Based on J. Crew's low score of: 1.7, we would recommend that you try your hardest to overlook their bright colors, cute cuts and hot models and buy your little black dress at another retailer . . . until J. Crew becomes a bit more open about what it is doing and develops stronger policies and procedures.
Thursday, May 15, 2008
J. Crew Recommendation: BAD
Based on J. Crew's low score of: 1.7, we would recommend that you try your hardest to overlook their bright colors, cute cuts and hot models and buy your little black dress at another retailer . . . until J. Crew becomes a bit more open about what it is doing and develops stronger policies and procedures.
Wednesday, May 14, 2008
J. Crew - Template
Summary
I chose J. Crew as the first company to evaluate for no other reason than it was part of my list of companies for another research project.
J. Crew has really re-established itself over the last few years as a higher-end fashion company. Gone is the emphasis on Gap-like basics, replaced with bright colors, of-the-moment silhouettes and patterns, but with many pieces still having that classic J. Crew feel. J. Crew went public in 2006.
Perhaps a remnant of its privately-held past, J. Crew does not issue any annual report besides the mandated SEC Filings. Although the filings require an assessment of operations, the company is not obligated to report on any social responsibility issues (i.e., policy on wages paid by foreign suppliers, greenhouse gas emissions). Consequently, it is quite difficult to assess its CSR performance using the template. But, we did our best.
Some Key Facts
J. Crew does not own or operate any manufacturing facilities. In 2007, approximately 85% of J. Crew merchandise was sourced from Asia (with 73% of products from China, Hong Kong and Macau).
Although the company does not state so on its website, the SEC filing shows that J. Crew maintains a Code of Vendor Conduct, which requires that each J. Crew supplier operate in compliance with applicable wage, benefit, working hours and other local laws, and forbids the use of practices such as child labor or forced labor. The Code of Vendor Conduct is currently administered internally by J.Crew employees, including a dedicated J.Crew employee [ed.note: just one??], and two outside compliance audit firms that make periodic visits to the facilities that produce J. Crew goods to monitor compliance. New suppliers are prequalified based on the Code of Vendor Conduct and each existing supplier must execute an annual compliance certification. J. Crew's also works with the Fair Factories Clearinghouse, which is a provider of software to manage factory evaluations.
Here is our evaluation of J. Crew based on the Scale of Involvement:
Due to some technical difficulties, links are not working right now, but will be added soon.
I chose J. Crew as the first company to evaluate for no other reason than it was part of my list of companies for another research project.
J. Crew has really re-established itself over the last few years as a higher-end fashion company. Gone is the emphasis on Gap-like basics, replaced with bright colors, of-the-moment silhouettes and patterns, but with many pieces still having that classic J. Crew feel. J. Crew went public in 2006.
Perhaps a remnant of its privately-held past, J. Crew does not issue any annual report besides the mandated SEC Filings. Although the filings require an assessment of operations, the company is not obligated to report on any social responsibility issues (i.e., policy on wages paid by foreign suppliers, greenhouse gas emissions). Consequently, it is quite difficult to assess its CSR performance using the template. But, we did our best.
Some Key Facts
J. Crew does not own or operate any manufacturing facilities. In 2007, approximately 85% of J. Crew merchandise was sourced from Asia (with 73% of products from China, Hong Kong and Macau).
Although the company does not state so on its website, the SEC filing shows that J. Crew maintains a Code of Vendor Conduct, which requires that each J. Crew supplier operate in compliance with applicable wage, benefit, working hours and other local laws, and forbids the use of practices such as child labor or forced labor. The Code of Vendor Conduct is currently administered internally by J.Crew employees, including a dedicated J.Crew employee [ed.note: just one??], and two outside compliance audit firms that make periodic visits to the facilities that produce J. Crew goods to monitor compliance. New suppliers are prequalified based on the Code of Vendor Conduct and each existing supplier must execute an annual compliance certification. J. Crew's also works with the Fair Factories Clearinghouse, which is a provider of software to manage factory evaluations.
