Processing

In order to check working conditions in the production plants, Migros needs to know where the products are produced. As the supply chain often involves several intermediaries who do not always wish to disclose the identity of their manufacturers, full transparency over the supply chain is difficult to achieve. A further challenge lies in the dynamic nature of the supplier portfolio: Migros is continuously adopting new suppliers and cutting ties with existing ones.

In 2015 the Migros Group managed to reduce the proportion of non-transparent supply chains to 34% (2014: 42%). It procured raw materials or products from 99 countries, 51 of which were high-risk countries. Overall, Migros worked with 8'474 suppliers. 3'505 of these suppliers (41%) have potentially risky supply chains.

In a supply chain with risk potential, the production plants may be located in a high-risk country such as India, China or Eastern Europe, with production processes that involve a great deal of manual labour. The definition of a high-risk country is based on the World Wide Governance indicators of the World Bank, which relate to issues such as corruption, rule of law and the implementation of legislation in a country.

To check the working conditions and social standards for producers in high-risk countries, Migros generally relies on the Business Social Compliance Initiative (BSCI), as well as factory visits by Migros specialists, and gradually integrates the producers in the BSCI process.

In 2015, Gries Deco Company visited twelve of its most important suppliers in Asia and inspected around twenty factories. The aim was to find out more about the local working conditions in order to work on implementing the BSCI Code of Conduct together with the supplier and addressing individual problems. At the end of 2015, 101 suppliers in high-risk countries were involved in the BSCI process. This represents 60% of the purchasing volume of Gries Deco Company in those countries.

More audits and new BSCI Code of Conduct The Migros Group integrates its business partners into the BSCI process on the basis of a risk assessment, which takes into account the type of supply chain, the country of production, the industry and the sales volume.

During a BSCI audit, external specialists spend several days assessing the employment and working conditions in the suppliers' factories and recommend ways to remedy any non-conformities that are discovered. A follow-up audit checks whether the measures have been successfully implemented.

In 2015, Migros conducted more factory visits and audits than in the previous year. For example, 425 BSCI audits (2014: 294) and 78 factory visits were conducted by specialists (2014: 45), the majority of which were in India and China. 55 companies (13%) achieved good results in the audits. Minor non-conformities were found at 281 companies (66%), and 89 companies (21%) need to correct more serious problems. These figures are within the sector average.

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BSCI audits

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Results BSCI Audits: first audits and follow-up audits 1	2011	2012	2013	2014	2015 2
Good	28%	18%	29%	15%	13%
Improvement needed	24%	31%	29%	51%	66%
Not fulfilled	48%	51%	42%	34%	21%
Number of employees	248	246	206	294	425

1 Includes the results of Cooperative Retailing, Globus and Gries Deco Company

2 As of 2015, a new audit system based on the BSCI Code of Conduct (Version 2014) is being applied with the ratings A to E. The audit results from 2015 have been converted into the previous audit system: A and B correspond to the rating ‘good’, C corresponds to the rating ‘improvement needed’, D and E correspond to the rating ‘not fulfilled’.

Factory visits by Migros specialists have a positive effect on adherence to the BSCI Code of Conduct. This can be seen using the example of a textiles factory in Turkey. After a BSCI audit had found some more serious non-conformities relating to employee time tracking, two specialists discussed the possible causes with the local managers and outlined some improvement measures that were flawlessly implemented.

Most of the non-conformities at Migros' supplier companies are found in occupational health and safety, management system, maximum working hours and remuneration. The focus during the factory visits is on correcting these deficiencies. Non-conformities in the area of child labour (2%) and forced labour (1%) are rare. In two factories in Malaysia, foreign employees were required to surrender their passports to management. Thanks to Migros' intervention, this practice was stopped in the factories concerned.

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BSCI audits: breakdown by type of non-conformity

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BSCI Audits: broken down into type of non-conformity 1	2011	2012	2013	2014	2015
Occupational health and safety (OHS)	36	27	50	59	96
Management system	13	12	8	18	69
Maximum working hours	97	92	50	65	57
Remuneration	84	82	54	69	51
Environmental requirements	16	6	3	7	13
Discrimination	1	5	1	2	6
Child labour	4	3	4	1	5
Documentation	6	19	15	21	4
Forced labour	3	8	1	3	3
Right to freedom of association and collective bargaining	2	3	1	0	3
Health and social facilities	2	7	15	14	3
Young workers	0	0	0	0	2
Working conditions (cleanliness, ventilation, etc.)	3	5	1	2	1
Accommodation	0	0	0	0	0
Total non-conformities 2	267	269	203	261	313
Total amount of audits with Migros producers	248	246	206	294	425

1 As the audit system was changed to the new BSCI Code of Conduct (Version 2014), the non-conformities relating to documentation, working conditions, health, social facilities and accommodation have not been documented in full, as the corresponding chapters no longer exist in the new audit system or have been spread across other areas.

