pactics csr magazine #2
DESCRIPTION
Corporate Magazine published Q1 2015 includes CSR Report 2013TRANSCRIPT
PACTICSInnovation you can trust
Better
Corporate social responsibi l i ty report
Siem Reap Cambodia
together
Colophon
Editors-in-chiefJul ie Bi j lstra and Mart i jn van Ri jnsoever
Managing editorDaniel le van Gi ls Synergos Communicat ie
The fol lowing people contributed to this magazinePiet Holten Bor is Ploum Jul ie Bi j lstra Mart i jn van Ri jnsoever Maart je Smeets Swen Rothman Miranda Minassian Peter Olszewski and Lina Goldberg
PhotographyJohn McDermott Antal Gabel ics and Yolanda vom Hagen
DesignJanneke Holten
PrintingIndrukwerk Huizen The Nether lands
When the previous issue of this magazine appeared we had just embarked on a
new adventure I described the building of the Pactics organization as a thousand
decisions that led to the creation of a factory that was good for its customers and
good to its employees as well A factory we could be proud of
Since then we have maintained our momentum and have been able to lift our
company to the next level Although our factories set the industry standard in our
market when it comes to Corporate Social Responsibility we are not perfect and
each audit is a learning experience After a long and instructive series of audits I am
very proud to say that we have won approval from adidasrsquo Social and Environmental
Affairs (SEA) team which means we can start producing for adidas
What we promised to do in our last magazine we are now doing This is why I chose
ldquoWell on our wayrdquo as the title of this foreword Our Cambodian factory celebrated
its official opening in March 2014 and is now going full steam This means that
we can truly offer high-volume production to our customers with very competitive
prices while providing very flexible and fast deliveries from our Shanghai location
Looking ahead I see things changing in the right direction Where once we
sometimes felt we were a bit too far ahead of the curve offering a level of supply
chain that was not yet in big demand from our customers we now see very
stimulating developments in the market That helps us feel confident that most of
the thousand decisions wersquove made have been the right ones and that we are now
a company whose multiple production locations offer the supply chain of the future
On behalf of Pactics management and staff
Piet Holten
President
Foreword
Piet Holten
Well on our way
4 | PACTICS magaz ine4 | PACTICS magaz ine
Table of content
10Smart production design
11Our definit ions
31Liv ing wage project
33Facebook t imelineBui lding the factory
36Portaitof Kong Chanrotha
37TI Cambodiarsquos Business Integrity Program
39Better together
43Corporate social responsibi l i ty Report 2013
22In search of people
24Training our people
28Portaitof Chhoat Makara
29Pact ics and SA8000
14Portraitof Yan Vanna
6Innovat ion you can trust
12Portrait of Wave
15A factory thatrsquos both sustainable and low-cost
19Opinion Peter Olszewski
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
Colophon
Editors-in-chiefJul ie Bi j lstra and Mart i jn van Ri jnsoever
Managing editorDaniel le van Gi ls Synergos Communicat ie
The fol lowing people contributed to this magazinePiet Holten Bor is Ploum Jul ie Bi j lstra Mart i jn van Ri jnsoever Maart je Smeets Swen Rothman Miranda Minassian Peter Olszewski and Lina Goldberg
PhotographyJohn McDermott Antal Gabel ics and Yolanda vom Hagen
DesignJanneke Holten
PrintingIndrukwerk Huizen The Nether lands
When the previous issue of this magazine appeared we had just embarked on a
new adventure I described the building of the Pactics organization as a thousand
decisions that led to the creation of a factory that was good for its customers and
good to its employees as well A factory we could be proud of
Since then we have maintained our momentum and have been able to lift our
company to the next level Although our factories set the industry standard in our
market when it comes to Corporate Social Responsibility we are not perfect and
each audit is a learning experience After a long and instructive series of audits I am
very proud to say that we have won approval from adidasrsquo Social and Environmental
Affairs (SEA) team which means we can start producing for adidas
What we promised to do in our last magazine we are now doing This is why I chose
ldquoWell on our wayrdquo as the title of this foreword Our Cambodian factory celebrated
its official opening in March 2014 and is now going full steam This means that
we can truly offer high-volume production to our customers with very competitive
prices while providing very flexible and fast deliveries from our Shanghai location
Looking ahead I see things changing in the right direction Where once we
sometimes felt we were a bit too far ahead of the curve offering a level of supply
chain that was not yet in big demand from our customers we now see very
stimulating developments in the market That helps us feel confident that most of
the thousand decisions wersquove made have been the right ones and that we are now
a company whose multiple production locations offer the supply chain of the future
On behalf of Pactics management and staff
Piet Holten
President
Foreword
Piet Holten
Well on our way
4 | PACTICS magaz ine4 | PACTICS magaz ine
Table of content
10Smart production design
11Our definit ions
31Liv ing wage project
33Facebook t imelineBui lding the factory
36Portaitof Kong Chanrotha
37TI Cambodiarsquos Business Integrity Program
39Better together
43Corporate social responsibi l i ty Report 2013
22In search of people
24Training our people
28Portaitof Chhoat Makara
29Pact ics and SA8000
14Portraitof Yan Vanna
6Innovat ion you can trust
12Portrait of Wave
15A factory thatrsquos both sustainable and low-cost
19Opinion Peter Olszewski
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
When the previous issue of this magazine appeared we had just embarked on a
new adventure I described the building of the Pactics organization as a thousand
decisions that led to the creation of a factory that was good for its customers and
good to its employees as well A factory we could be proud of
Since then we have maintained our momentum and have been able to lift our
company to the next level Although our factories set the industry standard in our
market when it comes to Corporate Social Responsibility we are not perfect and
each audit is a learning experience After a long and instructive series of audits I am
very proud to say that we have won approval from adidasrsquo Social and Environmental
Affairs (SEA) team which means we can start producing for adidas
What we promised to do in our last magazine we are now doing This is why I chose
ldquoWell on our wayrdquo as the title of this foreword Our Cambodian factory celebrated
its official opening in March 2014 and is now going full steam This means that
we can truly offer high-volume production to our customers with very competitive
prices while providing very flexible and fast deliveries from our Shanghai location
Looking ahead I see things changing in the right direction Where once we
sometimes felt we were a bit too far ahead of the curve offering a level of supply
chain that was not yet in big demand from our customers we now see very
stimulating developments in the market That helps us feel confident that most of
the thousand decisions wersquove made have been the right ones and that we are now
a company whose multiple production locations offer the supply chain of the future
On behalf of Pactics management and staff
Piet Holten
President
Foreword
Piet Holten
Well on our way
4 | PACTICS magaz ine4 | PACTICS magaz ine
Table of content
10Smart production design
11Our definit ions
31Liv ing wage project
33Facebook t imelineBui lding the factory
36Portaitof Kong Chanrotha
37TI Cambodiarsquos Business Integrity Program
39Better together
43Corporate social responsibi l i ty Report 2013
22In search of people
24Training our people
28Portaitof Chhoat Makara
29Pact ics and SA8000
14Portraitof Yan Vanna
6Innovat ion you can trust
12Portrait of Wave
15A factory thatrsquos both sustainable and low-cost
19Opinion Peter Olszewski
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
4 | PACTICS magaz ine4 | PACTICS magaz ine
Table of content
10Smart production design
11Our definit ions
31Liv ing wage project
33Facebook t imelineBui lding the factory
36Portaitof Kong Chanrotha
37TI Cambodiarsquos Business Integrity Program
39Better together
43Corporate social responsibi l i ty Report 2013
22In search of people
24Training our people
28Portaitof Chhoat Makara
29Pact ics and SA8000
14Portraitof Yan Vanna
6Innovat ion you can trust
12Portrait of Wave
15A factory thatrsquos both sustainable and low-cost
19Opinion Peter Olszewski
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
Table of content
10Smart production design
11Our definit ions
31Liv ing wage project
33Facebook t imelineBui lding the factory
36Portaitof Kong Chanrotha
37TI Cambodiarsquos Business Integrity Program
39Better together
43Corporate social responsibi l i ty Report 2013
22In search of people
24Training our people
28Portaitof Chhoat Makara
29Pact ics and SA8000
14Portraitof Yan Vanna
6Innovat ion you can trust
12Portrait of Wave
15A factory thatrsquos both sustainable and low-cost
19Opinion Peter Olszewski
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
6 | PACTICS magaz ine
The combination of productprocess innovation and an
international sales and service department offers unique
opportunities for Pacticsrsquo clients to work directly with the
factory and get the best results in quality on-time delivery new
product development and brand protection
Knowledge and innovation in microfiberPacticsrsquo customers are assured of products made of consistently
high-quality microfiber fabrics Because of their knowledge
of the microfiber material Pactics is able to source the right
raw material to match clientsrsquo needs ldquoMicrofiber comes
in a lot of varieties We advise our client which variety best
matches their designs and brand imagerdquo explains Business
Development Manager Julie Bijlstra ldquoWe advise our clients on
what techniques we can use to create the look and feel they
need In this way the accessories help not only to safely clean
and protect eyewear but also to strengthen their brandsrdquo
Commitment to their current products has not stopped Pactics
from looking towards the future The company continues to
move forward by continuously challenging what is possible
to ensure their leading role in microfiber for eyewear The
unique properties of microfiber offer benefits in other markets
too Says Bijlstra ldquoWe are the market leaders in what we do
Our expertise enables us to explore other markets as well
Our approachndashtrying new thingsndashgives us the confidence to
expandrdquo At the moment most of their clients are eyewear
brands but Pactics also has begun entering other markets
Microfiber ensures scratch-free cleaning and protection which
makes the products perfect for protection and packaging for
for instance jewelry and electronics products as well
The Pactics factory in Shanghai is equipped with the newest
printers and sublimation machines Complicated designs can
be printed professionally on fabrics This in combination with
the well-trained staff makes Pactics perfectly able to create
a product that not only protects or cleans but also as an
accessory enhances our clientsrsquo products Unique designs and
great prints strengthen the brand message
Innovation you can trust
Pactics manufactures premium cloths and pouches for the
worldrsquos leading brands in sports and fashion eyewear Its
