SUPPLY CHAIN DISCLOSURE
CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT AND UK MODERN SLAVERY ACT DISCLOSURE
TOMS' mission to help improve lives through business is a core value and is embedded in everything we do. We believe in partnering with others who share these values and who conduct business ethically.
This Statement relates to our fiscal year ended December 31, 2016 ("fiscal 2016"). This Statement describes the activities of TOMS SHOES, LLC and its consolidated subsidiaries (collectively "TOMS," the "Company," "we" or "our"). We distribute our products in over 70 countries and most of our consolidated subsidiaries are not subject to the California Transparency in Supply Chains Act or the UK Modern Slavery Act. We have prepared this Statement on a consolidated basis because we employ the same policies and compliance program relating to anti-human trafficking and forced labor (sometimes referred to herein as "modern slavery") across our entire business.
We are a global footwear, accessories, apparel and coffee company. At the end of fiscal 2016, we had approximately 550 total employees, consisting of approximately 450 full-time employees and approximately 100 part-time employees, with approximately 150 of our employees engaged in retail selling and administrative positions, and the remaining employees engaged in other aspects of the Company's business. As of the end of fiscal 2016, most of the Company's employees were located in the Americas (primarily in the United States), with the remainder located in Europe and Asia. Our commercial manufacturing base, which consists of third-party contractors, is located mostly in China and Vietnam.
TOMS takes seriously the global efforts to end all kinds of forced labor, whether in the form of prison labor, indentured labor, bonded labor, human trafficking or otherwise. At TOMS, we believe we have a responsibility to conduct our business in an ethical way. We expect the same from our business partners, and focus on working with long-term, strategic suppliers that demonstrate a commitment to engaging with their workers and ensuring safe working conditions and environmental responsibility.
With every product purchased, TOMS will help a person in need, One for One®. Consumer purchases allow TOMS to give in over 70 countries around the world through our network of TOMS Giving Partners. TOMS currently helps give shoes, restore sight, provide safe water, support safe birth, and stop bullying. To date, TOMS has helped give over 70 million new pairs of shoes. TOMS works closely with our 70 giving partners to determine how our giving can add the most value to both the community and individual beneficiary. Our giving partners are focused on education, health, relief and empowerment.
TOMS offers our giving partners multiple shoe styles based on the varying needs of the environment, terrain and children served.
Giving partners give new TOMS shoes to children through their larger programs in health, education, and community development. Shoes will often be given with services like health care, hygiene education, school assistance or basic necessities. When shoes are strategically integrated into our partners' programs, we believe that there is a greater impact on children's health and education.
In 2013, TOMS committed to producing one-third of our giving shoes in the regions where we give them. We believe local production helps build industry, create jobs and build sustainable futures. Today we manufacture giving shoes in Ethiopia, Kenya, India, China and Vietnam.
To learn more about our shoe and other giving, please click here.
Risks of Slavery and Human Trafficking in Our Supply Chain
We believe that the risk of modern slavery in our own business is minimal, given our robust internal procedures. Our compliance efforts are therefore focused on our supply chain. TOMS has established the compliance and other procedures discussed in this Statement to mitigate the risks of slavery and human trafficking in our supply chains for our products.
We focus primarily on our direct factory suppliers, since this is the level of the supply chain where we believe that we have the most influence and can therefore be the most effective. We expect our suppliers will uphold the same values that are associated with TOMS, i.e., improving lives through business.
We recognize the need to continually evaluate the effectiveness of our operating procedures relating to modern slavery to confirm compliance with laws, disclose legally mandated and/or voluntary information and, most importantly, ensure that effective preventive mechanisms are in place.
Policies and Contractual Terms and Conditions
We have a Code of Business Practices (the "Employee Code") that sets forth the standard of conduct that is to govern the actions of every employee of TOMS. In addition to indicating that employees must respect and obey the laws, the Employee Code indicates that we are committed to a work environment in which all individuals are treated with respect; that we prohibit discriminatory practices; and that we are committed to providing a safe, healthy and comfortable workplace for all employees. New employees are provided with a copy of the Employee Code upon hire, which each employee must sign and acknowledge. A copy of the Employee Code is also available on the TOMS Intranet. Failure to comply with the Code may result in corrective action up to and including termination of employment with the Company. For a copy of the Employee Code, please click here.
We also require all suppliers to adhere to the Supplier Code (the "Supplier Code") when producing TOMS merchandise. The Supplier Code is a statement of values and expectations meant to guide decisions in factories where TOMS shoes are manufactured and addresses topics such as child labor, forced labor, excessive overtime, legal wages, discrimination, harassment-free workplace policies and freedom of association. We evaluate potential contracted factories against our Supplier Code standards and require them to agree in writing to these standards prior to entering our supply chain. –We have progressively raised the expectations of our factory partners through the evolving standards of our Supplier Code of Conduct. The Supplier Code can be viewed here.
