SFI0080

Written evidence submitted by ASOS

Executive Summary

• ASOS was founded in the UK 18 years ago and has since become a top fashion destination for 20-somethings with 18.4 million customers around the world.

• The evidence provided below characterises the values and activities of Fashion With Integrity (FWI), a four pillar programme that drives our approach to everything we do, while serving as the model for how we work with others to transform the impact of fashion on people and the environment.

• ASOS welcomes the opportunity to contribute to the Committee’s inquiry and hopes our evidence supports efforts to implement positive change throughout our industry.

About Fashion With Integrity (FWI)

The four FWI pillars that feed into our core business strategy, and how we ask every ASOSer to do their job, are:

• Our products: Respecting people and the planet with products that our customers can trust
• Our business: Achieving growth in a way that adds social value and prevents or minimises environmental impacts now, and in the future
• Our customers: Giving young people the confidence to be whoever they want to be
• Our community: Investing time and resource to make a real difference in our communities

Alongside daily department-relevant work, we have seven governance groups in place to both remove barriers to progress and find opportunities for taking FWI even further. These groups are led by executive directors and supported by senior leaders and subject-matter experts who help to ensure FWI is embedded with operational plans and woven into the fabric of ASOS.

Scope of submission

As a business, we stock a mix of ASOS and third-party brand products. On the latter, we have a dedicated third-party brand engagement workstream which promotes best practice on ethical trade and sustainability among our third-party brands. There are three main aims to this programme:

• To learn from and collaborate with established brand partners with strong ethical trade and sustainability programmes
• To influence those brands that are in the early stages of their journey on ethical trade and sustainability
• To support smaller, new brands in building their capacity for ethical trade and sustainability as they grow.

These third-party brands are outside the scope of this submission, which is limited to the ASOS-branded products for which we hold responsibility for sourcing. ASOS brands include ASOS Design, ASOS White, and ASOS 4505, alongside ASOS-owned venture brands such as Collusion, and account for circa 40% of our product mix.

QUESTION 1.A: How do you currently ensure that all the garment workers producing the clothes you sell are paid at least the minimum wage?

1.       We source our products from 175 suppliers, who between them use 944 factories (tier 1, 2 and 3; listed here) and they have approximately 174,000 workers in total. Our factory list has been published since 2017 and is updated every month.

2.       We have ethical trade teams and third-party auditors working on the ground in our main sourcing regions of China, Eastern Europe, India, Turkey and the UK, and in other countries where our factories are located. 

3.       These suppliers are governed by our contractually-agreed ASOS Supplier Ethical Code, which is based on the Ethical Trading Initiative (ETI) Base Code and International Labour Organization Fundamental Conventions.

4.       To ensure compliance with this code, we carry out regular visits and unannounced audits of all of our tier one factories. We completed 426 of these in the last year.

5.       The ASOS Supplier Ethical Code includes stipulations that employee pay should meet or exceed national legal or industry benchmark standards and should be at least sufficient to meet basic needs and provide discretionary income.

6.       The code also covers all statutory entitlements and benefits, such as sick pay and pension, as well as overtime, ensuring that this is offered fairly, paid and managed in accordance with the employment contract and complies with legislation. It also requires suppliers to ensure that all subcontractors (tier 2 and 3 factories) engaged by the supplier follow the same code.

7.       As outlined above, we carry out regular unannounced audits to ensure our suppliers are following these requirements.

UK-specific initiatives

8.       Our UK auditing system follows a different standard to take account of the differing challenges facing UK production.

9.       We source our products from 42 tier one, two and three factories in the UK.

10.   However, this comes with its own challenges: UK factories can be small and lacking in management systems and knowledge of labour laws, which can lead to poor working conditions. Additionally, informal subcontracting can be commonplace in the UK, making it difficult for brands to identify where products are being produced.

11.   To tackle these issues ASOS became a founding member in 2014 of Fast Forward, a new independent initiative involving other major UK retailers, aimed at addressing UK-specific supply chain issues. Fast Forward developed a new, more financially forensic auditing programme designed to ensure that all suppliers under the programme not only become fully compliant with UK legal requirements but also work towards achieving industry best practice standards.

12.   All of our UK factories have been audited under this programme and we have seen the following successes:

1. 100% of factories with right-to-work checks in place, as per Home Office guidelines.
2. 100% of factories now paying workers’ wages into bank accounts, providing us with a more accurate picture of working hours and wages.
3. An increase in declared weekly working hours and payments at many UK factories.
4. All of our UK factories are now enrolled onto the Fast Forward audit programme, which includes a Modern Slavery assessment.
5. Matured management systems.