goal is to do so while sustaining a balance between product excellence and competitive pricing and doing business
in a socially and environmentally responsible way
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 7
Furthermore Pactics is not limited to manufacturing products
made of microfiber materials
New materials are being explored and Pactics connects with
universities for instance in the Netherlands to work with
students in projects related to product development and
material development For example projects have been started
with the Industrial Design faculty of Delft Technical University to
develop different kinds of eyewear cases different in both form
and material What if the product is not only used for protection
and cleaning but as an information carrier as well Can it be
used for presentation in retail Thinking out of the box like
this is typical of Pactics Pactics is very aware of the growing
interest in doing business in a more sustainable way We focus
on production techniques and use of materials that have less
impact on our environment To fully investigate alternatives
last year Pactics began collaborating with students from the
University of Amsterdam This assures that Pacticsrsquo clients will
benefit from the latest developments creative solutions and a
professional approach
Two wholly owned production locations With the opening of its production plant in Siem Reap Cambodia
in March 2014 Pactics now operates two wholly owned
factories Pactics overseeing of the complete manufacturing
process has multiple advantages for their clients Bijlstra
ldquoWe manufacture all products in our own production facilities
in Shanghai and Siem Reap We fully control the production
environment where the branded products are manufactured
This means clients can trust that their brands are secure
can count on consistent high quality and can rely on on-
time delivery at a competitive price We fully understand the
importance of brand protection and brand security We have
been working with premium brands now for many yearsrdquo
Pactics can promise their customers consistently high-quality
products At the same time with the whole production in their
own hands Pactics can ensure products are made in an ethical
and environmentally friendly way
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
8 | PACTICS magaz ine
Bijlstra ldquoDoing business with Pactics means you deal directly
with the factory Consequently lines are short and direct
and Pactics is able to be very responsive in development of
new products and in meeting the needs and demands of our
clientsrdquo Pactics controls the complete cycle of manufacturing
They develop manufacture and test their products and do it all
themselves Turn-around times are short and communication
is easy
The growing interest in sustainable materials and a responsible
way of manufacturing them is a key focus of Pacticsrsquo
manufacturing process In this way of doing business not only
Pacticsrsquo employees also their clients gain major benefits from
the responsible process of production Brands are secure and
products have consistent quality Bijlstra ldquoWe offer our clients
a facility in Cambodia that can manufacture high volumes at a
very competitive price and a very flexible and creative facility
in Shanghai that offers small runs quick turn-around times
design capacity and innovative techniques and materialsrdquo
All-around serviceIn Pacticsrsquo view delivering a high-quality product also means
following through with precision service From first contact
through the ordering process prototype development and
final delivery Pactics works to maintain the highest standards
Vice President for Business and Product Development Erwald
Boer saysldquoWe believe in a constant dialogue with our clients
Communication goes both waysrdquo To fully understand the needs
and demands of their clients Pactics employs a wide range of
international employees They are able to speak with clients
in their native language and also understand their business
ldquoworldrdquo In this way Pactics can make sure that the details of
each request are accurately conveyed
Boer ldquoClients feel like they get a special treatment when we give
them our undivided attention and make sure we understand
what they exactly want But to us this is the only way to interact
with clients We donrsquot do business with abstract companies
but with the people who work thererdquo Part of the interaction
between Pactics and their clients is to think along with their
clients Advice on which fabric is the most advantageous for
a particular order helps the client to benefit from Pacticsrsquo
expertise Understanding a clientrsquos business enables Pactics
to provide their expertise already in the design phase of new
projects This brings in creative ideas and saves their clients a
lot of extra work in later stages of development
Pacticsrsquo Quality Control Department provides professional
quality control in all stages of production from incoming
raw materials to finished products With a professional and
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 9
internationally staffed sales and service desk in Shanghai and
sales offices in Europe and the United States Pactics makes
sure they are close to their customers Being close makes
communication easy and the personal way of doing business
guarantees good understanding of the customersrsquo business
Boer adds ldquoIn this way we are very flexible Were able to act
proactively and are available at short notice in all time zonesrdquo
Strong CSR policy in production and sourcingClients as well as consumers are increasingly interested in where
products are made and how they are made Pactics believes
there is only one way to guarantee a high-quality product ensure
safe and fair labor practices and do business in an ethical and
environmentally responsible manner Says Bijlstra ldquoWe prioritize
the social and environmental impact of manufacturing The
needs of our planet and our peoplendashpartners customers and
staffndashare of primary importance to our businessrdquo Pacticsrsquo
commitment to sustainable production arises from the belief not
only in a better world but in making a better product
Erwald Boer notes ldquoOur clients invest heavily in their brand
image You see a growing demand for decent supply chains
especially for the major brands In our market we are currently
the only one offering this We see the growing importance of
sustainability policies among our customers Pactics wants
to be a partner in realizing sustainability objectives for these
customers And should they not find this a top priority we are
still the best low-cost manufacturer aroundrdquo
To make sure Pacticsrsquo supply chain is in line with their own
policies Pactics regularly audits their suppliers has strict
agreements with suppliers and works in partnership to
continuously improve collaboration
Innovation you can trustPactics believes in being a decent and responsible company
that provides their employees with a safe and pleasant
working environment and serves their clients with reliable and
consistent high-quality products
Pactics believes in being a decent and responsible companyrdquo
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
10 | PACTICS magaz ine
Smart production design
ampRPSDQLHVRHQVSHFLDOL]HLQHLWKHUKLJKPL[ORZYROXPHRUKLJK
YROXPHORZPL[SURGXFWLRQRSHQLQJDsecond production
facility in CambodiaZHVLPSORਬHURXUFXVWRPHUVERWK
We make 50 million products per year and in over 400 variations
Some products are made in high volumes but many others are
made in small volumes and highly customized Our two facilities
are specifically designed to offer both
Looking to keep costs down and stay ahead of main competition
in China Pactics has invested in streamlining its business In our
production design the bulk production now goes to Cambodia
and the specialty products and product development stay in
Shanghai
Since the cost of labor is lower in Cambodia high-volume
orders will now be rerouted to the new Siem Reap factory
This redirection of simple bulk contracts frees up the veteran
production center in Shanghai to handle more technically
demanding orders specialty pieces and rush requests
By choosing a specialization per factory each factory is able
to develop according to future needs creating efficiencies
for the company as a whole in the process Our production
strategy allows us to also make use of the preferential import
arrangements between Cambodia and the European market
High volume high mixBoris Ploum Vice President Production amp General Manager Pactics Cambodia
More flexibilityLooking to further increase the companyrsquos flexibility we
have taken reorganizing a step further We are moving the
Shanghai factory from traditional factory line production to
more responsive individual teams called cells This allows the
Shanghai factory to create faster turnaround times for specialty
items The company-wide shift in production systems has of
course presented challenges for us Changing workersrsquo habits
takes time The cultural and geographical differences between
the two locations require separate planning for each country
Since we are a company with high social standards we always
have to be innovative to keep our prices low The flexibility
to deal with these changing conditions is in our DNA The
efficiencies that have been created through smart planning and
organization whether production -related or institutional we can
pass down to the customer We have taken fundamental steps to
stay cost-effective while operating ethically in the niche market
of microfiber products It is very rewarding to see how a good
production strategy creates benefits for our customers and for
our employees
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 11
2XUGHक़QLWLRQVCSR amp SA8000
CSR - Corporate Social ResponsibilityPactics works in a very volatile market We are a low-cost
supplier in a global supply chain Cost is an important driver
for our customers and therefore also for us Corporate Social
Responsibility for us is a very clear definition of the bottom
line We do not exploit human capital or natural capital
to make a profit For Pactics this is a matter of common
decency CSR refers to agreed frameworks that regulate
this bottom line across the supply chain Pactics stays
ahead of the game to offer our customers (and ourselves)
long-term reliable supply chain solutions
SA8000 and BSCISA8000 is a certification standard It is based upon the ISO
methodology and the SA8000 certification uses the same
approach as ISO SA8000 requires a set of policies tools
reports monitoring and review mechanisms that enables
a company to set a standard and then maintain it SA8000
certification has to be earned and is offered for a period of
three years with in-between checkups SA8000 is generally
perceived as the highest standard in social compliance BSCI is
one of the fastest growing auditing schemes and is based upon
the SA8000 standard BSCI auditors need to follow SA8000
training and become SA8000 certified auditors to do BSCI
SA8000 basic auditor training courseSo far two Pactics managers have successfully completed the
SA8000 basic auditor training course We are implementing
SA8000 in our factory in Cambodia For Shanghai we are
talking with customers about whether we can use a BSCI
auditing program to monitor social compliance in Shanghai
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
12 | PACTICS magaz ine
Known as Wave and running a small but highly entrepreneurial
taxi company he impressed Holten who used the young manrsquos
services whenever he was in Phnom Penh
Recognizing Waversquos potential Holten coaxed the enthusiastic
