Target Description:
KPIs:
PUMA’s sustainability policies are aligned with the United Nations’ (UN) Declaration of Human Rights, the UN Guiding Principles (UNGPs) on Business and Human Rights, the International Labor Organization’s Core Labor Conventions, and the ten principles of the UN Global Compact (UNGC). Observing human rights was part of our first Code of Conduct developed in 1993 and has guided our business ethics ever since. It has been the long-standing practice of PUMA to continuously and rigorously monitor our supply chain and conduct human rights due diligence on all our suppliers globally, including those in major production hubs such as Vietnam, Bangladesh and China.
Guided by our Code of Ethics and Code of Conduct, PUMA’s company culture of diversity and inclusion puts Human Rights at the center of everything we do.
All PUMA employees who feel that ethical standards in business may have been compromised can raise their voice. Various channels are in place to report any suspicions and/or observations related to modern slavery or other human rights aspects. In practice, all employees could address their request regarding apparent failure to their line manager. They may also raise the matter with staff representatives, the legal department, the internal audit department or via a toll-free external whistleblower platform available worldwide. Our Ethics Committees make sure that no action is taken against an employee who, in all good faith, reports a case of failure to comply with an ethical principle of the Code of Ethics, as a consequence of having reported the matter.
Besides implementing Human Rights and Labor Rights for our own employees, our colleagues are active in community engagement work and our Reform Program supports organizations like Women Win or Football versus Homophobia, who promote Human Rights in sport and work against discrimination in any form.
More on our Reform Initiative can be found here.
Our goal is to reach a total number of hours spent on community engagement equal to twice our annual average FTE (full-time equivalent). We encouraged all our employees around the world to participate and record projects and employee engagement on an online platform.
Our Community Engagement Program has continued to create a positive impact locally by supporting social, health and environmental causes, and we were able to donate 43,000 community hours in 2022.
For more information on PUMA's employee policies and philanthropic donations please refer to the Our People section of this report.
As a responsible business partner to our suppliers, we recognize that our own business practices, as well as our trading terms and conditions can have a significant impact on the organization at our suppliers’ factories. The aim of this PUMA Responsible Sourcing Policy is to reduce potential negative impacts.
PUMA’s responsible purchasing practice policy was developed in 2019, to create a framework for guiding decisions and maintaining consistency through key principles:
In 2022, 280 PUMA colleagues from development, sourcing and production joined Responsible Sourcing Practice training, the same topic also covered 1,145 supplier participants through virtual webinars. The training referred to the UN Guiding Principles on Business and Human Rights, to explain the link between the purchasing practices, potential impact on working conditions and risk of Human Rights violations.
In 2022, 31 staff members of the PUMA sustainability team and our licensees' team attended Better Work Purchasing Practices e-learning. This online course tracks a garment from inception to delivery. It provides an overview of global supply chain dynamics, sourcing modules and procurement, and highlights the impact of purchasing practices at each stage of the process. This interactive training is divided into eight modules, each consisting of an informational video and quiz for participants to check their understanding.
In 2022 we asked 30 strategic Tier 1 suppliers to participate in the Better Buying Survey and collected core suppliers' feedback on the implementation status of PUMA responsible purchasing practices. 9 accessories, 14 apparel and 7 footwear suppliers, representing 75% of our business volume and 67% of our business value. 28 suppliers responded (response rate: 93.3%).
Better Buying gathers data from suppliers to provide guidance to brands for improving purchasing practices, so suppliers can provide good working conditions and improve their environmental performance. Brands voluntarily invite their suppliers to participate.
Suppliers rate their brands anonymously according to the Five Principles of Responsible Purchasing which focus on the buyer purchasing practices that could have the biggest impact on suppliers’ businesses:
We benchmarked our 28 suppliers' feedback with more than 700 suppliers' feedback to the 20 brands classified under sporting goods and discussed these results internally to set a clear focus area for improvement. We received the following feedback:
Visibility
Design and development can play a significant role in improving sustainability in supply chains. Choices made at this stage of the process have significant downstream financial, social and environmental impacts. While all our samples are based on a Tech Pack, we see opportunities in improving accuracy for accessories and footwear. We have an overall high sample hit rate and our suppliers recognize our effort in increasing the use of more sustainable materials, 3D sampling, industry certification and in setting target prices prior to product development. While 100% of our purchase orders are accurate for apparel, we see room for improvement in the accuracy of purchase orders for accessories and footwear to avoid an impact on shipping deadlines.
All our suppliers confirmed that we would provide them with a business forecast, enabling them to plan the workforce needed. We see the need to better communicate our overall forecasting and planning timelines and processes to our vendors and improve our in-season communication for some of our product divisions.