13.   Fast Forward allows us to identify risk more effectively than under our previous audit standard. The table below illustrates the improvements we have seen in UK factories since implementation.

14.   Under Fast Forward, the onus is on the supplier to prove compliance against the standards. This is contrast with traditional audit methodology where it is the auditor's responsibility to unearth non-compliances. This means that factories must have robust management systems and HR practices in places to order to allow for verification against each of the standards within the audit.

15.   Fast Forward encourages the member brands within it to collaborate to remediate issues in joint factories. This is through sharing of factory lists through the Fast Forward programme owner.

16.   3 out of 42 of our factories currently have wage issues identified through our Fast Forward audit programme. These relate to statutory entitlements, in particular holiday pay. 

17.   Rather than exiting the relationships outright, we are working with these suppliers to try to improve compliance. There are time-bound improvement plans in place to resolve issues, and only if there is no improvement will we exit the relationships.

18.   Fast Forward includes a whistleblowing hotline that provides a safe and confidential way for workers to report concerns they may have about any wrongdoing in the workplace, to Brands sourcing from those factories. We investigate all complaints, treating them confidentially and deciding on remedial action on a case by case basis.

19.   Many of these calls have been in relation to wage payments (some relating to the same issue), where we have been able to advise the worker of appropriate avenues of action to reclaim funds or we have commissioned a follow up audit (if the site is known) to focus on the issue.

20.   Since September 2014 we have exited three factories where our efforts to deliver improvements have not led to meaningful change in national minimum wage payment:

1. Through a combination of whistleblowing calls and targeted audits we were able to ascertain that one site was systematically underpaying minimum wage. This site was given the opportunity over 6 months to make changes to their business practices, but declined to do so, resulting in an exit.
2. Another site was given a year of support to improve time recording systems to prove compliance with our wage standards, however did not make necessary developments in this area, resulting in an exit.
3. Workers in the third site were unable to verify their working hours against hours recorded on timesheets which had been completed by supervisors. The factory was given support for more than a year, including follow up audits to improve their practices, however no improvements were made and we exited the relationship.

21.   Over the last 18 months, ASOS has been in dialogue with Leicester City Council, the Leicester Local Enterprise Partnership and other government agencies to help support the growth of UK manufacturing. Discussion areas have focused on enforcement and legislation, infrastructure and training. On the training piece, ASOS is also a supporter of Fashion Enter, a Haringey-based factory and training academy that teaches pattern cutting, garment technology and stitching skills.

Working towards a living wage

22.   We have put in place a number of other measures to accelerate the payment of living wages in our international supply chain. We’re one of 21 brands participating in ACT (Action, Collaboration and Transformation), an initiative between international brands and retailers, manufacturers and trade unions to address the issue of living wages in the textile and garment supply chain.

23.   ACT aims to improve wages in the industry by establishing industry collective bargaining in key garment and textile sourcing countries, supported by world-class manufacturing standards and responsible purchasing practices.

24.   As an ACT member brand, we have signed a Memorandum of Understanding with IndustriALL Global Union that explicitly identifies the development of industry bargaining in garment producing countries as essential to achieving living wage, and we’re working to improve wages in key garment sourcing countries through sectoral collective bargaining.

25.   As a group, ACT member brands have developed a set of Enabling Principles which include addressing living wages through better purchasing practices, improving skills and productivity, freedom of association and collective bargaining, and positively influencing governments.

26.   We were also the first e-commerce brand to sign a Global Framework Agreement with IndustriALL Global Union, which represents 50 million workers in 140 countries campaigning for trade union rights and better working conditions around the world.

27.   The Global Framework Agreement sets out to respect and protect workers employed in our supply chain, and has been negotiated at the global level between IndustriALL and ASOS. It represents a strong framework for implementing freedom of association and other labour rights in our supply chain, regardless of existing standards of a particular country. The overall aim of this is to better enable workers on the ground to collectively lobby for improvements to their own working conditions.

QUESTION 1.B: Do you allow your buyers to order garments from UK suppliers at any price, or do you educate them on the cost of UK labour and material so that they are aware when a price is ‘too cheap’ to be made without breaking employment law?

28.   No, we don’t allow our buyers to order garments from UK suppliers at any price.

29.   Our Buying and Merchandising teams receive internal training on purchasing practices and use the framework of the ACT initiative on living wages to refine and improve our approach.

30.   Through Fast Forward, our UK supplier base is thoroughly audited and we have seen higher payments to employees and better compliance standards since this was put in place. There is still some way to go in this space but through improved auditing processes we hope to have a lasting positive impact on suppliers within the UK, enabling us to make purchasing decisions with full confidence that employment law is followed.

