@Risk

The Sportlifestyle company Puma recently issued its fifth sustainability report, in which the firm revealed numerous issues of “non-compliance” in its supply chain.

Puma is refreshingly candid in discussing the compliance challenges it faces throughout  its global supplier network. (The report even walks the reader step-by-step through  Puma’s extensive auditing protocol.) Clearly, progress has been achieved in many areas, and yet, as Puma readily admits, significant compliance problems remain.

For instance, the most persistent issues are excessive overtime and recurrent work on rest days. Many factories use double sets of time records to cover up excessive working hours, Puma reports. Some are even using software programs developed specifically for this purpose.

Puma also says that suppliers frequently failed to meet requirements regarding the payment of minimum wages. Likewise, “very few” suppliers provided legal benefits such as annual, sick, or maternity leave.

Even so, the company is committed to continuing its auditing process as it works to re-mediate weak spots and improve conditions for employees in the supplier network.

According to the report,

“Some people argue that auditing is not the key to ensure compliance with work and social standards at our suppliers’ production facilities as –according to them –the situation in the factories has not changed in the recent years. However, we consider auditing an important as we have seen significant improvement in our factories since we implemented auditing as our compliance tool. Despite its shortcomings, auditing has been instrumental not only in the transformation of our factories but also in the choice of factories that PUMA does business with. If not for auditing, our factories would not have made an effort to improve standards. PUMA would have mediocre factories if PUMA’s sourcing teams were not thorough in their choice of factories.

Whatever other strategies may be applied in the future, auditing with all its limitations will have to remain a major component of our program to sustain compliance as it is a tool that gives us an instant picture of the social and working standards in the factories.”

As I have posted before, about 70% of the Fortune 500 use suppliers located in emerging economies, where tens of millions of the world’s poor live on less than a dollar a day. Even though these countries may have legislation in place to protect workers, local regulatory and enforcement activity are sporadic, at best. That means companies have no choice but to be proactive, working to ensure that human rights are respected and labor standards are protected.

Kudos to Puma for sharing not just its achievements, but its compliance challenges, as well. Companies that choose to ignore these issues put their operations –and their reputations –at risk.

Puma’s 121-page report is available exclusively online at: http://safe.puma.com/us/en/