impact through ethical tradeIn past years, the SDGs have shaped the debate on business opportunities by reverting from a do-no-harm perspective to impact creation. Working strategically with ethical trading indeed provides plenty of opportunities for contributing to the fulfillment of the SDGs. However, the debate this year also reverted back again due to more emphasis on due dil-igence and responsible supply chain efforts and the point that promoting decent work (SDG 8) can actually be one of the most influential ways to contribute to all the other Goals, creating competitive and robust businesses at the same time.

THE BUSINESS CASE FOR ETHICAL TRADE THE BUSINESS CASE FOR ETHICAL TRADE

resource scarcity and climate change affects their future more drastically than previously acknowledged 2. Throughout 2018, it became even more evident that the global adoption of the Sustainable Development Goals (SDGs) has created a new paradigm by providing an ‘action plan’ and framework for 2030. Companies realise that the global market for sustain-able solutions and responsible business conduct is triggered by this paradigm and that, in many cases, ‘business as usual’ is not an option. Their long-term performance and success is dependent on how they interact and respond to these major global challenges.

2 The Ministry of Foreign Affairs of Denmark, 2019, A World of opportunities for Danish business 3 Danish Chamber of Commerce, 2019, Alle ombord? Status på virksomhedernes arbejde med CSR og FN’s Verdensmål

10 State of Ethical Trading 2018/2019

20 40 60 80

100

%33 %Equality

38 %Economic equality

50 %Human rights

52 %Working conditions

86 %Climate

88 %Natural resources and environment

48%

62%

92%

85%

78%

Sustainability is the most important political subject at the moment

Companies need to play a role to ensure sustainable development

The public sector should be a frontrunner in sustainable development, by sourcing responsibly and sustainably

Sustainability will be the most important political subject in the next five years

Companies are to act ethically and morally

Figure 2

Expectations of the Danish consumerPercentage of danish consumers that agree or strongly agree with the following statements:

Danish consumers

increasingly want ethical trade!

DANISH CONSUMERS

Figure 3

Perceptions of sustainability

It is often discussed to what extent consumers are prioritising ethical production and sustainability in their purchasing decision. In other words, to what extent are consumers driving a transforming towards more responsible supply chains?

A brand new opinion poll named The Sustainability Barometer published by Advice A/S provides interesting new insights into how Danish citizens and consumers view ethical trade and sustainability. The barometer furthermore looks at Danes’ per-ceptions of sustainability and the Sustainable Development Goals and cast light on the priorities of Danish consumers. The barometer is based on responses from 1000+ Danes, rep-resentative in terms of geography, demography, gender, etc.

Sustainability is regarded as a key political priority by Danish citizensThe barometer documents that, according to Danish citizens, sustainability has climbed high up the ladder of political pri-orities. It shows that almost half of the Danish citizens today consider sustainability as the most important political subject at the moment and more than 6 in 10 Danish citizens agree or strongly agree that sustainability will be the most important political subject in the next five years.

Danish consumers have high expectations to businesses and public procurersAt the same time, Danish citizens’ expectations to businesses and the public sector go beyond that of compliance with reg-ulations. When asked about whether companies are to behave ethically and morally, more than 90% say they agree or strongly agree. Furthermore, as many as 85% answer that companies shall contribute to ensuring sustainable development.

It also seems to be the general opinion that public institutions should play a leading role towards achieving more sustainable supply chains through means of responsible public procure-ment. When asked about the role of the public sector 77,5% agree or strongly agree that it is important for the public sector to lead in sustainable development by procuring sustainably.

Danish Citizens’ perception of sustainabilityThe barometer further reveals that the Danes have different understandings of the term sustainability. When asked, almost nine out of ten Danes agree or strongly agree that sustainability is about climate as well as natural resources and environment. Roughly half of the Danish citizens lists human rights and work-ing conditions and only about one third of Danes consider gender equality and economic equality a part of sustainability.

These numbers clearly illustrate that there is a need for empha-sising the fundamental importance of respecting human rights and ensuring better working conditions as prerequisites for ensuring a more sustainable future for all. The notion of eth-ical trade puts strong emphasis on human- and labour rights as well as environment and climate and therefore provides a compelling way forward in communicating this.

Advice A/S Sustainability barometer, 2019

Advice A/S Sustainability barometer, 2019

11

13State of Ethical Trading 2018/2019State of Ethical Trading 2018/2019PREFACE

73%are willing to pay

more! 47%have actually payed more for a

more sustainable product or service in the past year

73%find it important that the products (s)he buys are responsibly produced

57%look for certification labels on sustainability when shopping

64%agree that sustainable develop-

ment requires a change in his/her consumer habits

Figure 5

Danish consumers' habits

Figure 4

Company, NGO and consumer perspectives on the SDGs

Are danish consumers willing to adjust their buying behaviour and support products or services that contribute to sustainable development?

Danish Citizens’ knowledge of the Sustainable Development GoalsAn increasing number of Danes appears to be aware of the 17 SDGs. A study from February 2018 found that 16% of Danes were familiar with the SDGs. According to the Advice Sustainability Barometer, a total of 58% respond that they have either heard of the goals – but do not know them very well (48%) or are very familiar with the goals (10%).

2/3of all Danes agree or strongly agree that a sustainable development requires them to change their consumer habits.

When looking at the actual behaviour of Danish consumers, there seems –not surprisingly- to be an attitude-behaviour gap: just under half of the Danes state that they within the last year have paid more for a product or service, because the company contributed to sustainable development, with another 26% stating that they do not know. Still, it is a strong indication that the Danish ethical consumer is becoming mainstream and that consumers are increasingly rewarding those companies that are working towards more responsible supply chains.

HIGH

MANY

NG

Os

impo

rtan

ce o

f sel

ecte

d S

DG

s (lo

w to

hig

h)

Companies working with selected SDGs (few to many)

The dots represent the di�erent SDGs, while the size reflects consumer priorities

Goal 1: No poverty

Goal 6: Clean water and sanitation

Goal 14: Life below water

Goal 7: A�ordable and clean energy

Goal 8: Decent work and economic growth

Goal 9: Industry, innovation and infrastructure

Goal 4: Quality education

Goal 5: Gender equality

Goal 13: Climate action

Goal 2: Zero hunger

Goal 16: Peace, justice and strong institutions

Goal 17: Partnerships for the goals

Goal 10: Reduced inequality

Goal 11: Sustainable cities and communities

Goal 12: Responsible consumption and production

Goal 3: Good health and well-being

Goal 15: Life on land

Consumer preferences for sustainable productsThe barometer provides interesting insight into the prefer-ences of the Danish consumers when it comes to sustainability. Interestingly two thirds of all Danes agree or strongly agree that a sustainable development requires them to change their consumer habits. Less than 10% disagree or strongly disagree with this statement, while the remaining 25% of respondents either don’t know or are undecided.

