REI stopped doing business with two of its more than 130 offshore factories in 2012 after they either failed to respond adequately to remediation plans or were not forthright about their stand on hiring minors, the company disclosed in its 2012 Stewardship Report.


 
REIs Fair Labor Compliance (FLC) team and its Fair Labor Oversight Committee, which consists of five executives, created escalation plans in 2011 to provide a roadmap for consistently remediating difficult compliance situations with its factories.

 

In 2011-2012, the plans were put to the test with one supplier, reads REIs seventh consecutive annual stewardship report. Due to the suppliers continued lack of transparency and inability to follow through with the requirements of the escalation plan, the Fair Labor and Sourcing teams agreed to exit the factory. While making an unannounced visit to another factory, factory management could not convincingly articulate their stand on hiring minors, nor were they able to produce or discuss their policies in this area. The Sourcing and Fair Labor teams determined the best course was to source from a more sophisticated supplier.

 

The biggest area of non-compliance with REIs Factory Code of Conduct (FCC), however, were found in the area of Health & Safety (H&S). REI found 50 instances of non-compliance with its H&S standards last year, or almost as many as all other 12 categories combined. REI had found 41 H&S violations in 2011.

 

The findings came from audits of 35 of REIs 133 Tier 1 factories that conduct final assembly of REI-branded products.

 

By comparison, REI found a total of 52 violations in the remaining 11 categories of non-compliance. The second most common area of non-compliance related to Fair Wages, where there were 14 instances, up from 13 the year before. Coming in third was Working Hours/Overtime, where the number of incidents declined by nearly half to nine.

 

REIs 2012 audits identified four major areas of weakness: lack of transparency in record keeping; lack of operational policies and procedures to protect workers health and safety and prevent discrimination, harassment, and abuse; management and workers lack of education on FLC requirements and workers lack of understanding of what constitutes a safe workplace; and lack of knowledge about, and inadequate staff to handle, social compliance work.

 

REI emphasized that it continues to work with existing and new vendors to refine the audit and post-audit process with an eye toward not only improving compliance, but reducing audit fatigue. Last year, for instance, REI relied on audits from other members of the Fair Factory Clearinghouse (FFC) for nine of the 35 factories inspected. REIs Fair Labor Compliance team also partnered with third party consultants to assess six factories in Vietnam and China as part of its dialogue with factory management over the need for human resource systems. In addition, the staff in REIs Quality Office in Shenzhen, China received training on the REI FCC and the Visual Observation Checklist (VOC), which includes a description of safety and labor-related issues that REI employees can easily identify while traveling to factories.

Impressive gains with solar power

While REI has its work cut out for it on the FLC front, it reported impressive gains in curbing its greenhouse gas (GHG) emissions, in part by adding solar power to cut its use of natural gas by 16 percent last year, according to the Sustainable Operations section of the report.
In 2012, REI added solar electrical systems to three stores, bringing the companys total investment to 26 locations, including one distribution center. Today, approximately 20 percent of REIs stores have solar systems that generate between 15 and near 100 percent of their electricity needs.

 

REI also continues to consume less electricity through energy efficient store designs implemented in 2005. Since 2008, the company has increased its total energy consumption by only 2 percent, despite opening 31 stores.

 

While REI grew revenues by 7.4 percent last year, the report states that the company made progress in decreasing its environmental footprint in several areas, including a 7.6 percent reduction of CO2 emissions related to operations (headquarters, distributions centers and stores) and a 53-ton decrease in its waste to landfill contributions.

 

The BTUs REI used to run operations increased just 1.0 percent as the addition of five new stores offset continued efficiency gains at its distribution centers. However, the installation of solar power at more stores, enabled REI to dramatically reduce its consumption of natural gas. As a result, the company increased its overall consumption of energy by just 0.4 percent, beating its goal of 1.0 percent.

 

REIs major sources of operational greenhouse gas (GHG) emissions as measured in tons of CO2   in order of their share of 2012 emissions were: electricity, 43 percent, up 5 percent; employee commuting, 18 percent, down 27 percent; product transportation: 17 percent, down 9 percent; direct fulfillment: 8 percent, down 12.2 percent; corporate travel: 8 percent, down 10.4 percent; and natural gas: 5 percent, down 16 percent.

 

REI attributed the impressive declines in employee commuting to strong alternative commuting rates, induced in part by rising gas prices and the companys 50 percent subsidy of public transit. Approximately half of the more than 700 employees at REIs headquarters in Kent, WA, either use public transit, a company van pool or their bicycles to commute to work.

 

The company was able to decrease the impact of its direct fulfillment operation by using less packaging, making lighter gear, reducing use of air freight and by better balancing inventory between its East and West distribution centers to reduce the number of cross-country shipments.  
In addition, REI Adventure Travel generated an estimate 38,298 tons of CO2 emissions, down nearly 12 percent.

 

Missing from the GHG estimates was the impact REIs 133 offshore contractors, which is standard industry practice. Virtually no companies include contract manufacturers in the GHG emission estimates, because it is so difficult to see into their global supply chains. It is precisely for that reason, that REI is a leading supporter of the Outdoor Industry Association Sustainability Working Group. The group developed the HiGG index to help brands measure the impacts of their apparel products and now expanding its work to help hardgoods manufacturers.

 

 I think where all this is going is a true recognition that your impact on the world does not end at the four walls of your factory, said says Chris Walker, associate director of Ernst & Young LLPs Americas Climate Change and Sustainability Services unit. It includes everything you use and how customers use your products and even how they dispose of it.

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