Stability
As a principle, we will not cancel orders and accommodate order placement to suppliers’ difficulties such as lockdown period. In the case of order cancellation which remains less than 1% for PUMA, we always pay our suppliers for any liability associated to cancellation. Some of our suppliers reported that our company canceled orders. We will follow up on this.
Time
A large majority of our suppliers confirmed that we have an agreed time and action calendar for pre-production and production deadlines. We got feedback from our suppliers that PUMA missed some deadlines, we will further investigate, so we can guide our teams for improvement.
Financial
Most of our suppliers feel they have favorable terms through digital payment, the Forever Better Vendor Financing Program, PUMA paying for samples and bulk production in a timely manner.
The centralization of both the sourcing and procurement functions, along with the rollout of a cloud-based purchase order collaboration and payment platform, linking the sales subsidiaries, PUMA International Trading and the vendors, has enabled the digitization of the supply chain creating transparency, operational efficiency and reducing complexity. For example, all payments to vendors are automated and paper-free. We do not apply any late penalties to our vendors. We will strengthen our communication of payment terms to suppliers and refresh their knowledge on the Forever Better Vendor Financing Program. We also see opportunities to collaborate with our suppliers to increase their production efficiency (related to style allocation, volume, standardization of fabrics, labeling and packaging processes etc.).
Shared responsibility
All our suppliers reported that sustainability criteria are considered along with commercial concerns, 89% of our suppliers feel rewarded for their sustainability performance. Providing incentives for compliance and sustainability encourages suppliers to partner with our company by giving them a competitive advantage for working toward sustainability goals.
A large majority of our suppliers acknowledge our effort to enforce our sustainability standards and to reduce audit duplication at their factories, which helps them to gain clarity on their improvement actions.
We use our PUMA Forever Better Vendor Financing Program to incentivize suppliers, with a better scoring in our social and environmental compliance audits with lower interest rates. The program, established in 2016, allows suppliers with a good or very good compliance rating to benefit from PUMA’s high credit rating and preferred interest rates. The program runs in partnership with IFC, BNP Paribas, HSBC and Standard Chartered Bank.
At the end of 2022, 71 vendors were registered users (compared to 60 at the end of 2021) and the financed volumes in the whole of 2022 increased to USD 800 million (+USD 157 million compared to 2021).
In previous years we had conducted human rights risk assessments at the corporate and the supply chain level and communicated the results in our 2016 and 2017 Annual Reports. In 2021 we commissioned and completed a human rights risk assessment, focusing on forced labor management in the supply chain. The most salient risks to human rights are forced or bonded labor in our supply chain and, at the farm level, child labor.
In 2021 the supply chain services company ELEVATE supported PUMA by conducting an evaluation of its human rights risk assessment approach, with a specific focus on forced labor. The evaluation framework utilized drew on the expectations of the UN Guiding Principles for Business and Human Rights (UNGPs) with a specific focus on the risks of forced labor, based on the definition of forced labor specified in the ILO Forced Labour Convention, 1930 (No. 29) as, “all work or service which is exacted from any person under the menace of any penalty and for which the said person has not offered himself voluntarily”. ELEVATE also utilized ILO’s 11 indicators of forced labor in this analysis.
Policy Commitment and Embedding
As a result of the assessment, PUMA scores highly regarding policy commitment and internal alignment. ELEVATE recommended strengthening existing human rights-related policies to explicitly reference the ILO Forced Labour Convention, and all eleven forced labor indicators. We are in the process of developing an updated Human Rights Policy, which will include this as a specific element. We are also developing Human Rights e-learning to provide further guidance materials for internal teams on mitigating risks. In 2023 we will launch e-learning based on the PUMA social handbook for our suppliers, covering PUMA’s social monitoring program and standards.
Forced Labour Due Diligence Procedures and Processes
As a response to ELEVATE’s recommendation, we refreshed our risk assessment for supply chain and published it in this report. This includes both risk exposure and business leverage insights to prioritize suppliers.
PUMA reviewed the severity grading of audit findings linked to forced labor indication, this will then also increase escalation and prioritized investigation and remediation processes. We revised our social handbook and trained our suppliers and sourcing colleagues accordingly.
At the end of 2021 PUMA also adopted ELEVATE intelligence, or “EiQ”, a comprehensive suite of supply chain analytics, to:
In 2022 we uploaded 1,390 audit reports (2019 to 2021) in the EIQ tool. This tool shows the gross risks which are risks before mitigation measures, such as social security benefit, systematic excessive overtime, or insufficient overtime wage. We evaluated the countermeasures that we have in place in the factories shown as high risks in this tool. All these factories go through regular audits, some are part of the ILO Better Work program. The majority are enrolled in our fair wage program and were provided with Working Hours Management and Root Causes Analysis training; we have also provided tailormade programs to increase the capability of factory and vendor staff to one factory. For the other factories, mainly Tier 2 suppliers, we plan to expand the Root Causes Analysis training to them in 2023, so they can introduce corrective action to resolve their audit findings by addressing the root cause. We see some countries with higher risks. In 2022 we allocated a full-time team member in India and in Cambodia and added more team members in China.
