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The electronic version that is maintained on Li & Fung’s website is the only controlled document. Printed copies are deemed not to be controlled and may be out of date.

January 1, 2012

Supplier ComplianCe

manual

li & Fung limited Supplier Compliance manual

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TABLE OF CONTENTS

Introduction 5

Li & Fung Code of Conduct 6

Li & Fung Code Standards 7

General Requirements 7

Laws, Rules and Regulations 7

Internal Policies and Procedures 7

Court Orders 7

Voluntary Labor 7

Prison Labor 7

Bonded and Indentured Labor 7

Free to Resign 8

Human Trafficking 8

Freedom of Movement 8

Foreign and Migrant Employees and 8 Recruitment Agencies

Contracted Foreign Employees 9

Working Age 10

Minimum Working Age 10

Age Verification 10

Juvenile Employees 10

Child Labor Remediation 10

Additional Documentation 11

Fair and Equal Treatment 12

Abuse and Harassment 12

Discrimination 12

Women’s Rights 12

Grievance Process 13

Disciplinary Measures 13

Termination and Retrenchment 13

Wages, Benefits and Terms of Employment 14

Policy and Communication 14

Regular and Overtime Wages 14

Pay Slips 14

Deductions from Wages 14

Payment of Wages 15

Social Benefits 15

Holiday and Leave Benefits 15

Employment Contracts 15

Documentation 16

Working Hours 16

Hours of Work 16

Overtime Hours 16

Rest Days 16

Breaks 16

Time Keeping System 17


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TABLE OF CONTENTS

Freedom of Association and Recognition 17of the Right to Collective Bargaining

Freedom of Association 17

Employee Representation 17

Collective Bargaining 17

Support of Union Activities 18

Ethical Conduct 18

Policy and Procedures 18

Highest Standards of Ethical Conduct 18

Safe Places to Work 19

Laws, Rules and Regulations 19

Policy and Procedures 19

Hazardous and Dangerous Work 19

Machine Safety 19

First-Aid 20

Food Safety and Hygiene 20

Facilities/Amenities 20

Employee Health and Safety 21 (EHS) Committee

Hazard Identification and Risk Assessment 21

Training and Education 22

Emergency Preparedness 22

Emergency Exits and Emergency Lighting 22

Incident Investigation 23

Fire Safety Management 23

Chemical Safety 23

Hearing Protection 25

Obsolete/Prohibited Technology 25 and Equipment

Container Labeling 25

Stair Railing and Guards 25

Electrical Safety 25

Control of Hazardous Energy 26 (Lockout and Tagout)

Heat Stress 26

Bloodborne Pathogens 26

Powered Motor Vehicles 27

Ergonomics 27

Work from Height 27

Confined Space 28

Aboveground (AST) and 28 Underground (UST) Storage Tanks


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Environmental Protection 29

Environmental Impact Assessment 29

Management Commitment and Responsibility 29

Pollution Control 29

Water Use and Wastewater 29

Air Emissions 30

Waste (Domestic, Industrial, 31 Hazardous and Chemical)

Restricted Substances 32

Responsibility, Transparency 32 and Accountability

Accessibility 32

Transparency 33

Accountability 33

Subcontracting and Home Working 33

Security Standards 34

Policies and Procedures 34

Physical Security 34

Physical Access Control 35

Procedural Security 35

Personnel Security 35

Security Training and Threat Awareness 35

Information Technology Security 36

Container Security 36

Business Partners Requirements 38

Environmental Sustainability Guidelines 38

Resources and Waste Management 38

Greenhouse Gas Reduction 39

Energy Efficiency 39

Water Efficiency and Quality 40

Appendix 1 : Glossary of Terms 41

Appendix 2 : Classification of Issues 44

Appendix 3 : Supplier Compliance Ratings 45

TABLE OF CONTENTS


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This manual provides specific requirements and recommended guidelines for Suppliers on how to achieve compliance in order to maintain lawful, safe and respectful working conditions, and to minimize negative impacts on the environment.

The Li & Fung (LF) Code of Conduct and its related Standards listed in this manual outline the detailed specifications for Suppliers to comply with labor, health, safety, and environmental standards. The requirements are based on local, national laws/regulations, the International Labor Organization’s core conventions, internationally recognized occupational health, safety, and environmental standards.

Although Suppliers’ employees in different departments have varied natures of work, the LF Code and associated Standards are applicable to every worksite and residential facility.

The LF Security Standards are the basic security measures required for the Suppliers producing LF products based on the Customs-Trade Partnership Against Terrorism (C-TPAT), Security Guidelines issued by the US Customs and Border Protection Agency and the Authorized Economic Operators (AEO) Guidelines issued by the European Commission.

The LF Sustainability guidelines are for Suppliers to implement current best practices in order that every business partner of Li & Fung will positively contribute to building sustainable communities in which we live and work, and to sustain the planet for future generations.

At the sole discretion of Li & Fung, Suppliers may be audited with or without prior notice according to these requirements and guidelines. If a Supplier fails to meet the acceptable compliance levels, the Supplier will be expected to improve its compliance performance. Failure to improve its performance will result in a Supplier being barred from producing merchandise for Li & Fung and its customers.

INTRODUCTION


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Li & Fung (Trading) Ltd’s activities on behalf of its customers rely on sourcing from Suppliers around the world. We work with our global supply chain to cultivate safe working conditions, to foster dignity and respect for workers and to promote responsible environmental practices.

Our Code of Conduct and accompanying Standards detail the principles and practices that we expect our Suppliers to uphold. The Code, which is based on universally accepted fundamental principles and local laws, represents our commitment to source goods from Suppliers who value and incorporate these provisions into their operations.

SUPPLIER CODE OF CONDUCT

Labor PracticesVoluntary laborAll work should be voluntary and not performed under threat of penalty or coercion. Forced labor, including bonded, trafficked, indentured or prison labor, is prohibited.

Working age Employees should not be younger than the minimum employment age of the relevant country, or the maximum age of compulsory education, whichever is higher. Not under any circumstance should workers be younger than 15 years of age.

Fair and equal treatmentAll employees must be treated with respect and dignity. In other words, the workplace should be free of emotional, verbal and physical abuse.

Moreover, employees must not be subjected to discrimination in hiring, compensation or discipline, on the basis of gender, age, religion, marital status, race, sexual orientation, disability, disease, nationality, pregnancy, or trade union and/or political affiliation.

Wages, benefits and terms of employmentEmployee compensation – including wages, overtime pay, benefits and paid leave – must meet or exceed legal minimum and/or industry standards and/or collective bargaining agreements, whichever is higher. Wages for traineeships and apprenticeships should also meet at least the legal minimum. Disciplinary deductions from compensation are not allowed.

Working hoursWorking hours should not exceed 60 hours per week. All overtime must be voluntary, mutually agreed, and compensated at a premium rate. Employees should be given at least 1 rest day in any 7-day period.

Freedom of association and recognition of the right to collective bargaining Suppliers must respect the right of employees to freedom of association and collective bargaining as permitted by law.

ethicaL conductSuppliers must operate with high ethical standards and should not be involved in any corruption, extortion, bribery, fraud, false declarations, counterfeiting or insider trading. safe PLaces to WorkSuppliers should promote and maintain a safe, hygienic and healthy working environment and residential facilities, where provided. Adequate measures, systems, protections and training must be implemented to prevent harm to employees’ health, safety and well being. environmentaL ProtectionSuppliers should actively work to improve the environmental performance of their operations. This includes measures to mitigate adverse environmental impacts, and to improve material and resource efficiency, reduce waste and prevent pollution.

resPonsibiLity, transParency and accountabiLity Suppliers must be transparent in their policies, processes, and standards which govern their operations and which are related to their compliance with the Code. As such, Suppliers should educate their employees and managers on their rights and responsibilities related to upholding the Code.

As a condition of doing business with LF, Suppliers agree to give LF, our customers or third-party representatives unhindered access, with or without notice, to their facilities and records related to compliance with the Code.

Should a Supplier be unable to comply with the Code, a corrective action plan should be put in place and the Supplier must actively progress towards compliance. Otherwise, LF reserves the right to terminate our relationship.


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General requirements

1. laws, rules and regulations

Suppliers shall operate in full compliance with all applicable laws, rules and regulations with respect to all aspects of business operations.

a) Suppliers shall maintain and keep up-to-date, relevant business licenses and industrial permits as required by law.

b) Suppliers shall be in compliance with Rules of Origin laws and regulations.

c) Suppliers shall maintain copies of or have immediate and reliable access to, such as internal or external lawyers, most up-to-date national/local laws and regulations and implement fully all applicable provisions in the Suppliers’ business practices.

2. internal policies and procedures

a) Suppliers should develop written internal policies and procedures that govern employee decision-making processes and conduct. Such policies and procedures should be aligned with the most stringent requirements of the Collective Bargaining Agreements in force or the laws and regulations of the country. In the countries where such provisions are absent, LF standards will be applied.

b) Such policies and procedures should be used to train all employees, review Suppliers’ business practices and employee conduct and be evaluated for improvement on a regular basis.

3. Court orders

Suppliers must undertake to fulfill in a timely manner their legal obligations in accordance with any ruling or instruction made in any court of law or tribunal.

Voluntary labor

All work should be voluntary and not performed under threat of penalty or coercion. Forced labor, including bonded, trafficked, indentured or prison labor, is prohibited.

1. prison labor

Suppliers must not use prison labor or subcontract work to prisons in any form, including but not limited to, materials, goods and services.

2. Bonded and indentured labor

a) Suppliers must not use any kind of bonded or indentured employees nor permit or encourage employees to incur debt through recruitment fees, fines, or other means.

b) Suppliers shall not withhold employees’ original identity papers, deposits, or money or other employees’ property.

LI & FUNG CODE STANDARDS


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c) Monetary Deduction:

I. Suppliers shall not make any monetary deduction as a result of disciplinary actions.

II. Suppliers shall not require monetary deposits for accommodation or PPE, uniforms, tools etc.

III. Suppliers shall not require employees to give written consent for deduction for items that are not mandated by law or collective bargaining agreement.