Here is our evaluation of J. Crew based on the Scale of Involvement:
| Indicator | Commitments/Comments | SOI Rank |
| Environment – Operations | ||
| GHG Emissions | No Information available | 1 |
| Energy Efficiency | No Information available | 1 |
| Air & Water Pollution | No Information available | 1 |
| Promoting Employee Enviro. Awareness | No Information available | 1 |
| Waste Reduction (Haz & Non) | No Information available | 1 |
| Environment – Materials | ||
| Use of Toxics in Products | No Information available | 1 |
| Use and Promotion Of Sustainable Materials (i.e. organic cotton) | No Information available | 1 |
| Social | ||
| Workplace Diversity | Generic diversity policy outlines in Code of Ethics | 4 |
| Unions | Brief statement on unions in SEC filings. No unions at J. Crew. | 2 |
| Workplace Safety | No reference to workplace “safety”; generic statement on workplace “violence” in Code of Ethics. | 2 |
| Community Relations | No Information available | 1 |
| Strategic Partnerships with NGOs | No Information available | 1 |
| Animal Welfare | No Information available; though stopped carrying fur after pressure from PETA. | 1 |
| Human Rights | ||
| Operating in Countries of Conflict | No Information available | 1 |
| Child Labor | Forbidden under Code of Vendor Conduct; no specific procedures discussed. | 4 |
| Forced Overtime | Forbidden under Code of Vendor Conduct. No specific procedures discussed. | 4 |
| Indentured Servitude | No Information available | 1 |
| Compliance with ILO Standards? | No Information available | 1 |
| UN Global Compact? | No Information available | 1 |
| Supplier Management Issues | ||
| Code of Conduct | Yes, though it is not public. | 5 |
| Fair Wages | Code of Vendor Conducts states that all vendors must “operate in compliance with applicable wage, benefit, working hours and other local laws” | 3 |
| Training | No Information available | 1 |
| Environmental Management | No Information available | 1 |
| External Verification | |||
| Member of | No. | n/a | |
| CSR Reporting Standard? | No. | n/a | |
| Other | Working with Fair Factories Clearinghouse to share factory data with other brands. | n/a | |
| Demonstrated CSR Leadership Among Peers? | No. | ||
Due to some technical difficulties, links are not working right now, but will be added soon.
Tuesday, May 13, 2008
Issues Template
Template
The Issues Template is used to summarize the key issues that are being evaluated for each company. Some might say that apparel companies should focus their efforts on issues that are most relevant to their business operations - mostly labor issues, wage issues, worker training, product safety/quality, etc. However, I have added environmental issues into the mix for several reasons. Environmental issues, like climate change and water pollution, are growing in importance to society at large and companies should at least, at this point, be getting a sense of their impacts. Personally, I also see this as a differentiation marketing strategy and as a way to be prepared for any potential legislation on the environment. In addition, negative public opinion can adversely affect sales, and the public is calling for more environmental awareness on the part of companies.
Sorry, you will have to click on the image above to get a better view of the template.
Definitions
GHG Emissions: Is the company tracking its emissions from its operations? This does not have to include supplier emissions, but should include all stores, offices, distribution networks (from warehouse to stores, stores to outlets, etc.)
Air and Water Pollution: Is the company tracking its air and water pollution?
Employee Awareness: Is the company doing anything to make its employees aware of environmental issues? Educating employees is a incredibly effective way for a company to have a position environmental impact.
Waste Reduction: Does the company track waste (both hazardous and non.)?
Toxics in Products: Does the company do anything to reduce the use of toxic chemicals in their products?
Promotion of Sustainable Materials: Is the company doing anything to use more organics or other sustainable fibers/materials?
Workplace Diversity: Does the company seek to promote a diverse workplace (this does not include suppliers, but does include stores, admin. offices, warehouses, etc.)?
Unions: What is the company's position on unions?
Workplace Safety: Again, not including suppliers.
Community Relations: How does the company work with the communities that are touched by its business? This can include communities surrounding suppliers, if the company sources a large percentage of its product from that one supplier.
NGOs: Does the company try to work with NGOs to address issues or create opportunities?
Animal Welfare: Is there any action to promote humane treatment of animals if the company uses leather, fur, etc.?
[Note: many of the "Human Rights" issue categories are aimed at determining how companies work with their suppliers in other countries, rather than how it treats its own employees in the country of origin.]
Countries of Conflict: Does the company operate or use suppliers from countries of conflict where their business activities are promoting adverse impacts on the population or environment of that country?
Child Labor: What does the company do/say about child labor?
Forced Overtime: This is when employers force employees to work more than whatever the accepted standard is. In the US, it is 40 hours per week or, sometimes, 8 hours per day.
Indentured Servitude: An indentured servant is a laborer under contract of the employer for some period of time, usually three to seven years, in exchange for such things as ship's passage, food, land and accommodations. And believe it or not, it still happens fairly often in some countries.
Compliance with ILO standards?: "Since 1919, the International Labour Organization has maintained and developed a system of international labour standards aimed at promoting opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and dignity." (from here) Read more here.
UN Global Compact: "The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour,the environment and anti-corruption ."
Code of Conduct: Does the company have a Code of Conduct that must be adhered to by suppliers?