In our handbooks, we request our vendors to conduct due diligence. We facilitate our supplier training in due diligence through the International Labour Organization-International Training Center platform.
To increase transparency, we report on the most common audit findings, training, grievances and mitigation measures such as outcome focused KPIs (Key Performance Indicators) to track the effectiveness of our supplier programs.
While PUMA’s hotline is accessible to civil society organizations and external stakeholders, we will review our stakeholder engagement methodology, especially civil society organizations stakeholders representing vulnerable groups, such as women, children and migrant workers.
We also extended the scope of our social monitoring programs to EMEA factories, high-risk countries’ warehouses and to some non-core Tier 2 suppliers.
We translated our handbooks (PUMA factory monitoring standards and procedure for social, occupational health and safety, environment and chemical) into Chinese, Vietnamese and Spanish and created a video to explain the PUMA social handbook in three languages as well.
We will conduct regular reviews of the grievance mechanisms available to stakeholders, in line with the UN Guiding Principles effectiveness criteria. We will also review how stakeholder groups that are likely to use the grievance mechanism are engaged in the performance of the mechanism.
An example of our supply chain due diligence efforts at farm level is the rubber mapping project in collaboration with the Fair Labor Association. In 2019 the Fair Labor Association partnered with the International Organization for Migration and three global footwear and three major sporting goods companies, which source shoes and sporting goods from Vietnam, including PUMA, on a project to map natural rubber. The project report was published in 2021.
The project had two primary objectives:
At the plantation and rubber farm level, the research team found a general lack of awareness of legal requirements and a lack of government labor inspections. The project highlighted the challenges to addressing labor issues in the rubber supply chain. Most industry stakeholders have not considered upstream supply chain mapping as a core operational activity. The scope of the supply chains, which often span borders, makes mapping a resource-intensive exercise that is a challenge for any single company to undertake, while collective approaches to mapping have not yet been developed.
This research was a first step toward mapping human rights and labor risks in the supply chain of natural rubber. This exploratory exercise has highlighted issues with working conditions at the rubber production level. The project developed an understanding of purchasing practices at different tiers, how the factories engaged with upstream suppliers evaluated the worker demographic at the facility level. Moving forward PUMA will continuously explore the opportunity to engage with stakeholders on lower tier monitoring.
PUMA operates multiple worker voice channels. The third-party worker engagement platforms cover 92 suppliers, 202,397 workers, which represents more than 80% of our Tier 1 and Tier 2 production volume in 2022. 21 non-strategic suppliers from Bangladesh and China also adopted one of these platforms in 2022. In 2020 PUMA launched the Worker Survey Program to get workers’ feedback in eight countries on their satisfaction with the factory work environment via a mobile app survey. Workers score each survey question from 0 (the least satisfied) to 5 (the most satisfied).
In 2022 overall workers’ satisfaction increased by 6% compared to 2020.
| Year | Number of factories | Number of workers | Satisfaction rate |
|---|---|---|---|
| 2020 | 20 | 17,551 | 3.93 |
| 2021 | 48 | 13,557* | 4.17 |
| 2022 | 68 | 21,526 | 4.17 |
The survey includes fair compensation, stress management, employee-employer relationship, grievance mechanism, dignity and respect, workers’ engagement, working hours, health and safety and how friendly the work environment is. In the 2022 survey, all were scored between 3.96 (fair compensation) and 4.30 (friendly work environment).
Workers felt more satisfied than the previous year in the number of working hours, the grievance mechanism and stress management. We see more effort required on fair compensation and improving employee-employer relationships. We had one-on-one communication with all participating factories to understand their challenges and agreed on key priorities to improve in the coming year. On average, 49% of the agreed actions have been implemented.
Training women on their rights and empowering them to advance their careers further is key to achieving gender equality, where both men and women have equal power and opportunities for education, healthcare, economic participation and personal development.
60% of workers producing PUMA goods are women and 49% of factory managerial positions at our core Tier 1 suppliers are filled by women. PUMA initiatives support suppliers in reviewing existing policies and practices or establishing new ones for women’s empowerment. We believe that collaboration among the industry and with NGO experts in women’s empowerment is key to avoid duplication and provide the right expertise.
