3 loreal social audits program suppliers subcontractors

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L’OREAL OREAL Social audits programSocial audits program

Suppliers & SubcontractorsSuppliers & Subcontractors

EXTERNAL INFORMATION KIT

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Why Such a Program ?

L’Oréal has been a signatory of the United Nations Global Compact since June 2003 and is committed to a set of core values in the areas of human rights, labour standards, the environment and anti-corruption as set out in the Global Compact’s ten principles.

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Social audits program

L’ORÉAL has decided to reinforce the social audit program in order to ensure compliance with the L’ORÉAL’s General Terms of Purchase and Payment, ILO conventions and local laws.

L’ORÉAL is reinforcing its 2006 action plan:Internal social audits : plants and distribution centers External social audits : our suppliers and sub-contractors

- all sub-contractors : wherever located- packaging components, raw materials,

POS & promotional items suppliers for factories located in « countries at risks »

The social audits program will be realized by a third part auditing body Intertek.

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Third part auditing body : Intertek Global quality control service provider with 15000

employees in 110 countries and 309 laboratories

15'000 audits per year in more than 100 countries

Global Network of more than 300 qualified auditors close to most of the main industrial areas

Professionals in terms of social and environmental responsibility

Already working in this area with many international Groups

www.intertek.com

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What is a Social Audit ? The social audit will cover the following areas:

> child labor > forced labor > health and safety > freedom of association > non-discrimination > disciplinary practices > sexual and moral harassment > pay > working time > relations with sub-contractors and suppliers

The auditors will check the compliance with both the L’OREAL General terms and conditions and with the ILO conventions and local laws

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Audit Scope & Texts of reference Audit Scope & Texts of reference

Themes Principles listed in our GTP

Child Labor ILO Conventions 138 et 182 + specific requirement from L’Oréal child = under the age of 16+ laws and regulations of the country

Forced and Prisoner Labor ILO Conventions 105 et 29, + laws and regulations of the country

Health and Security Laws and regulations of the country

Freedom of Association ILO Conventions 87 et 98+ laws and regulations of the country

Equality, Non discrimination ILO Conventions 100 et 111 + laws and regulations of the country

Disciplinary practices, harassment and abuse, hours of work, wages and primes, sub-contractor.

Laws and regulations of the country

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Possible Audit ResultsFinal Social Audit Result

Actions

« Zero tolerance »Child labor < 16 years/

Concealed, forced, prison, dangerous

labor

Alert sent to L’OREAL HeadquartersInterruption of business relationship

with the factory

« Needs Major Improvement »

Major and recurrent issues

Re-audit within 90 days maximumFollow up audit with a “Needs Major Improvements” result twice in the

same section = “Zero Tolerance”

« Needs Improvement »Isolated Problem

Periodic re-audit to be planned

« Satisfactory »Best Practices

Periodic re-audit to be planned

« Access denied »Completely or partially

Re-audit to be planned as soon as alert received

2nd « Access denied » = Zero tolerance

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L’ORÉAL L’ORÉAL L’ORÉAL

Day + 7

L’Oréal

Opening meeting

Facility tour

Documents review

Employee interviews

Pre-closing meeting

Closing meeting

Sign Corrective Action Plan

SITE MANAGER & INTERTEK

Intertek

Audit Window Audit

Sends Audit request to Intertek

Intertek

Satisfactory

Needs Improvement

Needs Major Improvement

Zero Tolerance

Intertek

Contact Intertek Local Office

Supplier facility

Initiation of Audit Request

Day + 7

Posts report on the Web Platform

Audit Report

Logs in on the Web Platform to check audit results

Provides L’Oréal and site with audit window

Prepares documentation & available management resource for audit day

Process FlowProcess Flow

L’Oréal

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L’ORÉAL

Audit ProcessAudit Process

Documentary Documentary ReviewReview

Facility Facility TourTour

Pre-Closing Pre-Closing MeetingMeeting

Opening MeetingOpening MeetingWith INTERTEKWith INTERTEK

Closing MeetingClosing Meeting

Employee Employee InterviewsInterviews

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Opening Meeting Explain to the management representatives:

The aim and scope of the audit,The standards and policies against which the facility will be audited, The audit procedure,The agenda of the audit,Learn about the facility,The site Manager, a health and safety manager and a human resources manager should be present at the opening meeting.

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Facility Tour Verification of the Workplace Conditions, Fire Prevention, Dormitories,

Cleared and Identifiable AlleysCleanliness, First AidFire Prevention EquipmentTemperature, VentilationLighting, Potable WaterAccess to safety ExitsAccessibility in case of fireEarplugs, MasksGloves, Protective glassesSafety shoes, HelmetsUse of ChemicalsDormitories Toiletsetc..

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Documentation Review A review and analysis of :

Personnel recruitment file and contract Working Hours recording system for normal/OT hours Payslip records Social Security payment Proof of salary payment Health and safety records & certificates Fire protection records and SOP Health & Safety Management systems Minimum Wages, OT hourly rate Paper/money deposits Salary Payment delay Unauthorized deductions/fines Clarification on normal/OT working hours Rest days, leaves Health & Safety and other local regulations

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Interviewing Employees

Key Elements of the employee interview :

Without Management or site representativesOnly upon acceptance of the employee itselfConfidentiality of the interview and source of information ensuredInformal way to ensure efficiencyInterview in 1 by 1 (or group)Random Selection of the personnel list, based on facility ratio (Women/Men, Packaging/ admin dept..)Also employees identified during the facility tour

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Pre Closing Meeting

A meeting between auditors to :

Clarify and cross check information & issues found

Clarify and Debate among themselves if necessary

Write down the Non conformities in the Corrective Action Plan

Quote the Local laws to address the findings

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Closing Meeting A meeting with the management representatives to:

Present the Best Practices /Observations/ Non Conformities

Clarify and Debate necessary issues

Explain and find an agreement on the Corrective Action Plan

A copy of the Corrective Action Plan is provided to the management representatives at the end of the audit

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Reporting The report given to the requestor is made of:

A photo report (whenever possible) on main non conformities & best practices,

The audit report itself with details of the findings, objective evidence and details of local laws if applicable

A copy of the Corrective Action Plan (CAP) in English that will help the requestor to follow up with the supplier

A copy of the signed CAP in the local language to get the proof that it has been signed by the facility representatives

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Example of an Audit Report 1st Page information on Factory and global

resultTo: From:

Audit Type: Initial

Name of Factory: XXX

Factory Address: YYYY

Mailing Address: Same as above

Telephone No.: 86-512-000000 Tel-Fax No: 86-512-00000

OVERALL RATING:

Zero Tolerance X Needs Major Improvement

Needs Improvement

Satisfactory Access Denied

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Example of an Audit Report Overall result by section(1/2)

Overall Result by Section

Themes ComplianceLevel

BestPractices

Non Conformity Summary

1 Child Labor Satisfactory NIL

2 Forced & Compulsory Labor

Satisfactory NIL

3 Health & Safety Needs Major Improvement

NIL 1. No ventilation system was equipped to expel the foul air at the raw material department.

2. No belt guard was equipped to two Sponge Grinding machines in Pen making department.

4 Freedom of Association

Satisfactory NIL

5 Non Discrimination

Satisfactory NIL

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Example of an Audit Report


6 Disciplinary Practices

Satisfactory NIL

7 Harassment and Abuse

Satisfactory NIL

8 Compensation & Benefits

Needs Major Improvement

NIL 1.The factory had not signed labor contracts with 11 out of 16 interviewees.

9 Hours of Work Needs Major Improvement

NIL Hours of Work could not be verified during this audit due to:1)The factory only provided the manual attendance records of January 2006, which issued by department supervisor, and no detailed working hours and overtime hours were registered on the records. The manual attendance records for 2005 were not maintained as the factory had finished the year-end sum-up.

10 Subcontracting Satisfactory NIL

Overall result by section(2/2)

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Overall Assessment Factory Overview XXXX., Ltd is located in Province, China. The total land area occupied by the facility is about 60,000m². They have started their operation in existing location since February 1991. The main products manufactured by the factory are High-Class Cosmetic Packaging Components.

Percentage dedicated to L’Oréal: 10%

Other brands in the factory: X, Y, Z …..

Number of employees interviewed: 16

Number of Record reviewed & review period: 16Last period paid: January 2006Peak period: N/ARandom Period: December 2005 and October 2005Peak Months of the Facility: N/A

Communicated Findings with (Facility Manager): Mr. XXX / Vice General Manager

Agreed to and signed Corrective Action Plan (CAP): Yes

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Detailed Findings by section, example 8. Compensation & Benefits:

Zero Tolerance Needs Major Improvement

X Needs Improvement

Satisfactory

Access Denied

Subject : Labour contract

Law:In accordance with the PRC Labor Law article 16, a labour contract shall be concluded where a labour relationship is to be established.

Finding/Objective evidence: It was noted that the factory had not signed labor contracts with 11 out of 16 interviewees.

Management response: During the audit, the factory provided one copy of <Labor Services Agreement>, signed between the audit factory and ‘Kunshan XXX Due to the factory could not provide the original version of the <Agreement> and there were several unclear points on it, the copy was not accepted during this audit. The factory explained that ‘XXX., Ltd.’ exported the 8 out of 11 interviewees who did not sign labor contracts with the factory. And the rest 3 were new workers and their labor contracts were in process. Proposed corrective action: It is recommended that the factory should sign labor contracts with all workers.

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Example of a Photo Report


Detailed pictures on non conformities & best practices

Blocked Emergency Exit of Dormitory

Electric Appliance Controller Box without Cover and Warning Sings

Evacuation Plan provided

Sponge Grinding Machines without Belt Guard

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Example of a Corrective Action Plan (CAP)


Section NON CONFORMITY CORRECTIVE ACTION DEADLINE

Health &Safety No ventilation system was equipped to expel the foul air

at the raw material department.

Factory will equip ventilation system of the raw material

department to ensure workers working under

healthy condition.

1 week

factory did not supervise and

train employees to properly wear and

to use the personal protective

equipment such as respirator, two workers in raw

material department did not

wear respirator.

factory should supervise and train employees to properly wear and use the personal

protective equipment.

Immediate for workers not trained yet

and training plan for others.

CAP is submitted in both local language and translated in english.

CAP is signed by both the audit team and facility

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« Need Social Audit countries list » « Need Social Audit countries list » PC / RM / POS & Promotional Items suppliers’ plants located in :

ArgentinaBoliviaBrazilChiliColombiaDominican RepublicEcuadorHonduras MexicoNicaraguaParaguayPeruUruguayVenezuelaGuatemala

BangladeshBruneiCambodiaChinaHong KongIndiaIndonesiaMacauMalaysiaPakistanPhilippinesSouth KoreaSri LankaTaiwanThailandSingapore Vietnam

DubaiEgyptGhanaIsraelKenyaLesothoMauritiusMoroccoSouth AfricaSwaziland

BulgariaCroatiaEstoniaHungaryLatviaLithuaniaPolandRomaniaRussiaSerbiaSlovakiaSloveniaTurkeyUkrainia