From best in the world - to best for the world
WELCOME TO THE B CORP MOVEMENT
Many decades of “corporate responsibility” and billions of dollars in auditing and compliance have failed to meaningfully improve the wellbeing of vulnerable workers in global supply chains. Such audits were never designed to assess or measure many of the social challenges that threaten the wellbeing of workers in global supply chains, such as bullying and abuse, sexual harassment, forced labor and other forms of Modern Slavery.
The very real threat of social and planetary collapse has convinced many that any sense of maintaining the status quo “business as usual” model is delusional. The Covid-19 Pandemic has only reinforced this fact.
The Benefit Corporation or “B Corp” movement is fundamentally based upon a different way of seeing the world, one that recognises the inherent interconnectedness and interdependence of all things. As such, it is inherently more honest as it recognises and reflects what numerous scientific disciplines has been affirming for many years.
In 2019 Kathmandu became a Benefit-Corporation or a “B-Corp”. A B-Corp is a new way of doing business, one that balances purpose and profit. Through a business structure that considers all stakeholders, B Corps endeavour to make decisions that balance profit and purpose, to benefit more than just the bottom line. B-Corps are now a rapidly growing community of leaders, driving a global movement of people using business as a force for good.
What this means in practice for Kathmandu is that as a B-Corp we are required to consistently consider the impact of our decisions on our customers, the wider community, the environment and the workers in our global supply chain.
Kathmandu believes that the Benefit Mindset that lies at the heart of the B-Corp movement, is required to effectively respond to the social and environmental challenges of our time. The Benefit Mindset is a new lens, a frame of reference for transforming how we come to understand the universe and our place in it: from separateness to interdependence. Secondly it is a paradigm-shifting psychology for becoming aware of how we can fulfil our potential in a way that serves the wellbeing of all. And finally, it is a pathway for transforming business culture where corporate institutions operate as purpose-driven innovation ecosystems. Kathmandu believes that adopting a Benefit Mindset as a liberating framework and pathway for transforming business culture, is a necessary first step that underpins our entire social impact strategy.
The United Nations and the combined weight of global governments struggle to meaningfully address the myriad of Environmental, Social and Governance (ESG) challenges of our time. Kathmandu recognises the very real limitations, resources and influence we have in seeking to respond to such challenges on our own. We therefore seek to work collaboratively with others whenever possible.
This includes working in partnership with our suppliers to facilitate ongoing improvements in the pursuit of ethical fashion principles, benefitting both their workers and their business performance. It means working with other businesses and brands to facilitate change that we could not achieve by ourselves as well as working with civil society, human rights organisations and relevant government departments.
Our social impact program aims to protect and enhance the wellbeing of the workers in our global supply chain. Until recently, factory audits were the tool we primarily used to make sure suppliers were providing safe working conditions and fair pay to workers through our Code of Conduct. Audits are typically the main method that companies around the world use to measure conditions in their supply chain.
However, after several decades it is clear that, on their own, audits have severe limitations. They are based on a lack of trust and often promote a game of cat and mouse between the auditors and the suppliers. The traditional audit was never designed to identify or address the root causes of issues or prevent them from occurring again. Audits are rarely able to identify violations such as systemic corruption, sexual harassment, bullying and other forms of exploitation and abuse. Audit fatigue puts real strain on the factories and can hamper their progress.
THE KATHMANDU APPROACH
As a certified B Corp and as part of the global B Corp movement, our response to the numerous Environmental, Social and Governance (ESG) challenges of our time, is reflected in the mindset we adopt, the collaboration we invite and the transparency we seek. While our approach is very imperfect, it relies on the following:
- Having a Regional ESG Manager based in Asia where the majority of our suppliers are located is critical. To facilitate an equal partnership that is mutually beneficial to all stakeholders, it is imperative that we understand the cultures, languages and local laws of those countries where our suppliers are based.
- Kathmandu’s key partner in responding to the ESG challenges in our supply chain is Elevate, an industry leader in sustainability and global supply chain services. Elevate designs, builds and manages data driven sustainability linked programs that drive positive impact and shares our value of transparency and authenticity.
- Another key partner is the Fair Labor Association (FLA). The FLA is a collaborative effort of universities, civil society organizations, and socially responsible companies dedicated to protecting worker’s rights around the world. The FLA provides transparency and accountability for our internal program and ensures we are complying with international labor standards and best practices throughout our supply chain. Kathmandu was the first company in Australasia to become an accredited member of the FLA in 2018 and our Code of Conduct and supplier assessment framework is aligned with and based upon the 2020 FLA Compliance Benchmarks.
- Kathmandu works with other brands, NGOs, governments and multi stakeholder initiatives in recognition that we cannot meaningfully address any of the ESG challenges we face on our own. An example of this is the Social & Labor Convergence Project, an industry collaboration to create a standard assessment tool to minimise the strain on factories and facilitate greater cooperation across the apparel industry.
- We prioritise transparency over compliance. Rather than insist that factories achieve a certain audit score, we seek to drive transparency by inviting suppliers to trust us with their imperfections and the very real challenges they are facing so that together we can work to make the necessary improvements for the benefit of all.