In 2021 PUMA cooperated with the International Center for Research on Women (ICRW) to run a Gender Equity Project in Indonesia, Vietnam, India and Bangladesh. The aim was to create holistic worker voice and employee engagement tools with the intention of addressing the challenges women face across supply chains and advancing their wellbeing.
PUMA factories used the Gender Equity Self-Diagnostic Tool to generate a snapshot of nine factories’ gender equity policies and practices, identify opportunities for high-impact gender-specific initiatives, and help inform new priority action areas to promote gender equity, such as compensation and pay, or women’s health and safety efforts to understand the condition of gender equity. By using this tool, suppliers can determine where there are opportunities to enhance gender integration through their policies and practices and then improve gender equity within their factories. They can identify actions they can take to open and strengthen women’s pathways to leadership and operations.
In 2022 PUMA, together with ICRW and other brands, worked on improving the self-diagnostic tool. We also participated in the Worker Voice tool pilot: Worker survey to get workers’ perspective on gender equity in the factory, in three factories which used the tool in 2021. We could compare factory management and employees' responses. In the three factories, factory management and employees consider workers’ professional development as an area for improvement; workers are satisfied by Gender-Based Violence& Harassment (GBVH) and Health protection policies and practices in place in the three factories. Most positive responses are around workers’ trust in response to GBVH reports. Pay and compensation as well as pay equity are areas where responses were not aligned: Management has invested in implementing policies, but workers do not view these as satisfactory. There could be a need for re-evaluation of wage structures and additional transparency around pay structures and policies. Workers are very satisfied to be paid digitally. Support & care for working parents with fewer policies and practices in place are where workers are less satisfied.
In 2021 we conducted a pilot, and the video from the Better Work Course related to the prevention of sexual harassment was uploaded to the Micro Benefit Platform from late 2021 in Vietnam. 175 employees in six factories completed the training online. In 2022 the Chinese e-learning course was developed and piloted from August that year. 7,896 employees in 22 factories completed the training online.
The International Training Centre (ITC) has been at the forefront of learning and training since 1964. As part of the International Labour Organization, it is dedicated to achieving decent work while exploring the frontiers of the future of work. To strengthen PUMA’s commitment to promote Responsible Business Conduct (RBC), fundamental principles and rights at work, and occupational safety and health (OSH) throughout our operations and network of business partners, ITC-ILO created customized online training packages for our sustainability team. After completing courses (10 RBC modules plus 18 OSH modules) and successfully passing the technical exams with the ITC-ILO, PUMA Social Sustainability team members were certified by ITC-ILO as Trainers on RBC and OSH in 2021. The PUMA team is training and certifying the factory management team to deliver training to workers on RBC and OSH. One of the topics is harassment and violence at the workplace.
In 2021 we conducted a pilot to train 10 factory managerial staff, who extended the training to 570 workers, counting for more than 386 hours of training, at four factories in China, Bangladesh, Vietnam and Indonesia. In 2022 we trained 287 factory managerial staff in 114 factories, who extended the training to 159,503 workers, counting for 142,841 hours of training in 18 countries on harassment and violence at the workplace.
In 2022, 351 factory managerial team passed the ITC-ILO course (five RBC plus five OHS modules).
In 2023 we are aiming to expand the training to at least 16,000 workers so 180,000 workers would be trained.
PUMA’s Code of Conduct is an integral part of our supply contracts. All PUMA suppliers sign a legally binding “Declaration of Principles” to comply with the PUMA Code of Conduct. PUMA requires all vendors, their subcontractors and their suppliers to comply in full with this Code of Conduct.
Compliance with PUMA’s Code of Conduct is verified through regular audits. The frequency of an audit is based on the factory grade (A grade re-audited after 24 months (about two years), B+ after 18 months (about one and a half years), B- after 12 months, C grade after six months, and warehouse grade (A, B+, B- grade re-audited after 24 months, C grade after 12 months, D after six months. For factories with D grade, including Better Work Factories, Zero Tolerance (ZT) issues need to be corrected between eight weeks and six months. New factories will not be authorized to produce PUMA products until the factory can be rated A or B.
Independent of the factory grade, all issues identified need to be remedied as part of a corrective-action plan.
Since 1999 all direct PUMA factories (Tier 1) have been frequently audited for compliance with ILO Core Conventions and basic environmental standards. Each year we collect between 300 and 500 audits or assessment reports issued through PUMA’s compliance program, the ILO Better Work Program, our industry peers compliance programs, or by independent experts accredited by the Social and Labour Convergence Program (SLCP). We have also included our most relevant material and component suppliers (Tier 2) and key priority warehouses in our audit program. Through collaborative efforts with the sourcing team, we mapped more than 200 non-core Tier 2 suppliers. While one third use FEM (Facility Environmental Module) for other brands, only 13 have had a social audit. We converted these audit reports in our grading system. In May 2022 we reminded all suppliers that the use of undeclared sub-contractors is a Zero Tolerance issue, as per PUMA standards. We asked them to self-declare their Tier 1 subcontractors used for PUMA production. 48 Tier 1 subcontractors were declared, 10 had an audit report that we converted in the PUMA grading system.
