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LOREAL Social audits program Suppliers & Subcontractors

EXTERNAL INFORMATION KIT

Why Such a Program ?


LOral has been a signatory of the United Nations Global Compact since June 2003 and is committed to a set of core values in the areas of human rights, labour standards, the environment and anti-corruption as set out in the Global Compacts ten principles.

Social audits program


LORAL has decided to reinforce the social audit program in order to ensure compliance with the LORALs General Terms of Purchase and Payment, ILO conventions and local laws. LORAL is reinforcing its 2006 action plan: Internal social audits : plants and distribution centers External social audits : our suppliers and subcontractors - all sub-contractors : wherever located - packaging components, raw materials, POS & promotional items suppliers for factories located in countries at risks The social audits program will be realized by a third part auditing body Intertek.

Third part auditing body : Intertek


Global quality control service provider with 15000

employees in 110 countries and 309 laboratories

15'000 audits per year in more than 100 countries Global Network of more than 300 qualified auditors close to most of the main industrial areas Professionals in terms of social and environmental responsibility Already working in this area with many international Groups www.intertek.com

What is a Social Audit ?


The social audit will cover the following areas:
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child labor forced labor health and safety freedom of association non-discrimination disciplinary practices sexual and moral harassment pay working time relations with sub-contractors and suppliers

The auditors will check the compliance with both the

LOREAL General terms and conditions and with the ILO conventions and local laws

Audit Scope & Texts of reference


Themes Child Labor Principles listed in our GTP ILO Conventions 138 et 182 + specific requirement from LOral child = under the age of 16 + laws and regulations of the country ILO Conventions 105 et 29, + laws and regulations of the country Laws and regulations of the country

Forced and Prisoner Labor Health and Security

Freedom of Association

ILO Conventions 87 et 98 + laws and regulations of the country ILO Conventions 100 et 111 + laws and regulations of the country

Equality, Non discrimination

Disciplinary practices, harassment and abuse, hours of work, wages and primes, sub-contractor.

Laws and regulations of the country

Possible Audit Results


Final Social Audit Result Zero tolerance Child labor < 16 years/ Concealed, forced, prison, dangerous labor Needs Major Improvement Major and recurrent issues Needs Improvement Isolated Problem Actions Alert sent to LOREAL Headquarters Interruption of business relationship with the factory Re-audit within 90 days maximum Follow up audit with a Needs Major Improvements result twice in the same section = Zero Tolerance Periodic re-audit to be planned

Satisfactory Best Practices


Access denied Completely or partially

Periodic re-audit to be planned


Re-audit to be planned as soon as alert received 2nd Access denied = Zero tolerance
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Process Flow
Initiation of Audit Request
Audit Window Audit
Satisfactory Needs Improvement Needs Major Improvement Zero Tolerance

Audit Report
Day + 7

LOral
Sends Audit request to Intertek

Intertek
Provides LOral and site with audit window

SITE MANAGER & INTERTEK


Opening meeting Facility tour Documents review Employee interviews

Intertek

Posts report on the Web Platform

Intertek
Contact Intertek Local Office

Supplier facility
Prepares documentation & available management resource for audit day

LOral
Logs in on the Web Platform to check audit results
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Pre-closing meeting Closing meeting Sign Corrective Action Plan

LORAL

Audit Process
Documentary Review

Opening Meeting With INTERTEK

Facility Tour

Employee Interviews

Closing Meeting LORAL

Pre-Closing Meeting

Opening Meeting
Explain

to the management representatives:

The aim and scope of the audit, The standards and policies against which the facility will be audited, The audit procedure, The agenda of the audit, Learn about the facility, The site Manager, a health and safety manager and a human resources manager should be present at the opening meeting.

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Facility Tour

Verification of the Workplace Conditions, Fire Prevention, Dormitories,


Cleared and Identifiable Alleys Cleanliness, First Aid Fire Prevention Equipment Temperature, Ventilation Lighting, Potable Water Access to safety Exits Accessibility in case of fire Earplugs, Masks Gloves, Protective glasses Safety shoes, Helmets Use of Chemicals Dormitories Toilets etc..

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Documentation Review
A

review and analysis of :

Personnel recruitment file and contract Working Hours recording system for normal/OT hours Payslip records Social Security payment Proof of salary payment Health and safety records & certificates Fire protection records and SOP Health & Safety Management systems Minimum Wages, OT hourly rate Paper/money deposits Salary Payment delay Unauthorized deductions/fines Clarification on normal/OT working hours Rest days, leaves Health & Safety and other local regulations

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Interviewing Employees

Key Elements of the employee interview : Without Management or site representatives Only upon acceptance of the employee itself Confidentiality of the interview and source of information ensured Informal way to ensure efficiency Interview in 1 by 1 (or group) Random Selection of the personnel list, based on facility ratio (Women/Men, Packaging/ admin dept..) Also employees identified during the facility tour

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Pre Closing Meeting


A

meeting between auditors to :

Clarify and cross check information & issues found Clarify and Debate among themselves if necessary Write down the Non conformities in the Corrective Action Plan Quote the Local laws to address the findings