Fair Wages: What does the company do to ensure that its suppliers are paying "fair" wages to workers producing the brand's products?
Training: Does the company do any training for suppliers on improving efficiency, operations management, employee management, environmental management, etc.?
Environmental Management: Does the company do anything to track the environmental impacts of its suppliers.?
Member of FLA?: The mission of the Fair Labor Association (FLA) is to combine the efforts of industry, civil society organizations, and colleges and universities to protect workers’ rights and improve working conditions worldwide by promoting adherence to international labor standards. The FLA conducts independent monitoring and verification to ensure that the FLA’s Workplace Standards are upheld where FLA company products are produced. Through public reporting, the FLA provides consumers and shareholders with credible information to make responsible buying decisions. More here.
CSR Reporting Standard?: Disclosure and transparency are very important. There are number of different reporting standards (i.e., AA1000, Global Reporting Initiative, find more examples here) that a company can use to make its reporting more organized, more substantial/comprehensive and more credible.
Closing Thoughts
Although I think that this list of issues is actually larger than it necessarily needs to be, it does not mean that a company needs to focus on every specific issue listed. However, I do feel like the majority of these issues represent real operational risks (whether from public opinion, the legal perspective or operational efficiency) that companies need to start getting their heads around.
The Issues Template is used to summarize the key issues that are being evaluated for each company. Some might say that apparel companies should focus their efforts on issues that are most relevant to their business operations - mostly labor issues, wage issues, worker training, product safety/quality, etc. However, I have added environmental issues into the mix for several reasons. Environmental issues, like climate change and water pollution, are growing in importance to society at large and companies should at least, at this point, be getting a sense of their impacts. Personally, I also see this as a differentiation marketing strategy and as a way to be prepared for any potential legislation on the environment. In addition, negative public opinion can adversely affect sales, and the public is calling for more environmental awareness on the part of companies.
Sorry, you will have to click on the image above to get a better view of the template.Definitions
GHG Emissions: Is the company tracking its emissions from its operations? This does not have to include supplier emissions, but should include all stores, offices, distribution networks (from warehouse to stores, stores to outlets, etc.)
Air and Water Pollution: Is the company tracking its air and water pollution?
Employee Awareness: Is the company doing anything to make its employees aware of environmental issues? Educating employees is a incredibly effective way for a company to have a position environmental impact.
Waste Reduction: Does the company track waste (both hazardous and non.)?
Toxics in Products: Does the company do anything to reduce the use of toxic chemicals in their products?
Promotion of Sustainable Materials: Is the company doing anything to use more organics or other sustainable fibers/materials?
Workplace Diversity: Does the company seek to promote a diverse workplace (this does not include suppliers, but does include stores, admin. offices, warehouses, etc.)?
Unions: What is the company's position on unions?
Workplace Safety: Again, not including suppliers.
Community Relations: How does the company work with the communities that are touched by its business? This can include communities surrounding suppliers, if the company sources a large percentage of its product from that one supplier.
NGOs: Does the company try to work with NGOs to address issues or create opportunities?
Animal Welfare: Is there any action to promote humane treatment of animals if the company uses leather, fur, etc.?
[Note: many of the "Human Rights" issue categories are aimed at determining how companies work with their suppliers in other countries, rather than how it treats its own employees in the country of origin.]
Countries of Conflict: Does the company operate or use suppliers from countries of conflict where their business activities are promoting adverse impacts on the population or environment of that country?
Child Labor: What does the company do/say about child labor?
Forced Overtime: This is when employers force employees to work more than whatever the accepted standard is. In the US, it is 40 hours per week or, sometimes, 8 hours per day.
Indentured Servitude: An indentured servant is a laborer under contract of the employer for some period of time, usually three to seven years, in exchange for such things as ship's passage, food, land and accommodations. And believe it or not, it still happens fairly often in some countries.
Compliance with ILO standards?: "Since 1919, the International Labour Organization has maintained and developed a system of international labour standards aimed at promoting opportunities for women and men to obtain decent and productive work, in conditions of freedom, equity, security and dignity." (from here) Read more here.
UN Global Compact: "The Global Compact is a framework for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labour,the environment and anti-corruption ."
Code of Conduct: Does the company have a Code of Conduct that must be adhered to by suppliers?
Fair Wages: What does the company do to ensure that its suppliers are paying "fair" wages to workers producing the brand's products?
Training: Does the company do any training for suppliers on improving efficiency, operations management, employee management, environmental management, etc.?
Environmental Management: Does the company do anything to track the environmental impacts of its suppliers.?