31.   To help ensure we understand production costs, we’re using a piece of software with our key UK suppliers that tracks and traces the garment through the manufacturing process. The software also populates the time taken to complete each process in the garment construction and gives a full breakdown of the total time taken to produce each garment. Using this information, we can confidently calculate the labour element of the cost price and ensure we are paying the right amount for each garment. 

32.   In addition, the software works as an incentive for performance-related pay. In the sites that have used this system, the suppliers are on average seeing a 35% increase in productivity, enabling the workforce to earn more money per hour.

QUESTION 2: What is the average life-cycle of the garments you sell? What design and testing processes do you undertake to determine the quality of new products?

33.   The average lifespans of our garments change depending on the product and its level of use.

34.   Our products are designed to last and to meet the common quality performance standards adopted by most retailers. It is standard practice to test materials and garments at various stages of the production cycle to ensure they are going to meet our requirements against a number of measures for durability, including tests that indicate how a product responds to the expected wash and wear in use.

35.   We know from the testing we carry out with independent laboratories, and from customer feedback, that we are achieving a good standard of quality. Through our customer returns process we have an active system of continuously assessing reasons for returns, feeding that data back into our product design and development process for improvement.

36.   We believe it makes good business sense to produce good quality garments to avoid the cost of returns linked to product quality dissatisfaction and loss of future sales linked to customer dissatisfaction and brand loyalty.

37.   The SAC (Sustainable Apparel Coalition) Brand & Retailer benchmark helps us to see where we can improve. Under the SCAP program, we’ve done some work on understanding durability including on the use of fusible thread in hems.

38.   We are using our considerable social media reach of 21.4 million people to educate our customers on ways of extending the lifecycle of the garment they’ve purchased from us. Recent examples include ways of caring for jeans and ‘how to’ videos on repair.

QUESTION 3: What steps are you taking to reduce the environmental and social impact of the products you sell? Do you audit this? How do you measure progress towards reducing the environmental impact of the products you sell?

Reducing social impact

39.   We have experts based in the UK and in key sourcing regions, who are responsible for checking and monitoring the social impacts of producing the products we sell. Alongside day-to-day monitoring of supply chain through factory audits, the department focus is on five key areas:

1. Transparency

Supply chain visibility remains a priority for ASOS in order to ensure our workers are protected and respected. We share our list of factories on our website to encourage greater openness, and the list is updated monthly.

1. We also recognise the importance of supply chain mapping and due diligence to uphold human rights and prevent undeclared subcontracting. Therefore, we are always striving to develop ways to ensure the visibility of our supply chain and traceability of our products.
2. We have mapped tiers one, two and three of our supply chain, which we publish through our interactive supply chain map, which is updated every two months and shared with IndustriALL Global Union, as part of the Global Framework Agreement we signed in October 2017.
3. We are working to trace our products back to raw material source.

2. Purchasing practices
1. We understand that we have a direct impact on our suppliers and are committed to improve our purchasing practices in order to limit any negative outcomes from our commercial decisions.
2. In signing a Memorandum of Understanding with IndustriALL Global Union, ASOS as an ACT member brand has committed to ensuring that our purchasing practices facilitate the payment of a living wage.
3. We conducted an independent review of our purchasing practices within the framework of ACT as well as our own focused research through surveys and interviews with buying and merchandising teams, giving us a benchmark from which to refine and improve our approach. We have since delivered training on purchasing practices to our senior Buying and Merchandising teams.

3. Freedom of Association
1. A worker’s right to organise and bargain collectively and gender equality are essential steps towards enjoyment of other labour rights, but we recognise the barriers to freedom of association and gender equality that exist in our sourcing regions. We took a fundamental step towards overcoming these barriers by signing a Global Framework Agreement (GFA) with IndustriALL Global Union.
2. A GFA enables us to strengthen our approach to protecting the right to freedom of association and collective bargaining, understand better the challenges faced by workers, proactively prevent violations, and contribute in the solution of any problems before they’re escalated.
3. Our GFA implementation plan covers three key areas; ensuring access to remedy, empowering our workers and creating an enabling environment.

