SUMMARY REPORT Q1/2015

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1 SUMMARY REPORT Q1/2015

2 IDH, the Sustainable Trade Initiative (IDH), together with Dell, HP, Philips, Apple, Microsoft, ELEVATE, ERI and civil society organizations, has developed a program to improve the working conditions and environmental impact of over 75 electronics factories in China, reaching over 200,000 workers. A wide variety of training on labor, health & safety and environmental performance is being offered, however the innovative focus of the IDH Electronics Program is the development of effective worker-management dialogue to strengthen the continuous improvement muscle of local manufacturers, as a prerequisite to addressing the root causes of social and environmental performance issues. ELEVATE believes sustained, impactful improvement in social and environmental performance requires sincerity of intent and a responsible balance between maximizing financial return and meeting supplier responsibility requirements. We call this Business Driven Sustainability. ELEVATE s mission is to help our clients design and implement customized programs that provide complete insight into risk and improve supply chain social, environmental and business performance. Within the IDH Electronics Program ELEVATE is responsible for the executive facilitation of the program as well as the implementation of the non-dialogue (business performance) curriculum. The Economic Rights Institute (ERI) is a non-profit organization, registered in Hong Kong, with a mission to support alliances of stakeholders to actualize economic development that respects the rights of all. Within the IDH Electronics Program, ERI is responsible for designing the methodology to promote worker-management (employer employee) dialogue, for support to service providers who implement this methodology and for appraisals of the evolution of dialogue and where this promotes wider enterprise improvements. 2

3 Index of Contents: Supplier uptake Comments on program progress (Q1 15) Progress status overview on supplier implementation Work-plan completion vs work-plan agreed timelines by supplier Program trend analysis KPI s Appendix 1: Worker satisfaction index Appendix 2: Worker management dialogue maturity index 3

4 Supplier Uptake Overview of Supplier On-boarding Status by Brands Total 30/6/2014 Dell HP Philips Apple Microsoft Regular Program Fast Track Program Geographic Location by Brands Program Dell HP Philips Apple Microsoft TOTAL Guangdong Area Shanghai Area Other Number of Fast Track Program suppliers is in blue lettering 4

5 Total Factories on board (by Dec. 31, 2014) Geographic location, total factories (by Dec. 31, 2014) Total: 53 Total: Dell HP Philips Apple Microsoft South Shanghai Area Other Comment on Progress During Q1 15 IDH completed the MTA (mid-term assessment) reporting and feedback with the sample of 13 factories. This involved on site surveys, interviews and analysis. This was a major effort for the program facilitators, service providers and the factories themselves. In addition the program team worked on the feedback collected at the brand / supplier conference (Dec 14) and prepare for the later stages of the program (legacy package). It should also be noted that due to business changes, one of the factories in the program has dropped out, reducing the number of active factories to 53. Implementation focus During Q1 the program team continued to focus on implementation for both worker-management dialogue and non-dialogue (capacity building) training. The IDH program team is focused on factories in need of support to complete the training implementation by July Most factories in the WMD training have now completed, or will complete CC session 6 (out of 7) soon. KPI trend analysis (1) The peak average program turnover rate in 2015, at 19% worker turnover, shows a strong reduction compared to previous years. The worker turnover trend in Q1 15 shows the traditional increase in line with seasonal averages during Q1 (celebrating CNY). However, the peak average program turnover rate in 2015stops at 19% worker turnover, a significant reduction compared to 26% and 29% in Q1 of 2014 and 2013 respectively. (2) Rework rates showed a corresponding increase in Q1, which is likely to be related to the increased worker turnover, noted above. This strong correlation can also be seen during previous seasonal peaks in worker turnover. (3) Average salaries and working hours reduced in Q4, in line with seasonal holidays. Key Focus Points: 1) Implementation must be completed by July 2015, the IDH program team is focused on this with the factories and brands, to ensure training activities are completed. 2) As observed in the MTA, KPI reporting is a key element of the program. It s an important factor for the factories and brands to focus on collecting and reporting the monthly KPI data. The factories not reporting KPI s can be seen in the chart below. 5

