Company profile: Li & Fung
Headquarters: Hong Kong
Country: Hong Kong
Founded in: 1906
Total points of sale in Europe: Li&Fung manages the supply chain for retailers and brand name companies, but doesn't have stores in Europe/US of their own. They are the licensee for Circle K, ToysRUs and Branded Lifestyle in Asia, in total 950 outlets.
Owned by: Private owned shareholder company
Name of CEO: William Fung
Product description : Li&Fung is the Asian licensee for brands as Mango, Calvin Klein, Country Road and GANT (under the name of “Branded Lifestyle”). Li&Fung also organizes sourcing for many international brands as Levi Strauss and Tommy Hilfiger, and retailers as KarstadtQuelle, HEMA, V&D, Bijenkorf, Claudia Sträter, Hunkemöller and M&S Mode.
Countries of production: n.a.
General remark: n.a.
Li & Fung
Honson Li
11th floor, LiFung Tower, 888 Cheung Sha Wan Road, Kowloon, Hong Kong SAR
Comment from CCC and proposal for action
Although Li & Fung is not very known in Europe (it does not sell its own brands neither does it exploit retail shops), it is the world’s largest sourcing company, and organizes sourcing for many international brands as Levi Strauss and Tommy Hilfiger, and retailers as KarstadtQuelle, HEMA, V&D, Bijenkorf, Claudia Sträter, Hunkemöller and M&S Mode. Labour conditions in factories producing for those companies, therefore heavily rely on the implementation of labour standards by Li & Fung.
Li & Fung did not respond to the CCC questionnaire sent in 2007. As a member of Global Compact, Li & Fung has provided two “communication on progress” reports for the years 2006 and 2007 in which it describes some of its activities with regard to the 10 Global Compact principles. Li & Fung indicates that it has carried out 6000 (2006) and 8000 (2007) evaluations of its suppliers in 40 production countries worldwide. However, the company fails to indicate if and how stakeholders are involved in these evaluations, which methodology is used and how the findings are verified. In a recent case of labour rights violations at an Indonesian Tommy Hilfiger supplier an audit by Li & Fung failed to interview workers without management presence, and ignored the evidence provided by dismissed union leaders, although these dismissals were the core violation reported by labour rights groups. Given the well-documented weaknesses of auditing (see also Looking for a Quick Fix, How Weak Social Auditing is Keeping Workers in Sweatshops at http://www.cleanclothes.org/ftp/05-quick_fix.pdf), the CCC urges Li & Fung involve stakeholders in its monitoring activities, and join a credible multistakeholder initiative (MSI) to guarantee independent verification of the labour conditions in its supply chain. This should include the establishment of confidential and accessible means for workers to report exploitation and abuse, and independent training to workers concerning their rights at work. The CCC also calls upon Li & Fung to disclose its list of suppliers.
The CCC calls upon Li & Fung to guarantee a living wage for all workers producing goods for the companies in its “portfolio”. As in general the case in the garment industry, workers are often severely restricted in their right to freedom of association. Li & Fung should therefore not increase its sourcing in countries and free trade zones where the right to freedom of association does not have legal force. To guarantee that all workers are entitled to the full package of labour rights, Li & Fung should ban, or severely restrict, the use of short-term contracts. Finally the CCC expects Li & Fung to make sure its purchasing practices allow suppliers to respect labour standards, which includes stable business relationships, and reasonable prices and delivery times.
The following evaluation of the company’s performance in terms of transparency, code implementation and monitoring of labour standards is based on the company’s response to the questionnaire and on an additional desk study conducted by the CCC in 2007. In the section “Recent developments” you can find additional information gathered after 2007.
Transparency
Li & Fung answered that it did not wish to respond to the CCC questionnaire. The company is transparent with regard to: turnover, profits, sales and corporate structure. The amount of salaries of the top management is not known. The information given about producer countries and the structure of the supply chain is not comprehensive. There is no comprehensive sustainability report available. Li & Fung provides neither the results of factory audits nor information about verification activities. The company does not disclose general targets for future monitoring activities.
Formal commitment to labour standards
Li & Fung has adopted a code of conduct that requires compliance with all relevant local labour laws, but does not indicate that where local and international standards are at variance the higher standard should prevail. The code does not include a reference to the Universal Declaration of Human Rights. The company is formally committed to respecting minimum labour standards in accordance with ILO Core Conventions. These include the right to organise and bargain collectively and prohibit child labour, discrimination, and forced labour.
Li & Fung’s code of conduct applies to all workers affected by labour practices for which the company has some measure of responsibility. The code of conduct includes measures to implement the code and monitor labour conditions in the facilities used. Beyond the ILO Core Conventions, the company is only committed to paying the legal minimum wage or industry standard, i.e. not a living wage. There are no limits to overtime. The company’s code calls for a safe and hygienic environment for the workers who produce its garments and/or sportswear. The company does not explicitly require that all workers receive a regular employment contract.
Beyond the labour standards mentioned above, the company code is not precise enough on some specific issues. It does not state its commitment in relation to*:
- the provision of transitional measures that will be in the interest of the child and of her/his family where child labour is found;
- special provisions for workers under 18 years of age (e.g. education, no night work);
- specific steps to encourage decent working conditions in countries where freedom of association and collective bargaining are restricted by law;
- prohibiting the retention by employers of security deposits or identity papers;
- guaranteeing a living wage during regular working hours without overtime;
- ending the worst forms of child labour with explicit reference to ILO core-convention 182.
Code implementation and purchasing practices
Li & Fung did not indicate the steps it is taking to effectively implement minimum labour standards in its supply chain. The company has not disclosed whether its code of conduct has been translated into the languages of any of the countries it is sourcing from. There is no evidence that training on labour rights issues is promoted by Li & Fung. According to the information given Li & Fung has no intention to implement the payment of living wages to workers. Li & Fung has not shown that it is aware of the fact that part of its production sites are located in countries or zones where freedom of association is not guaranteed by law. There are no provisions to give buyers positive incentives to reward better working conditions. There are no measures that show how to improve planning and prevent excessive overtime.
Monitoring and Verification
Li & Fung has audited 6000 suppliers in 2006. Li & Fung did not provide any information on corrective steps for the remediation of labour rights violations in its supply chain. The company is not involved in independent verification by a multi-stakeholder approach.
Violations of labour rights and public conflicts
In 2007, there were no CCC public urgent appeals calling on Li & Fung to take responsibility for workers’ rights violations in its supply chain.
Recent developments
In 2007, 26 workers at the PT Mulia Knitting Factory in Jakarta, Indonesia formed a union to fight the factory's violation of their rights. The factory reportedly refused to pay female workers their pregnancy and miscarriage leave and failed to offer transportation for female workers after the night shift. In addition, the factory had failed to pay mandatory health and pension benefits, often did not provide adequate safety equipment and kept workers on precarious, temporary contracts. Within 10 days of announcing the union to the factory management, 19 of the union leaders were dismissed, suspended and transferred to another factory. The factory, producing for Tommy Hilfiger (through their agent Li & Fung) has to date refused to reinstate the union leaders. You can join the CCC Urgent Appeal at http://www.cleanclothes.org/urgent/08-09-16.htm