Member of FLA?: The mission of the Fair Labor Association (FLA) is to combine the efforts of industry, civil society organizations, and colleges and universities to protect workers’ rights and improve working conditions worldwide by promoting adherence to international labor standards. The FLA conducts independent monitoring and verification to ensure that the FLA’s Workplace Standards are upheld where FLA company products are produced. Through public reporting, the FLA provides consumers and shareholders with credible information to make responsible buying decisions. More here.
CSR Reporting Standard?: Disclosure and transparency are very important. There are number of different reporting standards (i.e., AA1000, Global Reporting Initiative, find more examples here) that a company can use to make its reporting more organized, more substantial/comprehensive and more credible.
Closing Thoughts
Although I think that this list of issues is actually larger than it necessarily needs to be, it does not mean that a company needs to focus on every specific issue listed. However, I do feel like the majority of these issues represent real operational risks (whether from public opinion, the legal perspective or operational efficiency) that companies need to start getting their heads around.
Monday, May 12, 2008
The Scale of Involvement!!
[I feel like the title of this entry needs to be said by some baritone-voiced radio personality, with emphasis on "scale" and "-volve-". ]
In any case, the "scale of involvement" is a scale that was developed by one Dova Wilson, a member of my class group at GWU.
It was designed as a way to evaluate a company's commitment to corporate social responsibility through its policies, programs and key performance indicators (KPIs). Since much of the information available on a company's CSR activities is qualitative in nature (meaning that it can't really be measured easily), the "Dova Scale" (as we like to call it) attempts to quantify (with numbers) mostly qualitative data. The scale is used along with a template (which I will share in the next entry). I have adapted the template we developed in class to be more relevant to the branded apparel companies I will be profiling.
Definitions (we will use child labor as an example to make it easier to understand):
1- No Visible Involvement: This rating can be applied when a company shows no mention of a particular issue. (For instance, has no official policy on child labor.)
2 - Lip Action: The company may have a statement on child labor, but no specifics. It could be something like, "X company cares deeply about child labor", but with no specifics on anything else. This could also be the rating when a company says that it does something, but a third party (NGO, government, labor group) shows proof that this is not true.
3 - Compliance: The company may make a blanket statement that they "comply with all necessary regulations" relating to child labor in the countries where they operate, but with no information on how they track this or what the regulations are.
4 - Policy & Procedures: The company has a public policy on child labor that talks about how it would handle a situation of child labor (for example, the company would immediately terminate a contract with a supplier or factory that was found to have child labor). This rating is given when the company, although having a policy and procedure, does not actively investigate and monitor the issue.
5 - Internal Audit and Measurement: The company investigates, monitors and reports on issues of child labor. This could mean that the company has hired a third-party verifier to investigate its factories or has its own compliance officers who work with their suppliers. The company may or may not report on its findings, but states that it has a way of doing so.
6 - Active Steps: This rating would be given to a company when it is apparent that the company is proactive about child labor. For instance, one company that I have looked at partners with NGOs to provide education opportunities for children near the factories where the company manufactures its clothes, so the children have other options besides working.
7 - Creativity: This rating is given to a company that definitely meets the 6th rating, but also tries to solve issues creatively or using its market position, partners with unique organizations, or, otherwise, takes active steps in ways that are different than the industry norm.
8 - Continual Improvement: The company strives, year after year, to do better than it did the year before to address challenges, solve problems and be proactive about issues that affect its business and industry. Many companies that receive this rating have social responsibility as part of their mission statements. Their senior officers are vocal about the company's actions. The companies participate in external evaluations of their activities for research purposes. There is a high level of transparency, involvement of internal and outside stakeholders, development of new approaches, etc.
Bonus Point - Leader: The company is a clear leader in the industry based on what others are doing. In some industries, the leader may actually be rated low (like a 5 or 6), but because the industry as a whole is not doing much, they benefit in the scale by doing more. (This is not actually a whole point, but, more like an asterisk that will be taken into account.)
How The Scale Is Used: For every category on the template (which you will see next), the researcher (that would be me) looks at information available from the company and other resources and tries to get an overall opinion on what the company says its doing, what it is trying to do and what others say it is doing.
That is definitely one of the drawbacks of this process: that I decide what the rating should be based on my opinion. However, because of the type of information that is evaluated (mostly quantitative), and that there are no standards for what companies do on these types of issues, subjective decision-making is part of the process. It would be much easier if there was some standard that all companies had to subscribe to and report on. This is often the case with pollution information (although we all know that a company, if it really wanted to, can find a way to get around that. Erin Borkovich, anyone?)