4. Living Wage
1. All workers in our supply chain are entitled to a wage that meets their basic needs.
2. Through our active participation in the ACT initiative on living wage, as detailed above, we’re working to improve wages in key garment sourcing countries through sectoral collective bargaining. 
3. We achieved ‘maturing’ status under the assessment process with Platform for Living Wage Financials. PLWF is an alliance of eight Dutch financial institutions that encourage and monitor investee companies to address the non-payment of living wage in global garment supply chains. They assess investee companies against a robust living wage assessment methodology and then place them in one of four categories; ‘embryonic’, ‘developing’, ‘maturing’, and ‘leading’. In achieving ‘maturing’ status, we have been acknowledged for recognising the payment of a living wage as a salient issue, putting in place formal processes to address it, and displaying evidence of improvement in high risk areas.

5. Modern Slavery
1. We’re committed to ensuring there are no forms of modern slavery or child labour in our supply chain or business operations.
2. We have partnered with Anti-Slavery International, who act as our ‘critical friend’, ensuring we are continuously reviewing and improving our practices.
3. We’ve participated in meetings with Bangladeshi and Mauritian governments, conducted modern slavery training with four Mauritian suppliers, held a multi-stakeholder event to jointly address issues facing migrant workers in Mauritius, and established an Ethical Trading Initiative working group to agree on a common framework for improving the protection of migrant workers in Mauritius. 
4. We work with our suppliers, key stakeholders, industry colleagues, and other brands on programmes to address and reduce modern slavery risks in our supply chain. For example, we engage with UK and international government, and in March 2018 we held an event at the House of Lords in order to raise awareness and educate other brands on what needs to be done to achieve sustainable change across their supply chains.
5. We continue to conduct proactive risk assessment of modern slavery and child labour across our supply chain and business operations and prioritise collaboration as a means to create sustainable, long-lasting change.
6. We have published two comprehensive modern slavery statements in line with UK legislation, which were well-received for their transparency. See our latest Modern Slavery Statement for further details about our efforts in this area.

Reducing environmental impact

40.   With regards to auditing, as signatories to the Sustainable Clothing Action Plan, ASOS utilises the SCAP Metrics tool to measure and track the tonnage of clothing we put onto the market, and the associated water, carbon and waste impacts of those products. Within our ASOS brand products, we have also reduced our clothing water footprint by 5% and clothing carbon footprint by 12%, from a 2012 baseline.

41.   34% of all fibres used in ASOS Brands currently come from sustainable sources, including 80% sustainable cotton through the Better Cotton Initiative and others.

42.   We’ve committed to 60% of raw materials for ASOS brands to be sustainably sourced by 2020 and our goal is to work towards 100% by 2025. 100% of our ASOS Design cotton-based jeans will be made from sustainable cotton from Jan 2019.

43.   As members of the Sustainable Apparel Coalition we collaborate in a number of ways to assess and prioritise our supply chain impacts:

1. The HIGG Materials Sustainability Index informs our work to select and source more sustainable materials, based on sound life cycle analysis. We have a number of targets on switching from conventional raw materials to more sustainably-sourced alternatives, and this year we have started to rationalise the list of materials we use to exclude those we cannot see a way to improve. For example, we cut our use of animal materials considerably, in part due to their impact on the environment as well as animal welfare concerns, and we have plans to phase out acrylic fibre as it cannot be recycled with today's technology.
2. The HIGG Facilities Environmental Module is used to benchmark the impact of our supply chain. Next year all of our clothing and footwear manufacturing sites will complete this benchmarking exercise, which we then apply data assurance processes to. The data from this tool helps us identify specific, site level, environmental risks and partner with suppliers to address them, in a consistent and collaborative manner with others in the sector. Ultimately this work informs our sourcing strategy so that we build business with the most responsible suppliers.

44.   For specific sustainable initiatives we apply independent tools and frameworks for verification e.g. the Better Cotton Initiative, GOTS (Organic), Global recycle standard, each of which are supported by their own 3rd party audit and certification routes. These initiatives enable consumer confidence in any sustainable product claims we make and assist us with supply chain transparency.

45.   We have also launched training on circular design for our design teams, in collaboration with the London College of Fashion’s Centre for Sustainable Fashion. Circular design is critical in moving us away from a “take, make, dispose” economy into something more sustainable. As part of this approach we plan to have trained our entire design and product development teams by 2020, with a plan to make this approach companywide by 2025. Designing products for a circular economy will mean they are made with minimal waste and recyclability in mind from the start.

46.   We have recently joined the ZDHC (Zero Discharge of Hazardous Chemicals) Roadmap to Zero Programme. This aims to deliver widespread implementation of sustainable chemistry, by driving innovations and best practices in textile, apparel and footwear industries to protect consumers, workers and the environment.

QUESTION 4: What recycled materials, if any, do you use in your products? What could the Government do to encourage greater use of recycled materials in clothing production?