In line with this, seven out of ten Danes state it is important for them that the products they buy are responsibly produced with less than 5% saying that they disagree or strongly disagree. In similar lines, just over 70% state that they are willing to pay more for a product or service, if the company is contributing to sustainable development. Almost six out of ten consumers look for certifications, when they buy products (for instance the Nordic Swan eco-label, the organic label or the Fairtrade label).

DANISH CONSUMERS

Source: Advice A/S Sustainability barometer, 2019, Danish Chamber of Commerce, 2018 and Global Focus (Globalt Fokus), 2018

Note: n (companies) = 328, n (NGOs) = 80 and n (consumers) = 1061. The Y-axis represents the NGOs priorities on which SDGs are most important to them. Participating organisations were asked to state the five most prioritised SDGs within their organisation. This means that the ranking is not necessarily coherent with which SDGs they actually work with today, but represent which they perceive to be of highest priority in the organisation. The x-axis represents which Goals the Danish company members of the Danish Chamber of Commerce work with, as part of their core business. This means that they were not asked about priorities, but on which concrete Goals the companies actually work with. The size of the dots represent Danish consumers' weighted priorities on the most important SDGs. The largest dots reflect the most prioritised goals.

Advice A/S Sustainability barometer, 2019

The barometer alongside with the analysis carried by the Danish Chamber of Commerce as well as Danish NGO umbrella organ-isation Global Focus enables a comparison between the pri-orities of Danish NGOs, Danish citizens and the Sustainable Development Goals that Danish businesses currently work with in their core operations. This comparison is illustrated in figure 4, showing clearly the large discrepancies between prioritised SDGs among these groups.

12

State of Ethical Trading 2018/201914 State of Ethical Trading 2018/2019 SUPPLY CHAINS UNDER PRESSURESUPPLY CHAINS UNDER PRESSURE

Supply chains under pressure: hot topics and trends in ethical tradeDespite progress, many products consumed on the Danish market remain untraceable because of long and complex supply chains, originating in countries where respect for workers’ rights is low. As a result, environmental degradation and violations of peoples’ human and workers’ rights keep occurring at a significant scale and in particular at the bottom of supply chains - under the radar of those sourcing or consuming the products.

Supply chain hot spotsThis year – for the first time – we asked all DIEH members to list with which of the tiers of the supply chain they experience or identify the biggest challenges related to ethical trading. There is no doubt that the first three tiers are the most challenging, and as much as 83% of DIEHs company members list that the ‘production and processing’ tier is where the biggest challenges are faced. Next is ‘extraction of raw materials’ which 60% of DIEH company members list as challenging. This is followed by ‘primary production’, which among others includes fishery and agriculture. Transportation and disposal are other supply chain points taken into consideration – the latter reflecting a rise in importance attached to global resources and the need for waste-reduction, re-use and circular economy solutions.

Top sourcing countries Every year, DIEH asks its members to indicate supplier hot spots and challenges in ethical trade. This year we also asked our company members about their supplier countries in more detail. With 84% of DIEH company members sourcing from

Asia, the continent occupies the top of the geographic list of suppliers. China remains the primary sourcing hub with more than three out of four of DIEH’s company members sourcing from the country. China is followed by India (59%), Vietnam (46%) and Thailand (35%). Remarkably, Bangladesh is no longer among the top three sourcing spots. With 32% of DIEH members sourcing from there, the country has moved down to being the fifth most popular supplier country. At the same time Bangladesh is one of the countries that most DIEH members have attributed particular attention to in 2018 when it comes to ethical trading efforts.

Out of all DIEH company members, 24% work with suppliers on the African continent. While countries like Kenya, Uganda and South Africa retain their position as important suppliers for DIEH members, newcomer Ethiopia took first place in 2018.

89% DIEH companies source from within Europe, 24% from North America and 27% from South American countries such as Chile, Argentina, Peru, Brazil and Colombia.

Extraction of raw material

60%

31%Transportation

9%Wholesale

83%

Productionand processing

55%

Primary production

18%Consumers

35%Disposal

12%Retail/Shop

Figure 6

Where in the supply chain, do we encounter the biggest challenges

84% of DIEH company members are sourcing from Asia

DIEH member survey, 2018

Garment factory in Myanmar

15

17State of Ethical Trading 2018/201916 State of Ethical Trading 2018/2019

2018 ITUC GLOBAL RIGHTS INDEXTen worst countries in the world for working people

Algeria• State repression• Mass arrests and dismissals• Suppression of protests

Bangladesh• Violence• Mass arrests• Discrimination

Cambodia• Intimidation and reprisals• Repressive laws• Police violence

Colombia• Murders• Collective bargaining undermined• Discrimination

Egypt• State repression• Discrimination• Mass arrests

Guatemala• Violence and murder• Discrimination• Lack of due process

Kazakhstan• Arrest of union leaders• State repression• Discrimination

Philippines• Intimidation and dismissals• Violence • Repressive laws

Saudi Arabia• Migrant worker abuse• State repression• Forced labour

Turkey• Arrest of union leaders• Discrimination and dismissals

5+ No guarantee of rights due to the breakdown of the law

5 No guarantee of rights

4 Systematic violations of rights

3 Regular violations of rights

2 Repeated violations of rights

1 Sporadic violations of rights

No data

The 2018 ITUC Global Rights Index depicts the world’s worst countries for workers by rating 142 countries on a scale from 1-5 based on the degree of respect for workers’ rights with 1 being the best rating and 5 the worst rating.

Violations are recorded each year from April to March. Each country is analysed against a list of 97 indicators derived from ILO conventions and jurisprudence and represents violations of workers’ rights in law and practice.

www.ituc-csi.org #rightsindex .

3.44

AMERICAS3.91

AFRICA

2.48

EUROPE

4.55

MIDDLE EAST AND

NORTH AFRICA

3.95

ASIA-PACIFIC

4 Business and Development Commission, 2016. Business, Human Rights and the Sustainable Development Goals.

5 CEVEA, 2018. Mere end 20 pct. af dansk import stammer fra lande, der systematisk krænker grundlæggende arbejdstagerrettigheder.

6 ILO, 2019, Global Wage Report 2018/19 and ILO Global Commission on the Future of Work, 2019, Work for a brighter future.

