Living Wage and Responsible Purchasing
As part of our commitment to respect human rights, we understand the importance of a fair wage to help protect human dignity and enhance quality of life. This is why we have committed to work with our partners to achieve a living wage for factory workers. A living wage is the minimum income necessary for a person to meet their basic needs as well as that of his/her family, including some discretionary income.
In 2015, as a first step in developing a long-term strategy, we launched a research project to better understand the challenges and opportunities associated with achieving a living wage for factory workers. A key finding was the importance of partnerships. Sustainable improvements in wages cannot be achieved by individual brands and retailers working alone – they require active industry collaboration and partnerships with employers, trade unions and governments.
Partnering for Change
As a result, in 2015 we joined 'Action, Collaboration, Transformation' (ACT), a collaboration between international brands and retailers, and IndustriALL Global Union, the international trade union federation. ACT aims to achieve a living wage in the garment and textile industry - in countries such as Bangladesh, Myanmar, Cambodia, Turkey and Vietnam - through freedom of association and industry-wide collective bargaining, supported by world class manufacturing standards and responsible purchasing practices.
Since joining ACT we have been working alongside its other members and with IndustriALL to assess our purchasing practices, and the industrial relations and competitive context in key sourcing countries. This assessment has helped identify the main factors impeding progress toward a living wage. These have informed ACT’s strategy and a package of change commitments which will form the basis of country consultations with employer representatives and trade unions (along with government representatives), who are ultimately responsible for negotiating an industry agreement at a national level.
ACT’s vision of industry-wide collective bargaining agreements and a living wage for garment and textile workers is a long-term journey with many challenges to overcome. But we are convinced this is the right path and the only sustainable solution. Industry-wide agreements will:
- ensure that many workers benefit from higher wages, rather than a factory-by-factory approach; and
- encourage employers to compete through innovation and quality, rather than low pay and conditions.
For brands and retailers such as Target, industry agreements not only provide a mechanism to fulfil our human rights commitment, but also greater certainty for investment; which is of benefit to our business, our supply partners and the workers who produce our products.
To support our work with ACT, Target has conducted benchmark analysis on wage levels in select supplier factories drawing on industry benchmarks such as the Anker methodology, Asia Floor Wage and WageIndicator Foundation.
For example, in early 2018 Target in partnership with Kmart conducted a wage benchmark study with 12 supplier factories in Bangladesh. The study showed that, on average, the total worker wages (excluding overtime) across these 12 factories were 75% higher than the legal minimum wage in the Bangladesh garment industry. However, the average total wage of workers in the study represented only 56% of a living wage based on the ISEAL Living Wage Benchmark (Anker methodology) at that time, highlighting that a significant gap still remains.
ACT Global Purchasing Practices Commitments
By December 2023, we will improve purchasing practices with our suppliers of our own brand apparel and footwear by implementing the ACT Global Purchasing Practices Standard.
In December 2018, ACT publicly released its Global Purchasing Practices Commitments. The commitments are the result of three years of review and consultations aimed at developing a common set of changes and implementation measures on purchasing practices that will support the movement towards living wages in the garment, textile and footwear industry. In addition to our support for freedom of association and industry-wide collective bargaining agreements, the implementation of the ACT Global Purchasing Practices Commitments is a key part of our role within ACT, working in partnership with other retailers and brand members, and IndustiaALL Global Union.
The commitments cover five broad areas:
- Brands commit that purchasing prices include negotiated wages as itemised costs;
- Brands commit to fair terms of payments;
- Brands commit to better planning and forecasting;
- Brands commit to undertake training on responsible sourcing and buying;
- Brands commit to practice responsible exit strategies.
For more information on ACT, visit actonlivingwages.com
In the past year, Target has established a project team to drive the implementation of changes required to meet our December 2023 commitment. This project team has been focused on the following activities:
- The development and implementation of a new open costing sheet with our team and suppliers in order to itemise and ring-fence labour costs. Approximately 40% of suppliers have now submitted open costing in the new format.
- Piloting of enhanced planning and forecasting mechanisms with strategic and core suppliers in improve accuracy of forecasts and maximise capacity planning in factories.
- The development of a responsible exit strategy and procedures in accordance with the
ACT Responsible Exit Policy and Checklist .
- Commenced implementation of the ACT purchasing practices baseline assessment with our team and suppliers. Feedback from the survey will be used measure our progress toward our 2023 commitments and identify further opportunities for improvement.
In addition, in 2020 we supported a research project by Oxfam Australia and Monash University study on responsible purchasing practices in Bangladesh - ‘Shopping for a Bargain’. The results of the study, including suppliers feedback, can be found here.
Responsible purchasing during the COVID crisis
Factory shutdowns and falling consumer demand linked to COVID-19 has drawn the world’s attention to the plight of factory workers in the garment industry. In this period of great instability, the role of responsible purchasing practices has never been more important.
Since the crisis began in February 2020, Target has worked with suppliers on a case-by-case basis to reach fair and mutually acceptable outcomes in relation to orders, order reductions and cancellations. The guiding principles we have applied with our suppliers are:
- no change in payment terms
- no delays to any payments
- be flexible and accept delayed delivery of goods.
- no unilateral cancelation of orders.
- no unilateral application of discounts.
- accept liability for any redundant material by either paying for it or reusing it.
As result of these guiding principles, in the aftermath of the crisis less than 1% of existing garment orders were cancelled and not paid in full, and less than 3% of orders were impacted by discounts requested by Target and mutually agreed with suppliers. Where orders were cancelled through mutual agreement with suppliers, Target agreed to pay the resulting liability for unused material if it could not re-purposed or sold-off to other customers.
In addition, in April 2020, Target endorsed the Call to Action COVID-19: Action in the Global Garment Industry , which aims to generate action across the global garment industry to protect workers’ income, health and employment and support employers during the COVID-19 crisis, and establish sustainable systems of social protection for a more just and resilient garment industry.
Working together with other brands, trade unions, international organisations, government and other key stakeholders, specific measures are being developed to deliver on these priorities. The working group is led by the International Labour Organization (ILO) in partnership with the International Organisation of Employers (IOE) and the International Trade Union Confederation (ITUC).
Target standard payment terms with suppliers is 90 days; however, all suppliers are offered access to finance facilities via our partner Prime Revenue, which enables early payment of invoices (e.g. seven days) at a small cost. Further information can be found here.
Our standard supplier agreement template can be found here.