3. Free to resign

a) All employment must be voluntary and employees shall be free to resign from their position with reasonable notice.

b) Suppliers should not impose unreasonable notice requirements or financial penalties that restrict an employee’s resignation. In the event of separation, Suppliers should pay wages earned for worked hours according to laws and regulations.

c) Suppliers should adopt a separation policy and procedures written in the languages understood by employees and further ensure employees are informed of its provisions.

4. Human Trafficking

a) Suppliers must not engage in activities related to human trafficking nor deploy trafficked persons to provide services of any form.

b) The Supplier must establish a recruitment policy and procedure that prevents trafficked victims from employment. Human Resource personnel must be trained for implementation of this policy.

c) In the event the Supplier discovers trafficked persons working within their facilities and/or of their subcontractors, Suppliers must immediately remediate the issue according to the requirements stipulated in local laws and regulations. In countries where such laws and regulations do not exist, the Suppliers should:

I. Ensure employees suspected of being trafficked to stop working immediately.

II. Pay the trafficked employees’ wages including the current month and any back payment owed to them.

III. Provide health examination and psychotherapy to trafficked victims if the employees are found to be suffering psychological trauma.

IV. Notify local authorities and ensure they are returned to their home country according to law.

V. If trafficked victims were recruited through third parties, the Supplier shall stop using their services.

VI. Conduct internal investigations within 5 business days to discover if there are other trafficked persons deployed and implement corrective actions.

5. Freedom of movement

Suppliers shall not restrict the movement of employees in their designated work areas and provide free access to drinking water and toilets. This applies for both the employment site and dormitories.

6. Foreign and migrant employees and recruitment agencies

In accordance with local laws, Suppliers must use government registered or legally licensed recruitment agencies, when available in the sending country of the migrant employees. Use of unregistered/unlicensed agencies is strictly prohibited.


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7. Contracted Foreign employees

a) Suppliers who deploy foreign workers shall establish a written policy, which includes fair treatment, fees involved for workers to be eligible for employment, wages and benefits, repatriation and other requirements in accordance with the laws and regulations.

b) Suppliers must ensure each foreign employee is eligible to work in the country and meets the legal working age of the country. Suppliers shall verify government issued pertinent original documents such as notarized birth certificate, passport and work visa.

c) Suppliers shall not require foreign employees to surrender passports or other original legal documents for the duration of contract.

d) Suppliers shall provide training to ensure that the foreign employees understand their rights under the law and its policy.

e) Suppliers shall provide all foreign employees job-related training as well as occupational health and safety training in the languages they understand.

f) Foreign employees should not be charged for fees/charges incurred for obtaining employment eligibility. Suppliers should not deduct such charges/fees from the employees’ wages.

g) Suppliers should be responsible for in-bound transportation costs if the foreign employees were directly recruited from other countries.

h) Upon completion of the contract, Suppliers should provide repatriation transportation. However, such obligation for repatriation does not apply if the foreign employee:

I. is terminated for breach of contract due to illegal conduct

II. becomes employed by other employer within the country

III. leaves the employment voluntarily prior to the completion of the employment contract.


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Working age

Employees should not be younger than the minimum employment age of the relevant country, or the maximum age of compulsory education, whichever is higher. Not under any circumstance should workers be younger than 15 years of age.

1. minimum Working age

a) Suppliers should develop and implement a policy for the minimum age of employment.

b) Every employee must be at least fifteen (15) years of age, or must meet the legal working age of the country, whichever is higher.

c) Children aged below fifteen (15) or the minimum legal working age shall not be at the workplace.

2. age Verification

a) Suppliers shall establish written procedures that can successfully identify applicants with falsified proof of age documents, and use an effective age verification process when recruiting new employees.

b) In countries where such legal documents are not available or can easily be forged, the Supplier should take additional reasonable steps to help ensure the applicant meets the age requirement prior to employment, such as medical examinations. This refers to the situation where legal documents to prove the age of the job seekers are not available, e.g., ID Card, birth certificate, etc. Medical examination would then be used in lieu of these documents, e.g. checking bone/teeth development.

c) Suppliers shall obtain and maintain a copy of proof of age documentation for all employees.

3. Juvenile employees

a) Juvenile employees are defined as employees at juvenile ages stipulated in the local law.

b) Suppliers shall set up a policy and procedure for the use of juvenile employees according to all applicable laws and regulations including hiring practices, physical examination, juvenile employee registration, hours and nature of work and proof of legally required documentation.

c) Suppliers shall ensure that juvenile employees do not work at night or perform hazardous work as defined by the ILO and required by the local laws and regulations.

4. Child labor remediation

a) Suppliers shall establish a remediation policy and procedures for remediation of underage employees found to be working at the Suppliers’ or their subcontractors’ sites.

b) Such policy and procedures must be consistent with the overall best interests of the underage employee and within the requirements of the laws of the country.

c) In countries where such laws do not exist, the Supplier should undertake the following actions:

I. Remove the underage employee from the workplace.

II. Provide adequate, financial and other support to enable such underage employee to attend and remain in school or a vocational training program until age 15 or the minimum legal working age, whichever is higher.


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III. If the underage employee is able to provide documentation that he or she is enrolled and attending school classes or a vocational training program, the Supplier should continue to pay the underage employee the base wage until the time he or she either finishes school/training or reaches age 15 or the minimum legal working age, whichever is higher.

IV. When the underage employee reaches age 15 or legal minimum working age, whichever is higher, he or she should be given the opportunity to be re-employed by the Supplier.

V. If the underage employee voluntarily chooses not to participate in a school education or vocational training program, he or she will forfeit the right to receive continued financial compensation from the Supplier. This decision should be signed by the underage workers and kept on file.

5. additional Documentation

a) Suppliers should maintain employee files, which at a minimum, contain the following documents and particulars: employment applications or contracts including employees’ date of birth, his or her signature, identification number, date of employment and current photo.

b) Suppliers should keep an updated list of employees with general details including name, current job title, employment start date, birth date, and termination date.


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Fair and equal Treatment

All employees must be treated with respect and dignity. In other words, the workplace should be free of emotional, verbal, and physical abuse.

Moreover, employees must not be subjected to discrimination in hiring, compensation or discipline, on the basis of gender, age, religion, marital status, race, sexual orientation, disability, disease, nationality, pregnancy, or trade union and/or political affiliation.

1. abuse and Harassment

a) Suppliers should establish a written policy to prohibit harassment and abuse in the workplace that includes disciplinary actions against the perpetrating employees up to and including termination of employment.

b) Suppliers should establish procedures for employees to report harassment or abusive behaviors in good faith without fear of retaliation.

c) Suppliers should train all employees on the policy and procedures.

2. Discrimination

a) Suppliers shall set up written policies against discrimination in accordance with the laws of the country.

b) Suppliers should respect equal opportunities and not subject employees to different treatment and terms and conditions with respect to recruitment, compensation, access to training, promotion, termination and retirement. Applicants and employees should be evaluated solely on the basis of individual skills and job performance, and Suppliers should not discriminate on the grounds of gender, age, religion, race, caste, social or ethnic origin, nationality, sexual orientation, marital status, familial status, pregnancy, disability, disease, political opinion/affiliation or union affiliation.

c) During recruitment, applicants shall not be tested for medical conditions not required by law or product safety requirements.

3. Women’s rights

a) A pregnancy test should not be a condition of employment unless required by the laws of the country. Voluntary pregnancy tests may be provided only at the request of applicants/employees. Such request must be documented and kept on file.

b) Suppliers should not force or pressure female employees to use contraception.

c) Suppliers shall not dismiss employees when they become pregnant except in specified circumstances permitted by laws and regulations.

d) Suppliers should provide appropriate and reasonable accommodations for pregnant employees and comply with legally mandated work hour limits or restrictions, and take reasonable measures to protect pregnant employees from hazardous or strenuous work as recommended by a licensed physician.

e) Suppliers shall provide all legally mandated provisions including maternity leave.


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4. Grievance process

a) Suppliers should develop a written grievance policy and provide multiple channels for employees to raise concerns and suggestions confidentially or anonymously without fear of retaliation.

b) Suppliers should develop effective grievance procedures and inform all employees at the start of employment.

c) All grievances should be investigated, documented and the decision for solutions shall be communicated back to the employee.

5. Disciplinary measures

a) Suppliers should establish a policy on employee discipline. All disciplinary measures shall be in accordance with law. Suppliers should train all employees on the policy at the start of the employment.

b) Under no circumstance, Suppliers shall allow physical punishment or public embarrassment as disciplinary measures.

c) Suppliers’ procedures for employee discipline should follow a progressive disciplinary model that includes an escalating series of verbal and written warnings prior to suspension or dismissal.

d) Suppliers shall not use unlawful fines as a disciplinary measure.

e) Suppliers should train managers, supervisors and team leaders on the grievance policy and procedures and their job performance should include their demonstrated ability to follow the procedures.

f) Management and supervisors should implement the procedures and document any disciplinary actions.

6. Termination and retrenchment

a) In the event of retrenchment or termination of employment, Suppliers shall provide affected employees reasons or criteria of temporary or permanent separation from employment according to law.

b) Suppliers shall provide advance notice or pay in lieu of notice as required by law.

c) Suppliers must not require employees to sign a declaration of good health, waivers or release of legally mandated rights in exchange for receiving legal severance/benefits of separation.

d) Where employees are represented by a trade union, Suppliers should fulfill all the requirements including consultation, notice, payment of severance and/or other benefits stipulated in the collective bargaining agreement, and/or any agreements achieved between the Supplier and the trade union.


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Wages, Benefits and Terms of employment

Employee compensation including wages, overtime pay, benefits and paid leave must meet or exceed legal minimum and/or industry standards and/or collective bargaining agreements, whichever is higher. Wages for traineeships and apprenticeships should also meet at least the legal minimum. Disciplinary deductions from compensation are not allowed.

1. policy and Communication

a) Suppliers shall establish a written policy on wages and benefits according to law.

b) Suppliers should provide employees written and understandable information about wages and benefits.

c) Suppliers should ascertain that the employees understand key information such as how wages are calculated, overtime rate, pay periods and benefits.