In 2022, 392 Tier 1 and 112 Tier 2 suppliers, representing around 80% of our material and component sourcing volume, were audited. In early 2021 we selected 10 priority warehouses, four were audited in or before 2021, and six in 2022. In 2022 we collected 536 audit reports from 510 factories (392 Tier 1, 112 core Tier 2 and 6 warehouses) to safeguard workers’ rights to more than half a million workers (630,585 workers). All PUMA suppliers are required to display our Code of Conduct in factories producing PUMA products, materials or components. It contains contact details of the PUMA sustainability team as a whistle-blower hotline. We share the number of grievances received and solved, as well as the most frequent type of grievances in this report.
Furthermore, PUMA is a member of the Fair Labor Association, which regularly audits and accredits PUMA's compliance program for compliance with the Fair Labor Association's Code of Conduct. It means that PUMA has the systems and procedures in place to successfully uphold fair labor standards throughout their supply chains and mitigate and remediate violations. PUMA, as an FLA member, has agreed to subject their supply chains to independent assessments and monitoring as part of an organizational commitment to upholding fair labor standards through transparency. FLA publishes the results of these assessments to encourage an open and honest dialogue about the conditions that workers face, ensure PUMA accountability, and help consumers make more informed decisions about the products they buy. PUMA, SE - Fair Labor Association
A comprehensive explanation of our compliance program for suppliers (including grievance mechanisms and case studies) can be found in our Sustainability Handbook for Social Standards. Our Social Handbook explains the procedure of factory monitoring programs (section 3) and our standards. This handbook is reviewed on a regular basis. Suppliers are trained on a regular basis on our standards and monitoring process.
PUMA discloses its factory list with the factory name, address, product category and headcount on PUMA’s website and the Open Supply Hub platform.
Our audit starts with a briefing to the factory management and worker or union representatives on the PUMA standards, as well as the audit process and its scope. In 2022, 84% of audits conducted included a trade union representative or workers’ representative during the audit’s opening and closing meetings (when closing meetings take place during working hours of the factory).
We believe that interviews with workers, workers’ representatives or union representatives are crucial for understanding workers’ perspectives on workplace standards, factory atmosphere and protecting vulnerable workers from any work that is likely to cause moral harm. All interviews with workers are conducted on site during the audit (no offsite interview).
In 2022, 7.1% of our Tier 1 factories and 13.4% of Tier 2 failed to meet our requirements. If the factory in question is an active PUMA supplier, we work the factory management on improvement. A pass grade was awarded to 86% (six out of seven) of factories subjected to a second audit. In 2022, 16 new factories did not manage to sufficiently improve their performance and were removed from our active supplier factory base. Applicants that failed their first audits were not taken on as suppliers. To avoid duplication and prevent auditing fatigue, we increased the percentage of shared assessments to 59% from 54% in 2020. We will further increase our adoption of SLCP-based assessments to 280 factories in 2023. We believe that SLCP is an ideal tool for building long-term relationships with suppliers and supporting them to own their social and labor data. PUMA is a member of the ILO’s Better Work Program and uses Better Work audit reports in lieu of the PUMA compliance program. PUMA also uses FLA accredited brand reports as well as some other brands’ audit reports in lieu of the PUMA compliance program. We aim to use external reports converted to PUMA standards for up to 80% of our suppliers at the end of 2025.
| 2022 | 2021 | 2020 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| T1 | T2 | Warehouse | T1 | T2 | Warehouse | T1 | T2 | ||
| A (Pass) | 63 | 17 | 75 | 6 | 82 | 5 | |||
| B+ (Pass) | 157 | 41 | 144 | 23 | 2 | 116 | 26 | ||
| B- (Pass) | 144 | 39 | 2 | 155 | 46 | 1 | 125 | 35 | |
| C (Fail) | 19 | 11 | 1 | 16 | 7 | 11 | 2 | ||
| D (Fail) | 9 | 4 | 3 | 2 | 4 | 0 | |||
| Total active + inactive audited factories | 392 | 112 | 6 | 392 | 82 | 3 | 338 | 68 | |
| Total active factories as of Dec 31st, 2022 | 516 | 128 | 10 | 445 | 99 | 6 | |||
| Number of employees | 546,286 | 82,070 | 2,229 | ||||||
| Audit coverage % | 76% | 88% | 60% | 88% | 83% | 50% | |||
| 510 | 477 | 406 | |||||||
| Pass/Fail % | 93/7 | 87/13 | 33/67 | 95/5 | 91/9 | 100 | 96/4 | 97/3 | |
We employ a team of compliance experts spread across all our major sourcing regions. They regularly visit and audit our core manufacturing partners. We also work with external compliance auditors and with the ILO’s Better Work Program. Each PUMA supplier factory must undergo a regular compliance audit from six to 24 months based on their audit rating and all issues identified need to be remedied as part of a corrective action plan.