6 Progress Status Summary of the status of the active suppliers in the program and the WMD service providers they are working with. No. By Brand Status EPA Implementation Starting Point Work Plan KPI Collection Involving WMD SPs 1 D1 2 D2 3 D3 4 D4 5 D5 6 D6 7 D7 8 D9 9 D10 10 D11 11 D12 12 H1 13 H2 14 H4 15 H5 16 H8 17 H9 18 H10 19 P3 On Track Completed Jan On Track Submitted by On Track Completed Jan On Track Submitted by On Track Completed Jan On Track NOT SUBMITTED On Track Completed Jan On Track Submitted by On Track Completed Jan On Track Submitted by Jul On Track Completed Mar On Track Submitted by On Track Completed Oct On Track NOT SUBMITTED Move to new location Re-doing EPA on new location May 2014 On Track - BLC On Track Completed Jan On Track NOT SUBMITTED On Track Completed Jan On Track Submitted by Feb On Track Completed Jan 2014 On Track Submitted by On Track Completed Jan On Track Submitted by On Track Completed Jan On Track Submitted by On Track Completed Sep On tract Submitted by On Track Completed Jun On track Submitted by On Track Completed Oct On track Submitted by On Track Completed Jan On track Submitted by On Track Completed Jan 2014 On track Submitted by Jun Re-joined Completed Aug On Track Submitted by, TIMELINE TIME LINE CLSN, TIMELINE TIMELINE LESN, TIMELINE TIMELINE TIMELINE Taos Taos Taos TBD TAOS 6

7 20 P5 21 P6 22 P7 23 P8 24 P9 25 P10 26 P11 27 P12 28 P13 29 P14 30 P15 31 P16 On Track Completed Jan On Track Submitted by Oct On Track Completed Mar On Track Submitted by Nov On Track Completed Mar On Track Not Submitted On Track Completed Mar On Track Submitted by Feb On Track Completed Sep On Track Submitted by On Track Completed Oct On Track Submitted by On Track Completed Oct On Track Submitted by Feb On Track Completed Oct On Track Submitted by Nov On Track Completed Oct On Track Submitted by Feb On Track Completed Nov On Track Not Submitted BLC On Track Completed Oct On Track Submitted by LESN SUSA On Track Completed Oct On Track Not Submitted TAOS E&T BLC 32 P18 33 PFT19 34 PFT20 35 PFT21 36 PFT22 37 PFT23 38 PFT24 39 PFT25 40 A1 41 A2 On Track Completed Mar On Track Submitted by On Track Completed May 2014 On Track Submitted by On Track Completed May 2014 On Track Submitted by On Track Completed May 2014 On Track Submitted by On Track Completed Jun On Track Submitted by On Track Completed Jun On Track Submitted by Dec 2014 On Track Completed Jun On Track Submitted by Dec 2014 On Track Completed Jun On Track Submitted by Dec 2014 On Track Completed Mar On Track Submitted by On Track Completed Mar On Track Submitted by E&T Taos Hengyi Hengyi LESN LESN 7

8 42 A3 43 A4 44 A5 45 A6 46 A7 47 A9 48 A10 49 A11 50 A12 On Track Completed Mar On Track Submitted by On Track Completed Mar On Track Submitted by On Track Completed Aug On Track Submitted by Feb On Track Completed Oct On Track Submitted by On Track Completed Oct On Track Submitted by On track Completed Oct On Track Submitted by On Track Completed Jan On Track Submitted by Dec On Track Completed Jan On Track Submitted by CLSN LESN TAOS Taos On Track Completed Jan On Track Not submitted E&T BLC 51 A13 52 N2 53 N3 On Track Completed Mar On Track Submitted by Feb On Track Completed Completed On Track Submitted by On Track Completed Completed On Track Submitted by BLC Taos 8

9 Microsof t Apple Dell HP Philips Program Status Overview: Work Plan Completion VS Work Plan Summary showing the progress of each supplier on their WMD and Non-Dialogue WP (work plan) vs the agreed project timeline from the EPA (Entry Point Assessment). 0% 20% 40% 60% 80% 100% P3 P5 P6 P7 P8 P9 P10 P11 P12 P13 P14 P15 P16 P18 PFT19 PFT20 PFT21 PFT22 PFT23 PFT24 PFT25 H1 H2 H4 H5 H8 H9 H10 D1 D2 D3 D4 D5 D6 D7 D9 D10 D11 D12 A1 A2 A3 A4 A5 A6 A7 A9 A10 A11 A12 A13 N1 N2 N3 WP WMD Completeness Non-D Completeness 9

