Like many internationally active commercial retailers, Arcandor has secured the purchasing services of Li & Fung in Hong Kong. Why?

It’s quite simple: in future, we will focus on our own product design and product range within our basket of goods. Li & Fung will deal on our behalf with all aspects of procurement services as well as follow-up work on purchasing commissions, quality assurance, training suppliers, fabric purchasing and financial services. We will continue to do everything that really differentiates us from the competition, but we will buy in services at a favourable price from the market leader for procurement services.

 

How can you guarantee that Li & Fung apply equally as stringent sustainability criteria as you do?

As a partner, Li & Fung has long-standing experience in this field and classifies this as part of its core expertise.
We guarantee that our purchasers/product mangers act in accordance with our own social standards.

 

Promoting those standards is, of course, praiseworthy. But will they also be monitored to ensure that they are maintained?

Yes, to that end, we have created a finely woven net. Over 100 employees all over the world will constantly monitor standards. They check, for instance, on aspects of employment protection, hygienic conditions in factories and accommodation quality. In other words, in cooperation with Arcandor, Li & Fung fulfils the requirements and provisions set out by our Social Compliance Team.

 

What does that specialist term imply?

The team monitors the maintenance of social standards within our company. The team’s members also visit different locations to obtain reassurance about this. Therefore, we have sent employees to those countries where our key purchasing markets are located. Then, they directly report to management.

 

Arcandor commissions many of its products for exclusive manufacture by certified companies. A certificate is granted on the basis of prior auditing. How do these audits work? And how do you guarantee that your suppliers in emerging and developing countries maintain high social and ecological standards?

We have developed a three-tier monitoring system. First of all, the BSCI rules (Business Social Compliance Initiative) are applied to ensure that independent agencies undertake the auditing of all companies. The companies have freely subscribed to this as organized retailers within the FTA (Foreign Trade Association). The result of the audit is forwarded to the FTA’s central database. This is how we can check whether another company has previously audited the supplier, or whether the auditing process is currently ongoing. In addition, independently of the FTA, Li & Fung has access to long-standing market experience and qualified evaluation that we are grateful to refer to. This expertise is further consolidated by each new commercial relationship.
The third tier of control is quality testing on goods. These tests are constantly carried out in every factory – they even apply to sub-contractors – with auditors also paying attention to how well suppliers implement social standards. If any infringements are noted, our employees advise the companies about how they can improve the situation.

 

Do you also differentiate criteria according to how closely you cooperate with a supplier – in other words, the closer the liaison, the stricter the controls?

You can also put it like this: successful, close cooperation with suppliers is based on the results of continual feedback processes. The whole thing is a learning process for both parties. It starts with auditing, in accordance with the BSCI (see above) by independent monitoring agencies. The auditors check the accounts; they inspect all factory facilities, canteens and sleeping facilities, interview the bosses as well as individual employees. Suppliers, whose social standards deviate from our guidelines are given the chance continually to improve their working conditions. That is also exactly the key to success. We ensure that any insights from feedback processes are also put into practice.

 

Goods manufactured in Asia undergo a long transport route back to Europe. In future, costs will rise, as cheap petrol is projected to run out. Is it not necessary for sustainable production to take place nearer to the sales locations?

Not necessarily. The distance between production and consumption is certainly an indicator for energy consumption, but it is not the only one. Ships are amongst the most “environmentally friendly” transport methods available. Over the next few years, many changes will occur in energy production, production technology and the control of emissions etc. Thinking in terms of offsetting energy emissions will increasingly impact on competition and therefore on prices. I am not risking any prognosis about the distribution of production and consumption at the end of the next ten years.

 

Global climate protection is currently at the top of the political agenda. The emission of carbon dioxide (CO2) is to be heavily reduced over the next few years. What are you doing to achieve as positive a CO2 balance as possible?

CO2 emissions can only be controlled locally. Asian countries, where we primarily commission our production, also have clearly recognized this problem and are working at different speeds on individual solutions. We are focusing on raising awareness of this subject with suppliers in the context of the audits. Today, we also attain positive values for sea freight and the highest volume of goods are transported by sea.
In Germany, we are major energy consumers in our department store and distribution warehouse locations and endeavour to achieve constant improvements in re-investments. We are currently working on a detailed package of measures.

 

On the subject of jobs: what was the situation for the group’s former employees abroad after the takeover by Li & Fung?

This kind of “transaction” is bound to “affect” any employee. Approximately 99 per cent of all employees already signed up to the new employment contracts distributed by Li & Fung about three to five months ago. Very little changed for local employees respectively in China, India, Indonesia, Bangladesh, and Pakistan etc. For expatriates, many new career opportunities emerged in the globally aligned purchasing services companies.

 

What is Arcandor doing to ensure that sub-contractors employ no child workers?

We have stipulated that all suppliers must select their sub-contractors according to whether they fulfil our social standards. This also includes regular training courses. We monitor this, as I already told you, by regular audits.

 

Arcandor sources a large proportion of its goods from China. What is being done for environmental protection in this case?

We cannot reform environmental protection in China – that must be categorically stated. The Chinese government has recently called for more efforts on the part of suppliers. We can ensure that our partners over there produce with more environmentally friendly methods. To that end, we have developed a catalogue of action and behavioural guidelines or a code of conduct. Our partners confirm by signing up to this code that they will follow its guidelines on environmental protection.

 

An accident that gained a lot of international attention was the collapse of the factory building of your supplier Spectrum Sweater. The criticism was that you only compensated the victims after a time delay?

No, we helped from the beginning. Along with other companies (Steilmann, Scapino and the Cotton Group) we organized immediate aid with “Friendship”, a Non-Government Organization (NGO), to assist victims and those left behind. This included payment for medical treatments.

 

In the interim period, a trust fund has been set up. It was formed thanks to the initiative of the International Textile, Garment and Leather Workers’ Federation. How is it helping those people affected by the accident?

Since the trust fund was set up (which took almost two years), we have also contributed to it. Victims of the accident and their families have been compensated from the fund. It is meant to enable those affected by the disaster to regain independence and earn their own living again. The idea is to help people to help themselves, in one case, that may be a small sewing workshop, in another, a plot of land or cows.

 

Is the accident in Bangladesh and the trust fund setting a precedence for other countries?

No, because we cannot create uniform working and living conditions. In every country, we have to take into account local conditions and cultures, in order to be able to react in an appropriate and plausible way.

 

Moving on from this acute case: what is Arcandor doing for sustainable improvement of working conditions in Bangladesh?

We say to everyone we deal with there – to the politicians, authorities, trade unions, company associations and non-government organizations – very clearly how important this subject is for us. Ultimately, we also have a lasting impact on the improvement of working conditions due to auditing procedures. I am certain that our discussion partners have understood that we need to act together if we are significantly to improve the situation. Otherwise, the poorer country risks making crucial losses in its key export industry. My impression is that because we have already been committed to this subject for a long time, we are perceived as trustworthy and credible partners.

 

30 per cent of Arcandor’s turnover comes from the sale of clothing and fashion. Recently, you opened a new design centre in Hong Kong. What was the aim of that?

Our aim is to keep our finger on the pulse and to be prepared for the latest trends in the fashion world. This is the only way to differentiate ourselves. Trends are immediately translated into in-house collections, which means we have to be quick to keep up with brands such as Zara and H&M. By close cooperation with trend scouts, designers, suppliers and especially with Li & Fung, who can quickly organize the materials and manufacturers for the cuts and collections, we can ensure that we are one step ahead. Fashion is a fast-moving business. The client cannot wait. With the first design centre in Hong Kong, we can quickly adapt to the changing moods of the fashion market.