In 2022 the number of audited factories increased and 207 more factories were audited compared with 2021 as per our strategy to increase our local-for-local production and scale up our social monitoring program to non-core Tier 2 suppliers (13).
In total 53 factories failed the audit, (33 Tier 1, 16 Tier 2, 4 warehouses); 35 were new factories or factories not under our audit scope yet, such as warehouses or non-core Tier 2. 16 were deactivated due to low performance, 37 are still active, six were re-audited in 2022 and passed the audit. The others were rated C and had 6 months to improve, they will be re-audited in 2023 accordingly.
Out of the 15 factories graded D in 2022, only five were still active as of end of December 2022, as progress is on-going. None of these five D graded still active factories have Zero Tolerance issues.
Around 78% of factories active as of end of December 2022 were audited in 2022. Factories not audited in 2022 had an audit still valid in 2022 because of their grading or factories that could not be audited due to the lockdown enforcement in China or located in Ukraine.
69 factories were upgraded to A or B+ this year (48 Tier 1, 21 Tier 2), as a result of our follow-up and training programs.
*Excluding converted reports and newly audited factories in 2022.
G.10 shows the 11 most frequent audit findings in 536 audit reports from 510 factories.
207 audits were initial assessments (meaning no audit was conducted previously) in 2022, 39% of the total number of audits performed in 2022, meaning that these suppliers are not yet familiar with our standards, which explains the increase in the number of violations. Furthermore, the number of audited factories and audits increased compared with 2021 (2022, 536 audits, in 2021, 508 audits) (in 2022, 510 audited factories, 2021, 477 audited factories).
Some newly audited factories have non-conformities on social security benefits and legal obligations, such as missing required sub-licenses, while other factories started to close this issue. 100% of workers are covered under social security among all our core Tier 1 suppliers, except in China where this is the case for 76% of workers.
Factories in which we detected transparency issues in 2021, have all remedied this issue, no transparency issues detected during 2022 remained open at the end of 2022.
Systemic overtime has remained a challenge, and in 2022 we conducted working hours management training to all Tier 1 factories and a root cause analysis workshop with selected core Tier 1 suppliers to explore opportunities for improvement. Factories’ management reviewed and strengthened their policy and working hours monitoring system. They gained a deep understanding of how to conduct a root cause analysis. We could collect an action plan to address prioritized root causes of overtime hours. We will need to further follow up on progress on site in 2023, even though we have noticed a decrease in average overtime hours compared with 2021 from 8.3 to 7.7 hours at our core Tier 1 factories.
There were five audit findings on a potential risk of Freedom of Association breach in 2022, mainly related to the election process of unions or a worker representation committee. As of today, four remain open. We have deactivated one factory and won't be able to follow up on this issue any further. We will continue our engagement with the factory management to close the other cases.
PUMA is committed to respecting women’s rights as per the Convention on the Elimination of Discrimination Against Women and expect suppliers to commit to and respect women’s rights. In this context, we carefully monitor working conditions for pregnant women. Five audit findings related to pregnant workers, mainly about overtime and maternity leave, two of them are closed and three are still being followed up. Our 2022 assessment showed that bathroom breaks were not being restricted for pregnant women.
There was no violation found on forced overtime or retaining workers' passports or other identity and personal documents. One audit finding was identified related to restricted freedom of movement and the factory was deactivated. We identified 15 violations regarding delayed payments, eight of them are closed, three factories were deactivated; we are still following up on the four pending findings for improvement.
11% of corrective actions pertaining to wages and/or overtime were implemented, and these issues were resolved in 2022. We expect more progress in 2023, since 40% of audits were conducted near the end of 2022. We noticed improvements in working hours management for especially vulnerable workers, transparency, on-time payment, chemical safety management, labor dialog management. As nearly 40% of the audits conducted in 2022 were initial assessments, reducing overtime and increasing social security coverage will remain a focus of our efforts. In 2023 we will provide e-learning on our social standards, which will help suppliers, especially those newly onboarded, to better understand our expectations.