2018 ITUC GLOBAL RIGHTS INDEXTen worst countries in the world for working people

Algeria• State repression• Mass arrests and dismissals• Suppression of protests

Bangladesh• Violence• Mass arrests• Discrimination

Cambodia• Intimidation and reprisals• Repressive laws• Police violence

Colombia• Murders• Collective bargaining undermined• Discrimination

Egypt• State repression• Discrimination• Mass arrests

Guatemala• Violence and murder• Discrimination• Lack of due process

Kazakhstan• Arrest of union leaders• State repression• Discrimination

Philippines• Intimidation and dismissals• Violence • Repressive laws

Saudi Arabia• Migrant worker abuse• State repression• Forced labour

Turkey• Arrest of union leaders• Discrimination and dismissals

5+ No guarantee of rights due to the breakdown of the law

5 No guarantee of rights

4 Systematic violations of rights

3 Regular violations of rights

2 Repeated violations of rights

1 Sporadic violations of rights

No data

The 2018 ITUC Global Rights Index depicts the world’s worst countries for workers by rating 142 countries on a scale from 1-5 based on the degree of respect for workers’ rights with 1 being the best rating and 5 the worst rating.

Violations are recorded each year from April to March. Each country is analysed against a list of 97 indicators derived from ILO conventions and jurisprudence and represents violations of workers’ rights in law and practice.

www.ituc-csi.org #rightsindex .

3.44

AMERICAS3.91

AFRICA

2.48

EUROPE

4.55

MIDDLE EAST AND

NORTH AFRICA

3.95

ASIA-PACIFIC

Figure 7

ITUC Global Rights Index 2018

Priority topics in ethical tradeDIEH members refer to a wide range of issues in relation to their ethical trading efforts. Just like in previous years, work environment is listed as top priority: in 2018 72% of DIEHs members listed this topic, which includes health & safety issues, up from 67% last year. The environment forms another top priority, consistent with other years. For the first time this year, we have asked our members to report in more detail on envi-ronmental issues. This explains why newcomers such as ‘climate & energy’, ‘chemicals’ and ‘resource consumption & circular economy’ have now entered the top ten list of priority issues - as illustrated in figure 8.

Global threats to safeguarding workers’ rightsRoughly two billion people are directly affected globally by the supply chains of multinational companies4. If we add the supply chains of smaller and medium-sized companies, the number of people involved is uncountable.

In 2018, DIEH members have increased their focus on worker’s rights-related issues. Half of DIEH members report to focus on collective bargaining and freedom of association, which is

almost a doubling since 2015. It is very likely that this focus is a reaction to global deteriorating conditions as illustrated by the ITUC Global Rights Index.

The Global Rights Index depicted in figure 7, illustrates that many of the top sourcing countries are performing low on all aspects related to workers’ rights. Based on this 2018 analy-sis by ITUC and other figures, Danish think tank CEVEA con-cluded in 2018 that more than 21% of the products imported to Denmark originate in countries that systematically violate workers’ rights5.

Labour rights experts and trade unions emphasise that more and more countries are excluding workers from labour law, creating increasingly precarious and irregular job situations (such as daily and contract labourers) as well as threats to freedom of association globally.

Remuneration and living wage have been a key priority area this year – very possibly a reflection of the fluctuating growth in wages in emerging and developing countries measured by ILO since 20066. Despite an overall wage growth, ILO reports that in many low and middle-income countries, average wages

20 30 40 50 60 70 80

%

2018

72 %

56 %

53 %

51 %

51 %

49 %

49 %

47 %

2017

2016

Working environment

Forced labour

Working hours

Child labour

Chemicals

Discrimination

Freedom of Association

Resource consumption & circular economy

Remuneration & living wage

Climate & energyNew data

New data

New data

55 %

53 %

Figure 8

Top 10 frequently listed ethical-trade issues

remain too low to sufficiently cover the needs of workers and their families. More than half of DIEH’s members reported living wages as a priority topic for 2018 - a 65% increase since 2015.

Another workers’ rights related issue, which received atten-tion this year is forced labour - the most common element of modern slavery. Since 2015, the number of DIEH members listing forced labour as a focus area related to their work on ethical trade has increased by 65%, now counting more than half of DIEHs members, some of whom refer to the Modern Slavery Act. Forced labour is most often found in labour inten-sive industries, and often the workers produce for seemingly legitimate commercial channels. ILO estimated that as of 2016, up to 25 million people have been victims of forced labour.

The same tendency goes for attention paid to other workers’ rights related issues such as working hours and regular employ-ment. Twice as many DIEH members today are focusing on regular employment compared to 2015.

Decent work and democratic rights grew weaker in almost all countries, while inequality continued to grow.

Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC)

Product (US $ value)

Top 5 products at risk of modern slavery imported into the G20 (by US $ value)

Source: Global Slavery Index 2018

1. Laptops, computers & mobile phones ($ 200.1 billion)

2. Garments ($127.7 billion)3. Fish ($12.9 billion)4. Cocoa ($3.6 billion)5. Sugarcane ($2.1 billion)

DIEH member survey, 2018

SUPPLY CHAINS UNDER PRESSURESUPPLY CHAINS UNDER PRESSURE

19State of Ethical Trading 2018/201918 State of Ethical Trading 2018/2019

High-risk product categoriesThe previously mentioned ITUC Global Rights Index shows that in 2018, 80 of the world's countries were characterised by systematic failure to respect or total absence of labour rights7. According to think tank CEVEA, Danish import from these 80 countries (amounting to DKK 235.6 billion in 2018)8 consisted primarily of products such as garments, shoes, bags, textiles, materials for the transportation industry (e.g. train carriers, tram elements etc.) as well as animal and vegetable oils. DIEH members report similar products and categories of high risk – Historically, the textile and garment sector have been focal areas when it comes to ethical trading and over the years this focus has extended to interior design and consumer products and to materials or ingredients that can be related to deforest-ation, e. g. wood, soy and palm oil.

The final – and probably most notable - addition to the high-risk portfolio of ethical trading in 2018 was the banking sector. After the disclosure of how networks of banks and stock traders had unlawfully gained billions from Danish and other European treasuries through speculation with among others dividend tax, Denmark also hit international headlines with the Danske Bank scandal. With suspicious transactions of around 200 billion euros through the Estonian branch of Danske Bank, whitewashing and corruption landed high on the agenda of risk managers.

A turning point for climate- and environmental actionEffects of climate change are increasingly visible, causing another form of pressure in supply chains, particularly in developing countries but also closer to home. The year 2018 was a turning point in the public Danish debate for climate change, emphasising the need for action. With Swedish Greta Thunberg, -named one of the world’s most influential teen-agers- representing a young generation in protest, the debate has now turned into an urgent call for action amongst young people and students, consumers, investors, organisations, com-panies and policy makers.

