pactics csr magazine #2

56
PACTICS Innovation you can trust Better Corporate social responsibility report Siem Reap, Cambodia together

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Corporate Magazine published Q1 2015 includes CSR Report 2013

TRANSCRIPT

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

Contactwwwpacticscominfopactics-cncomwwwfacebookcompacticskh

LocationsSiem Reap CambodiaShanghai ChinaHong KongVelp The NetherlandsTucson USA