To ensure compliance with our standards, we have implemented an internal audit process and are committed to providing our suppliers opportunities for learning and development. To identify and evaluate the potential risks of human trafficking, slavery or violations of other local labor standards that may be unique to L Brands and its business, we conduct our own ongoing, internal verification of our product supply chain. The resulting information has helped to ensure that our suppliers are in compliance with L Brands Supplier Code of Conduct.
As L Brands continues to foster strategic relationships with suppliers, it maintains its commitment to supplier education. For suppliers, factory management and associates who have direct responsibility for the supply chain management, the company hosts annual awareness and training sessions on all compliance standards in multiple countries around the world. In addition, we use one-on-one training in conjunction with compliance reviews and corrective action plans to continuously educate our factories and reinforce our Supplier Code of Conduct.
L Brands associates are held responsible to comply with the L Brands Associate Code of Conduct.
L Brands maintains policies and procedures which govern the consequences of non-compliance by associates or suppliers.
Independent Production Services (IPS) is a function within L Brands that works with suppliers to ensure goods are sourced from factories that meet or exceed L Brands compliance standards. IPS has been supporting global compliance for nearly two decades, enabling improvement in working conditions, supply chain security, trade compliance and brand protection in our supply chain through monitoring, remediation, capacity building and training.
Our list of qualified suppliers is established and maintained in reliance on specific qualification standards and protocols developed by IPS.
About the process:
1. First, a supplier verification and risk assessment is conducted to prevent involvement with high-risk suppliers.
2. Once a supplier has passed the risk assessment, the relationship between L Brands and a qualified supplier begins with a written master sourcing agreement wherein the supplier certifies that its factories and any that it may contract with will strictly adhere to L Brands Supplier Code of Conduct, including those pertaining to slavery and human trafficking. No subcontracting is permitted without prior approval.
3. Each supplier must agree to allow L Brands, or an independent third-party hired by L Brands, to conduct an audit of the supplier's business without prior notice. IPS or a third party auditing firm conducts announced or unannounced audits of each of our approved factories at least annually to ensure compliance. The company may conduct more frequent reviews of factories located in countries designated as high risk by the U.S. State Department's Trafficking In Persons Report or identified through the company’s annual risk assessment process. In order to both commend good behavior and to focus our resources on the least compliant factories, limited exemptions from annual audits may be granted to highly compliant factories based on the previous year's audit results.
L Brands sources from a few hundred suppliers and factories. During fiscal 2013, nearly 20,000 audit findings were evaluated across our supplier base through our standard auditing process, which includes a rating protocol where critical questions are weighted higher. Approximately 10 percent of these findings required corrective action, substantially all of which was completed within 90 days. Those factories that did not remediate in a prompt and satisfactory manner were terminated.
Sourcing Risk Committee
L Brands has a Sourcing Risk Committee comprised of senior executives from various company divisions and functions that meets at least quarterly to discuss core business, sourcing and purchasing practices and assess current risks, including geopolitical, social compliance and associated supply risks. The Sourcing Risk Committee operates under the guidance and oversight of the Audit Committee of the Board of Directors. The Sourcing Risk Committee reports to the Audit Committee on a regular basis, and the Audit Committee reports periodically on these issues to the full Board of Directors.