47.   We are developing our roadmap on adopting recycled materials and, as a signatory to Global Fashion Agenda’s 2020 Circular Fashion Commitment, will publish our targets and progress in this area before 2020.

48.   We have been building capacity on recycled materials with good uptake of recycled cotton in our denim and recycled nylon and polyester in our swimwear.

49.   We’re increasing the amount of recycled cotton we use in our denim ranges and we currently stock many styles that contain 18% post-consumer denim.

50.   We face some challenges in obtaining the right quality and availability of recycled materials to make our products, and as such are investing resource in fabric sourcing capability. This an area of research and development for the sector.

51.   As members of the Ellen MacArthur Circular Fibres Initiative we actively participate in collaborative discussion focused on understanding and addressing the barriers to closing the loop on textiles. We also participate in the Textile Exchange Recycled Polyester Working Group, addressing the technical challenges in re-manufacturing of polyester.

52.   To encourage greater use of recycled materials in clothing production, one measure the Government could take is to stimulate the fibre recycling industry within the UK, rather than exporting this waste.

1. If fibre recycling facilities existed in the UK, it could foster longer term UK textile manufacturing such that products could be produced and recycled without leaving the country.
2. The government could also bring local waste collection and processing through local authorities to a consistent standard, facilitating recycling behavior for consumers and enabling retailers to give clear and uniform advice to consumers.
3. Kerbside collection of waste clothing and fibres.

QUESTION 5: ls your company taking action to reduce the risk of synthetic microfibres being washed into the ocean? lf so, what actions have you taken?

53.   The scientific community is not clear if the pollution risk is limited to just synthetic fibres or also extends to natural fibres, particularly when considering the presence of dyes and processing chemicals, hence the need for further research.

54.   We are members of the Microfibre Consortium led by the European Outdoor Group, Leeds University and Biov8tion. As members of this group we are supporting research and the goal of single industry guidance, which we will then adopt and share with our portfolio of suppliers and brands. The Microfibre Consortium projects will bring:

1. A reliable and robust methodology for testing microfibre release
2. An understanding of how recycled synthetic fibres and processes impact shedding rates
3. An understanding of how colouration methods impact shedding rates, and how we can engineer reductions in shedding  

55.   We are members of Ellen MacArthur Foundation ‘Circular Fibres Initiative’ Microfibres workstream, which is coordinating an assessment of current efforts across the sector with hopes to align strong industry action by 2020.

56.   We are actively taking the following actions with our customers to reduce microfibre shedding in line with our current grasp of the situation:

1. Advising customers on our product pages to wash at low temperatures, use full loads, and only wash when it’s needed. We are currently developing plans to communicate recommended aftercare tips to customers, including for microfibres, with the aim of reducing the impact this has on the environment.
2. Helping customers to keep their clothes out of landfill – one example is a project with a logistics provider in London where customers can drop off their used clothes for reuse and recycling.
3. We also have a public commitment to facilitate customer recycling for customers the UK and Germany by 2020. We’ve recently trialled such a recycling system internally to ASOS staff to allow us to assess how best to roll this out to customers. Following this we’ll work to roll out customer education around garment end of life care.

QUESTION 6: Are you taking any action to encourage reuse, repair and/or recycling of clothing? What do you recommend your customers do to dispose of your products responsibly?

57.   In line with our commitment under Global Fashion Agenda, we are ramping up our customer dialogue on garment care, repair and recycle. We have in the past released customer ‘how to’ videos on repair (e.g. How to replace a zip), and in the pipeline we have plans to release a series of engaging content pieces around care, repair and recycle as per our commitment under the Global Fashion Agenda.

58.   When we launch our customer take-back initiative in the UK and Germany (as detailed in paragraph 63) it will be supported with marketing activity to educate and influence customer behavior, particularly focusing on keeping clothing out of landfill.

59.   On re-use, our ASOS Marketplace site retails vintage clothing from small brands and boutiques. We sell 112 metric tonnes of vintage clothing through marketplace per annum.

QUESTION 7: Do you incinerate unsold or returned stock?

60.   We follow the waste hierarchy of reduce, reuse and recycle. Items returned to us by customers will always be resold on ASOS if they meet the criteria set by our returns team (reduce).  For items we can’t salvage, we then work with commercial partners who will either resell stock (reuse) or recycle it. We also have various initiatives to donate unused pieces to charity and regularly run staff sample sales where a proportion of money raised is given to charity.

QUESTION 8: Do you use supply chain contracts which provide for rebate payments from manufacturers to your company?

61.   No, we do not.

November 2018