Anyway, an important part of making the rating decision is also understanding what other companies in the same industry are doing. This is important for several reasons. First, it might be difficult to get a full picture of the trade-offs that a company must make to implement a particular policy unless you have a lot of internal information on the issue. However, if you see many companies in the same industry implementing a particular policy, then you can assume that is it possible for the company in question to do so as well. For instance, if many companies in the same industry decide that they want to be open about what countries most of their clothing is manufactured in and one company is not sharing that information, then that will stand out. Also, looking at many companies in the same industry is helpful for getting a baseline on what can be done across the board. For the brand-name apparel sector, it is amazing to see that some companies are doing a lot, some are starting to do a little and others do very little or don't do anything at all.
In any case, the "scale of involvement" is a scale that was developed by one Dova Wilson, a member of my class group at GWU.
It was designed as a way to evaluate a company's commitment to corporate social responsibility through its policies, programs and key performance indicators (KPIs). Since much of the information available on a company's CSR activities is qualitative in nature (meaning that it can't really be measured easily), the "Dova Scale" (as we like to call it) attempts to quantify (with numbers) mostly qualitative data. The scale is used along with a template (which I will share in the next entry). I have adapted the template we developed in class to be more relevant to the branded apparel companies I will be profiling.
Definitions (we will use child labor as an example to make it easier to understand):
1- No Visible Involvement: This rating can be applied when a company shows no mention of a particular issue. (For instance, has no official policy on child labor.)
2 - Lip Action: The company may have a statement on child labor, but no specifics. It could be something like, "X company cares deeply about child labor", but with no specifics on anything else. This could also be the rating when a company says that it does something, but a third party (NGO, government, labor group) shows proof that this is not true.
3 - Compliance: The company may make a blanket statement that they "comply with all necessary regulations" relating to child labor in the countries where they operate, but with no information on how they track this or what the regulations are.
4 - Policy & Procedures: The company has a public policy on child labor that talks about how it would handle a situation of child labor (for example, the company would immediately terminate a contract with a supplier or factory that was found to have child labor). This rating is given when the company, although having a policy and procedure, does not actively investigate and monitor the issue.
5 - Internal Audit and Measurement: The company investigates, monitors and reports on issues of child labor. This could mean that the company has hired a third-party verifier to investigate its factories or has its own compliance officers who work with their suppliers. The company may or may not report on its findings, but states that it has a way of doing so.
6 - Active Steps: This rating would be given to a company when it is apparent that the company is proactive about child labor. For instance, one company that I have looked at partners with NGOs to provide education opportunities for children near the factories where the company manufactures its clothes, so the children have other options besides working.
7 - Creativity: This rating is given to a company that definitely meets the 6th rating, but also tries to solve issues creatively or using its market position, partners with unique organizations, or, otherwise, takes active steps in ways that are different than the industry norm.
8 - Continual Improvement: The company strives, year after year, to do better than it did the year before to address challenges, solve problems and be proactive about issues that affect its business and industry. Many companies that receive this rating have social responsibility as part of their mission statements. Their senior officers are vocal about the company's actions. The companies participate in external evaluations of their activities for research purposes. There is a high level of transparency, involvement of internal and outside stakeholders, development of new approaches, etc.
Bonus Point - Leader: The company is a clear leader in the industry based on what others are doing. In some industries, the leader may actually be rated low (like a 5 or 6), but because the industry as a whole is not doing much, they benefit in the scale by doing more. (This is not actually a whole point, but, more like an asterisk that will be taken into account.)
How The Scale Is Used: For every category on the template (which you will see next), the researcher (that would be me) looks at information available from the company and other resources and tries to get an overall opinion on what the company says its doing, what it is trying to do and what others say it is doing.
That is definitely one of the drawbacks of this process: that I decide what the rating should be based on my opinion. However, because of the type of information that is evaluated (mostly quantitative), and that there are no standards for what companies do on these types of issues, subjective decision-making is part of the process. It would be much easier if there was some standard that all companies had to subscribe to and report on. This is often the case with pollution information (although we all know that a company, if it really wanted to, can find a way to get around that. Erin Borkovich, anyone?)
Anyway, an important part of making the rating decision is also understanding what other companies in the same industry are doing. This is important for several reasons. First, it might be difficult to get a full picture of the trade-offs that a company must make to implement a particular policy unless you have a lot of internal information on the issue. However, if you see many companies in the same industry implementing a particular policy, then you can assume that is it possible for the company in question to do so as well. For instance, if many companies in the same industry decide that they want to be open about what countries most of their clothing is manufactured in and one company is not sharing that information, then that will stand out. Also, looking at many companies in the same industry is helpful for getting a baseline on what can be done across the board. For the brand-name apparel sector, it is amazing to see that some companies are doing a lot, some are starting to do a little and others do very little or don't do anything at all.
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