Khmer to relocate to Siem Reap and take a job with Pactics
in 2010
Waversquos responsibilities have developed since he was initially
tasked with helping prepare and maintain the companyrsquos first
converted shophouse-factory in Cambodia
Over the last three years the 31-year-old has used a positive
attitude and a knack for problem solving to develop a well-
rounded understanding of Pactics operations
Portrait of
0RGHUQGDampDPERGLDLV
ਭOOHGZLWKopportunity for
those able to adapt Well
suited to meet the challenges
of a changing landscape
Naing Vannoeun has a skill
set that was recognized
and recruited by Pactics
President Piet Holten
After heading to Shanghai for machine maintenance training
Wave has gone on to manage the shipping systems and deal
with day-to-day logistics
ldquoIt is very different to run a small taxi company than to be
standing in front of 100 people to have a meetingrdquo Wave says
about his progression within the company ldquoI am very happy to
work with a team with high knowledge that comes togetherrdquo
Smiling as he talks about the business and personal
development that he has experienced over the last three years
Wave is now looking forward to the future ldquoI want to have a
family and a small house to live in in Siem Reaprdquo he says
adding ldquoI want to work for Pactics for as long as they need merdquo
Wave
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 13
new factory -Hbrand
Siem Reap Cambodia
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
14 | PACTICS magaz ine
Yan Vanna has been working with Pactics ever since their
first small-scale shophouse was opened in Siem Reap The
dedicated mother of two was among the companyrsquos first
employees when Pactics first started production in Cambodia
An orphan before her eighth birthday Vannarsquos future didnrsquot
seem so bright She was sent to live with a family friend in
Siem Reap But with little money to go around and a guardian
who didnrsquot believe in education for women she was forced
out of school in the third grade a common fate for girls in
Cambodia Approximately 65 percent of women do not receive
an education beyond grade school and future employment
opportunities can be limited for women who find themselves
without schooling
Portrait of
ampRPSDQZLGHWUDLQLQJ
has her in the classroom
where she has always
wanted to be
Now the mother of two young boys Vanna has spent the
past three years working full time to provide them with the
educational opportunities and stability her own childhood
lacked With a stable jobndashone that offers insurance and public
holidays offndashVanna says that she has been able to carve out a
life for her family
Completion of Pacticsrsquo new factory complete with a day-care
room has Vanna hoping to spend more time with her children
Smiling broadly as she talks about providing for her sons
Vanna is equally excited about her own future Company-
wide workplace and labor regulation training have her in the
classroom where she has always wanted to be Learning
about employee rights and obligations as well as labor laws
has renewed her dedication to her job
YanVanna
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 15
Pacticsrsquo decision to build a factory in Siem Reapmdasha small town
thatrsquos also Cambodiarsquos most popular tourist destinationndashcreated
the ideal opportunity to apply the companyrsquos commitment to
corporate social responsibility to this new arena Piet Holten
Pacticsrsquo president was convinced that sustainability and ethical
working conditions would actually enhance the bottom line
ldquoTo us it made business senserdquo Holten explains ldquoWe are doing
a lot with our products to make them in a way that minimizes
the impact on the environment So it is a small step to make
them in an environmentally friendly buildingrdquo
To realize this vision he enlisted the help of Stuart Cochlin a
British architect based in Siem Reap Together their goal was to
create a factory that would showcase Pacticsrsquo commitment to
its customers its employees and the wider community
A factory thatrsquos both sustainable and low-cost
Pactics works to minimize the impact on the
HQYLURQPHQWLQWKHLUmanufacturing process It seemed
REYLRXVWKDWDQHZIDFWRUVKRXOGHPERGWKHVDPHJRDOV
Together Piet Holten and architect Stuart Cochlin created
DQHZWSHRIIDFWRULQampDPERGLDRQHWKDWLVERWKORZ
cost and sustainable
Holten says it was the architect who came up with many of
the specific sustainable elements for the building Cochlin had
previously worked on social housing projects in the United
Kingdom and has long had a deep interest in sustainability He
found a willing partner for his ideas in the Pactics management
As a result Pacticsrsquo new Siem Reap factory will include such
features as solar panels that provide electricity a well-water
filtration system and toilets that are flushed with harvested
rainwater
Cochlin saw the Pactics factory as an opportunity to
create a blueprint for responsible sustainable factories in
Southeast Asia
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
16 | PACTICS magaz ine
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 17
ldquoHaving worked in Cambodia for a number of years I had a good
understanding of local construction issues the culture and the
climaterdquo the architect says ldquoI tend to try and find simple low-
tech cost-effective and practical solutions much as NGOs do I
think this approach fits well with Pacticsrsquo requirementsrdquo
Just as important as environmental sustainability was the
environment for the factoryrsquos workers Piet Holten is convinced
that a workplace that is good for the employees is also good
for business ldquoIt was important to me to create a pleasant
place to work inrdquo ldquoThat has real and very positive business
implicationsrdquo
A good environment can help lower staff turnover and increase
retention he notes as well as reduce sick days and enhance
productivity
Holten and Cochlin wanted to design a factory that treated
its employees well and followed best practices for health
and safety while at the same time being financially viable
That meant finding smart solutions that would simultaneously
benefit the companyrsquos employees the environment and the
companyrsquos bottom line
ldquoIn the early stages of research I came across the
recommendations of the International Labour Organization
lsquoBetter Factories Cambodiarsquordquo Cochlin recalls ldquoThey called for
designing facilities with a focus on the well-being of employees
This approach helped inform part of the strategy for the Pactics
factoryrdquo
A typical Cambodian factory is little more than a metal shed with
artificial lighting and poor ventilation Holten and Cochlin were
determined to build a very different kind of facility One goal
was to use natural rather than artificial light and to have natural
cross-ventilation Natural daylight is not only more pleasant
for employees but also minimizes the cost of electrical power
Another goal was to include areas where employees could eat
learn care for their children and relax
Even the factoryrsquos location in Siem Reap would have a positive
impact Siem Reap is in a rural part of Cambodia from which
much of the countryrsquos industrial labor force is drawn and a
large portion of Cambodiarsquos factory workers are women
Locating in Siem Reap rather than in the more industrial capital
city of Phnom Penh would allow these women workers to stay
with their children rather than leave them with family while they
seek employment far from their home province Ultimately this
would help with staff retention
It was important to
create a pleasant place
to work in That has
real and very positive
business implicationsrdquo
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
18 | PACTICS magaz ine
Cochlin believes that part of good design is achieving design
goals within a stated budget Staying within budget targets
wasnrsquot always easy however Nonetheless Cochlin says that
he enjoyed the challenge of trying to set a positive benchmark
for building a new kind of factory in Cambodia
In the end the building cost about $250 USD per m2 compared
to the typical cost of $150 to $200 per m2 for a factory with no
insulation no natural light and poor ventilation The additional
building cost is offset by the savings on electricity by utilizing
sunlight and natural ventilation But building costs arenrsquot the
only thing that matters says Holten ldquoWhat is more important is
that we believe that our productivity is higher and that our staff
turnover is lower by offering a pleasant work environmentrdquo
Pacticsrsquo Siem Reap factory is bright and cool featuring natural
light and plenty of outside green space Itrsquos a world apart from
the hot stuffy factories typically found in Cambodia
Where most factories consist of a single large structure the
Pactics Siem Reap plant is broken up into several smaller
buildings ldquoThis brings the natural landscape into the heart
of the master planrdquo Cochlin explaines The buildings are set
around a large landscaped courtyard garden that helps reduce
ambient temperatures in the hot subtropical climate The
garden also provides a relaxing spot for employee breaks
Lit by indirect sunlight the buildings are positioned in a north
south direction to take advantage of Cambodiarsquos natural wind
patterns while shaded windows on the south sides and roof
ventilation on the north encourage a natural cross breeze
The structural engineering of the buildings was designed to
French standards and includes disabled access throughout as
well as disabled toilets Fire safety was also considered critical
and the one-story factory design allows for multiple fire exits
that lead directly to the outside
In addition the factory has an on-site cregraveche and nursing room
so that young women who work there can spend more time
with their children and are less likely to quit when they become
mothers The factory also has an open-air canteen a library
and computer room a dedicated medical room and a kitchen
that feeds the staff a subsidized nutritious lunch each day
Piet Holten believes that Pacticsrsquo Siem Reap factory will be
recognized as a model of sustainability and good business
practice ldquoI think wersquove proven that it can be donerdquo he says
factory
Whatmakes
a better
Corporate social
responsibility can
be achieved without
sacrificing financial
successrdquo
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 19
The publicrsquos perception due mainly to media coverage is that
the industry is a greedy exploiter happy to ruin workersrsquo lives
by condemning them to slave in dark satanic mills But to many
industry observers there are positive signs that the garment
trade is in a vigorous reformist stage albeit marred by slow
progress
The opening of Pactics Cambodiarsquos new worker-friendly factory
on March 22 is undeniably a good news story (especially for the
employees) but good news is certainly not ldquosexy newsrdquo in the
garment industry sector media coverage
Perhaps nowhere was this more evident than in news reports
about the March 17 launch of the International Labour
Organizationrsquos Better Factories Cambodia grouprsquos online
transparency database This was the first report of factory-
level compliance data and the ILO News press release was
headed ldquoTransparency drives improvements in factory working
conditionsrdquo That sounds remarkably like good newsndashbut not
Opinion Peter Olszewski
Is Cambodiarsquos garment industry so bad that itrsquos beyond
redemption or are there encouraging signs that the
industry is in fact redeeming itself with an agenda set