Environment and climate change has been a particular focus for us, in combination with partnerships (SDG17).

Together, organizations and companies can co-create new solutions to some of the challenges faced by people living in poverty

Morten Fauerby Thomsen, Program Coordinator, Care Denmark.

“We work actively to promote a holistic approach to sustainable development in which respect for human

rights is recognised as the fundamental premise” Gitte Dyrhagen Husager,

Head of Private Sector Engagement, DanChurchAid

7,8 CEVEA, 2018. Mere end 20 pct. af dansk import stammer fra lande, der systematisk krænker grundlæggende arbejdstagerrettigheder.

9 UN, The Sustainable Development Goals knowledge platform

In line with these developments, 59% of DIEH members report that they have now developed a strategy for addressing envi-ronmental- and climate related issues, compared to 22% in 2017. One reasonable assumption is that the Sustainable Development Goals have outlined common ambitions for change. In particular, goal no. 6, 7, 11, 13, 14 and 15 call for a number of concrete actions towards sustainable solutions that can contribute to minimising the global consequences of climate change and environmental degradation9.

For DIEH members the following environmental topics are most pressing: climate and energy, chemicals, resource consumption & circular economy, deforestation and biodiversity.

59% of DIEH members report that they have now developed a strategy for addressing environmental- and climate related issues

Respect for human rights remains on the decent work agendaAddressing violations of basic human rights is a crucial part of promoting decent work. This year we see a notable increase in DIEH members addressing various human rights related issues in their work on ethical trade. We see a 76% increase in members listing discrimination as a primary focus area since 2015. Moreover, the percentage of members who list harass-ment and abuse as a primary focus area almost doubled since 2015 - amounting to one third of DIEH’s members.

The evident increase in members focusing on human rights related issues is in line with the rising number of members who have developed human rights due diligence documents, going from 41% in 2017 to 59% in 2018. It is difficult to know exactly what has triggered the increasing focus on human rights related issues. It may be a consequence of the global awareness of issues related gender-based and other discrimi-nation in the work place, e.g. in continuation of the #metoo movement. In addition, a number of DIEH’s civil society mem-bers have also advocated strongly for this agenda in global supply chains.

SUPPLY CHAINS UNDER PRESSURESUPPLY CHAINS UNDER PRESSURE

Coffee berry selection at Gichichi factory, Kenya

21State of Ethical Trading 2018/201920 State of Ethical Trading 2018/2019PREFACE PREFACE

700people are living in extreme or moderate poverty despite having employment.

MILLION

7

In 2016, household and outdoor air pollution led to some 7 million deaths worldwide.

MILLION DEATHS 53.5 GIGATONNES

In 2017, the total annual greenhouse gas emissions, including from land-use change, reached a record high of:

of equivalent carbon dioxide - still increasing year after year

2.01 BILLION TONNESIn 2016, the worlds’ cities generated 2.01 billion tonnes of solid waste, which is expected to increase to 3.40 billion tonnes in 2050.

44

2017 2018

59COUNTRIES WITH WORKERS ARRESTED

Countries where workers are arrested and detained increased from 44 in 2017 to 59 countries in 2018.

2,780,000people die every year as a resultof occupational accidents or work-related illnesses.

48% 75%48 % of women are in the labour force, compared to 75 % of men. Women earn around 20% less than men.

Sources: see overview on page 39

150There are 150 million migrant workers in the world today.

MILLIONMIGRANT WORKERS

81%of countries have violated the right to collective bargaining.

1.90$/DAY9.2 % of the world’s workers live with their families on less than 1.90 dollar per person a day – a decline from 26.9 % in 2000.

9,2% LESS THAN

40.3people were victims of modern slavery in 2016.

One out of every four victims of modern slavery is a child.

MILLION 70was the amount of primary materials extracted from the Earth in 2010– an increase from 22 billion tonnes in 1970.

BILLION TONNES

State of Ethical Trading 2018/201922 State of Ethical Trading 2018/2019 PREFACEEMBEDDING ETHICAL TRADE

Embedding ethical trade: a systematic approach It is not an easy task to integrate sustainability and ethical trade into all parts of an organisation or company – and to measure the actual impact or progress. In this chapter we explore the various ways in which DIEH members tackle this. Roughly nine out of ten DIEH members have integrated or have started to integrate sustainability and ethical trade in their decision making and core strategy – and more than one third of DIEH company members report that their company is defined by sustainability. For these members, top management play a leading role in driving the ethical trading agenda.

Figure 9

How sustainability and ethical trade is integrated in DIEH members' decisionmaking

Not at all It is used occasionally in our

decision making

We have started to integrate

sustainability into our core strategy

Sustainability is highly integrated

into our core strategy

Our company or organisation is

defined by sustainability

- it is integrated into our mission

0 1 2 3 4

Organisations

Companies

40

35

30

25

20

15

10

5

0

24%27%

10% 11%

0% 0%

29%27%

37%35%

Towards true integration of sustainabilityWhen we look at the extent to which sustainability and ethical trade is embedded in the core of DIEH member companies and organisations, we notice some interesting developments.

First, as illustrated in figure 9, 62% of DIEH company mem-bers and 66% of organisations mention that sustainability is highly or fully integrated into their core strategy, or that they are even defined by sustainability. Similar responses are given when we asked DIEH company members in more detail about the resources allocated to ethical trade and sustainability: 59% of DIEH member companies mention that resources have been allocated to make improvements (up from 46% in 2016). Interestingly, half of them state that their top management is driving their ambitions forwards in order to be at the forefront.

Besides allocation of resources and top management engage-ment, setting goals or KPI’s is key to integrate ethical trade efforts into the operational agenda, e.g. in relation to pur-chasing practices. Among DIEH company members, 55% have defined concrete goals and KPIs or met ambitious KPIs in 2018 - a significant increase from the 33% who reported on this in 2016. Another 28 % work with an overall CSR/sustainability strategy or action plan rather than setting concrete goals and 17% report that they have not yet started at all to plan or measure their activities.

Working with guidelines and legislationIn the past years we have noticed that DIEH members adopt a more systematic approach when it comes to ethical trading activities. One indicator for this is that we see more and more members referring to various guidelines and legislation – as illustrated in figure 10. The most common guidelines used by DIEH members are UN Global Compact and the UN Guiding Principles for Business and Human Rights, mentioned by 70% and 68% respectively. Following this, almost half of DIEH’s members relate to the Danish Financial Statement Act, par-agraph 99a, while the number of DIEH members relating to EU directives has gone down from 52% in 2017 to 38% in 2018. Around a third use the OECD guidelines for Multinational Enterprises and the newly developed OECD Due Diligence Guidance for Responsible Business Conduct from 2018. Finally, the Modern Slavery Act is referred to by 27% of our members, while 8% report that they do not relate to any guidelines or legislation, or that it is not relevant to them.

