As an international retail company, the Otto Group sources more than one million different products from over 70 countries and works with several thousand suppliers, who in turn place orders with various factories. To improve working conditions in the factories, we need to know exactly where the Otto Group's goods are produced. This is a particular challenge due to the complex and globally branched supply chain and the fact that the production sites are not our own.
To ensure compliance with social standards and humane working conditions in the producing countries, we developed our first supply chain Code of Conduct back in 1996. In 2018, the code of conduct of the industry initiative amfori BSCI replaced our code of conduct, thereby contributing to greater uniformity in the industry.
To improve working conditions, the first step is to create transparency in the supply chain. Suppliers are therefore obliged to disclose factories that produce for the Otto Group. All supplier-related data is recorded in the so-called supply chain database.
As a retailer, we also offer articles from various brands via our platforms. For these products, the responsibility to comply with social and environmental standards lies with the brands themselves.
Each of our suppliers is obliged to sign the "Supplier Declaration on Sustainability": In this binding document, we bundle all our sustainability requirements for our business partners. The signing of this document is the basic prerequisite for all business relationships with the Otto Group.
To ensure compliance with social standards in the factories, we launched the social programme in 1999 and have been continuously developing it ever since. The aim of the programme is to gain insights into the respective working conditions through audits and standards and to improve these in the long term. In addition to registering all factories that produce in high-risk countries (according to the amfori BSCI list), the supplier is obliged to check compliance with social standards and the existence of valid and accepted social audits or certifications. The Otto Group sources its merchandise only from factories that are able to provide such proof, e.g. SA8000 certificates, amfori BSCI audits or Otto Group's own assessment. This ensures that working conditions in all factories are monitored by accredited audit firms and that any necessary improvements are recorded in correction plans. If a supplier does not disclose the factory structure or continues factory relationships without a valid audit or with unresolved grievances, the Otto Group reserves the right to terminate cooperation with the supplier.
In addition to auditing production sites, training suppliers and factory employees to act on their responsibility is a central element in achieving lasting improvements. For this reason, we have developed the capacity building programme "EMPact". The name combines the EMPowerment of our suppliers with the resulting action ("act"). It includes workshops, e-learnings, webinars, homework and on-site visits. It enables factories to improve their manufacturing conditions in a protected environment and allows us to learn even more about the challenges on-site.
With our Social Programme, we have set ourselves the goal of establishing transparency concerning working conditions in our supply chains and supporting our business partners and their factories in complying with human rights. Meaning: by 2020, we wanted to integrate 100 percent of our suppliers into the social programme. A supplier is considered integrated if he can present valid evidence of social audits or certificates for all factories that produce goods on behalf of the Otto Group.
We have not quite achieved the goal of 100 percent transparency, mainly due to COVID19-related challenges. While we were able to integrate 95 percent of all suppliers into the Social Programme in 2019, the key figure has fallen to 90 percent in 2020. In some cases, audits could not be carried out due to the lockdown and its impact on factories and audit companies and travel restrictions. The option of remote audits (online), introduced in 2020, if no visit at the site was possible, provided some relief.
Many challenges, such as low wage levels, lack of health and safety at work or freedom of association, cannot be solved by individual actors. Accordingly, the Otto Group relies on cooperation between the relevant players to achieve sustainable and comprehensive improvements. To tackle the complex tasks along our supply chain, we are therefore involved in various partnerships and cooperations, such as the German Partnership for Sustainable Textiles, the amfori Business Social Compliance Initiative (BSCI) or the Accord on Fire and Building Safety in Bangladesh (ACCORD). We believe that by pooling our strengths and know-how, we can achieve the greatest possible range and effectiveness and thus contribute to improving working conditions in production facilities.
For our employees, too, as well as for employees of our business partners and service providers -such as external cleaning services at own locations - we have developed specific social standards. They are consistent with internationally applicable standards, such as the United Nations Universal Declaration of Human Rights, the UN Convention on the Rights of the Child and applicable Conventions of the ILO, as well as legislation in the respective country. In Germany, as well as in all other countries, we comply with local laws and regulations, and we adhere to existent collective agreements.