2. regular and overtime Wages

a) All employees including regular full-time, part-time, temporary, contract, trainees or apprentices, shall be paid at least the legal minimum wage, or the local industry standard or collective bargaining agreements, whichever is higher.

b) All overtime wages shall be paid according to the requirements of the local laws and regulations.

c) Wages for hourly employees must be calculated based on the recorded working hours in the time-keeping system. This work hour record shall be used to compute employees’ wages, and in all circumstances the Supplier shall comply with the local laws and regulations in the computation of earned wages.

3. pay Slips

a) Suppliers should provide each employee with pay slips in the language the employee understands. Pay slips should contain key wage items including pay period and wage payment dates, regular and overtime hours worked, regular wages, overtime wages, allowances, incentives and bonuses, total amount of wages, and itemized deductions.

b) Suppliers shall document all payments made to employees outside of payroll, be it reward, incentive, bonus or otherwise, and maintain such documents on file.

4. Deductions from Wages

a) Deductions from wages shall be made according to law. Any deductions not mandated by law shall not be made without written permission of the employees concerned.

b) Suppliers shall not deduct unlawful fines from employees’ wages as disciplinary measures.

c) Suppliers shall not unlawfully charge employees for tools to perform their job responsibilities. Employees who are found responsible for loss or damage of tools or property may be held financially responsible if allowed by law.

d) Suppliers should not unlawfully deduct from employees’ wages fees such as work visas, permits, and/or health/medical examinations and other charges incurred for employment eligibility.

e) Union dues shall not be deducted from the employees’ wages without written consent from the employees except when it is specified in a collective bargaining agreement.


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f) Voluntary deductions such as additional benefits or employee savings programs will be made only with written consent of the employees.

g) Suppliers must maintain the signed documents/consents in each employee’s file.

5. payment of Wages

a) Suppliers shall ensure that wages are paid regularly and on time to all employees.

b) Employees on probation or trainees should not be kept in these positions for extended periods to prevent them being paid the same as their permanent or qualified counterparts.

c) Suppliers shall pay compensation directly to its workforce by way of cash or directly credited into the employees bank account, as required by applicable law.

d) When contract employees are being paid, at least one representative from the Supplier’s management should be present to ensure that all payments are made as per legal requirements.

e) Wages shall not be paid indirectly through hiring agents or brokers or through any third parties, except when there is an express notification from the appropriate legal authority to do so.

6. Social Benefits

a) Suppliers shall provide all legally mandated social benefits such as social security, medical, occupational illness/injury protection, retirement benefits, and additional benefits stipulated in collective bargaining agreements.

b) Suppliers shall determine and pay all statutory severance and other legal separation benefits upon termination of employment.

7. Holiday and leave Benefits

a) Suppliers shall ensure that legally mandated benefits pertaining to holiday and annual leaves are provided for all applicable employees.

b) Employees shall be paid for public holidays and leaves as required by applicable law or collective bargaining agreements.

c) Pregnant employees shall be provided for legally mandated benefits and leaves.

d) No unlawful examinations may be conducted to verify eligibility for menstrual leave if it is a benefit stipulated in local laws.

8. employment Contracts

a) Suppliers shall not fire and re-hire employees or keep them on temporary or agency contracts in order to avoid providing them with employment rights under the relevant national law.

b) Suppliers shall provide employees and contract employees as required by law with written information such as the collective bargaining agreement or written contracts about their employment terms and conditions in the language the employee understands.


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9. Documentation

a) Suppliers shall maintain appropriate signed and confirmed payroll registers and other records indicating pay periods, gross wages, deductions, net wages, working days, leave and regular and overtime hours, bonus, allowances paid.

b) Suppliers must maintain all financial records for the payment of legally required premiums and withholdings such as social security, unemployment, retirement, severance or provident funds

Working Hours

Working hours should not exceed 60 hours per week. All overtime must be voluntary, mutually agreed, and compensated at a premium rate. Employees should be given at least 1 rest day in any 7-day period.

1. Hours of Work

a) Suppliers should ensure employees do not work in excess of 60 hours per week or the regular and overtime hours permitted by the local laws.

b) Suppliers should establish a written policy on working hours and inform all employees through various means such as employment contracts, employee handbook and bulletin boards.

2. overtime Hours

a) When a Supplier requires employees to work overtime, it shall ensure that all overtime is voluntary.

b) Where mandatory overtime is legally permitted and if overtime is a condition of employment, Suppliers shall inform employees at the start of employment and obtain employees’ consent to work overtime.

c) Suppliers must comply with the legal limits concerning daily, weekly and annual overtime hours.

d) Suppliers shall ensure the management staff obtains necessary prior approvals/ exemptions from the appropriate authority in the event the work hours exceed the legally stipulated limits, provided such exemptions are permissible by the local laws and regulations (e.g. Comprehensive Working Hour Permit in China).

3. rest Days

a) Suppliers should ensure at least one (1) full day of rest upon six (6) consecutive days of work is provided for all employees on a regular basis.

b) In cases of extraordinary business circumstances when employees are requested to work on a regularly scheduled rest day, Suppliers should advise the employees at least 24 hours in advance, and provide a full day of rest immediately within the following six (6) working days.

4. Breaks

Suppliers shall provide employees break(s) during work shifts as required by local law or the collective bargaining agreements.


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5. Time Keeping System

a) Suppliers must maintain an effective time-keeping system that accurately records daily working hours of all hourly and piece rate employees.

b) Each employee shall record their own beginning and ending times.

c) Both regular and overtime hours must be recorded in the same system and reflect the actual hours worked.

d) Suppliers shall maintain the working hour record for the period required by law or the most recent twelve (12) months, whichever is higher.

Freedom of association and recognition of the right to Collective Bargaining

Suppliers must respect the right of employees to freedom of association and collective bargaining as permitted by law.

1. Freedom of association

a) Suppliers shall allow employees to form and/or join organizations of their own choosing in accordance with legal provisions of the country.

b) Where the right to freedom of association and collective bargaining is restricted or prohibited by law, Suppliers should not hinder alternative forms of independent and free employee representation and negotiation in accordance with international labor standards.

c) Suppliers shall not dismiss, discipline, coerce or threaten employees seeking to exercise their legal right of association, which includes the right to join or not to join trade unions or other worker organizations/associations.

d) Conditions of employment, reward, and discipline shall be based on merit and must be unrelated to employees’ status of affiliation to associations or trade unions.

2. employee representation

a) Employees shall be allowed to elect their own representatives according to law without Supplier’s interference, which includes acts to establish or promote the domination, financing or control of a trade union or employee committee.

b) Suppliers shall give employee representatives access to their members under conditions established by local laws and/or international standards in order to fulfill their functions.

3. Collective Bargaining

a) Suppliers shall bargain in good faith and comply with all collective agreements.

b) Management shall not unlawfully postpone requests for meetings by the trade union.

c) Collective agreements shall be confirmed in writing, and the provisions shall not violate local or national laws and regulations.

d) Suppliers should circulate information of any collective bargaining agreements to employees. Supplier’s management should not unlawfully restrict union/committee notices to be posted publicly on notice boards.


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4. Support of union activities

a) Suppliers shall not unlawfully restrict the activities of trade union representatives and if the union/worker representatives are employees, Suppliers shall compensate them for reasonable time spent on union activities in accordance with legal provisions and the collective bargaining agreements.

b) Suppliers shall provide union representatives with adequate facilities for them to perform their activities according to laws and collective bargaining agreements.

c) Employees must be notified of the union dues. Suppliers shall obtain written consent for the deduction of dues from their wages unless otherwise specified in a valid collective agreement or if it is a requirement of law.

ethical Conduct

Suppliers must operate with high ethical standards and should not be involved in any corruption, extortion, bribery, fraud, false declarations, counterfeiting, and insider trading.

1. policy and procedure

a) Suppliers should establish a written policy and procedure for all employees to maintain the highest standards of ethical conduct at all times.

b) Training should be provided to employees to ensure their understanding of the written policy and procedure.

c) Suppliers should provide means of reporting suspicious misconduct anonymously, which should be written in policy and procedure. When a Supplier receives any report of suspicious misconduct, an internal investigation should be conducted within five (5) working days. Corrective action shall be made when it is necessary.

d) Employees who have been confirmed to have engaged in bribery, corruption and fraudulent behaviors shall be disciplined in accordance with Supplier’s internal policy and regulations.

2. Highest Standards of ethical Conduct

a) Suppliers must not engage in any form of corrupt practices such as extortion, fraud, false declarations or bribery.

b) Suppliers shall not offer gifts or entertainment, meals, travel expenses, money or the equivalent, free goods, tickets or access to events or personal favors to LF employees or those working on behalf of LF. LF employees are required to decline them and to report the incident to the company.

c) Suppliers must not enter into transactions or agreements with LF employees that might cause personal interests to interfere with the business interests of LF.


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Safe places to Work

Suppliers should promote and maintain a safe, hygienic, and healthy working environment and residential facilities, where provided. Adequate measures, systems, protections and training must be implemented to prevent harm to employees’ health, safety and well being.

1. laws, rules and regulations

a) Suppliers shall operate in full compliance with all applicable laws and regulations with respect to occupational health, safety, and environmental practices in all aspects of their operations.

b) Suppliers shall maintain and keep up-to-date, relevant health, safety and environmental permits as required by applicable laws and regulations.

2. policy and procedures

a) Suppliers should maintain and keep up-to-date, necessary policies and procedures approved by top management, and these should be aligned with international standards such as OHSAS18001:2007 and ISO14001:2004.

b) Such policies and procedures should be used to train all employees, review Supplier’s operational practices and employee conduct and be evaluated for improvement on a regular basis.