DIEH member survey, 2018

23

State of Ethical Trading 2018/201924 State of Ethical Trading 2018/2019 EMBEDDING ETHICAL TRADE

Documents and policies form the foundationThis year, 95% of DIEHs company members have policy- or other strategic documents in place on how they address ethical trading – and many of them refer to several documents.

In 2018 we noticed a rising number of company members who have developed a human rights due diligence policy, going from 41% in 2017 to 59% in 2018. In addition, 54% of DIEH members have a policy in place for their work on environmental and climate related issues. Yet at the top of ethical trade related documents we still see the (supplier) code of conduct, which is used for supply chain management by 86% of company members.

CODE OFCONDUCT

POLICY FOR HUMAN RIGHTS / DUE DILIGENCE STRATEGY / PLAN

ON THE SDGs ENVIRONMENTAL / CLIMATE POLICY

CSR POLICY RESPONSIBLE SOURCING POLICY STRATEGY ON

ETHICAL TRADE

86%

59% 57% 54% 51% 46% 43%

2017 - 88%2016 - 74%

2017 - 41%2016 - 41%

+18% + 4%+4%

-12%

-2%

2017 - 53%2016 - 22%

2017 - 47%2016 - 48%

(new data)(new data) 2017 - 56%2016 - 44%

Figure 11

Ethical trade related documents prepared by DIEH company members

70% 68% 38%49%

32% 30% 27%

UN Global Compact

81% - 201758% - 2016

61% - 201765% - 2016

52% - 201746% - 2016

52% - 201746% - 2016

new data

2018

new data

2018

new data

2018

UN Guiding Principles for Business and

Human Rights

OECD guidelines for multinational

enterprises

OECD Due Diligence Guidance for

Responsible Business Conduct (2018)

UK Modern Slavery Act

Danish Law on CSR reporting (Årsregn-skabslovens §99a)

EU directives

Relates to guideline

All members

Figure 10

DIEH members relate to the following guidelines and regulations on ethical trade:

Risk mappingAnother indicator of the increasingly systematic approach for working with ethical trade is that 73% of DIEH company members have mapped and identified their core risks related to human and workers’ rights as well as environmental chal-lenges. Such risk mapping is typically conducted for their own operations as well as for suppliers and partners. It is impor-tant to note that among the remaining 27%, some may have identified core risks related to some but not all parameters. After companies, public institutions are the category of DIEH members who have conducted comprehensive risk mapping the most - 66% report to have been doing so. Among DIEH’s business organisations, civil society members, and trade union members, just over half have mapped risks related to workers’ and human rights as well as environmental challenges – either internally in the organisation, among suppliers or partners.

EMBEDDING ETHICAL TRADE

“Our new Responsible Business Principles were developed to reflect new legal requirements and standards (such as Mod-ern Slavery Act). It introduces a two tier approach where we

now differentiate between mandatory requirements and aspi-rational targets and best practices benchmarks”Marie Enemark Olsen, Senior Manager, Social Responsibility & Engagement, Lego Group

DIEH member survey, 2018

DIEH member survey, 2018

25

27State of Ethical Trading 2018/2019State of Ethical Trading 2018/2019PREFACE

Not begun

We have begun to form an overview /understanding of how we measure

progress and results

We do annual evaluations of our ethical trading activities and e�orts

We measure results on activities, e�orts, and changes in processes (ex. In relation to

purchasing practices, new areas of focus etc) in relation to decided goals and indicators

We work systematically with impact assessment on ethical trading, as well as collaborating with

independent stakeholders/partners to be able to improve the measuring of results

0

1

2

3

4

18%

22%

29%

22%

8%

Figure 12

How do DIEH members measure the progress of their ethical trading work?

Complaint mechanismsAs an important tool to address violations on human- and workers’ rights in the supply chain, many of DIEHs members have made complaint mechanism procedures. 27% report that they have a procedure in place to deal with complaints in their own organisation or company, while almost one third of DIEHs members report to have either discussed complaint mechanism with their suppliers, or secured mechanisms for all their suppliers. One out of three DIEH members have not started to work with complaint mechanisms at all.

Measuring progressAs shown in figure 12 the majority of DIEH members measure progress in their ethical trading work in one way or the other. They do this either by conducting annual evaluations (29%), by measuring on activity level (22%) or even by measuring results on impact-level (8%) which means that they work sys-tematically with other stakeholders to measure the impact of their ethical trading efforts.

18% of DIEH members do not monitor or measure progress on their work on ethical trading, and another 22% have started to form an overview on how to go about this.

In conclusion, we note a clear tendency amongst DIEH mem-bers to embed ethical trade and sustainability strategically and systematically into their operations and supply chains. At the same time, since 40% of DIEH’s members have not begun or are in the initial phase of measuring impact, there is still much to be gained from further collaboration and sharing of good practice on how to embed and measure progress on ethical trading efforts.

By the end of 2018 we began to work strategically with developing a way in which we would be significantly better at measuring and reporting, both internally and externally,

on the work we do within ethical trade - and what influ-ence our work has on the development of our suppliers

- John Aamodt, CEO, ITP Holding

EMBEDDING ETHICAL TRADE

DIEH member survey, 2018

59% of DIEH members measure progress of their ethical trading work

26

State of Ethical Trading 2018/201928 State of Ethical Trading 2018/2019 PREFACETHE ROAD TOWARDS RESPONSIBLE VALUE CHAINS

The road towards responsible value chainsIn this chapter we look into the various ways in which DIEH members work with ethical trade and responsible supply chains and discuss developments from previ-ous years. At the end of this section, a presentation of good practice cases provides insights to the various approaches and efforts DIEH members are involved in when tackling issues related to ethical trading in their supply chains and other international activities.

The many roads that lead to RomeIn Figure 13 we have presented nine ways in which DIEH mem-bers address ethical trade and challenges in the supply chain. The list is not exhaustive but it indicates some of the most common ways for the DIEH member base to work with ethical trade. Typically we see that DIEH members combine several approaches, as illustrated by the good practice case examples on page 34-37.

Partnerships and collaboration with other stakeholdersWhile often embedded in the other approaches listed, part-nerships across and within sectors as well as with stakeholders more generally represent an increasingly common approach to address issues related to ethical trade.

This year, 65% of DIEH members report that they promote eth-ical trading through collaborations or partnerships with other DIEH members and/or other stakeholders. Moreover, 76% of the members see future opportunities in establishing partner-ships – especially in relation to fulfilment of the Sustainable Development Goals.