Our mechanisms for reporting violations of our Employee Code and Supplier Code and other grievances are discussed below under "Internal Accountability and Training."
Our supplier contracts provide that contracted factories must conduct business in full compliance with all applicable laws, rules and regulations and comply with the terms of the Supplier Code. In addition, these contracts specifically forbid the use of forced labor and prohibit discrimination or harassment in the workplace. Each factory is required to certify compliance with these terms and conditions prior to becoming an approved contracted factory.
In addition, to mitigate the risks of slavery and human trafficking at indirect suppliers, TOMS prohibits contracted factories from engaging subcontractors without the written permission of TOMS and a subsequent audit of the facility.
Verification of Product Supply Chains to Address and Evaluate Risks of Human Trafficking and Slavery
When assessing the risks of modern slavery at any one factory, we consider various factors, including the factory's geographic location(s) and the nature of its manufacturing activities for TOMS (including consideration of the anticipated output). As part of our risk assessment, we also conduct preliminary inspections of each new factory's facility and require detailed questionnaires from potential factories.
Before conducting business with TOMS, each factory must undergo a factory audit. Our on-site process includes audits by our trained factory compliance auditors and third-party audit companies. Issues such as health and safety, wage and compliance, forced labor, child labor issues, harassment-free workplace policies, and environmental issues are reviewed. The entire factory, including dormitories, if applicable, is audited. The auditors will interview groups of employees, as well as individuals, without management presence, to allow them to freely comment on their work conditions. Commencing in 2017, anonymous factory employee surveys have been included as part of our audit process to increase transparency within our supply chain.
Audits also are performed annually and scored on a graded scale. To receive an "accepted" rating, a factory must not have any serious health, safety or labor issues in its facility. A factory receiving an "accepted" rating is authorized to produce TOMS products for one year, at which time it must again undergo an annual review and full audit. A factory receiving a "Needs Improvement" rating may still produce our products, but is audited again within six to nine months and must show continuous improvement in health, safety, and labor issues. Factories with a lower rating are evaluated on a case-by-case basis. The CSR compliance team will work with factories receiving a "Needs Improvement" or lower rating to build a Corrective Action Plan and address the issues in a proactive manner. A factory with persistent safety, health, or labor issues that fails to remediate these issues in an acceptable manner will be rejected as our supplier and will not be authorized to supply products for TOMS.
Auditing our suppliers helps to bring accountability and deliver credibility to the supply chain by providing a verification point and by helping us to understand the overall direction of improvement. However, audits are not an end in themselves, providing only a snapshot in time, and we believe work best as part of a broader approach to engagement, collaboration and continuous improvement.
Internal Accountability and Training
TOMS has a zero-tolerance policy for violations involving any form of modern slavery. Vendors or factories found to be in violation of this policy will be immediately terminated. Our CSR compliance team works closely with our senior leadership and General Counsel to help ensure that our suppliers are in compliance with our Supplier Code.
TOMS conducts annual global compliance training with its employees and the management teams of its key factories, focusing on monitoring the risk for modern slavery and adherence to the Supplier Code. TOMS' supply chain employees meet regularly with factories and key suppliers to reiterate TOMS' zero tolerance policy for suppliers who engage in modern slavery. They are also encouraged to utilize a compliance checklist when visiting factories, which helps to identify any issues which may require correction. Suppliers have been informed that they must make every effort possible to ensure that workers in their factories are employed at their free will. Any supplier found in violation of this policy will be terminated. TOMS takes issues involving human rights seriously and we expect our suppliers to do their best to ensure that forced labor in any form is not used in the production of our goods. We will continue to evaluate and update our policies and procedures as needed to make certain that the appropriate safeguards are in place to prevent any mistreatment of persons involved in our supply chain.
Additionally, our employees are encouraged to raise any concerns they may have about human rights issues and they have multiple channels to do so, including through a confidential ethics hotline staffed by independent third-party operators. The company's ethics hotline is also made available for external stakeholders. Complaints may be made by calling EthicsPoint, by NAVEX Global, a U.S.-based toll-free hotline at (855) 230-8383, and leaving a message. (In mainland China, the hotline can be reached at 4006013787.) Language translation is available as a standard offering on the hotline. Complaints can also be reported online at http://www.toms.ethicspoint.com. All complaints are confidential, but reporting anonymously could limit TOMS ability to collect relevant information about the concern.