10 Trend Analysis - KPI s measuring worker and productivity data to indirectly link social factors with business performance. Worker Turnover (%) The worker turnover shows an increase in Q1, in line with seasonal trends (CNY), however, the peak turnover in Q1 at 19% is significantly reduced compared to Q1 14 (26%) and 30% in Rework Rate (%) Rework rates show a significant increase in line with CNY, but at a reduced rate vs CNY in 2013 and

11 Average Monthly Net Wages (RMB) Program average wages reduced in Feb, in line with seasonal trends, and followed the reduction in working hours (below). The program average is slightly above China average. Average Weekly Working Hour (Hours) Working hours reduced in Q1, in line with seasonal trends for CNY holidays in previous years, but the program trend is increasing marginally over the program. 11

12 Program average and leader KPI data points KEY PERFORMANCE INDICATORS Comparative Analysis (LATEST QUARTER) *Compared to last quarter data in bracket Program Factory Name Average Leader Worker-Management Dialogue WMD Benchmarks (Non-rep comm systems) in EPA WMD Benchmarks (Rep systems) in EPA Worker Satisfaction Worker Satisfaction Indicator from EPA Working Condition # of work-related injuries # of days lost due to work-related injuries Average weekly working hours in the calendar month Average # of rest days Total monthly working hours in the calendar month 550, N/A % of workers working more than 60h in the week Average monthly net wage (RMB) 2, , Average monthly gross wage (RMB) 3, , Ratio of OT Premium to Gross Wages N/A 1st quartile of monthly net wage (RMB) 2, , nd quartile of monthly net wage (RMB) 2, , st quartile of monthly gross wage (RMB) 2, , nd quartile of monthly gross wage (RMB) 3, , Environmental Condition Kilowatts used per product unit Business Impact Unit Produced Per Hour (UPPH) Rework Rate (%) Turnover (%)

13 Appendix 1 Worker Satisfaction Index Comparison by Supplier: Measured at Entry Point Assessment & repeated at Exit Point Assessment (no suppliers completed Exit Point Assessment yet). Directly measuring program impact through 6 dimensions on worker satisfaction before & after. (Remark: 1 means unsatisfied/not living up to expectations, and 10 means satisfied/living up to expectations. Overall scale is generated by the 6 dimensions score in even weight) Working Relationships Wage Fairness and Transparency Working Hours Facilities Health and Safety Career/Personal Development Factory Name Overall Scale Working Relationships Wage Fairness and Transparency Working Hours Facilities Health and Safety Career/Person al Development Above Average Below Average (1-10) (1-10) (1-10) (1-10) (1-10) (1-10) (1-10) A A A A A A A A A A A A A D D D D D

14 19 D D D D D H H H H H H H H H N N N P P P P P P P P P P P P P P P P

15 Appendix 2 Worker Management Dialogue Maturity Index Comparison by Supplier: Measured at Entry Point Assessment & repeated at Exit Point Assessment (no suppliers completed Exit Point Assessment yet). Directly measuring program impact on WMD before & after by covering below criteria: Non-representative communication systems System & roles Rep structures Depth of worker rep role Representation & participation Selection of employee reps Employee reps & employees Scope of discussion Resources Time Funding Peer network (Remark: 1 means no functioning systems/ no resources available; 10 means well functioning systems/ required sources available. The overall score of Rep. system is generated by 8 KPIs divided in 3 areas weighing 25% (system & roles), 37,5% (representation & participation) and 37,5%(resources)) Supplier/ Factory Name Above Average Below Average Non-Rep comm systems Overall (1~10) System & roles (1~10) Representa tion & participa tion (1~10) Rep systems Resources (1~10) Overall (1~10) A A A A A A A A A A A

16 12 A A D D D D D D D H H H H H N N N P P P P P P P P P P P P P P P

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