For non-company members, partnerships and dialogue with other stakeholders is important to enhance other activities such as capacity building, lobbying, campaigning or political work as a way to strengthen their agenda.

Partnerships and collaboration with other stakeholders

65%

Looking at own Purchasing Practices

59%

Making use of certification and labels

55%CERTIFIED

Concrete projects51%

Product design and choice of sustainable materials

33%

Consumer communication32%

Lobbying28%

Training and education of staff in Denmark

35%DK

Capacity building of suppliers29%

Figure 13

How DIEH members address supply chain issues

The last couple of years we have had a particular focus on limiting our number of suppliers to ensure that we have a

more permanent base of suppliers- Lene Wildfang, Head of CSR, DK Company

65% of DIEH members currently use partnerships and collaboration actively to address supply chain issues, while 76% see future opportunities in collaboration with others.

DIEH member survey, 2018

29

31State of Ethical Trading 2018/201930 State of Ethical Trading 2018/2019

Looking at own Purchasing PracticesMost companies and organisations’ purchasing practices cover the same list of aspects: pricing, contracts, order placements, tenders, production-delivery time and communication with suppliers. Purchasing practices have been identified as one of the key areas for improvement in terms of responsible business conduct and due diligence in supply chains – but its importance has not been widely acknowledged10.

Last year, we reported a quite significant increase to 70% whereas this year, 59% of DIEH members are addressing their own purchasing practices as a way to enhance ethical trade. When asked to specify, over half of DIEH company members explain that they have to a certain extent integrated purchasing practices in the overall work with ethical trading, while 32% take it as far to say that they are leading on this.

One way to integrate this area is by conducting training for buyers /sourcing staff based in Denmark or at the head office, to build knowledge and awareness on how buying practices such as last minute order adjustments or overaggressive price pressure may lead to negative consequences at the work floor or sub-supplier level. An additional approach is to set

Figure 14

Number of suppliers reported by DIEH company members

<10 suppliers

11-100 suppliers

101-1000 suppliers

>1000 suppliers

10%

32%

35%

24%

specific KPIs and reward systems that motivate buyers to keep up responsible buying practices and two-way communication with suppliers.

Almost two out of three DIEH members (companies and organ-isations) report that an increased focus on purchasing practices is among the future actions they are planning to take to pro-mote ethical trade.

Supply chain collaborationAs illustrated in figure 14, 32% of DIEH company members have very large supplier bases consisting of more than 1000 suppliers, which increases the need for a systematic approach to ethical trading. In line with recommendations and international guidelines, several DIEH members have stated that they aim to engage with less suppliers in order to secure better and more permanent relationships. In turn, this may facilitate supply chain collaboration and progress.

Not surprisingly, we find that companies with less than 10 suppliers report that they have entirely direct contact with their suppliers. For companies with up to 1000 suppliers or more, contact with suppliers is typically both direct and through agents and importers. This is important to take into consider-ation as the level of direct versus indirect supplier contact will

THE ROAD TOWARDS RESPONSIBLE VALUE CHAINS THE ROAD TOWARDS RESPONSIBLE VALUE CHAINS

Purchasing practices have been identified as one of the key areas for improvement in terms of responsible business conduct and due diligence in supply chains

10 ILO 2017, Purchasing practices and working conditions in global supply chains: Global Survey results.

We aim to increase transparency and knowledge in our supply chain, with a focus on working conditions and reducing risks. We want to

contribute with long-term sustainable solutions, and we are aware of our role in creating positive changes in our production chain

Line Vind, Project Coordinator, By Malene Birger

DIEH member survey, 2018

33State of Ethical Trading 2018/201932 State of Ethical Trading 2018/2019

affect the ways in which supply chain issues can be addressed. This year, we furthermore asked our members to rank their level of supplier collaboration. Here, we see that the most common supplier collaboration method for companies with more than 1000 suppliers is self-evaluation forms for the sup-pliers (33%), which the company can use to conduct audits or assessments with high-risk suppliers. Among our members with 11-500 suppliers, merely 11% report that they have a close and long-lasting collaboration with most of their suppliers. This may, among other things, involve providing guidance and/or share responsibility with their suppliers. DIEH companies with more than 500 suppliers overall rank themselves 19% higher than other company members when it comes to implementing incentive systems for their suppliers, such as long-term con-tracts and price premiums.

Capacity building of suppliersThere is a slight increase among DIEH company members who offer capacity building of suppliers, reported by 29% in 2018 compared to 23% in 2017. While some offer training and/or advisory visits, others are making use of sustainability certifi-cation systems and/or independent local organisations to build capacity. This year we identified a rise among DIEH’s company members who work with certification, going from 43% to 55% compared to last year. Several of the cases listed on pages 34-37 illustrate the potential of working with certification sys-tems to make continuous improvements in the supply chain. One advantage of using certification systems is the ability to communicate the work more easily to the consumer or client.

No opportunities

Development of new business models

Focus on designing products / services, including application of more

sustainable (raw)materials or ingredients

Focus on procurement practices

We see opportunities through the development of new partnerships or collaboration

on specific themes, problems, value chains etc.

50%

60%

76%

28%

1%

Figure 15

Which future opportunities do DIEH members see to enhance ethical trade and the SDGs?

Product design and choice of more sustainable materialsWhen asked “what future opportunities do you see to enhance ethical trade and the SDGs?” 50% of DIEH members mention product and service design and sustainable materials as a key area for further exploration. This focus area, which includes the use of alternative, more sustainable (raw) materials or ingre-dients, is currently referred to as relevant for one out of three DIEH members. Several companies for instance list their efforts on replacing plastic packaging with alternative materials. In

the food sector, we see a tendency to offer a wider range of more ‘climate-friendly’ often plant-based alternatives to meat and dairy. Alternative ingredients to palm oil or soy used for animal feed are also explored out of concern for deforestation, biodiversity and labour rights violations.

The textile and (interior) design sectors too are exploring the role of product design and choice of materials. Awareness on the resource-intensive process of cotton production for instance has led leading companies to look for alternative fabrics such as bamboo, lyocell (wood) or recycled materials, and to do research, development and innovation in order to replace con-ventional materials with more sustainable alternatives.

We have taken steps to strengthen the dialogue with our customers on replacing

single-use promotional products with multi-use, more sustainable products.