on reform
according to the English-language print media which ignored
the ILOrsquos positive spin and zeroed in on one of the negative
aspects revealed in the database ldquoFactory Flaws Go Liverdquo
headlined the Phnom Penh Post which said ldquoUnionists and
labour rights officials are applauding a website scheduled to go
live today that will hold to account garment factories that flout
Cambodiarsquos labour lawrdquo
The unionists may have applauded the outing of bad factories
on the website but unions involved in strikes also came up
wanting on the databasendashnot one of the nine unions and
federations named in the Union Compliance List passed
compliance with legal requirements for strikes with all of
them failing to provide the required seven daysrsquo notice to
management and to the ministry Itrsquos also interesting to note
that on March 7 the Garment Manufacturers Association in
Cambodia applauded the Ministry of Laborrsquos decision to start
requiring union leaders to prove they have a clean criminal
record before registering new branches
Acknowledge improvements in the garment sector
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
20 | PACTICS magaz ine
But with the database The Cambodian Daily also headlined
the negative aspect of the report zeroing in on the ten errant
workplaces in an article headlined ldquoILO Names Factories with
Poor Conditionsrdquo The Daily article did fleetingly note that while
ten factories were named and shamed ldquo30 factories were
found to have met all of BFCrsquos 21 lsquoCritical Issuesrsquordquo and the
article gave some coverage of the unionsrsquo low compliance But
in a subsequent article on March 21 the Daily again focused on
the naming of the ldquoworst factoriesrdquo seemingly suggesting that
the outing of poor performing factories was the driving agenda
of the database The article said ldquoThe initiative seeks to name
companies that persistently fail to comply with Cambodian
labor law and international standardshelliprdquo
Compare this to statements released by the ILO in a March
17 press release and attached documents The press release
stated ldquoOne third of the 51 factories included in the lsquoCritical
Issuesrsquo database made improvements on 21 basic legal
requirements in anticipation of their inclusion in this initial
report The total number of Critical Issues violations in the
group of factories fell from 59 to 34 between December 2013
and February 14mdasha 42 percent improvementrdquo In fact as the
release pointed out more than half the factories assessed
scored full points racking up no Critical Issue violations at
all That constitutes 30 factories or 59 percent of all factories
assessed
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 21
A data-based fact sheet stated that the objectives were firstly
to ldquoBuild the Cambodian garment industryrsquos reputation for
decent working conditions and keep pace with competing
industries where disclosure of ILO factory compliance will soon
be the normrdquo
The press release also featured two pie charts illustrating solid
improvements in performance on some critical issues One
pie chart showed that in relation to emergency evacuation
drills a July 30 2013 report showed compliance was 55
percent while the March 2014 transparency report showed
that compliance had risen to 77 A July 2014 report showed
this figure has edged up to 79 percent As for the payment
of seniority-related benefits compliance was 71 percent in
July 2013 and an admirable 94 percent in the March 2014
transparency report With the release of its second report
of factory-level compliance data dated July 3 2014 the
database more than doubled to 151 the number of factories
in the program totaling nearly one-third of Cambodiarsquos export
garment factories Of the 12 factories originally included in the
low compliance group three made 33 verifiable improvements
in recent months and have moved off the list One third of
the 92 factories added to the Critical Issues database in July
2014 made improvements and the number of Critical Issues
violations fell from 134 to 87 between April and June 2014mdasha
35 percent improvement Twenty-four factories were already in
compliance on all 21 of the basic Critical Issues requirements
and a further 19 factories moved into this group meaning that
43 factories listed no violations
While the improvements showed in the transparency reports
do reveal that positive measures have been taking place
it is certainly not the time to project that all the industryrsquos
considerable failings are on the mend And it must be noted
that two-thirds of Cambodiarsquos garment factories are not
included in the reports
But it would certainly be helpful if media coverage in particular
did at least acknowledge improvements are being made
instead of constantly reiterating horror stories emanating from
the sector
Peter Olszewski
Siem Reap Bureau Chief
Phnom Penh Post
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
22 | PACTICS magaz ine
In Search of People
QDIHZVKRUWHDUV3DFWLFVKDVJRQHIURPKDYLQJMXVWD
handful of employees in Siem Reap to more than 300 Despite
scaling quickly Pactics has made their priorityਭQGLQJWKHright people to become part of the Pactics family
The company has embraced the challenges of recruiting for a
brand-new factory and has focused on hiring locally In order
to have a positive effect on the surrounding community the
company must hire from within that same community Just
as the company canteen sources locally grown foods Human
Resources focuses their recruiting effort in the communes
nearest to the factory
In Cambodia garment factory workers often work far from
home commuting under unsafe conditions Flatbed trucks
filled with dozens of women packed in shoulder to shoulder
barrel along Cambodiarsquos roads taking employees to and from
work Workers complain that commuting costs are excessive
and serious accidents are not uncommon Pactics frees
employees from this sort of commute and also participates in
a safe travel program for employees
Company compliance with local labor laws is not a given in
Cambodia In fact it is a rarity Pactics by contrast scrupulously
follows local labor laws concerning salaries working hours
holidays and annual leave The company also provides sick
leave and health insurance as well as subsidized lunches and
a social responsibility program There is a disciplinary system
in place and employees are not terminated unilaterally (and in
fact the company has not yet had to lay off any production staff
since opening in 2010)
ldquoPactics provides job security a fair salary and a lot of benefitsrdquo
Corporate Social Responsibility and Human Resources Manager
Jack van Dokkum explains ldquoThat is very attractive in a province
that is the second poorest in Cambodia and that has otherwise
limited opportunities for fair wages for those who really need
that extra bit of incomerdquo
Despite its large tourist industry Siem Reap is one of
Cambodiarsquos poorest provinces and talented locals often
head to the capital Phnom Penh to seek employment As a
result Siem Reap has a large pool of low-skilled and unskilled
labor but finding skilled employees can be more difficult For
lower-skilled jobs the company advertises through word of
mouthmdashmany new hires are friends or relatives of current
employeesmdashas well as through a network of local NGOs and
on the companyrsquos Facebook page
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 23
When production line jobs are offered there are on average
ten applicants for every advertised position a testament to
Pacticsrsquo reputation in the local community
Skilled positions can be more difficult to fill Hospitality is the
primary employment sector in Siem Reap and there are few
candidates with production or technical experience To fill
positions in these areas Pactics must recruit more aggressively
This includes looking for candidates in Phnom Penh who are
originally from Siem Reap and might want to move back to be
closer to their families
For example Human Resources Administrative Assistant
Chanthou Hay was tapped for the job while working on
the production floor After earning a bachelorrsquos degree in
management in Battambang Hay had moved back to Siem
Reap to be with her mother and sister Initially unable to find
a job she removed her degree from her CV and applied for a
job at Pactics packing boxes on the production floor When the
management team discovered her qualifications they asked
that she apply for a job in the office and she was promoted to
Human Resources
Often though it makes more sense to find a candidate who
might not have previous experience but does have the right
skill set and company fit and train them for their new role
ldquoOne of our production managers used to be a bartenderrdquo van
Dokkum reveals ldquoNow he is organising the production lines
with a hundred employeesrdquo
Pactics is also committed to hiring from within Van Dokkum
ldquoWe prefer to find the right people on our own production
floor and assist them in stepping up to more responsible
jobsrdquo Another example is Sokha Soem who joined Pactics in
February 2014 and was promoted to Housekeeping Supervisor
in July Before she came to Pactics her career options and
earning potential in Cambodia were limited due to a disability
that makes walking difficult The promotion to supervisor was
a great achievement for Soem and her family And Pactics
benefited as well since she was the best of the applicants for
the role
Once hired new employees are put through a rigorous training
program that includes modules ranging from occupational
safety and job-specific training to leadership development and
health and hygiene ldquoItrsquos all part of giving people the right tools
to be successfulrdquo van Dokkum explains ldquoBecause if they are
successful they will also bring success to the companyrdquo
The employees at Pactics Siem Reap come to the company
with a varying range of skills experience and motivations
for working there But it does not take long for new hires to
become members of the Pactics family
ldquoMany Cambodians want to do something good for their
countryrdquo van Dokkum says explaining the appeal of working
at Pactics in Siem Reap ldquoOur factory offers excellence in
efficiency and quality together with social responsibility for
employees and community That is very rare in Cambodiardquo
Itrsquos all part of giving
people the right tools
to be successfulrdquo
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
24 | PACTICS magaz ine
The local Siem Reap population has little or no experience
working in a large production facility To close the broad gap
in the current workforcersquos knowledge base Pactics makes an
effort to school individuals on all aspects of employee life ndash from
the importance of arriving on time and maintaining a clean work
environment to basic health and safety practices
In addition to basic employee training the company has also
invested in SA8000 standards education (For more information
on SA8000 see p 27) The training aims to create a widespread
understanding of fair labor practices and their ability to secure
basic human rightswhile benefiting business ldquoTo me SA8000
criteria are really a matter of common decency The standards
and criteria of SA8000 are an excellent guideline for usrdquo says
Jack van Dokkum the corporate social responsibility and
human resources manager at Pactics in Cambodia
The construction of the new Pactics facility in Cambodia created
the unique opportunity to implement the training policies- and
procedures necessary to work towards the accreditation from