3. Hazardous and Dangerous Work

a) Hazardous work is any activity involving work with and/or exposure to hazardous/toxic/corrosive chemicals, loud noise levels, radiation, asbestos and processes/material containing asbestos and bacteria.

b) Dangerous work is any activity involving work with and/or exposure to the risk of a fall from heights (e.g. work on scaffolding), fire and explosion (e.g. welding), operation of machinery/equipment that may result in the loss of limbs (e.g. power presses), operation of forklifts, and heavy lifting.

c) Suppliers shall prohibit juvenile employees and pregnant women from engaging in hazardous and dangerous work according to the stipulations of laws and regulations.

d) Suppliers shall ensure that appropriate Personal Protective Equipment (PPE) is provided for hazardous and dangerous work activities. Suppliers should ensure all employees wear PPE as required when exposed to occupational hazards.

e) Employees who are exposed to hazardous work shall undergo medical examinations at the expense of the Supplier and as required by law.

4. machine Safety

a) All machinery and equipment should be equipped with appropriate safety devices such as guards, barriers, interlocking systems, etc.

b) Where applicable, each machine should have an appropriate emergency stop button installed. Machine presses, cutting machines and similar machinery should have two-hand operated controls. (The machine only starts when both activate buttons are pressed simultaneously and the machine stops immediately if one of the buttons is released.)


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c) Suppliers shall provide employees with all necessary Personal Protective Equipment (PPE) at no cost to the employee. Furthermore, worn and/or defective PPE shall be immediately replaced at no cost to the employee.

d) Electrical plugs, cords and wiring should be maintained in a good and safe working condition ensuring proper insulation, no exposed wiring, without frays, and operated within legal limits.

5. First-aid

a) Suppliers shall provide and maintain an adequate first-aid box, appointment and training of first-aiders and provide and maintain a first-aid room as required by law. Professional medical support such as a doctor or nurse/s shall also be provided as required by law.

b) When there is no legal requirement for the provision of first-aiders, professional medical support, first-aid room and first-aid supplies, Suppliers should ensure at least one (1) first-aider and one (1) first-aid kit is provided for every one hundred (100) employees.

c) Suppliers should ensure first-aiders, medical support and first-aid supplies are easily accessible and replenished regularly.

6. Food Safety and Hygiene

a) Suppliers shall obtain the relevant food safety and hygiene certificate for their canteen and kitchen facilities according to law. Food preparers should undergo medical examination and be certified as free from communicable diseases at least annually and before hiring date. Suppliers should post all the required certificates prominently and in an appropriate location.

b) Food should be stored in a sheltered, clean and dry environment with doors/cabinets that can be closed firmly to prevent pests such as rodents from entering. Secondary food storage containers such as jars, bins and crates should be provided where necessary (e.g. for food where the original seal has been open or broken). A refrigerator and/or freezer should be provided for food requiring storage in cold temperatures.

c) Food service and cooking areas should be cleaned and disinfected regularly.

d) All cooking and food utensils such as pots, plates, pans, fork, spoons, etc., should be washed with soap, rinsed with clean water and dried with a clean cloth or left to air dry on appropriate racks before storage.

e) Food scraps and left-over food should be disposed of into plastic bags and tied off before being placed into rubbish bins with appropriate covers that prevent access by pests and animals. Cooking oil should be drained or poured into collection bottles/drums and collected by a licensed waste disposal vendor. All other refuse such as paper, glass and plastic should be segregated and disposed of into designated bins for recycling by an appropriate waste recycling vendor, if any.

f) Suppliers should ensure adequate seating is provided for employees in the canteen/dining area.

g) Canteen/dining area should be kept clean and well managed at all times.

7. Facilities/ amenities

a) The factory must be structurally sound. Suppliers must maintain a valid building and construction license/certificate/re-certification for the Supplier’s premises, as required by applicable law and regulations.

b) Warehouse and production areas should be separated from dormitories/residential facilities.

c) Suppliers shall provide adequate and appropriate childcare facilities, if required by law.


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d) Suppliers shall ensure that ventilation, air conditioning and lighting shall comply with applicable laws and regulations in all areas of the warehouse and production area.

e) Sufficient clean and safe drinking water should be provided at the workplace and dormitories. If ground water is used as drinking water, Suppliers should test the water at least quarterly to ensure bacteria and disinfection acceptance levels meet legal drinking water requirements.

f) Toilets shall be regularly cleaned and sufficient for the number of employees according to law. In the absence of law, the Supplier should provide sufficient numbers of toilets according to the following:

For each gender - number of employees number of toilets

1-15 1

16-36 2

36-55 3

56-80 4

81-110 5

111-150 6

Over 150 1 additional for each increment of 40

g) Male and female toilets should be kept separate, and toilet paper and soap shall be readily available.

h) Suppliers should ensure the workplace, dormitory, kitchen, canteen and any other facilities are clean and tidy.

8. employee Health and Safety (eHS) Committee

a) Suppliers should have at least one qualified occupational health and safety expert, by education and experience, at the factory and dormitory/residential facility in charge of EHS and leading the EHS Committee.

b) Suppliers should establish an EHS committee with at least 50/50 representation by employees and management (Note: Managerial/ supervisory representation shall not be in ratio greater than employee representation, e.g. 60 managerial /40 employees).

c) The committee should meet regularly (i.e. at least on a monthly basis) to discuss health and safety matters.

d) An appropriate venue should be provided to allow the EHS meeting to be held. The committee members should be given time to attend the meeting during work hours without any form of penalty.

e) The minutes of the meeting should be recorded. The minutes should, at the least record the issues raised, what was done to resolve them, members attendance and the date of the next meeting.

9. Hazard identification and risk assessment

a) Hazard identification and risk assessment (HIRA) should be performed for all activities conducted at the facility, and include off-site activities that are related to the Supplier’s business.

b) HIRA should be conducted at least once (1) per year, andI. before the implementation/installation of new processes,II. following any incident, andIII. before maintenance, repair and/or alteration works commence.

c) EHS risk assessment should include I. identification of hazardsII. evaluation of risks associated with hazardsIII. identification and implementation of control measures to reduce the risks.


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d) The results from ‘b)’ above, should be actively followed up by a team led by the EHS Committee.

10. Training and education

a) General health and safety training should be conducted for all new employees to raise their awareness of the hazards and risks of their work environment. Training records should be kept and properly maintained.

b) Management should provide health and safety training for all employees, including those engaged in off-site work. Training records should be properly maintained.

c) Suppliers should provide all employees exposed to health and safety hazards with the relevant training on the safe use of machinery and equipment as required by law. Training records should be kept and properly maintained.

d) Training on chemical handling, storage and use should be provided to relevant employees. Training records should be properly maintained.

e) Suppliers should provide employee training on the use and care of Personal Protective Equipment (PPE).

f) Suppliers shall provide employee training on the safe handling and disposal of hazardous wastes and chemicals.

11. emergency preparedness

a) Suppliers shall have an emergency response plan to address potential emergency scenarios according to law (e.g. fire/explosion, natural disaster such as flooding, chemical leaks/spills).

b) Suppliers should post emergency evacuation plans and procedures at appropriate locations throughout the facilities.

c) At least one (1) fire evacuation drill every six (6) months should be conducted at the workplace and dormitories, or more frequently where required by law. Time to complete the evacuation, attendance and missing persons must be reported following the drill. Records of the fire drill should be properly maintained.

d) Emergency drills for other potential emergency scenarios should be conducted at least once a year.

e) Local emergency response arrangements/agreements should be made with the appropriate local authorities such as emergency management agency, community medical responders and law enforcement agency.

12. emergency exits and emergency lighting

a) Suppliers should ensure at least two emergency exits are provided on each floor of all facilities including dormitories, if any, or must adhere to the local legal requirements. Each emergency exit should have doors that open outwards and remain unlocked and free from obstruction at all times.

b) Width of exits and aisles/passageways leading to emergency exits shall be in compliance with applicable laws.

c) Emergency lighting should be installed to illuminate exit paths in the event of power failure. They shall be located in major walkways, nearby exits and in stairwells, as required by laws and regulations.

d) Exit signage should be marked with letters of appropriate height (in fluorescent material and in local language) and be easily visible to direct employees safely from the building.

e) Exit lighting and emergency lighting should be powered both by electricity and battery back-up during the event of power failure.

f) Exit lighting and emergency lighting should be regularly maintained and tested monthly. Records shall be properly maintained.


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g) Diagrams showing emergency exits and routes should be posted in all major areas of the facility.

13. incident investigation

a) Suppliers should set up a policy and procedure for the investigation of incidents and identification of the root cause(s).

b) Corrective/preventive actions and person(s) responsible for implementation should be identified, and followed through to prevent recurrence of the incident.

14. Fire Safety management

a) Fire Control Facilities/Fighting Equipment

I. Suppliers shall ensure the installation of adequate, appropriate, and easily accessible fire prevention and firefighting equipment at the workplace, dormitories, canteens and other premises, as required by applicable law and regulations. For example, fire alarms and fire extinguishers.

II. Fire extinguishers shall be installed according to laws and regulations, along with appropriate, brightly colored and visible signage. The internal pressure of fire extinguishers shall be properly maintained.

III. There should be regular inspection and maintenance of the fire control facilities and equipment (including fire control panel, fire water pump, water tank, fire extinguishers, hose reel, lighting protection device, alarms, etc.) with records maintained. Fire fighting equipment provided should be suitable for the type of fire expected in the area.

IV. Fire control facilities and equipment should be tested regularly as required. For example: Fire alarms should be tested monthly, fire water pump should be tested at least annually.

V. The relevant authorities should approve fire control facilities and new, additional and/or altered equipment.

VI. Employees who have fire fighting responsibilities should receive at least an annual training by certified firefighter and/or relevant authorities on the use of fire fighting equipment, procedures, personal protective equipment, roles and responsibilities, etc.

15. Chemical Safety

a) Laws, rules and regulations

I. Suppliers shall purchase all toxic and corrosive chemicals from vendors holding the relevant legal license and permits for the sale and supply of such chemicals.

II. Suppliers shall be in compliance with chemicals prohibited and/or restricted from use by law.

III. Suppliers shall inform the relevant authorities of any chemical incidents as required by law.

IV. Employees working with chemicals should be trained at least annually and prior to placement in roles where they are expected to handle or use chemicals.

V. No chemical should be allowed on site without a Material Safety Data Sheet (MSDS). The MSDS must be in the language that employees working with such chemicals understand and must be available in all areas where chemicals are used and stored.