2 More than one non-conformity can be discovered per audit.

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BSCI Audits: broken down into type of non-conformity 2015	Non-conformities in 2015	Proportion of total non-conformities
Occupational health and safety (OHS)	96	31%
Management system	69	22%
Maximum working hours	57	18%
Remuneration	51	16%
Environmental requirements	13	4%
Discrimination	6	2%
Child labour	5	2%
Documentation	4	1%
Other 1	12	4%
Total	313	100%

1 Includes the following BSCI Audit chapters: forced labour, right to freedom of association and collective bargaining, health and social facilities, young workers, working conditions (cleanliness, ventilation, etc.), accommodation

In 2015, Migros helped evolve the BSCI Code of Conduct and its implementation system as part of various BSCI committees and working groups. In doing so, it contributed to improving the development approach of BSCI. Factories should not just be checked on the basis of audits. Instead, their employees should be taught how to interpret and implement the Code correctly, in order to establish sound management practices that meet the requirements of BSCI.

As an active member of the BSCI Swiss Contact Group, Migros took part in workshops to help Swiss companies apply the Code and implement it in the supply chain.

Capacity building: training and empowering suppliers As part of the development approach, Migros provides training, factory visits and courses to help its suppliers implement social standards.

Cooperative Retailing set itself the goal of improving the working conditions of 75'000 employees in supplier companies by the end of 2015. Between 2013 and mid-2015, more than 137'000 employees of Migros suppliers benefited from programmes and tailored training. Migros trained a further 16'420 people by the end of 2015, with more to follow this year.

"Sustainability is just as important as price in procurement. That is why we develop sustainable structures that guarantee quality."

In 2015, the focus of capacity building in Cooperative Retailing was on Asia and Eastern Europe. For example, Migros sent its experts to production plants and factories in China and India, where they inspected working conditions and initiated improvement measures. In addition, 19 employees of suppliers completed an e-learning course, which teaches subjects such as fire safety, remuneration management, occupational health and safety and environmental protection in a practice-oriented way in the local language.

The Migros purchasing offices in Hong Kong and India play a key role in the factory visits. The purchasing offices in Hong Kong celebrated their 20 year anniversary. In the reporting year, three specialists in social standards conducted audits to verify compliance with the Code of Conduct and trained staff at suppliers. Since the end of 2014, one employee has been working in the Migros Liaison Office in India, which is primarily concerned with factory visits and improvement measures as part of the BSCI implementation in the factories.

Migros has set itself the target of increasing the number of audits and factory visits even further this year and addressing the issue of living wages.

At the end of 2015, 77% of all clothing products of Cooperative Retailing carried the Eco label. Migros has set itself the target of producing all own-brand textiles in an environmentally and socially sustainable and traceable way in accordance with the Eco label guidelines by the end of 2017.

Compliance with the Eco requirements is checked by independent third parties on behalf of Migros. All participants in the textile value-added chain are known. The standard aims to ensure that all stages of production – from yarn to finishing – are documented with details of the chemical products and production processes that are used, as well as being assessed and checked for compliance with Migros' requirements. By showing its suppliers how to handle harmful substances and chemicals, for example, and providing staff training, Migros helps to improve the relationships with suppliers and ensure traceability.

Migros is aiming to produce more than 150 products containing less sugar, salt and fat, but more fibre, by the end of 2018. Migros has analysed more than 1'400 products since 2013. In the past two years, it has improved 184 product recipes, especially those for ready meals, dairy products and instant soups.

In the reporting year, Migros signed a memorandum of understanding with other food retailers and producers, which serves as the basis for developing voluntary promises of action as part of the Swiss government's Initiative actionsanté. The aim is to gradually reduce the amount of sugar contained in yoghurts and breakfast cereals over the next four years. Between 2011 and the end of 2013, Migros reduced the sugar content in 56% of its yoghurts. By signing the memorandum, it has demonstrated its intent to systematically continue this trend.

To ensure perfectly safe food, the Migros Group companies apply various standards during quality assurance, such as those certified by The Global Food Safety Initiative (GFSI). Most domestic and foreign third party suppliers of processed foods, including the M-Industry companies, are certified according to a standard recognised by the GFSI.

For the remaining suppliers, Migros carries out risk-based inspections. The standards recognised by the GFSI and the inspection requirements of Migros cover areas such as production hygiene as well as product safety guidelines for preventing contamination through pollutants or allergens. In 2015, the implementation rate among suppliers was 89% in Migros Industry, 73% in Commerce and 86% in Cooperative Retailing.

In addition, Migros and its suppliers have their products continuously monitored during introduction and sale. On behalf of Migros, Swiss Quality Testing Services (SQTS) subjects the products to risk-based tests as part of self-regulation. Using a modern analysis method, SQTS checks the quality and safety of the products and whether they conform to the applicable laws. In 2015, Cooperative Retailing performed around 20'000 product tests; 17 products had to be recalled due to deficiencies, such as Alnatura Tahin Sesammus, which was found to contain salmonella.

Globus offers many products that are hand-made by small producers. During artisanal production, there is a higher risk of contamination with germs, as the quality assurance measures are usually less professional than those in industrial production. In 2015, Globus analysed a total of 900 products. The company also helps to increase food safety by checking products before they are adopted in the range. For example, a jarred terrine was rejected because the pasteurisation process used was inadequate.