the get-gomdasha fact the company was eager to take advantage
of ldquoIt is an investment but it has a returnrdquo van Dokkum
explains ldquoIn a construction company with a good company
culture people automatically wear a safety helmet Culture is
much stronger than rules As we are starting up a whole new
company training is essential for us to ingrain awareness on
health and safety but also on quality and productivity issues
in the companyrsquos culturerdquo SA8000 certification would further
secure Pacticsrsquo position as responsible pioneers in Cambodian
factory ownership Pactics expects the Siem Reap factory to
meet the necessary criteria and be certified by 2015mdasha move
they hope gives them a competitive advantage in an industry
that has been marred by workplace abuses
The training is administered by a local non-governmental
organization based in Siem Reap and familiar with Cambodian
culture Van Dokkum believes the investment in training is a
natural step for the growing company The companyrsquos plan
Training our people
3DFWLFVLVWKHਭUVWFRPSDQ
to locate a factory in Siem
5HDS$QH[WHQVLYHHPSORHH
education program has been
VHWXSWRLQYHVWLQWKHORFDO
SRSXODWLRQौHFRPSDQ
is taking their position as
community trailblazers
to heart
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 25
moving forward takes into account that at least in the first year
10 percent of the workforce will be in the classroom receiving
additional education at any given time
While teaching the importance of labor laws workersrsquo rights and
responsibilities and safety regulations is vital to Pacticsrsquo long-
term plans the process is not always easy Adhering to proper
precautions is time-consuming which presents a conflict for
workers who are paid by the piece Longer production times
mean that individuals arenrsquot able to maximize their earnings
an issue the company continues to address In addition extra
supervision is required for new employees to ensure compliance
with the outlined rules since many workplace concepts are new
to them
ldquoTo date staff have been overwhelmingly receptive to the new
information though it will take time for the company to assess
how well the new concepts work in practicerdquo says van Dokkum
The training is expected to prepare staff for working in a
manufacturing company streamline factory processes and
ensure that Pactisrsquo rigorous workplace standards continue to be
met As a bonus the added education has had the unexpected
consequence of helping with employee retention
When they were children many of the Pactics employees were
either denied or couldnrsquot afford primary or secondary education
a shared history that means they appreciate the opportunity to
learn as adults
Many employees cite the educational opportunities as a reason
for staying loyal to the company
ldquoWhen I say to my friends what I am doing they are surprised
that a company has this classrdquo explains 25-year-old Yan Vanna
who has been with the company for three years ldquoThey like to
hear more about it and tell me they would like to join a company
that offers that kind of educationrdquo
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
26 | PACTICS magaz ine
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 27
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
28 | PACTICS magaz ine
Chhoat Makara knows an opportunity when he sees one
Originally hired at Pactics to knot the end of the drawstrings
that pull eyewear bags closed the 28-year-old has since used
his natural curiosity about how things work to create for himself
a position with both promise and growth
ldquoWhen I was a sewer I saw how difficult it was to find people
to repair the machinesrdquo he explained When the company
was finally able to find technicians to make the much-needed
repairs Makara keenly watched as the solutions unfolded
Slowly he gained enough knowledge to solve some of the
smaller more commonplace problems encountered by the
other machines
Eventually it became apparent to management that his skills for
repair work could be put to better use He became responsible
Portrait of
ChhoatMakara
There are new
things to learn
every dayrdquo
for making sure the sewing machines were kept runningmdasha
position that gave him the opportunity to study in Phnom Penh
ldquoIt was difficult for me in the beginning because I could only see
how to do some of the repairs and it was hard to find solutions
for new and more complex problemsrdquo Makara said about his
assumed responsibility ldquoNow I know more I try new solutions
There are new things to learn every dayrdquo
With the opening of the new much larger factory the eager
technician is looking forward to his growing future and the
challenges that working with new machines will bring ldquoThe
new machines with the new factory bring worries but I know I
can learn about themrdquo said Makara ldquoYou just try until you find
the solutionrdquo
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 29
SA8000 is the leading certification for corporate social
responsibility (CSR) You could call it the ISO standard in CSR
What SA8000 does beyond what most normal auditing systems
do (such as BSCI and FLA) is not merely take a one-point-
in-time measurement but look at the ability of a company to
manage and maintain a high level of social compliance Like
the ISO9001 quality system it requires a strong focus on our
management system
Why pursue SA8000 certification in CambodiaFor us the implementation of SA8000 is an investment in the
future It is the highest available standard and acts as a guide for
the industry We donrsquot take a back seat in these developments
We want to be out in front Moreover opening a factory in a
poorly regulated country such as Cambodia simply requires
us to take a high level of responsibility ourselves SA8000 is
very good at defining that responsibility For our customers this
means that we offer them a first-class production facility in a
low-cost location The Siem Reap factory meets the highest
demands in supply-chain management and compliance for our
brand customers
Pactics and SA8000
Opening a factory in a poorly regulated country such
as Cambodia simply requires us to take a high level of responsibilityRXUVHOYHV
Martijn van Rijnsoever Chief Sustainability Officer Pactics Group
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
30 | PACTICS magaz ine
For us it is one of the most rewarding projects to be involved
in in this line of work The motivation enthusiasm and positive
effects both inside and outside the company make us incredibly
proud of our work
Implementation in CambodiaImplementation of SA8000 in a brand-new factory has both
advantages and disadvantages Amongst the advantages is
that we do not have an existing culture and existing habits
that we need to change We started with a clean slate and
implementing the SA8000 standards is foremost a matter of
building and less of changing Building generally is perceived
as a more rewarding and positive activity than changing
The disadvantages are that SA8000 is a huge amount of work
It requires policies knowledge of laws and regulations all kinds
of procedures and management tools monitoring and reports
It requires a high commitment of management and a strong
management review system that makes sure that we can
maintain and update the policies tools and procedures that
together realize our social compliance In addition it requires a
lot of all our employees as it is a lot about culture and behavior
is why in the start-up phase we invest so much in training (see
p24)
All this is required at a level that one would normally not expect
from a start-up factory SA8000 is for us a strong push for
professionalism that has a good spin-off in all aspects of
management
So what about ShanghaiIn Shanghai we never rest Although we are not (yet) pursuing
SA8000 certification in Shanghai we are constantly improving
our social compliance We get audited very regularly and each
time we learn a little bit more Besides that we keep close
alignment with the developments in our Cambodia factory Very
recently we got approved as an adidas supplier which is like
a certification in itself We are currently talking to some of our
customers about whether the BSCI auditing scheme would
be an option to manage and monitor our social compliance
BSCI is based on the SA8000 standard so for us it would fit
perfectly
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 31
Being a responsible employer is key to Pacticsrsquo way of
doing business To ensure they are offering decent and fair
employment to the local community Pactics has engaged a
local non-governmental organization (NGO) to help direct wage
levels and provide an expert objective opinion
In an effort to learn more about the cost of living in Siem Reap
Pactics is cooperating with ConCERT a social enterprise based in
Siem Reap ConCERT is closely connected to local communities
the environment and responsible businesses ConCERT
gathers data on cost of living in the city This information will
Pactics enlisted ConCERT to execute a local living wage research
Cambodiarsquos garment and textile industry is ripe
for change poor work
conditions and low wages
led to increased labor
XQUHVWLQGXVWUZLGHLQ
WKHਭUVWPRQWKVRI
be used to guide appropriate pay rates for entry-level factory
labor Offering a wage that allows employees to meet their
basic needs supports the companyrsquos commitment to being a
responsible employer while helping develop the community
ConCERT has been active in Siem Reap since 2008 working
to direct tourist dollars in the most positive and sustainable
way possible Siem Reap is the place where Cambodiarsquos most
famous temples are located and the Angkor Wat complex
receives around 3 million tourists per year Most tourists only
stay for a couple of days but they see the enormous poverty
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
32 | PACTICS magaz ine
and want to offer help to the local communities It is ConCERTrsquos
mission to turn peoplersquos good intentions into the best possible
help for the most vulnerable people in Cambodia Michael
Horton the chairman and founder of ConCERT sees working
with Pactics and the first factory to open in Siem Reap as a
win-win scenario
ldquoYou canrsquot help but be impressed with how they go about trying
to be fair and equal employers Their whole way of operating is
socially responsiblerdquo said Horton ldquoIt is an opportunity to add
another dimension to what we can offer the local communitiesrdquo
With no standard in Cambodia to help guide salary levels
it can be difficult to gauge what is appropriate for unskilled
laborers The government set the unenforced minimum wage
at $100 during the election in 2013 but at this moment there
are no mechanisms to enforce this There is thus no guarantee
that employees will be compensated fairly Private industry
partnerships with experienced NGOs could help ensure that
industry transforms for the better Horton noted
ConCERT has designed and distributed a survey to study
how cultural differences such as family living situations and
shopping and saving habits affect required income levels
ldquoWe are here to present Pactics with the data to make a
decisionrdquo said Horton who feels itrsquos a positive step to be
collaborating with the private sector ldquoPactics is the first and so
far only company with a factory in Siem Reap I would love to
see more partnerships with NGOs and responsible companies
We are happy that Pactics reached outrdquo
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 33
Our new factory near the Cambodian Cultural Village is almost ready It looks great already but once the landscaping is done it will be fabulous