VI. A chemical inventory should be kept updated and properly maintained.


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b) chemical storage

I. Policy, procedures and all necessary controls shall be in place for the management, storage, dispensing, and transportation of all toxic, hazardous and corrosive chemicals according to law, in order to minimize the potential for air, water, soil and groundwater impacts.

II. Chemicals should be stored in a designated area, which is well ventilated, spark proof, equipped with sufficient fire-fighting equipment, away from direct sunlight and heat, ignition sources, electrostatic discharge proof, pressure relief valves, and protected from leaks.

III. Incompatible chemicals should be segregated.

IV. All chemical containers, bottles, drums etc., should be clearly labeled with appropriate chemical labeling:

• The common name of the chemical. • The name, address and emergency phone number of the company responsible for the product.• An appropriate hazard warning and in applicable languages, e.g. “Danger,” “Warning,” “Corrosive.”• First aid instruction.

V. Proper and accurate warning signage should be displayed prominently at chemical use locations.

VI. Suppliers should monitor chemical inventory levels and expiry dates on a monthly basis. Records should be properly maintained.

VII. An inventory of hazardous substances used and stored should be maintained with relevant and up-to-date Material Safety Data Sheets (MSDS) made available and accessible at locations where any dangerous chemical is used, stored and delivered.

VIII. Explosion-proof equipment and lighting should be used in areas where flammable or combustible materials are stored.

IX. Primary and/or secondary spill containment should be installed in areas where chemicals are stored and used. The spill containment area and methods used should be sufficient to hold 110% of the volume of the largest container stored and used at the Supplier’s premises.

c) chemical handling

I. Spill control kits should be available, adequate and properly maintained.

II. A buddy system (two employees) should be implemented for the lock-up, dispatch and use of chemicals.

III. Appropriate Personal Protective Equipment (PPE) according to MSDS shall be provided for chemical handling according to law, and workers should be trained and competent in using PPE.

IV. Spill response teams should be established and these teams should be trained in emergency chemical spill response handling and disposal at least annually.


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16. Hearing protection

a) Suppliers shall measure noise levels and shall ensure all parts of the operation and in the construction areas, if any, are in compliance with applicable laws and regulations.

b) As first priority, Suppliers should make all possible efforts to eliminate and/or control sources of excessive noise by adopting process and equipment substitutes and/or engineering controls in the factory design. For example, install noise control fixtures (mufflers, barriers, vibration isolation systems, enclosures) or factory walls with a higher sound transmission loss.

c) Effective noise barriers or noise mitigation measures should be implemented in high noise areas. For example, piling, stamping, grinding, generators, compressors, etc.

d) Appropriate warning signage shall be provided and prominently displayed in high noise areas as required by law.

e) Hearing protection (PPE) shall be provided for all employees and contractors working in the high noise work areas that exceed the legal exposure limit.

17. obsolete/prohibited Technology and equipment

Technology and equipment categorized by the government as obsolete or prohibited shall noT be used.

18. Container labeling

All containers at the facility such as bottles, drums, bins, etc., should be appropriately labeled according to the contents inside the container and in languages understood by the employees (e.g. containers holding water or drinking water shall be labeled accordingly).

19. Stair railing and Guards

a) Handrails should be mounted on at least one side of all stairs with four (4) or more steps.

b) Guards should be installed on the open side(s) of stairs.

c) Both handrails and guards should be continuous for the entire length of a flight of stairs.

20. electrical Safety

a) Only licensed electrical contractors and trained and certified maintenance personnel should be authorized to inspect, install and repair electrical wiring, equipment and machinery. Inspection and preventive maintenance should take place on a regular schedule.

b) Suppliers shall ensure suitable control measures are in place to prevent employee exposure to electrical shock according to law. For example: Grounding to prevent build up of static electricity, suitable insulation for the voltage used and the conditions, effective guarding to prevent contact with live and exposed parts of electrical equipment, and circuit protection devices to limit or stop the flow of current such as: fuses, circuit breakers, GFCIs (ground-fault circuit interrupters).

c) All electrical distribution panels, breakers, switches and junction boxes should be completely enclosed and protected from wet conditions.

d) Lockout and Tag-out should be used to control hazardous energy (refer to “Control of Hazardous Energy” section).

e) Appropriate signs should be posted at entrances and guarded locations to alert persons to the hazard, and in applicable languages. For example: “Danger,” “Warning,” or “Caution.”


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f) The Supplier shall seek emergency medical help immediately if any person(s) receives an electrical shock.

21. Control of Hazardous energy (lockout and Tagout)

a) Suppliers should ensure a proper Lockout and Tagout (LOTO) procedure is developed and enforced to protect employees from the dangers of accidental or unexpected startup of electrical equipment, or the release of stored energy during inspection or repairs.

b) The LOTO procedures should ensure all forms of hazardous energy are de-energized or dissipated completely prior to inspection or repair work commences. Examples of hazardous energy include: electrical, mechanical, hydraulic, pneumatic, thermal.

c) Effective locks and tags should be used to keep electrical equipment locked out of service and tagged to alert all persons in the area which equipment or circuits are under inspection and/or repair.

d) Only authorized employees should be permitted to remove the locks and tags.

e) Appropriate safety barriers and/or demarcation should be used to isolate the area.

22. Heat Stress

a) Suppliers should ensure all risk factors for heat stress are controlled at the facility, i.e. high temperature and humidity, direct sun exposure, no breeze or wind, low liquid intake, lack of exposure to hot workplaces.

b) Training should be provided on the hazards and symptoms of heat stress and how to prevent and recognize them.

c) Sufficient drinking water should be provided to all employees for easy consumption and without any restrictions on accessibility.

d) Routine checks on employees at risk of heat stress should be made and medical help should be requested when necessary.

23. Bloodborne pathogens

a) Suppliers should ensure an effective bloodborne pathogen procedure is developed and implemented at the facility.

b) Broken needles should be recorded, collected and placed in appropriate containers.

c) Containers:

I. Containers should be puncture-resistant, sides and the bottom should be leakproof and containers should have a lid and be closable.

II. Containers should be stored upright and not be over filled.

III. Containers should be located as close as possible to the area where sharps are used.

IV. Containers must be disposed of as hazardous waste by a licensed waste vendor.

d) All medical service personnel and first aid responders should be adequately protected from exposure to bloodborne pathogens.

e) Training should be provided to all employees on this procedure.

f) Appropriate PPE for the task should be provided for the handling of sharps.


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24. powered motor Vehicles

a) Suppliers should ensure an effective motor vehicle safety procedure is developed and implemented at the facility.

b) Only licensed/certified and authorized employees should be allowed to operate powered motor vehicles.

c) Powered motor vehicles include any vehicle utilizing diesel, petrol, electricity or batteries for operation. For example: Forklifts, lift-trucks, trucks, van, cars.

d) Operators of powered motor vehicles should undergo safety training and re-training at least annually.

e) Designated parking should be allocated for all powered motor vehicles and keys should be securely locked to prevent theft and unauthorized use.

f) All powered motor vehicles should have seat belts installed that are in good working condition, inspected regularly for defects and repaired or replaced if necessary.

25. ergonomics

a) Suppliers should ensure an ergonomics program is developed and implemented at the facility.

b) The program should aim to identify and assess work-related factors that pose a risk of musculoskeletal disorders (MSD) and recommendations to remove or reduce them.

c) Employees should be given training on the ergonomic hazards and MSDs so they may identify them and alert their supervisor when necessary.

d) Suppliers should provide employees with the necessary equipment and tools to allow work to be conducted in an ergonomically safe manner with increased satisfaction amongst employees. For example: adjustable tables and chairs to suit different heights of employees, ergonomic tools for greater comfort and reduced physical stress.

26. Work from Height

a) Suppliers should ensure a comprehensive work from heights procedure is developed and implemented at the facility.

b) Work from heights includes any activity with the risk of falling that is being performed at an elevated height of two (2) meters or greater, from the ground, or a floor, or a platform. For example: work on scaffolding, ladders, lift-trucks, roof tops, etc.

c) Only trained, certified and authorized personnel should conduct any work from height that requires maintenance, repair or ad-hoc work to be conducted.

d) Proper inspection of all tools and equipment used for work from heights should be conducted prior to the commencement of such activities.

e) Guardrails and toeboards should be provided around every open-sided platform or floor. Regardless of height, if an employee is at risk of falling into or onto machines/equipment, guardrails and toeboards should be installed to prevent falling.


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27. Confined Space

a) Suppliers should ensure a comprehensive confined space procedure is developed and implemented at the facility.

b) Suppliers should identify confined spaces with one or more of the following characteristics:

I. Contains or has the potential to contain a hazardous atmosphere,

II. Contains a material that has the potential to engulf a person entering,

III. Has walls that converge inward or floors that slope downward and taper into a small area which may trap or asphyxiate a person entering, or

IV. Contains any other recognized safety or health hazard, e.g. unguarded machinery, exposed live wires, etc.

c) Only trained and authorized personnel should be permitted to enter confined spaces for the purpose of maintenance, repair and/or alteration works. A permit must be required for entering confined spaces that contain any hazard capable of causing death or serious physical harm or atmospheric hazard or potential atmospheric hazard according to law.

d) Confined spaces include, but are not limited to, underground vaults, tanks, storage bins, manholes, pits, silos, process vessels, and pipelines.

e) All necessary control measures should be used to address the hazards. For example: atmospheric testing/gas monitoring devices, standby rescue teams, emergency rescue equipment, firefighting equipment, dilution/ ventilation fans and/or exhaust fans, work permits, etc.

f) All employees should be trained to recognize, be aware of, and avoid confined space areas.

g) Appropriate signage should be in place to warn employees of the confined space and other associated hazards. For example: “Danger,” “No Smoking.”

h) Local emergency response arrangements/agreements shall be made with the appropriate authorities according to law.