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Closing Meeting
A

meeting with the management representatives to: Present the Best Practices /Observations/ Non Conformities Clarify and Debate necessary issues Explain and find an agreement on the Corrective Action Plan A copy of the Corrective Action Plan is provided to the management representatives at the end of the audit

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Reporting
The

report given to the requestor is made of:

A photo report (whenever possible) on main non conformities & best practices,
The audit report itself with details of the findings, objective evidence and details of local laws if applicable A copy of the Corrective Action Plan (CAP) in English that will help the requestor to follow up with the supplier

A copy of the signed CAP in the local language to get the proof that it has been signed by the facility representatives

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Example of an Audit Report


1st
To:

Page information on Factory and global result


From:

Audit Type: Initial

Name of Factory: Factory Address: Mailing Address: Telephone No.:

XXX YYYY Same as above 86-512-000000 Tel-Fax No: 86-512-00000

OVERALL RATING:

Zero Tolerance

X Needs Major Improvement Satisfactory

Needs Improvement Access Denied

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Example of an Audit Report


Overall

result by section(1/2)
Compliance Level Best Practices NIL Non Conformity Summary

Themes

Child Labor

Satisfactory Satisfactory

Forced & Compulsory Labor Health & Safety

NIL

Needs Major Improvement

NIL

1.

2.

No ventilation system was equipped to expel the foul air at the raw material department. No belt guard was equipped to two Sponge Grinding machines in Pen making department.

Freedom of Association Non Discrimination

Satisfactory Satisfactory

NIL

NIL

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Example of an Audit Report


Overall result by section(2/2)
6 Disciplinary Practices Harassment and Abuse Compensation & Benefits

Satisfactory Satisfactory Needs Major Improvement Needs Major Improvement

NIL

NIL

NIL

1.The factory had not signed labor contracts with 11 out of 16 interviewees. Hours of Work could not be verified during this audit due to: 1)The factory only provided the manual attendance records of January 2006, which issued by department supervisor, and no detailed working hours and overtime hours were registered on the records. The manual attendance records for 2005 were not maintained as the factory had finished the yearend sum-up.

Hours of Work

NIL

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Subcontracting

Satisfactory

NIL

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Example of an Audit Report


Overall Assessment
Factory Overview XXXX., Ltd is located in Province, China. The total land area occupied by the facility is about 60,000m. They have started their operation in existing location since February 1991. The main products manufactured by the factory are High-Class Cosmetic Packaging Components. Percentage dedicated to LOral: 10% Other brands in the factory: X, Y, Z .. Number of employees interviewed: 16

Number of Record reviewed & review period: 16 Last period paid: January 2006 Peak period: N/A Random Period: December 2005 and October 2005 Peak Months of the Facility: N/A
Communicated Findings with (Facility Manager): Mr. XXX / Vice General Manager Agreed to and signed Corrective Action Plan (CAP): Yes
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Example of an Audit Report


Detailed Findings by section, example
8. Compensation & Benefits: Zero Tolerance Needs Major Improvement X Needs Improvement Satisfactory

Access Denied
Subject : Labour contract Law:In accordance with the PRC Labor Law article 16, a labour contract shall be concluded where a labour relationship is to be established. Finding/Objective evidence: It was noted that the factory had not signed labor contracts with 11 out of 16 interviewees. Management response: During the audit, the factory provided one copy of <Labor Services Agreement>, signed between the audit factory and Kunshan XXX Due to the factory could not provide the original version of the <Agreement> and there were several unclear points on it, the copy was not accepted during this audit. The factory explained that XXX., Ltd. exported the 8 out of 11 interviewees who did not sign labor contracts with the factory. And the rest 3 were new workers and their labor contracts were in process. Proposed corrective action: It is recommended that the factory should sign labor contracts with all workers.

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Example of a Photo Report


Detailed pictures on non conformities & best practices
Blocked Emergency Exit of Dormitory Evacuation Plan provided

Sponge Grinding Machines without Belt Guard

Electric Appliance Controller Box without Cover and Warning Sings

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Example of a Corrective Action Plan (CAP)


CAP is submitted in both local language and translated in english. CAP is signed by both the audit team and facility
Section Health &Safety NON CONFORMITY No ventilation system was equipped to expel the foul air at the raw material department. factory did not supervise and train employees to properly wear and to use the personal protective equipment such as respirator, two workers in raw material department did not wear respirator. CORRECTIVE ACTION Factory will equip ventilation system of the raw material department to ensure workers working under healthy condition. factory should supervise and train employees to properly wear and use the personal protective equipment. DEADLINE 1 week

Immediate for workers not trained yet and training plan for others.

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Need Social Audit countries list


PC / RM / POS & Promotional Items suppliers plants located in :
Bulgaria Croatia Estonia Hungary Latvia Lithuania Poland Romania Russia Serbia Slovakia Slovenia Turkey Ukrainia

Argentina Bolivia Brazil Chili Colombia Dominican Republic Ecuador Honduras Mexico Nicaragua Paraguay Peru Uruguay Venezuela Guatemala

Dubai Egypt Ghana Israel Kenya Lesotho Mauritius Morocco South Africa Swaziland

Bangladesh Brunei Cambodia China Hong Kong India Indonesia Macau Malaysia Pakistan Philippines South Korea Sri Lanka Taiwan Thailand Singapore Vietnam

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