The magic of the new factory is that you can actually see the palm trees when you are in the factory halls And the natural ventilation is working in this season it remains pretty cool inside
Trying out the new cleaning machine for the factory floors Itrsquos a bit strange in the beginning but our cleaners seem to get the hang of it quickly
At Pactics we have our own water filtration system to provide safe drinking water to our staff
Operations are starting in the new factory hall in Siem Reap A small team is already working in our brand new factory Proud to see it all happening
On Sunday December 1st 106 Pactics Cambodia employees ran in the Angkor Marathon on 3 and 10 km They were sponsored by the company to raise funds to help the victims from this yearrsquos flooding in Siem Reap Together they collected over $1000
Today we started our Helmet Action we pay 50 of a quality helmet for everybody on a motorbike The helmets have a nice colour so soon The Blue Helmet is conquering Siem Reap
PACTICS Cambodia October 21 2013
PACTICS Cambodia October 27 2013
PACTICS Cambodia December 4 2013
PACTICS Cambodia December 13 2013
PACTICS Cambodia November 22 2013
PACTICS Cambodia December 2 2013
PACTICS Cambodia December 9 2013
OKT2013
NOV2013
DEC2013
Pactics Cambodia
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
DEC2013
JAN2014
Currently all 150 employees of Pactics Cambodia receive a basic training on Social Accountability Awareness is the first step in the process of SA8000 certification and in the training (created by The YES Center in Siem Reap Cambodia) We discuss mutual responsibilities on different topics like health safety working hours representation and many more
PACTICS Cambodia December 17 2013
The blue Pactics helmets are so popular that our local supplier (at Psar Kraom) cannot keep up with the orders We hope that in 2014 the road to and from the New Factory will be dotted with a Blue Parade every morning and afternoon
Next Monday the office will move to the new factory On the last day that we will work in the old office at Psar Kraom some staff decided to give the GM (formerly CEO) his own official parking space And yes he liked it
One last picture of the blessing last Sunday the tuktuk (driven by the future husband of one of our HR staff) goes back to Wat Damnak with its revered passengers
PACTICS Cambodia January 2 2014
PACTICS Cambodia January 16 2014
PACTICS Cambodia January 31 2014
We have officially been ldquostickeredrdquo for using Biodiesel The blue monster now runs on reused cooking oil that previously made fried bananas
Even in our new factory some things are slightly off balance But thatrsquos just reality not everything in life is straight and balanced
PACTICS Cambodia January 15 2014
PACTICS Cambodia January 30 2014
34 | PACTICS magaz ine
Pactics Cambodia
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 35
FEB2014
Our latest recruitment resulted in over 200 interested candidates We spent two whole days informing and selecting to find the 43 new staff that started working this week We welcome them and wish them a productive career at Pactics Cambodia
And of course welcome to all new employees in the Old Factory at Psar Kraom We wish you a happy time at Pactics too
The garden is starting to grow and flower we already have two roses near the canteen We hope next year the factory will resemble a botanical garden in spring time
PACTICS Cambodia February 5 2014
PACTICS Cambodia February 16 2014
PACTICS Cambodia February 12 2014
Welcome to all our new employees After our February recruitment this is the result in the New Factory at Phum Kruos We wish you a happy time at Pactics
Pactics Cambodia volunteered with 60 employees in the Giant Puppet Project Siem Reap as security guards The parade was a big success and afterwards we all had a late dinner
The new notice board seems to be working )
PACTICS Cambodia February 16 2014
PACTICS Cambodia January 24 2014
PACTICS Cambodia February 7 2014
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
36 | PACTICS magaz ine
Before Kong Chanrotha started at Pactics she wasnrsquot happy
She was a trained Apsara dancer but her previous employment
as a housekeeper left her too tired to perform the evening
shows she speaks so passionately about After quitting the
hotel job she moved in with her brother outside of Siem Reap
It was there that she was presented with the opportunity to
learn basic sewingmdasha skill she picked up and used to turn
her life around
Returning to Siem Reap with her new skill set Chanrotha was
able to secure a job with Pactics Immediately drawn to the
positive work environment she found herself thriving in the
supportive team atmosphererdquo
ldquoI focused on the best things I can share while working with
friends and every day I am happy to come to work and see the
other girlsrdquo she said ldquoThis is a great experiencerdquo
After an illness landed her in the hospital the 23-year-old
Portrait of
credits regular visits from her colleaguesmdashor her work family
as she calls themmdashwith raising her spirits and helping her get
better Gainfully employed with Pactics for the last three years
Chanrotha has found herself able to return to her first passion
mdashclassic Khmer dancing
ChanrothaKong
Sometimes I am
still tired but it is
better now There
is something that
motivates me insiderdquo
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 37
Transparency International Cambodia exists in order to promote
integrity and fight corruption for the benefit of individuals and
businesses alike This represents a critical task in a country
where corruption and bribery are perceived to be amongst
the worst in the world In Transparency Internationalrsquos 2013
Corruption Perceptions Index Cambodia ranked 160th out of 177
countries and territories surveyed While Cambodia is a signatory
to the UN Convention on Combating Bribery (UNCAC) and has
anti-corruption laws in place these have been inadequately
implemented and enforced to date Considerable evidence
points to the fact that corruption is a significant impediment to
doing business in Cambodia
According to TI Cambodiarsquos recent consultation with business
key areas of concern in relation to exposure to bribery and
corruption are broadly consistent with those in other developing
economies around the world These include dealing with
third parties and agents facilitation payments gifts and
entertainment and unseen costs in procurement and human
resources management Companies in Cambodia are also
increasingly concerned about complying with foreign bribery
TI Cambodiarsquos Business Integrity Program
$VSDUWRIDQHZLQLWLDWLYHODXQFKHGLQ7UDQVSDUHQF
International Cambodia is now working directly with
businesses that want to take action to stop corrupt practicesDQGOLPLWWKHLUH[SRVXUHWRWKHFRVWVDQGother risks associated with bribery and corruption
legislation that can apply to their operations in Cambodia even
if there are only relatively minor links back to the enforcing
country The US Foreign Corrupt Practices Act and the UK Bribery
Act are the most well-known laws but all OECD countries and
increasingly other countries are adopting similar laws Penalties
can be severe and companies are also responsible for offenses
committed by third parties and agents
As part of its recently initiated Business Integrity Program TI
Cambodia is helping businesses adopt appropriate policies and
procedures to comply with local and international anti-bribery
laws and to clean up corrupt behavior within their operations
These services are also being offered by other Transparency
International chapters in the region led by a pioneering initiative
from Transparency International Malaysia which continues to
engage a rapidly expanding number of companies that want to
take action to eliminate corrupt practices
TI Cambodia is excited to work with Pactics and welcomes
the companyrsquos enthusiasm for implementing policies to tackle
corrupt practices throughout its operations in Cambodia
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
38 | PACTICS magaz ine
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 39
Better together HHYROXWLRQRIPactics
Pacticsrsquo original production facility in Shanghai long
the companyrsquos headquarters is taking on a new role
Now that Pactics Siem Reap is fully scaled as a high-volume
factory the Shanghai operation is evolving into a nimble and
innovative center of excellence and expertise Shanghairsquos
development is in turn scaling up the capabilities of the entire
company
When Pactics was founded Shanghai was the one-stop hub
for all Pactics manufacturing large- or small-scale The Siem
Reap factory first opened in 2010 has since evolved into a
mature facility capable of taking over much of the companyrsquos
large-volume output That has allowed Shanghai the flexibility
to grow into a specialist facility focused on production
development speed technological development and high
levels of customization
Pactics is leveraging the Cambodia factoryrsquos strengthmdashlow-
cost high-volume production of simpler productsmdashto allow
Shanghai to focus on more complex tasksrdquo Shanghai acts
as the brains of the operationrdquo explains Ralph Wu operations
director in Shanghai
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
40 | PACTICS magaz ine
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 41
ldquoWersquove established one flat organization with experts from
different fieldsmdashfor example material development and
sourcing automation new product developmentmdashand a
continuous-improvement culturerdquo
While the Siem Reap facility is taking over the mass production
side of the business Shanghairsquos small project teams and
advanced technologies can handle shorter lead times smaller
quantities and new methods ldquoHere we focus on product
development supply-chain management new-product trial
runs and new and customized equipmentrdquo Wu says
Over the past year the Shanghai factory has risen to the
challenge of change as it turned from being a low-cost
manufacturing unit into an increasingly specialized and
technically oriented operation
Today Shanghai not only oversees sourcing quality control
account management and sales for all of Pactics but it also
handles production of more complex products and small custom
orders as well as new product development involving a variety
of cutting-edge printing and other high-skill technologies
Asked how Pactics Shanghai was able to tackle such a daunting
transformation the management team credits the hard work
and commitment of the employeesrdquoWersquove gone through a lot
of change and dealing with change isnrsquot always easyrdquo says
Vice-President of Business and Product Development Erwald
Boer ldquoWe are very fortunate that we have been able to keep
an experienced group of people and further improve the team
with new enthusiastic people Together they form the core of
our Shanghai factoryrdquo
Wu says he is particularly proud of the collaborative spirit that
has fueled the Shanghai facilityrsquos evolution ldquoOur staff has built
a culture of continuous improvement into their daily workrdquo he
says That means a commitment to constantly challenge each
other to question processes and seek improvements while
maintaining high quality standards ldquoThe people here take
responsibility for their work and embrace teamworkrdquo
The Shanghai factory smaller leaner and more seasoned than
its younger Siem Reap sister can provide quick turnaround
times for specialized small-batch samples It can readily
handle orders for products such as microfiber gloves and
jewelry pouches that require more complex processes and