28. aboveground (aST) and underground (uST) Storage Tanks

a) Suppliers shall ensure a comprehensive chemical storage tank procedure is developed and implemented at the facility according to law.

b) Appropriate signage should be in place to warn employees of the AST or UST and other associated hazards. For example: “Flammable.”

c) Only trained and authorized personnel should be permitted to work on and enter chemical storage tanks (confined spaces) for the purpose of maintenance, repair and/or alteration works.

d) All tanks should be regularly inspected for structural integrity such as cracks, leaks, and maintained in good working order. Records of inspection and maintenance should be kept on file.

e) Secondary containment should be installed to prevent spills from flowing onto land or into water.

f) The perimeter of the AST must be protected from accidental intrusion by motored vehicles.

g) Emergency response procedures should be developed to manage incidents involving chemical storage tanks. For example: Spill prevention, fire and explosion.


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h) Appropriate materials and equipment should be provided to handle emergency response to spills, fire and/or explosion.

i) Local emergency response arrangements/agreements shall be made with the appropriate authorities as required by law.

environmental protection

Suppliers should actively work to improve the environmental performance of their operations. This includes measures to mitigate adverse environmental impacts, and to improve material and resource efficiency, reduce waste and prevent pollution.

1. environmental impact assessment

a) Suppliers shall ensure that for all new, expanded or altered projects, the Environmental Impact Report(s) has been renewed and discharge permits have been obtained in accordance with applicable laws and regulations.

b) Suppliers should monitor environmental impacts caused by construction works and implement any necessary control measures required to prevent or minimize impact.

2. management Commitment and responsibility

a) Suppliers should appoint at least one member of the management team, who is to be responsible for the Environmental Management System (EMS) of the facility. The individual(s) should be selected based on previous experience, technical knowledge and/or environmental awareness. The Supplier should provide individual(s) with the necessary training to allow them to perform their role effectively.

b) Suppliers should deploy an environmental expert with appropriate technical knowledge and experience to engage daily to ensure the facilities are operating in compliance with relevant laws and regulations, and facilitate continuous improvement.

c) An inventory of all environmental aspects and impacts of the facility should be maintained.

3. pollution Control

Suppliers shall ensure appropriate pollution controls are installed to reduce environmental impacts resulting from their operations according to law. For example: engineering controls such as a scrubber system to reduce air emissions and administrative controls such as waste management procedures.

4. Water use and Wastewater

a) Laws, rules and regulation

I. The facility’s water extraction, use, storage, transfer, and infrastructure shall be in compliance with regulations and permits.

II. Discharge and other water permits shall be renewed periodically according to laws and regulations. Suppliers shall ensure that if any changes have been made to the facility that impacts the permit, then new permits shall be obtained.

III. Suppliers should have a system to remain up-to-date on any legislative and regulatory changes. Any third-party involved with water or wastewater discharge shall also have their permits checked.


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IV. Wastewater discharge shall comply with legal requirements including: generation, handling, transfer, treatment, disposal, and reuse.

V. Total quantity of wastewater discharge shall comply with discharge permits. Suppliers shall monitor and track the quantity to ensure compliance within legal limits.

VI. When discharge exceeds the regulatory limits, authorities shall be notified and corrective actions shall be taken.

VII. Contaminants, their flow direction, potential impact, and discharge points should be known, identified, and understood by Suppliers’ management personnel.

VIII. Suppliers must not dispose or discharge toxic and radioactive waste to the environment illegally.

b) Wastewater treatment

I. Storm drain systems should be segregated from wastewater systems.

II. Oil, grease, acids, bases, and toxic fluids shall be contained for disposal and/or treated before discharge according to law.

III. Areas where sludge and other wastes are stored shall be waterproof, spill/leak proof and isolated from washout, and shall be monitored according to law.

IV. Treatment facilities for domestic wastewater and industrial wastewater should be in good operating condition, with the appropriate performance parameters monitored, for example: correct flow rate, pH levels etc. Operators shall follow procedures for treatment strictly according to law.

c) monitoring

I. Supplier’s water consumption should be monitored and measured with at least a meter at all water intake points.

II. Appropriate monitoring instruments for water and wastewater should be available and operating properly.

III. All discharge points should be properly labeled.

IV. Supplier’s wastewater discharge quality and quantity shall be measured as legally required. Meters for discharge shall be in place.

V. Suppliers should make sure its staff understands and strictly follows procedure for testing discharge, and is undertaken at the appropriate point.

5. air emissions

a) Laws, rules and regulation

I. Emissions shall comply with legal requirements.

II. The quantity of air emissions shall be tracked, monitored, and in compliance with the facility’s discharge permit.

III. The discharge permit shall be renewed annually or as often as required by law.

IV. When air emission discharges exceed the regulatory limits, authorities shall be notified and corrective actions shall be taken.


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V. Air emission points should be identified and understood by the facility’s management personnel.

b) facilities and air emission treatment

I. The flue gas treatment facility shall be operating normally, in good condition, and regularly maintained by staff that strictly follow procedures according to law.

II. Any Volatile Organic Compound (VOC) containers or facilities wherein VOCs are used should be enclosed.

III. Refuse facilities and other odorous locations should be regularly cleaned and de-odorized.

IV. Air emissions from production, boiler flue-gas, and generator flue-gas shall be treated before discharge and the resulting concentration and rate shall comply with applicable laws and regulations.

V. Dust and particulates in production floors should be mitigated by water mist, an enclosure, or other dust-removing facilities before discharge and the resulting concentration and rate shall comply with requirements of law.

c) monitoring

I. Air flue-gas should be monitored regularly.

II. An inventory of main source point emissions to air should be maintained and the site should be considered as a potential for fugitive emissions.

III. Air emission discharge points should be clearly labeled.

6. Waste (Domestic, industrial, Hazardous and Chemical)

a) Laws, rules and regulations

I. Suppliers shall obtain appropriate and up-to-date permits for all waste disposal and discharge.

II. All hazardous waste disposal facilities and activities must be approved by relevant authorities.

b) Waste collection and handling Procedures

I. Inventory, management, storage, and transportation procedures for hazardous waste should be in place and strictly followed.

II. Throughout the entire facility, both domestic and industrial waste should be collected at designated points that are clearly labeled and sufficiently covered.

III. Hazardous waste (such as soiled rags, used filters, etc.) should be collected in designated locations, separate from general waste and clearly labeled.

IV. Suppliers shall not undertake illegal on-site burning of wastes or uncontrolled land filling.

V. Suppliers should ensure all hazardous waste is collected and handled by licensed vendors. Appropriate records should be maintained and kept up-to-date. For example: The quantity and type of waste.

VI. Employees should be trained on handling and segregation of waste and records maintained.

VII. Records of on-site and off-site waste treatment should be maintained.


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c) Waste storage

I. Both domestic and industrial waste should be segregated into different containers that are clearly labeled as appropriate.

II. Hazardous waste storage area should be weather-protected, leak-proof and well ventilated.

III. Waste storage area should be equipped with appropriate emergency response facilities/equipment.

d) Waste transfer and recycling

I. A trip-ticket system should be used for hazardous waste transfer.

II. Recyclable waste, either domestic or industrial that can be recycled either in-house or by a third party vendor should be segregated and treated appropriately before recycling.

7. restricted Substances

No substances or toxic chemicals banned by regulation, Li & Fung, or its customers (such as asbestos, PCBs, PBBs, DDT, etc.) shall be used. Some examples are given below:

a) CFC-113, CTC, and/or TCA are not used as cleaning agents.

b) H-1211 or H-1301-type fire extinguishers are not in use.

c) CFC-11, -12, -13, -114, and -115 are not used as refrigerants.

d) Toxic pesticides are not in use in gardening or pest control.

e) Radioactive substances are not in use, and if they are, appropriate precautions and are undertaken.

responsibility, Transparency and accountability

Suppliers must be transparent in their policies, processes, and standards which govern their operations and which are related to their compliance with the Code. As such Suppliers should educate their employees and managers on their rights and responsibilities related to upholding the Code.

As a condition of doing business with LF, Suppliers agree to give LF, our customers, or third-party representatives unhindered access, with or without notice, to their facilities and records related to compliance with the Code.

Should a Supplier be unable to comply with the Code, a corrective action plan should be put in place and the Supplier must actively progress towards compliance. Otherwise, LF reserves the right to terminate our relationship.

1. accessibility

a) Suppliers shall submit to and cooperate with audits, either by LF or its designated third-party auditors, with or without prior notice.


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b) Suppliers must provide auditors with access to all documents: records and information, including but not limited to policies, written procedures, personnel files, payroll, time-keeping records, reports, notices, complaints, computer files, e-mails and other correspondences.

c) Suppliers must also provide unrestricted access to all employees and when requested make available a reasonable area for the employees to be interviewed for the purpose of confidential verification.

d) Suppliers shall not coach, interfere with or retaliate against employees in connection with audits.

e) Suppliers shall allow auditors to access all areas of the business and residential facilities.

2. Transparency

a) Suppliers shall maintain complete and accurate documents; records and information shall reflect working conditions. In particular, Suppliers are prohibited from maintaining or presenting to auditors any documents/records containing false or misleading information on age, wages and/or working hours.

b) All documents are to be retained according to law or at least 12 months, whichever period of time is longer.

3. accountability

a) Suppliers must demonstrate efforts to address and correct any issues of non-compliance when identified.

b) In order that all employees are informed, Suppliers should provide all new employees at the time of hiring an orientation to explain the information necessary to effectively fulfill their employment obligations including terms of employment, benefits, policies and procedures including grievance process, their rights under law, basic health and safety and job training.

c) Suppliers should provide additional training to all employees on an on-going basis, especially when any of the policies, procedures or applicable laws are amended.

d) Such information should be provided in the language(s) spoken by employees. Information should also be given in writing such as employee handbook or posters in notice boards.

e) Training should be documented including dates, topics and attendees.