Søren Langhoff, owner at Langhoff Promotion

55% of DIEH company members work with certification, compared to 43% last year

DIEH member survey, 2018

THE ROAD TOWARDS RESPONSIBLE VALUE CHAINS THE ROAD TOWARDS RESPONSIBLE VALUE CHAINS

35State of Ethical Trading 2018/201934 State of Ethical Trading 2018/2019 GOOD PRACTICE CASESGOOD PRACTICE CASES

Good practice casesIn the previous section, we elaborated how DIEHs members work with ethical trade. DIEH’s members collaborate in various ways with each other as well as with local partners in producing countries to improve work-ing conditions and implement sustainable solutions that enhance ethical trading. Below we present selected good practice examples that illustrate these various approaches.

Partnerships and collaboration with other stakeholders

Looking at own Purchasing Practices

Making use of certification and labelsCERTIFIED

Concrete projects

Product design and choice of sustainable materials

Consumer communication

Lobbying

Training and education of staff in Denmark

DK

Capacity building of suppliers

Promoting labour rights and sustainable business in the PhilippinesIn the Philippines, the Danish Trade Union Development Agency has worked on a project promoting a rights-based Corporate Social Responsibility (CSR) approach to strength-ening labour rights and sustainable business in seven selected pilot enterprises.

The aim of the project is to boost the understanding of how inclusion and participation of workers lead to both economic and social development by creating better workplace condi-tions and by improving productivity for the businesses involved. The project is funded by Danida and carried out in collaboration with CO-Industry (CO-I), The Confederation of Danish Industry (DI), the Federation of Free Workers (FFW) and the Employers Confederation of the Philippines (ECOP).

Forest conservation and better income for cotton farmers in IndiaDanish B2B clothing company Neutral is engaged in a partnership with the C&A Foundation and WWF India, to promote biodiversity as well as better income for 1200 cotton farmers in India.

In recent years, cotton production has become a primary source of income for nearly 1.6 million farmers in central India. The rapid growth in cotton farming threatens one of India's largest forests, home to tigers and other endangered species. Of the 14.000 farmers who live in the area, the project helps 1.200 cotton farmers by training them to farm organically and invest in biodiversity: building the fertility of the soil to increase yields and making natural plant pesticides and compost. Farmers benefit from organic certification by acquiring better prices and access to international markets. In the 3-4 years period it takes to convert to organic cotton, however, the farmers’ output is declining, making it difficult to earn enough to survive. In this conversion period, Neutral pays a 10% premium for the cotton directly to the farmer, to remove the financial obstacle and increase their motivation to grow organic.

Reducing the use of plasticPlastic takes more than 400 years to break down and large amounts of plastic end up in the oceans every year, forming a major threat to the environment. Salling Group and WWF have entered a partnership with the aim to reduce the gen-eral use of avoidable or single-use plastic. For Salling Group, the plastic collaboration includes among others plastic used for transport, management in the stores, and the design and packaging of goods. Among other initiatives, Salling Group has introduced deposits on plastic bags with the aim to promote recycling of bags – an effort that has been tested in all Netto stores on Fyn and Bornholm. Another plastic reducing initiative is the phasing out of plastic cotton buds, disposable cutlery and tableware made of plastic in føtex. Furthermore, over one million of the plastic straws distributed in the bistros in Bilka and føtex will be replaced with paper straws.

Sustainable classrooms for refugees and internally displacedSave the Children Denmark has launched a partnership with Lifeshelter, a Danish company producing sustainable and safe shelters which have proven to provide an ideal setting for classrooms. The partnership is part of Save the Children’s transformation towards a greener purchasing strategy in their global humanitarian projects and contributes to sustainable development goal 4 - ensuring that more children get quality education. Lifeshelter’s classroom solutions are currently tested in Somalia.

Ways of working with ethical integration

Forest conservation and better income for indian farmers

37State of Ethical Trading 2018/2019State of Ethical Trading 2018/2019

Social certification in Aldi’s fruit, vegetables and flower supply chainsAldi works intensively to get its suppliers of fruit, vegetables and flowers certified according to both Global GAP and GRASP standards. GRASP is an ’add-on’ to the widely used Global Gap certification that several fruit and vegetable suppliers to European supermarkets already have to live up to. GRASP (Risk Assessment on Social Practice) covers critical issues such as worker representation, working hours, wages, forced labor and discrimination. The standards are used to assess social practices in primary production and to review basic indicators of potential social risks on farms.

Sustainable work wear in the municipality of OdenseThe municipality of Odense used the Nordic Swan Ecolabel to ensure a supply of work wear, allowing the Department for Elderly and Disabled to procure new clothes of high and sustainable quality. The municipality initiated the pro-cess by addressing its imperative demands. First, the working clothes should comply with the OEKO-TEX 100 requirements and the linnen needed to be certified with the Nordic Swan Ecolabel. The municipality of Odense wanted to increase the demand for sustainability but also reduce the special require-ments, which previously had raised the procurement cost. The breakthroughs were the inclusion of sustainability in the award criteria for the working clothes as well as talks and dialogue with different suppliers. Another benefit is that none of the employees had allergic reactions after wearing the new clothes, something that used to happen before.

SME partnership to boost production and increase incomes for local farmers and refugees in UgandaDanChurchAid has teamed up with two SME companies, Nordic Fruit from Denmark and Biofresh from Uganda, to promote sustainable production of organic sweet pota-toes in Uganda to the Danish market. The project empowers local farmers and young refugees in growing organic vege-tables, boosting the local development in the northern part of Uganda, which hosts more than one million refugees who have fled mainly from the civil war in South Sudan. Biofresh trains farmers in organic production for export and Nordic Fruit distributes the goods to Danish retailers and consumers. The project is unique as it engages local host communities and refugees in production - thereby not treated as passive receivers of aid but as active entrepreneurs, contributing to inclusive growth in the region. The project is funded by the Danida Market Development Partnership (DMDP) program.

Public procurement and supply chain dialogue on sustainable wood productsThe municipality of Aarhus and the Forest Stewardship Council (FSC) Denmark entered a collab-oration to promote the use of sustainably produced paper and wood products. Aarhus municipality wanted to ensure that its future purchase of wood and paper products plays out in a social, economic and environmental sound way. The use of certified products (for instance FSC certified) forms a solution for that.

Through the collaboration, existing and potential suppliers to the municipality were involved and informed about the advantages of making use of certified wood in the produc-tion of furniture, office supplies etc. By setting requirements for sustainable sourced wood and by supporting suppliers on this journey, the municipality contributed to sustaina-ble development goal 15 for Life on Land and goal 12 for Responsible consumption and production.

Letz Sushi uses certification schemes to meet sustainability ambitionsThe Danish restaurant chain, Letz Sushi, has placed sustainability at the core of the company’s mission and has taken various steps in the pursuit of being a sustainable busi-ness with a positive impact on the world and society. As the first Nordic restaurant chain, Letz Sushi recently obtained B Corp certification which means that it lives up to the B-Corp standards for social and environmental impact, measured on the four parameters governance, workers, community and environment. One important goal for the company is to pur-chase 100% sustainable ingredients by 2020. Currently, all fish is MSC and ASC certified and all of the rice is organic.

Step Up project has improved CSR and productivity in the Bangladeshi garment industryThe Step Up project is a collaboration between Danish sector organizations and the Bangladeshi garment association (BGMEA) to improve productivity and social and environmental performance in the Bangladeshi garment sector.

In collaboration with a local team of experts, the project pro-vided capacity building of factory managers, middle managers and workers to facilitate the implementation of productivity tools and a CSR management system in seven factories. Gains and savings from improvements in productivity were re-in-vested into health and safety measures, better working con-ditions and the establishment of CSR-management systems. The project has shown that it is possible to achieve significant synergies between productivity improvements and CSR and that productivity improvements at the same time can finance remarkable improvements when it comes to responsible busi-ness behaviour.

The Step Up project ran from October 2015 to December 2018 and was funded by the Danish Ministry of Foreign Affairs, Danida. The project was set up by Danish Fashion & Textile, Danish Fashion Institute, Danish Chamber of Commerce and WEAR.

GOOD PRACTICE CASES

Forest conservation and better income for indian farmers

36

39State of Ethical Trading 2018/201938 State of Ethical Trading 2018/2019 REFERENCESTOWARDS 2030

Collaborating towards 2030

• Aarhus Kommune 2018. Unikt samarbejde om bæredygtigt træ og papir

• C&A Foundation 2015. Conservation through Cotton

• CSR 2018. Nyt partnerskab skal booste entreprenørskab blandt flygtninge og lokale i Uganda

• DanChurchAid 2018. Refugees and host communities will grow organic fruit and vegetables in Uganda

• Dansk Erhverv 2019. Det lærte vi af Step Up

• DM&T 2018: Step Up viser vejen til CSR-forbedringer og højere produktivitet

• Ecolabel 2018. Case – Odense Kommune

• ILO 2015. New ILO figures show 150 million migrants in the global workforce

• ILO 2019. Poor working conditions are main global employment challenge

• ILO, IOM & Walk Free Foundation 2017. Global Estimates of Modern Slavery

• ITUC 2018. ITUC GLOBAL RIGHTS INDEX - The World’s Worst Countries for Workers

• Letz Sushi 2018. Vi vil være bedst for verden

• Salling Group 2019. Bilka og føtex dropper over en million sugerør af plastik

• The World Bank 2018. WHAT A WASTE 2.0 - A Global Snapshot of Solid Waste Management to 2050

• UK Fundrasing 2015. C&A Foundation partner with WWF India for conservation through cotton

• UN, 2018. The Sustainable Development Goals Report

• UNEP 2016. GLOBAL MATERIAL FLOWS AND RESOURCE PRODUCTIVITY

List of Sources for the global indicators on page 20-21 and good practice cases on page 34-37:

We live in the era of the Sustainable Development Goals – both a critical point in time in terms of climate change and a unique opportunity to create a world with greater prosperity and opportunities for future generations. With the words of the Danish Minister of Finance, Kristian Jensen, speaking at DIEHs annual conference in 2018, the Sustainable Development Goals are the world’s most important agenda.

Danish businesses, organisations, public institutions and other stakeholders working with sustainability very often find that key opportunities for making progress in terms of sustainability are found in their supply chains. They also often find that while they can solve certain issues themselves, much more can be achieved when working through dialogue, collaboration and partnerships with other actors. This is what DIEH is all about.

As this report shows, the SDGs have provided a new language and has – alongside with other factors – created an unprece-dented wave of sustainability interest and actions from all sides of society – business, municipalities, investors, organisations, citizens, etc. Sustainability has become top priority with Danish citizens with 62% of Danes expecting sustainability to be the most important political subject in the next five years. And DIEH members are increasingly working strategically with eth-ical trade with 89% having integrated sustainability into their core strategy and 35% stating that their company is defined by sustainability.

As Professor Steen Hildebrandt points out in the foreword to this report, there is still a lack of knowledge regarding where we are today, where we need to go and how we get there. This report aims to provide a small but important contribution to filling out this critical knowledge gap.

The wave of sustainability actions give good reason for opti-mism. At the same time, science and evidence tells us that progress is too slow – and in some areas – for instance on climate change and labour conditions – we are even heading in the wrong direction. This can clearly give reason for a great deal of pessimism. It is one of the key dilemmas of ethical trade today. Pessimism can easily lead to a sense of apathy and passivity. Blindfolded optimism may on the other hand neglect the urgency of the situation and lead to insufficient progress.

At DIEH we salute progress – one step at the time – and at the same time we do not loose track of the seriousness and the urgency of the challenges we are facing, when it comes to realising our vision of responsible global value chains. We look forward to working with our members to speed up progress and continue being a key convener and facilitate, support and guide companies, business organisations, NGOs, public insti-tutions and trade unions in this effort, thereby contributing to a better future for all.

State of Ethical Trading 2018 shows how ethical trade and sustainability have become mainstream both from a business perspective and in the minds of Danish citizens and consumers. It also illustrates how DIEH members are increasingly working strategically with ethical trade making a real difference for humans and environment around the globe.

40 State of Ethical Trading 2018/2019PREFACE

Not begun

We have begun to form an overview /understanding of how we measure

progress and results

We do annual evaluations of our ethical trading activities and e�orts

We measure results on activities, e�orts, and changes in processes (ex. In relation to

purchasing practices, new areas of focus etc) in relation to decided goals and indicators

We work systematically with impact assessment on ethical trading, as well as collaborating with

independent stakeholders/partners to be able to improve the measuring of results

0

1

2

3

4

18%

22%

29%

22%

8%

The Danish Ethical Trading Initiative is a non-profit

organisation that facilitates cooperation between

different stakeholders to enhance responsible

trade. Our aim is to contribute to global

sustainable development by strengthening our

members’ efforts on ethical trade, which respects

human and workers’ rights and considers the

environment and climate.

Members of the Danish Ethical Trading Initiative

represent a unique alliance consisting of small,

medium and large companies, trade unions,

public institutions, business associations and

NGOs – a network based on trust across sectors

and interests.

Danish Ethical Trading Initiative

Overgaden Oven vandet 10. st

1415 København K

www.dieh.dk

This publication is printed by KLS PurePrint, a Danish company working actively with the Sustainable

Development Goals to be the world's greenest printing house. KLS Pureprint wants to contribute to a

better future for people and the natural environment, by continuously using the circular way of thinking.