equipment such as digital printing and sublimation
The people here
take responsibility
for their work and
embrace teamworkrdquo
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
42 | PACTICS magaz ine
Its location offers first-class logistics allowing rush orders to
reach US and European customers within only a few days
The Shanghai factory and its staff can also draw on a wealth
of know-how Years of involvement with transfer printing plus
constant efforts to seek out improvements have allowed
Pactics Shanghai to put together the best set of variables for its
processes Those include biodegradable inks the newest most
agile software and the newest and fastest printer on the market
ldquoShanghai is an experienced factory It has been operating for
many years and is strong in engineering new productsrdquo says
Martijn van Rijnsoever the deputy general manager of the
Shanghai factory ldquoSo we implement innovations in materials
products and production processes quite easilyrdquo
While employees in Cambodia may be assigned to groups
that work on the same product for several days Shanghai
now has the expertise and flexibility to handle rapid changes
in production Each team member in Shanghai may work on
different products every few hours or even change job roles
completely Operations may vary day to day and change on
short notice particularly when time-sensitive rush custom
orders come in an arena that is becoming one of the Shanghai
facilityrsquos specialties
That agility reflects Chinarsquos more developed manufacturing
environment ldquoIn China everyone and everything is nimblerdquo
says van Rijnsoever ldquoNobody expects next year to be the same
as this yearrdquo It also reflects Pacticsrsquo long-term investment in its
processes and its people he adds ldquoWe are investing strongly in
our systems to be ever more flexible and ever more responsive
to our customersrdquo
Most of all Pactics Shanghairsquos evolution has been made
possible by the experience and technical skills of its employees
That in turn allows Pactics Shanghai to support the Cambodia
factory as it scales
ldquoShanghai sets themselves apart with their knowledge of
equipment operation and maintenance and of production
processesrdquo says Boris Ploum the general manager of Pactics
Cambodia Boer agrees ldquoIn Shanghai we can benefit from the
easier access to talented people the access to materials and
a great infrastructurerdquo he says ldquoThis allows us to focus on
product development small series and a quick set-up of first
series of bulk production which we can eventually move to
Cambodiardquo
Thus sample products developed in Shanghai may later be
produced in mass quantities in the Cambodian factory When
process improvements are initiated in Shanghai that expertise
is then shared with Siem Reap Certain safety initiatives such
as the move to ban all carcinogenic content by switching to
biodegradable inks are initiated in Shanghai as well The
Shanghai facility is becoming a learning and testing center
that will over time transfer training and knowledge to its
Cambodian counterpart
This ability to work in tandem and develop parallel workstreams
benefits both facilities and is building a stronger company
ldquoUrgent small orders with a special designmdashfor example for
a short-term sales campaignmdashare rush shipped by air out
of Shanghairdquo says Ploum ldquoAt the same time a full container
of high-volume standard products is being shipped from
Cambodiardquo By letting Shanghai and Siem Reap each play
to their strengths Pactics achieves better outcomes for all
stakeholders from customers to production-floor employees
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 43
Set up according to the report ing guidel ines of the Global Report ing In i t iat ive
CSR Report
planet - people - prof i t - principles
PACTICS
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
44 | PACTICS magaz ine
1 Strategy and Analysis
Pactics produces a low skill labor intensive product Production of these products takes place in low wage countries There is a constant pressure to move to even cheaper locations That is an undeniable dynamic in our industry We ourselves have already moved from Mexico to China And with rising wages here there is again pressure on our business
Pactics does not compromise to its bottom line so the pressure cannot be translated in lower wages more working hours or other savings on basic working conditions Our strategy to stay in business and keep our CSR level up is threefold First of all we invest in a more efficient production Both in actual productions as in management systems we try to automate as much as possible Secondly we look for clients that want a higher added value product As this is our competitive advantage Either they are more complicated products or products appreciated for its CSR compliant production The third is that are already moving part of the most labor intensive processes to Siem Reap Cambodia Life in Siem Reap is much cheaper than Shanghai which translates in lower wages This allows to remain faithfull to our bottom line In Siem Reap we are implementing SA8000 thereby making this factory a front runner in compliant low cost production
Our Shanghai facilities see year-over-year improvements We improve on elements like policy training and awareness We use the developments in Siem Reap to the advantage of Shanghai Moreover we see our customers are taking steps to more sustainability in the supply chain which we consider as proof that our strategic focus on CSR is the right focus for the future
Piet HoltenPresident
2 Organization Profile
3 Name of the organization Headquarter
Subsidiaries
NB this CSR report covers the Pactics Shanghai CO Ltd subsidiary
4 Primary brands products andor services The reporting organization should indicate the nature of its role in providing these products and services and the degree to which it utilizes outsourcing
The worldrsquos largest manufacturer of microfiber products for the eyewear industry We also develop and produce (microfiber) products for the jewelry fashion sports and electronics industry
Examples of products we make
jewelry etc)
electronics etc
cases etc)
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 45
4 Imaging techniques
Materials
soft cases (outsourcing)
5 Location of organizationrsquos headquarters Headquarter
Main office
6 Number of countries where the organization operates and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report
production and sales
production
7 Nature of ownership and legal form Privately owned limited company (PacticsShanghai Co Ltd has a WFOE status)
8 Markets served (including geographic breakdown sectors served and types of customersbeneficiaries)
Luxury and sport goods Eyewear garment electronics jewelry Geographic breakdown1 USA 512 Europe 343 Asia 15
9 Scale of the reporting organization including
revenues (for public sector organizations)
and equity (for private sector organizations) and
1 Employees 143 (end 2013) 2 Operations 1 in Shanghai3 Quantity of products (total 2013) 39 million
products (25 million cloths and 14 million bags)
10 a Report the total number of employees by employment contract and gender
b Report the total number of permanent employees by employment type and gender
c Report the total workforce by employees and supervised workers and by gender
d Report the total workforce by region and gender
Measure point end 2013Total workforce 143Male 29Female 114Fulltime 140Parttime 3Urban 16Migrant 119Foreigner 8
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
46 | PACTICS magaz ine
10 e Report whether a substantial portion of the organizationrsquos work is performed by workers who are legally recognized as self-employed or by individuals other than employees or supervised workers including employees and supervised employees of contractors
f Report any significant variations in employment numbers (such as seasonal variations in employment in the tourism or agricultural industries)
Over 2013 Min 143 workers Max 269 workers
RegionChongqing 1Shanxi province 2Sichuan province 11Shanghai 5Shandong province 1Neimenggu 1Guangxi province 1Jiangsu province 8Jiangxi province 4Jilin province 1Hunan province 6Hubei province 5Anhui province 66Henan province 22Gansu province 1England 2Italy 1The Netherlands 5
11 Report the percentage of total employees covered by collective bargaining agreements
No collective bargaining agreement in force
12 Describe the organizationrsquos supply chain Pactics has the following material suppliersFabric suppliers 13Cord suppliers 5Label suppliers 5Packaging suppliers 13Ink and paint suppliers 11Thread supplier 1Generally our suppliers are small Except for one Japanese ink supplier they are all local companies
13 Significant changes during the reporting period regarding size structure or ownership including
facility openings closings and expansions and
capital formation maintenance and alteration operations (for private sector organizations)
We have changed our production setup from two facilities and moved all our production into the same location
14 Awards received in the reporting period No rewards received
15 List externally developed economic environmental and social charters principles or other initiatives to which the organization subscribes or which it endorses
CSR policies and activities
group
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 47
16 List memberships of associations (such as industry associations) and national or international advocacy organizations in which the organization
membership dues
This refers primarily to memberships maintained at the organizational level
We are active in the Dutch-Shanghai CSR network as founders of a textile CSR workgroup and speakers at events
3 Identified Material Aspects and Boundaries
17 a List all entities included in the organizationrsquos consolidated financial statements or equivalent documents
b Report whether any entity included in the organizationrsquos consolidated financial statements or equivalent documents is not covered by the report
We have not created a consolidated financial statement for Pactics group
18 Explain the process for defining the report content and the Aspect Boundaries Explain how the organization has implemented the Reporting Principles for Defining Report Content
Pactics chooses the lsquoin accordancersquo - core option As a small company we found the reporting burden of more extensive options too high
19 List all the material Aspects identified in the process for defining report content
We believe our main impact is social and not environmental Good CSR practice is important for both our employees and our brand customers Although we believe our main impact is social and not environmental our customers require a larger focus on environmental management and reporting this year
20 21 22 23
Not included in report
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
48 | PACTICS magaz ine
4 Stakeholder Engagement
24 25
Provide a list of stakeholder groups engaged by the organization
For the writing of this report we did not engage stakeholders
26 27
Report the organizationrsquos approach to stakeholder engagement including frequency of engagement by type and by stakeholder group and an indication of whether any of the engagement was undertaken specifically as part of the report preparation process
Pactics is situated in an industrial area in Pudong Shanghai We have no active engagement with the community
5 Report Profile
28 The reporting period of this report is 1st Jan 2013 to 31st Dec 2013
29 This is the second CSR report Pactics publishes The previous report was published on 1st October 2012