Beyond auditing, we track social key performance indicators such as average payments vs. minimum wage payments, overtime hours or coverage by collective bargaining agreements. These data are reported under the Fair Income target.
We also increased our engagement through capacity building activities. In 2022 PUMA provided training to core Tier 1 suppliers on how to conduct OHS risk assessments. We followed up on progress with an on-site visit by a third-party auditing company. Overall core Tier 1 factories had an injury rate of 0.3 in 2022, well below our target of less than 0.5. However, as each accident is one too much and suppliers’ knowledge still needs to be further strengthened, we will keep our focus on OHS risk assessment training in 2023.
| Meeting | Topics | Number of factories | Number of participants |
|---|---|---|---|
| Supplier Virtual Meetings | Sustainability updates, best practices sharing, etc. | Average. 496 per round (3 rounds) |
Average. 1,160 per round (3 rounds) |
| Code of Ethics | 473 | 1,090 | |
| Responsible purchasing | 280 PUMA sourcing team members 31 PUMA sustainability and licensees’ staffs |
||
| OHS Risk Assessment | Core Tier 1 suppliers on how to do OHS Risk Assessments | 170 | 404 |
| Working hours management | Principles and process to control working hours | 387 | 950 |
| Overtime root cause analysis | In depth review of root cause analysis methodology | 75 | 240 |
Grievance Channels
We operate multiple worker voice channels to reach more than half a million workers. If workers are not satisfied with the responses offered by factories via their respective internal grievance system, we encourage the use of the PUMA hotline to raise complaints or request consultations. Phone numbers and e-mail addresses for this hotline are published on our Code of Conduct posters displayed at every audited factory globally. We also use WeChat, Zalo, Facebook, and other social media channels to connect with workers and have established more formalized compliance and human resources apps at selected core suppliers.
The third-party worker engagement platforms cover 92 factories (202,397 workers), which represents more than 80% of our production volume. In 2022 2,006 feedback were received through the MicroBenefits and the WOVO platforms in China, Indonesia, Pakistan, Philippines, Turkey, Cambodia and Vietnam, and the Amader Kotha Helpline in Bangladesh. Of the 2,006 messages, 14 cases were escalated to PUMA as the factory did not respond within the agreed timeline. PUMA engaged with the factory’s management to address the workers' concerns. All other concerns not escalated to PUMA were handled and resolved directly by the factory management.
In 2022, 159 workers’ concerns were raised through PUMA’s hotline across seven countries. Together with our suppliers, our team was able to resolve 99% of them.
Only one issue remains unresolved as of the end of 2022. Since 2021 one worker has not yet received child support sponsored by the government of Vietnam, but documents were not submitted on time by factory HR management. The factory management and PUMA sustainability team will keep following this up.
We also received 13 third-party complaints from external organizations related to PUMA’s manufacturing partners, seven have been resolved. The majority were about freedom of association, others about fair compensation, abusive practices and work environments. Five out of ten complaints about freedom of association were resolved in 2022, the union representatives were either reinstated or compensated in agreement with the unions involved. We are still following up on the six other cases.
| Workers’ complaints | 2022 | 2021 | 2020 | 2019 |
|---|---|---|---|---|
| Total received – external channels (third-party platforms) | 2,006 | 3,132 | 1,021 | |
| Total received – PUMA hotline | 159 | 223 | 101 | 70 |
| Total confirmed | 1,877 | 3,168 | 984 | 61 |
| Total received - PUMA hotline and escalated to PUMA via third-party platforms | 173 | 262 | ||
| Resolved - PUMA hotline and escalated to PUMA via third-party platforms | 172 | 261 | 983 | 61 |
| Not resolved - PUMA hotline and escalated to PUMA via third-party platforms | 1 | 1 | 1 | 0 |
| Resolved (%) | 99.3% | 99.6% | 99.9% | 100% |
For PUMA’s own hotline, employment relationship, fair compensation and excessive working hours are the most frequent concerns raised by workers in 2022.
Examples on how we handle grievances received:
In 2022 a group of workers complained through the PUMA hotline about a production manager’s abusive behavior in a factory located in South Africa. PUMA’s Sustainability Team and Sourcing Team convinced the factory management to collaborate with an independent third party to conduct an in-depth investigation and the production manager was enrolled in a leadership training program to prevent such behavior in future.
From any country, when workers complained about working during public holidays or overtime hours, PUMA engages with the factory management, so the production schedule was adjusted. Furthermore, PUMA provided training to these factories on working hours management, and a root cause analysis to prevent excessive overtime.
Most workers’ concerns about wages and benefits are mainly due to their misunderstanding about wage and benefit calculations. We ask factories to proactively talk to and train workers on the calculation methods.