4. Subcontracting and Home Working

a) Suppliers shall not subcontract out the production of LF or its customers’ products to third parties without expressed written authorization from LF.

b) When the Supplier requires subcontracting of finished products, prior to the subcontractor commencing production of LF merchandise, the subcontractor must first obtain explicit written approval that is only issued through the LF Supplier On-line Self-assessment. The Supplier that does not follow this procedure will risk forfeiting their business relationship with LF.

c) Suppliers must adopt the policy including consequences of violations and train all employees, and establish a routine internal monitoring to ensure no unauthorized subcontracting or home working is taking place.

d) If the Supplier finds violation of this policy, the Supplier shall exercise the necessary remediation including removing the production/work in progress from the unauthorized subcontractor or home work arrangements, disciplining applicable employees according to the policy, and scheduling and retraining all the employees about the policy.


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e) The Supplier must immediately notify LF with the detailed information including:

I. Name and address of the subcontractor/home working location

II. LF merchandise order number, style and volume

III. Start of the unauthorized production and the removal dates.

Security Standards

The measures listed below represent basic security features that should be present at each Supplier’s facility producing merchandise for Li & Fung, especially for US-bound goods.

1. policies and procedures

a) Suppliers shall establish internal policies and procedures to comply with local laws and regulations. In countries where such laws and regulations are absent, Suppliers should follow LF security requirements. Such policy should specify consequences of non-compliance.

b) Suppliers should define roles and responsibilities and assign appropriate employees for monitoring and enforcement of the policy.

c) Suppliers should train all employees to adhere to the policy. Suppliers should maintain all training records for a minimum of one year.

d) When and if there is a breach of policy and/or procedures found, Suppliers should take appropriate action stated in the established policy. Suppliers should investigate incidents of breach and deploy countermeasures to eliminate future non-compliance.

e) All incidents related to tampering of finished goods, breach of finished goods storage, or breach of transportation of finished goods must be immediately reported to appropriate entities including Li & Fung.

2. physical Security

Supplier’s buildings must be constructed of materials that resist unlawful entry and protect against intrusion, either from external or internal points. The Suppliers should incorporate the physical security criteria as follows:

a) Fencing should fully enclose the entire facility area and be regularly inspected for its integrity.

b) All gates which personnel and/or vehicles enter or exit should be manned and/or electronically monitored at all hours - 24/7.

c) All parking areas should be segregated between visitors and employees’ private vehicles, as well as cargo and container parking areas.

d) All external and internal windows, gates and fences should be secured by locking devices. The management and security should control all locks and keys. A key control and issue policy should be established, published, documented and reviewed on a regular basis. Locks should be periodically replaced or reset.

e) There should be adequate lighting inside and outside of the facility, to serve as an intrusion deterrent and to aid video surveillance cameras.


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f) Alarm system and video surveillance cameras should be utilized to monitor the premises and prevent any unauthorized access to the restricted area. CCTV should be used whenever possible to record vehicle loading, sealing, and the identifying plates and markings of finished goods transportation and loading staff.

3. physical access Control

a) Suppliers should issue a positive identification card to each employee and ensure all employees wear the identification at all times while on the premises.

b) Suppliers should verify all visitors, delivery personnel and drivers’ government issued positive identification prior to entering the premises.

c) Access control procedures should be set up to challenge unauthorized/unidentified persons, prevent unauthorized entry to facilities, maintain control of employees and visitors, and protect a facility’s assets.

d) Access control measures should include identifying and recording available personal data (photos, ID, etc.) and removing unauthorized persons from the premises.

4. procedural Security

Security measures should be in place to ensure the integrity and security of processes regarding the transportation, handling and storage of cargo as follows:

a) Suppliers should establish documentation processing procedures to ensure that all information used in the clearing of merchandise is legible, complete, accurate and protected against unauthorized changes, loss or introduction of erroneous information.

b) Suppliers should establish manifest procedures to ensure the integrity of the cargo and/or containers and the contents are accurately reported.

c) Suppliers should establish shipping and receiving procedures to reconcile the entire shipment against information on the cargo manifest. This procedure should include the tracking of the shipment and the positive identification on the transportation vehicle and its driver.

d) Suppliers should establish cargo discrepancies procedures to resolve all shortages and overages issues. Procedure should include reporting of discrepancies for a reasonable period. All the discrepancies reports (if any) should be kept for a minimum of 2 years since the incident’s date.

5. personnel Security

Suppliers must screen prospective employees and periodically check current employees’ possible criminal history during pre-employment verification, backgrounds checks and personnel termination procedures, in accordance with local, provincial and national laws.

a) Degree and complexity of screening should be proportional to the size of the facility and number of employees.

b) Additional screening should be used for key personnel with wide areas of access, or with positions of greater responsibility (Intellectual Property, Shipping staff, Management, Security staff, QA staff, master mechanics and maintenance teams with all hours and all area access, etc.).

6. Security Training and Threat awareness

a) A threat awareness program should be established and maintained by security personnel to recognize and foster awareness of the threat posed by thieves, counterfeiters, terrorists, and contraband smugglers.


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b) All employees should be made aware of general security and safety issues, and of the procedures the company has in place to address a situation and how to report it.

c) Additional periodic training should be provided to workers in the Quality Assurance (QA), final packing, finished goods storage area, shipping and receiving areas as well as those receiving and opening mail.

d) Security staff and appropriate departmental management should receive advanced awareness training on a regular basis, to ensure that existing and new staff continually develop their skill sets.

e) Security procedures should be tested by management, and results of procedural drills and tests should be reviewed and acted upon. Findings must be recorded and should be used as opportunities to improve the areas stated in point a) through d).

7. information Technology Security

Suppliers should establish measures to safeguard computer access and information as follows:

a) Suppliers should establish concrete Information Technology policy.

b) Every employee should have his/her own unique sign-in identification and password to access the computer systems. It is prohibited to share the same identification/password with others. Passwords should have an expiration cycle, typically no more than 6 months in duration.

c) Policies should be established that departing or terminated personnel passwords are removed and that all access to systems is removed.

d) Suppliers should establish effective methods to identify and trace any unauthorized access to the computer systems.

8. Container Security

Supplier should ensure that container and trailer integrity is maintained to protect against the introduction of unauthorized material and/or persons.

a) At the point-of-stuffing, Supplier should ensure the procedures are followed to properly seal and maintain the integrity of the shipping containers and trailers.

b) A high security seal (examples below) should be affixed to all loaded containers and trailers bound for the U.S. and all seals must meet or exceed the current PAS ISO 17712 standard.


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c) A seven-point inspection process is recommended for all containers and a ten-point inspection process is recommended for all trailers. All of these checking points are designed to address risk at the manufacturing facility or point-of-stuffing by verifying the physical integrity of the container structure and the reliability of the locking mechanisms of the doors.

Container inspection points Trailer inspection points

1. Front wall 1. Fifth wheel area

2. Left side of container (external and internal)

2. Exterior of trailer (front and sides)

3. Right side of container (external and internal)

3. Rear (bumper and doors)

4. Interior flooring 4. Front wall

5. Ceiling and roof 5. Left side of container (external and internal)

6. Inside and outside doors 6. Right side of container (external and internal)

7. Exterior and under the container 7. Interior flooring

8. Ceiling and roof

9. Inside and outside doors

10. External and undercarriage

summary of 17 inspection Points for trailers and containers

container inspection Points


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9. Business partners requirements

Suppliers should have written and verifiable procedures for the selection of business partners including, carriers, other manufacturers, product Suppliers, importers, ports, terminals, brokers, consolidators and Suppliers of other materials such as parts and raw material Suppliers.

a) Suppliers should conduct periodic reviews of business partners’ processes and facilities based on risk, and inform the partners to maintain the security standards required by the Suppliers.

b) Suppliers should have documentation (e.g., C-TPAT certificate, SVI number, etc.) indicating whether their current or prospective business partners are eligible for C-TPAT certification.

c) On U.S. bound shipments, Suppliers should monitor those carriers that subcontract transportation services to other carriers or use other C-TPAT approved carriers, or non-C-TPAT carriers that are meeting the security criteria as outlined in the business partner requirements.

environmental Sustainability Guidelines

Suppliers should actively work to improve the environmental performance of their operations. This includes measures to mitigate adverse environmental impacts, and to improve material and resource efficiency, reduce waste and prevent pollution.

LF’s sustainability guidelines are for our Suppliers to enhance environmental performance through resource conservation and pollution prevention. Resource efficiency saves money.

A best-practice Supplier would, for example, use recycled materials in its products and packaging, operate a hybrid vehicle fleet, use LED lighting, generate energy for heating and cooling from ground source heat pumps and solar panels and use an onsite water capture and reuse system.

1. resources and Waste management

As competition for resources increases the price of raw materials also increases. Therefore, cutting back on material use and waste will bring cost savings and reduce dependency on non-renewable resources.

Suppliers should:

a) review consumption of key materials/inputs;

b) develop a plan and implement initiatives to reduce resource consumption;

c) measure wastes requiring disposal;

d) develop plan and implement initiatives to reduce waste generation; and

e) properly dispose of waste materials to reduce environmental impacts and to comply with applicable regulations.

Measuring and improving material usage thereby can improve the bottom line by cutting the cost of purchasing materials and disposing of waste. This can be achieved by:

a) reducing consumption;

b) ordering and properly storing the right types and quantities of materials;


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c) maximizing material utilization;

d) using renewable resources; and

e) reusing and recycling non-hazardous materials.

2. Greenhouse Gas reduction

Greenhouse gases (GHGs) trap heat within the earth’s atmosphere, contributing to the ‘greenhouse’ effect and causing global warming and climate change. These gases include carbon dioxide, methane, nitrous oxide, refrigerants, water vapor and other gases. Industry, including manufacturing, is the second largest global emitter of human-created GHGs. The majority of industrial GHG emissions result from the burning of fossil fuels for heat and power generation.

Improving environmental performance and reducing our carbon footprint not only helps restore balance to our climate systems, but saves money, minimizes energy supply disruptions and reduces dependence on fossil fuels.

Suppliers should:

a) measure GHG emissions (carbon footprint);

b) monitor and track GHG emissions; and

c) develop a plan and implement initiatives to reduce GHG emissions.

A GHG audit should be conducted to determine:

a) how facilities, processes and systems generate GHGs;

b) initiatives and energy sources that can be implemented to reduce energy and fuel usage;

c) fuels, energy sources and refrigerants that can be used with lower GHG intensities; and

d) switch to renewable energy where feasible (e.g. generating on-site renewable energy or sourcing from green power such as electricity generated from renewable sources like wind, geothermal, biomass and landfill gas).

3. energy efficiency

Measuring and improving energy efficiency reduces greenhouse gas emissions, conserves resources and improves the bottom line by cutting fuel and utility costs.

Suppliers should:

a) measure energy consumption;

b) monitor and track energy consumption; and

c) develop a plan and implement initiatives to reduce energy consumption.

An energy audit should be conducted to determine:

a) how facilities, processes and systems use energy;

b) process changes and behavioral practices that can be implemented to reduce energy consumption and use less carbon intensive sources (e.g. turning off lights in unused areas, switching from coal or diesel to natural gas); and


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c) technologies or equipment that can be installed to reduce energy use (e.g. efficient lighting, heating and cooling systems, machinery and equipment).

4. Water efficiency and Quality

Water efficiency is about using water wisely to conserve water resources used in the manufacturing process and water quality refers to the quality of wastewater discharged as a result. Conservation and water quality management can improve water efficiency and quality, thereby reducing consumption costs and meeting increasingly stringent regulations and penalties.

Suppliers should:

a) measure water consumption;

b) monitor and track water consumption and wastewater discharges; and

c) develop a plan and implement initiatives to reduce water consumption and comply with applicable regulations.

A water audit should be conducted to determine:

a) how facilities, processes and systems use water and generate wastewater;

b) quantities of water consumed;

c) quality of wastewater discharged (i.e. monitoring results);

d) process changes and behavioral practices that can be adopted to reduce water consumption and reuse water (e.g. reduce wastage, prevent leakage, process/technology for capture and reuse);

e) retrofits or efficient technologies that can be adopted to reduce water consumption (e.g. water-conserving fixtures); and

f) processes or new technologies that can be adopted to reduce wastewater generation and improve wastewater quality (e.g. use less chemicals and non-toxic alternatives).


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Glossary of Terms

announced audit: Audit which is undertaken on a specified date that is chosen in agreement with the employment site.

benefits: Compensation paid to employees in addition to remuneration (wage/salary). Benefits can be classified as legal when stipulated by labor or federal agencies such as overtime, holiday or vacation pay. Companies can also provide voluntary benefits, which are not required by law, such as tuition reimbursement or food baskets.

c-tPat: Customs-Trade Partnership against Terrorism, a voluntary government-business initiative by the US Customs and Border Protection (CBP) to build cooperative relationships that strengthen and improve overall international supply chain and U.S. border security.

cctv: Closed circuit television.

coc: Li & Fung Code of Conduct.

code standards: A set of requirements for Suppliers to implement LF Code of Conduct.

compliance: Meeting local laws and regulations, applicable codes of conduct and international standards.

corrective action: Measures taken to eliminate non-compliance.

corrective action Plan: A plan of action drawn up at the end of an audit that records what measures have to be taken and within what time limit to remedy the non-compliance.

discrimination: Practices that use non-job performance related factors as the basis of employment decisions such as hiring, compensation, promotion, termination, retirement and access to training.

ehs: Environment, Health and Safety.

ems: Environmental Management System.

employee: A person who is directly hired by a Supplier or indirectly hired through its subcontractor for employment.

environmental aspect: An element of an organization’s activities, products, or services which can interact with the environment.

environmental impact: Any change to the environment whether adverse or beneficial, wholly or partially resulting from an organization’s activities, products, or services.

environmental sustainability Guidelines: Guidance for Suppliers to enhance environmental performance through resource conservation and pollution prevention.

forced Labor: Any arrangement in which workers are forced to work against their will or do not have the choice to leave their working arrangement when they choose.

Gfci: Ground-fault Circuit Interrupters.

GhG: Greenhouse Gases.

hira: Hazard Identification and Risk Assessment.

home Worker: A home worker can be defined as someone who, for a fixed rate of remuneration, carries out work at his or her home for an employer who is not the final consumer of the product or service provided.

human trafficking: The illegal trade of human beings for the purposes of reproductive slavery, commercial sexual exploitation, forced labor, or a modern-day form of slavery.

illegal activity: Engaging in activity that is against established law.

Appendix 1


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iLo: International Labor Organization.

iso 14001:2004: International Organization for Standardization’s standard used by organizations for designing and implementing an environmental management system.

Juvenile employees: Employees at the juvenile age stipulated in the local law.

Led Lighting: A light-emitting diode (LED) is a semiconductor light source.

Lf: Li & Fung Limited.

Lf security code standards: A set of requirements for Suppliers to implement LF Security Standards based on the Security Guidelines issued by the US Customs and Border Protection Agency and the Authorized Economic Operators (AEO) Guidelines issued by the European Commission.

Loto: Lockout/Tagout.

manual: Comprehensive and step-by-step guide to a particular topic for both beginners and practitioners that also serves as a reference book. A manual details what is given and what is required, explains how to put the presented information into practice, and instructs how to solve problems as they occur. This term is commonly used interchangeably with handbook.

migrant employee: A person who is engaged in a remunerated activity, who has moved to a country, province or region of which he or she is not a native, where he/she is not eligible to or does not intend to become a permanent resident.

msd: Musculoskeletal Disorder.

msds: Material Safety Data Sheet, provides detailed information on each hazardous chemical contained in a chemical product, including the proportion of each chemical, and the potential hazardous effects, physical and chemical characteristics, and recommendations for appropriate human protective measures. An MSDS does not identify whether a material is a hazardous waste.

non-compliance: Violation or failing to follow the obligations of a rule, law, regulations agreement or guidelines.

ohsas 18001:2007: Internationally recognized specification for designing and implementing an occupational health and safety management system.

Pas iso 17712: An international standard, called the DS DS / ISO / PAS 17712 Freight containers - Mechanical seals.

ph: A measure of the basicity or acidity of an aqueous solution.

PPe: Personal Protective Equipment including protective clothing, helmets, goggles, or other garment or equipment designed to protect the wearer’s body from injury by blunt impacts, electrical hazards, heat, chemicals, and infection, for occupational safety and health purposes.

Prison Labor: Prisoners used as part of the work force. Under prison labor arrangements, prisoners may be brought to the facility, or the production may occur in the prison facilities. Although prisoners may be paid, because they often have no choice to refuse the work, this is often a form of forced labor.

Psychotherapy: A general term referring to any form of therapeutic interaction or treatment contracted between a trained professional and a patient.

repatriation: A process of returning a person back to one’s place of origin or citizenship.

restricted substances: CFC (Chlorofluorocarbon), CTC (carbon tetrachloride), DDT (dichlorodiphenyltrichloroethane), PCBs (polychlorinated biphenyl), PBBs (polybrominated biphenyl), TCA (trichloroacetic acid).

rules of origin: A set of rules used to determine the country of origin of a product for purposes of international trade.

stakeholder: Any person, company, organization or other party that is affected by the activity and/or operations of the company.

subcontractor: An individual or a group of individuals to whom a contractor outsources the manufacture of a product or part-product.

suppliers: Companies/facilities producing merchandise for LF or its customers. These include Suppliers who produce merchandise at their owned sites, factories and approved subcontractors.


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temporary employee: Worker who is employed directly by the employer, but on a contract that is for a specified period of time. When the contract ends there is no obligation for the employer to continue the employment agreement.

trade union: A membership organization of workers which seeks to represent the view of workers and promote / enforce their rights within the workplace and the society as a whole. The organization must conform to local legal requirements, and be able to engage in collective bargaining with employers and employers’ organizations.

unannounced audit: An audit carried out without prior warning to the employment site.

underage employee: a person aged below 15 or younger than the legal working age of the country, whichever has higher requirements.

verification: Examination of claims made about the actual observance of code or standard provisions by Suppliers or of claims made about the activities that a company undertakes to give effect to its code. Verification implies that participating companies must have internal auditing or monitoring systems in place.

voc: Volatile Organic Compounds. Examples include paints, paint strippers, and other solvents; cleansers and disinfectants; stored fuels and automotive products.

Wages: Monetary compensation (money) paid to workers for producing goods or providing services.

Zt: Zero-Tolerance, the most severe non-compliance issue(s) among the LF Code requirements that requires immediate attention and remediation by the LF Supplier. The ZT issue(s) needs to be corrected within three (3) months from the date of discovery, otherwise it will result in the termination of the business relationship with the Supplier.


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Classification of issues

Categories Description

Minor Isolated non-compliance of issues that do not rise to the level of Major. Although Minor issues may not cause serious damage to employees and the environment, it is requested for Suppliers to correct, reduce or eliminate these issues.

Major A Supplier discovered to have any Major issues will be placed on “conditional approval” and required to make improvement, and be subject to frequent unannounced verification by LF. Failure of the Supplier to improve Major issues may result in LF considering the termination of its business relationship with the Supplier.

For example, Major issues include expired business license, isolated incidents of child labor, systemic verbal abuse, and either discriminatory employment practices or isolated environmental or health and safety practices that are against the law. For the complete list, please refer to the Li & Fung website.

Zero Tolerance A new Supplier discovered to have any ZT issues will not be able to commence producing merchandise for LF or its customer(s). An existing Supplier discovered to have ZT issues will be required to adopt immediate corrective actions and failure to resolve the issues to the acceptable level within 3 months will result in the termination of the business relationship.

ZT issues are those that are egregious and occur as part of business operations and include, for example, forced labor, child labor, physical and/or sexual harassment and abuse, termination of employee for organizing efforts, violation of wage and hour laws and environmental or health and safety practices that are against the law. For the complete list, please refer to the Li & Fung website.

Appendix 2


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Supplier Compliance ratings

To track Suppliers’ performance, LF assigns ratings based on most recent issues and improvements.

Appendix 3

GoLdexceeding Compliance

a: Greenmeeting Compliance

Presence of one or more Minor issue(s)

b: yellowapproaching Compliance

Presence of one or more Major issue(s)

c: redPresence of one or more Zero-Tolerance issue(s)

supplier compliance manual - total sourcing · pdf filethe electronic version that is...

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