30 Pactics plans to publish its CSR report on an annual basis
31 For further information on Pactics CSR policies please contact Martijn van RijnsoeverChief Sustainability Officer martijnvanrijnsoeverpacticscom
32 GRI lsquoin accordancersquo - core option
33 No external assurance was sought in writing this report
6 Governance
34 Pactics Group HQPresident amp owner | Piet HoltenGeneral Manager | Erwald Boer - Chief Finance Officer | Koen Laan - CSO | Martijn van Rijnsoever - Senior Manager | Silva Gu - Business Development Manager | Diederik Damen - Business Development Manager | Paula Webster - Junior Account Manager | Salvatore Contino - Information Manager | Thomas Hermans
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 49
Factory in ShanghaiOperations Director | Ralph Wu - Production manager | Kyle King - Automation amp Maintenance manager | Gavin Guo - PMC manager | Nancy Hao - QE manager | Carson Hu - Purchasing manager | Daniel Gu - Sourcing manager | Austin Zou - Finance manager | Shirley Fu - HR manager | Leyli Chen
7 Ethics and Integrity
56 EthicsPactics has a code of ethics that describes the general company Values These company values are in line with CSR standards that refer to ILO conventions Our values are reflected in our policies and company culture
8 Specific standard disclosures economic
A Economic Performance
NC Content Comments
EC 1 Direct economic value generated and distributed We choose not to report our financial data
EC2 Financial implications and other risks and opportunities for the organizationrsquos activities due to climate change
Our operation has no material impact from Climate Change
EC3 Coverage of the organizationrsquos defined benefit plan obligations
We have no benefit plan in place besides the required social benefits we pay
EC4 Financial assistance received from government We have not received any government assistance
B Market Presence
EC5 Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation
paid at 120 of minimum wage - No Gender distinction - overtime paid according to regulations
minimum wage - no Gender distinction - overtime paid according to regulations
our production lines are compensated based on a minimum wage + skill premium standard This standard determines what our piece rate is set to So the average skilled worker will be able to earn 130 of minimum wage
100 out of 134 people in our operations department are working according to this arrangement
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
50 | PACTICS magaz ine
EC6 Proportion of senior management hired from the local community at significant locations of operation
25 of significant are Chinese75 of significant are foreigners
C Indirect Economic Impacts
EC7 Development and impact of infrastructure investments and services supported
Not applicable
EC8 Significant indirect economic impacts including the extent of impacts
Pactics Shanghai is a small company amongst many in an industrial zone near Shanghai We employ mostly migrant workers that have moved from other parts of China to Shanghai The objective is often to stay in Shanghai for several years to earn money and then return to the home town Our impact on these people is that we are able to offer them a proper and pleasant work environment and proper wages and benefits This way we reduce their susceptibility to risk due to ldquolivesrsquo eventsrdquo like sickness and accidents Moreover we hope to set a standard for the local labor market and judging by the people that return to us after trying different jobs we succeed in setting a higher standard
D Procurement Practices
EC9 Proportion of spending on local suppliers at significant locations of operation
Pactics Shanghai procures most of it materials (gt 90) locally We define local as in the same or directly adjacent provinces in China
9 Environmental
EN1 Materials used by weight or volume Usage of microfiber cloth 387366 kgrecycled microfiber 290 kg string 5389 kgprinted labels 5022051 pcsPolybags 288961 pcs
EN2 Percentage of materials used that are recycled input materials
lt1 of material used is recycled
EN3 Energy consumption within the organization Pactics used 45775133 KwH electricity during the reporting period
EN4 Energy consumption outside of the organization No data available
EN5 Energy intensity Energy ratio 085 kg of processed material per KwH of electricity
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 51
EN6 Reduction of energy consumption Energy ratio last report 046 kg of processed material per KwH of electricity So no reduction
EN7 Reductions in energy requirements of products and services
No data available
EN8 Total water withdrawal by source In total Pactics used 686 cubic meter water during the reporting period
EN10 Percentage and total volume of water recycled and reused
No data available
EN15 Direct greenhouse gas (GHG) emissions No data available
EN16 Energy indirect greenhouse gas (GHG) emissions No data available
EN17 Other indirect greenhouse gas (GHG) emissions No data available
EN18 Greenhouse gas (GHG) emissions intensity No data available
EN19 Reduction of greenhouse gas (GHG) emissions No data available
EN22 Total water discharge by quality and destination In total Pactics used 686 cubic meter water during the reporting period It was all discharged into the sewer
EN23 Total weight of waste by type and disposal method 1 The waste of Pactics includes inks paint fibers paper etc
2 Pactics classifies waste by hazardous and non-hazardous
3 Method of disposal - hazardous waste is send back to original
suppliers - non-hazardous waste is sold to recycling
agents
EN28 Percentage of products sold and their packaging materials that are reclaimed by category
We are a supplier company the recycling of the finished products is not in our control
EN29 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations
We have not received any fines or sanction
EN30 Significant environmental impacts of transporting products and other goods and materials for the organizationrsquos operations and transporting members of the workforce
We make use of sea and are shipments between our locations and to our customers in the EU and US We have no data available on the environmental impact
EN32 Percentage of new suppliers that were screened using environmental criteria
None
Innova t ion you can t rus t | 51
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
52 | PACTICS magaz ine
EN33 Significant actual and potential negative environmental impacts in the supply chain and actions taken
The major environmental impact in our supply chain are the dye factories where the microfiber (main raw material) is dyed This is not in our direct control as our microfiber supplier has the contract with the dye factory and we buy lsquofinishedrsquo microfiber We believe the dye factories that are used by our microfiber supplier are of low quality and compliance We have found alternative dying techniques in south-east Asia but these will come with a cost Ultimately it is our customer that needs to decide whether we can pursue a cleaner supply chain We are in contact with our main customers about this issueActual impact assessments are beyond our business scope
EN34 Number of grievances about environmental impacts filed addressed and resolved through formal grievance mechanisms
None
EN9 EN11 EN12 EN13 EN14 EN20 EN21 EN24 EN25 EN26 EN27 EN31
Not applicable
10 Social
Labor practices and decent work
LA1 Total number and rate of new employee hires during the reporting period by age group gender and region
Employee number 143 (end of 2013) Interns 2The total number of new employee hired during the reporting period is 190 19 of them (10) are male and 171 of them (90) are female The total number of new employee leaving during the reporting period is 127 9 of them (7) are male and 118 of them (93) are female
LA2 Benefits provided to full-time employees that are not provided to temporary or part-time employees by significant locations of operation
We offer all people working for the company the same benefit package
LA3 Return to work and retention rates after parental leave by gender
We have not received any parental leave requests Although we offer this option employees choose to resign and return to their hometown
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
I nnova t ion you can t rus t | 53
LA4 Minimum notice period(s) regarding operational changes including whether it is specified in collective agreements
Pactics strives for active communication between management and workfloor Changes that impact wages are always notified one month in advance
LA5 The percentage of the total workforce represented in formal joint management-worker health and safety committees
Pactics has no formal health and safety committee
LA6 Type of injury and rates of injury occupational diseases lost days and absenteeism and total number of work-related fatalities by region and by gender
1 5 injury cases during the reporting period (injury rate (IR) 35)
2 No occupational diseases occurred and Pactics provides employees a free physical examination every year
3 Injury reports are discussed in the MT corrective actions are defined and executed
LA7 Workers with high incidence or high risk of diseases related to their occupation
No such risks exists in our operations
LA8 Health and safety topics covered in formal agreements with trade unions
None
LA11 Percentage of employees receiving regular performance and career development reviews by gender and by employee category
Total employees 14370 piece rate operators receive a productivity bonus
(piece rate)23 time wage operators receive a monthly bonus based
on a mix of quantitative and qualitative performance objectives
28 lower and middle managers receive a monthly bonus based on a mix of quantitative and qualitative performance objectives
11 office administration employees get reviewed but no bonus
11 managers and senior managers get annual reviews and performance bonusses
LA12 Composition of governance bodies and breakdown of employees per employee category according to gender age group minority group membership and other indicators of diversity
29 male 114 female
Under 30 years old 70 (48)11 of them (16) are male59 of them (84) are female
30-50 years old 69 (47)15 of them (22) are male54 of them (78) are female
Over 50 years old4 male (3)
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA
54 | PACTICS magaz ine
LA13 Ratio of basic salary and remuneration of women to men by employee category by significant locations of operation
The basic salary is the same between male and female employees The ratio is 11
LA15 Significant actual and potential negative impacts for labor practices in the supply chain and actions taken
Most of the production companies in our supply chain have a low level of compliance to general CSR standards Health and safety is not well managed remuneration and other labor rights are mostly not up to par We see this is a general issue in the textile supply chain
LA16 Number of grievances about labor practices filed addressed and resolved through formal grievance mechanisms
We donrsquot have any complaint records
Sub-category human rights
HR12 Number of grievances about human rights impacts filed addressed and resolved through formal grievance mechanisms
None
Society
SO11 Number of grievances about impacts on society filed addressed and resolved through formal grievance mechanisms
None
Product responsibility
PR9 Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services
None
Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh
LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA