Goals and progress
Supply chain | Data
Rating factories is one of the most important things we do to ensure that the people who make our clothes are working in safe, fair conditions. On a scale from one to five, these ratings provide a window into how factories are performing and help us focus our efforts to improve working conditions where needed. We look at our ratings data from a variety of angles to understand overall trends, as well as performance, in different regions and individual countries. Additional information about our factory ratings data is available below the chart.
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2005 - 2008 Factory Ratings Comparison
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Overall, we work with a higher percentage of Level 5 — or excellent — factories than Level 1 factories, which have potentially serious issues. In 2008, 25 percent of the factories we contracted with were Level 5, compared to 9 percent that were Level 1. Overall, our average factory rating in 2008 was 3.4, compared with 3.5 in 2007. While any rating above 3 is in the “fair” range, we aim to see our average ratings continually improve and are examining reasons for this recent decline.
Other trends also warrant a closer look. The percentage of Level 1 factories increased from 6 percent in 2005 to 9 percent in 2008. And while Level 5 factories increased from 2005 to 2006, the percentage has fallen for the past two years — from 30 percent in 2006 to 25 percent in 2008.
In 2007, we made a change in our rating methodology that has contributed to this trend. In order to make our ratings more comprehensive, we significantly expanded the items that we check for in factories. This increase makes it more likely that we will find violations, which translates to a greater percentage of lower ratings. Accordingly, we would expect to see a drop in top ratings.
While we believe that this shift helps to explain our findings, we’re investigating other factors to ensure that we understand this trend and continue to make improvements. We have focused our analysis on two regions, Southeast Asia and South Asia, which represent close to 50 percent of our factory base. Both have shown a drop in their average factory rating. One reason may be the economic climate, which has put pressure on the entire apparel industry — including our company — to lower costs. Such pressure may cause some factories to cut corners in an attempt to lower expenses. For example, a factory may stop paying legally-mandated overtime premiums, which is a key violation of our Code of Vendor Conduct. In these circumstances, a factory’s rating could fall significantly.
Other factors may be more complex. In India, minimum wage requirements were increased substantially in select states, and many of our factories in those regions had difficulty keeping up with the sudden increase in a timely manner. As a result, their ratings fell as they struggled to adjust. Likewise, in Cambodia, we have begun to use the monitoring findings of the International Labor Organization (ILO). The ILO utilizes multiple auditors over a longer period of time, resulting in the identification of more violations.
Moving forward, we will continue to monitor factory trends and seek to understand the forces at work in various regions. We are also open to shifting our approach if we find one that is more effective, and we are committed to working with factories to achieve the highest ratings possible by helping them improve their internal human resource management systems. Our data provides a basis for improving on our work and measuring our progress.