- Kathmandu makes 100% of our Tier 1 factories public. These are all the suppliers with whom we have a direct contractual sourcing relationship for the supply of Kathmandu branded products. We are currently working through our list of Tier 2 suppliers in the form of fabric mills and dyeing houses to ensure we correctly identify them all. Once complete this list will also be made public.
- Without consistent and systematic attention to supplier management and responsible purchasing and production practices, companies like Kathmandu can unintentionally undermine factory-level efforts toward ethical working conditions. We therefore recognise the importance of having good sourcing and purchasing practices that improve labour standards. Our purchasing policy reflects our alignment with the Fair Labor Association and seeks to proactively address those issues that can lead to excessive overtime, unauthorized subcontracting or other negative impacts.
WORKPLACE CODE OF CONDUCT
Our Workplace Code of Conduct is based on the International Labour Organisation’s standards and on internationally accepted good labour practices.
The code outlines what we expect from our suppliers including working hours, safe working conditions and explains what sufficient compensation looks like. It also includes the environmental standards we expect suppliers to meet.
All of our manufacturing partners must sign our Code of Conduct before we agree to do business with them and our ongoing business contingent on them abiding by it. Our program encourages suppliers to have greater ownership of those values that underpin our standards and to invest in their own improvements and transformation in partnership with us.
Please see our Code of Conduct for different languages below:
Code of Conduct
Code of Conduct (Chinese)
Code of Conduct (Indonesian)
Code of Conduct (Italian)
Code of Conduct (Nepali)
Code of Conduct (Spanish)
Code of Conduct (Vietnamese)
Worker Voice tools are a key part of our program, ensuring that every worker in our global supply chain has the ability to communicate directly with us. While traditional audits include interviews with workers, for numerous reasons they rarely result in workers speaking honestly and transparently. We have therefore invested in the following:
Ensuring that every Kathmandu Code of Conduct has a contact email or social media QR Code that workers can use to connect directly with the phone that sits on the desk of the Kathmandu CSR Manager.
Introducing a worker sentiment survey to every social audit we complete means that along with the traditional top-down audit, we now also gain a bottom-up view from the workers themselves.
We are currently trialling other worker voice tools that in time will allow us to survey every worker in our supply chain.
Sustainability at Kathmandu: Our Factory Audit Process
Kathmandu has a robust factory assessment and monitoring program. This ensures that those who make our products are being paid the legally required minimum wage. While this is a positive step in the right direction, we know that the majority of workers in our supply chain earn less than a living wage.
A living wage is a fair and decent wage, given the country, region and community where the workers live. A living wage covers the basic necessities for life in the form of food, water, housing, healthcare, education, clothing, transportation and childcare. There are different definitions of what constitutes a living wage and there is no universal living-wage calculator. There is also not a fair and effective means to translate what constitutes a living wage in one country compared to another.
Governments, businesses and the non-profit sector have been working hard for many years to regulate working conditions and worker hours, raise minimum wages and identify sustainable solutions for getting workers out of poverty. Despite this many workers within the wider apparel industry remain vulnerable to unfair wages, heavy workloads and various forms of exploitation and abuse.
Like all of the human rights challenges in our supply chain, Kathmandu cannot facilitate the positive changes we would like to see by acting alone and in isolation. We have therefore chosen to work collaboratively with other global brands and in partnership with the Fair Labor Association (FLA) in pursuit of identifying and utilising solutions for helping to shape a truly ethical global fashion industry. We are committed to doing all we can to ensure all of our workers are fairly compensated.
“Human rights is not something we reluctantly feel obligated to consider as a necessary business risk. It’s our number one material issue reflecting the very heart of our values and brand.”
Reuben Casey, CEO Kathmandu
It is estimated that more than 40 million people are trapped in some form of Modern Slavery. Approximately 75% of those people are found in global supply chains. This is often in the form of debt bondage or debt slavery.
The Modern Slavery Act 2018 established Australia’s national Modern Slavery Reporting Requirement. Under the reporting requirement, certain entities must publish annual Modern
Slavery Statements describing their actions to assess and address modern slavery risks. The reporting requirement applies to commercial and not for profit entities with annual consolidated revenue of at least AU$100 million.
2020 Kathmandu Modern Slavery Statement
Forced Labour and Child Labour Policy
To assess the ongoing impact of our combined efforts in response to Environmental, Social and Governance (ESG) challenges, we are using the The Higg Index. The Higg Index is a suite of tools that together assess the social and environmental performance of the supply chain. The Higg Index can better inform our suppliers on their individual sustainability strategies and drive collective industry transformation and full product transparency.
ETHICAL FASHION REPORT
Each year, Kathmandu participates in the Ethical Fashion Report produced by Baptist World Aid Australia and Tearfund New Zealand, which work towards ethical fashion in Australia and New Zealand. The Ethical Fashion Report grades fashion companies on ethical practices in their supply chains, giving consumers the power to shop ethically and use their voice to encourage greater transparency.
The report scores companies on the levels of visibility and transparency across their supply chain with regards to policies, transparency and traceability, auditing and supplier relationships, worker empowerment and environmental management.
If you have suggestions or feedback on any aspect of our Worker Wellbeing approach and program, please contact our Social Impact team.