Cambodia
Early in 2021 we received three complaints from one of the local unions in Cambodia and one case is still pending. The allegations were about a potential breach of freedom of association rights. We worked to find the best solution related to these concerns, facilitating mediation meetings between worker representatives and factory management, partnering with Better Work Factory Cambodia and/or with other brands producing in the same factories.
In 2021 PUMA partnered with Better Factories Cambodia to provide a customized workshop for factory management, shop stewards and union representatives. 109 participants from 20 factories attended the training.
The training covered:
A survey conducted after the training shows that factories have increased their awareness about resignation, retrenchment, termination process and scenario.
In 2022 we received five issues concerning three Cambodian factories, about a potential breach of freedom of association rights (three out of five are resolved). We worked to find the best solution related to these concerns, facilitating mediation meetings between workers’ representatives and factory management, partnering with Better Work Factories Cambodia and/or with other brands producing in the same factories. Two unresolved cases were received in late 2022 and we are still following up on them. In 2023 PUMA plans to work with Better Factory Cambodia to once again provide a customized workshop to factory management, shop stewards and union representatives.
Cambodia
In late October 2022, we were contacted by Voice of Democracy, a news outlet in Cambodia, which said that nine leaders and activists of Independent Trade Union Federation (INTUFE) at a Cambodia factory were terminated after union elections. The organization called on PUMA to intervene and ensure workers' rights and freedoms to organize the union were respected. PUMA played a role in organizing meetings with the factory and the union to start several close dialogs. The factory reached a mutual agreement with the nine workers. The factory’s management has now joined the ILO’s Better Factories Cambodia program and a program on industrial relations, both of which will help the management improve the social dialog at the factory.
Pakistan
In September 2022 we received an e-mail from UK-based media, asking for PUMA’s comments on the allegations made by the female employees of a factory in Pakistan. It was alleged that the managers of the factory were leaking the contact details of young female workers to other male colleagues without their consent and these female workers received inappropriate messages. In addition, there were allegations about unpaid wages during the COVID-19 pandemic. An unannounced investigation by a third party immediately took place in the same month. The auditor concluded that no wages were deducted during the pandemic, but confirmed some inappropriate behavior towards three female workers occurred in July 2022. The factory has already acted and dismissed the concerned supervisor in August 2022. Female workers interviewed during the investigation confirmed such cases did not happen anymore. In October 2022 the factory management agreed to take further actions to prevent similar cases from happening in the future, such as limiting access to personal contact information of employees to HR personnel only. An anti-harassment committee headed by female HR personnel was formed. 100% of committee members were trained in handling grievance cases. 100% female as well as male employees were given awareness training on harassment and abuse, reporting channels and the consequences or penalties of violating the anti-harassment policy. Awareness sessions are continuing as planned and are recorded accordingly.
All issues identified during our auditing and hotline activities are classified as zero-tolerance issues (such as child labor or forced labor), critical issues or other issues in our handbook.
As the name implies, zero-tolerance issues lead to the immediate failure of an audit. If these issues are reported for a new factory, the factory will not be allowed to produce PUMA goods. Established suppliers must remedy all zero-tolerance issues immediately by conducting a root-cause analysis and implementing preventive measures to avoid the issue from reoccurring in the future. As a last resort, business relationships will be terminated if the factory fails to cooperate. Other issues are also followed up on by our compliance team.
During 2022 we identified 12 zero-tolerance issues and were able to remedy seven on workers’ compensation in line with legal requirements, lack of transparency and illegal wastewater discharge. Five factories were deactivated in 2022. The increase in number is due to the increased number of factories audited in 2022.
| Country | 2022 | 2021 | 2020 |
|---|---|---|---|
| Bangladesh | 3 | 2 | 4 |
| Cambodia | 1 | 2 | 0 |
| India | 3 | 0 | 0 |
| Vietnam | 2 | 0 | 0 |
| Malaysia | 1 | 0 | 0 |
| Philippines | 1 | 0 | 0 |
| Spain | 1 | 0 | 0 |
| Total | 12 | 4 | 4 |
“As a partner since 2013, PUMA has signed up to Better Work's vision of a more transparent, inclusive, and ethical industry. As a joint programme between the UN’s International Labour Organization and the International Finance Corporation, a member of the World Bank Group, Better Work brings diverse groups together – governments, global brands, factory owners, and unions and workers – to improve working conditions in the garment industry and make the sector more competitive. Our business partners are a key part of this approach, which also includes evaluating their own purchasing practices and business behaviour for healthier supply chains. With Better Work, PUMA continues to support their supply chain by encouraging factory ownership and growth, strong worker-management dialogue and promoting decent working conditions.”
ROOPA NAIR
Head of Operations, Better Work
