Foreign Affairs Committee on April 28th, 2014

[Paul Dewar, NDP, Ottawa Centre, ON]

Mr. Smith, you have expertise on supply chain, which is growing and changing because of the nature of the businesses. You touched on the importance of supply chain transparency and the G-8 recently focused on this issue of transparency.

Can you relate how the transparency initiative and transparency in the supply chain are linked to having a responsible CSR policy?

[Tom Smith]

It has a direct link. I'll cite, for example, the retail food chains in Canada—and not just Loblaws—that are demanding more and more to see the chain of custody of products coming from the south, demanding to see that if a producer organization or a coffee producer in Peru is certified as a fair trade coffee producer, they are following the standards and the rules that are set by the Fairtrade International system. That has to be tracked through probably four levels of supply chain: from the producer, to the distributor, to the trader, to the wholesaler in Canada, and ultimately to the retailer.

At the end of the day, the consumer is at the heart of it. They need to see that there is reliable certification. They need to see that they can count on the retailer to follow through on their commitments. They have to be able to see it on the product. I think it has a direct link, and the link is really chain of custody, right from the production source through to the retailer in Canada.

[The Chair, Conservative, Dean Allison]

Thank you very much.

That's a good example to set for all for timing. That's good.

[Paul Dewar, NDP, Ottawa Centre, ON]

Thank you. I tried.

[The Chair, Conservative, Dean Allison]

Mr. Carmichael, we're going to start with you and then we'll go to Ms. Brown.

You have seven minutes.

[John Carmichael, Conservative, Don Valley West, ON]

Thank you, Chair.

Thank you to our witnesses this afternoon.

I'd like to join my colleague across in complimenting Loblaw Companies on the values that I think the leadership of your company displayed. I think that's clearly a sign of good leadership, strong leadership, and a strong commitment to so many aspects of business today, particularly in a crisis environment like the one you experienced.

Mr. Chant, I wonder if you could speak for a minute to the total compensation. You talked about the $5 million and Loblaws as the lead contributor to that fund. I'd like to get an idea of, number one, how large the fund was, and also, did it reach fully the people that it was intended to reach?

[Bob Chant]

The fund was established by a working group, a coordinating committee made up of labour interests, NGOs, brands—there are four brands on the coordinating committee and Loblaw is one of them—the Government of Bangladesh, and the producers' association representatives of the factory owners. The amount established was $40 million U.S. The expectation, the understanding, is that all the organizations we talked about, or at least the combination of government producers and brands, I should say, would contribute to that fund.

I don't actually know what the latest amount is. The last I heard, it was at around $15 million of the target of $40 million. Our contribution is just under $4 million towards that amount. There's an additional amount of short-term compensation that we provided back in early February, which we'd say then brings the total amount of our compensation up to $4 million and a million dollars in relief funding to the two organizations that Peter MacArthur referred to earlier and that we've directly engaged with: Save the Children in Bangladesh and the Centre for the Rehabilitation of the Paralysed.

The funds have just recently begun to flow. They are flowing on the basis of applications or claims to the fund and will be paid out as those claims are processed and as the amount of money that's brought into the fund allows. Only on a certain percentage basis will the claims be paid out. There would be subsequent payments made as money flows into the trust.

The trust is overseen by, or the trustee of the fund is, the International Labour Organization, and I have to express, on behalf of Loblaw, our appreciation for Dan Rees and the ILO's leadership on this as well. I've never participated in anything quite like this before, although by the colour of my hair you'd think I'd been around for a long time. But honestly, it's something quite unusual, and it has been very challenging. Each time I speak in public, I encourage brands and those others that I mentioned earlier to step forward and make a fair share contribution. It wouldn't take us very long to get to $40 million if everybody stepped up to the plate.

[John Carmichael, Conservative, Don Valley West, ON]

With that thought in mind, how many Canadian companies are there? You mentioned that you're the only one that's participating. How many are there?

[Bob Chant]

Well, I caution you not to confuse the accord with the compensation initiatives. The two aren't the same thing.

[John Carmichael, Conservative, Don Valley West, ON]

You're the only Canadian company in the accord?

[Bob Chant]

We're the only Canadian company that has signed onto the accord. There are many Canadian companies that are engaged with the workplace safety efforts, many of them through the alliance.

On the compensation file, to be honest I don't really want to speak about others, other than to say that I think quite a bit more can be done.

[John Carmichael, Conservative, Don Valley West, ON]

Okay.

I do want to speak about the supply management issue but before I do, you mentioned that the business is starting to flow again. I take it that you've established new facilities, and you're ready to go in terms of an operation. I wonder if you can talk about what's changed in the course of the year.

[Bob Chant]

Sure, I'd be happy to.

First of all, we don't own any of the factories in Bangladesh. As I said 11 months ago, we operate through the vendors we contract with, who then subsequently either own the factories or contract with factories on the ground.

There has been significant progress in doubling back and inspecting the facilities for both regular workplace conditions, environmental conditions, and what some call CSR audits, which now include building inspections or inspections of the physical or structural integrity of the buildings. I would say that most of the large brands have gone back and done that. We completed all of our audits by the end of July last year, shared our information with the accord, and now the accord process is under way and factories are being inspected a dozen per week, or thereabouts.

The pace is fairly slow and there are a large number of factories that have to be inspected. But my understanding is that the way the accord—and I believe the alliance, and Dan may be able to speak to this better—is doing this on an at-risk basis, so an assessment of what the riskier locations are....

We've also reiterated, reinforced our no tolerance policy for subcontracting, or at least unauthorized subcontracting. Subcontracting is okay as long as we are aware of it and as long as we have audited or inspected the factory that's going to be doing the subcontracting, but it's not okay if we're not aware of it so we don't allow that.

[John Carmichael, Conservative, Don Valley West, ON]

Within that there are effectively two prongs: you have working conditions, which you're auditing constantly; and you have building conditions. Is that correct?

[Bob Chant]

Yes, and now they're combined. As I've said before, pretty much no one was inspecting for the structural integrity of the buildings before and that's being done now. I would point out that the alliance and the accord have agreed on a common set of standards that I think is a very good sign. It's not as though we have two sets of standards that factory owners have to live up to. It's one set of standards and it's a very high set of standards.

[The Chair, Conservative, Dean Allison]

Thank you. That's all the time we have.

Good chairing, John.

[Some hon. members]

Oh, oh!

[The Chair, Conservative, Dean Allison]

We may catch you at the end.

Mr. Garneau, sir, for seven minutes, please.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you very much for your testimony today.

One of the people I spoke to before you came here was from government and he told me that there is no requirement for a retailer to actually interface with the government in their decision to engage a manufacturer in the garment industry in Bangladesh. They could go straight to them, work out a deal, and the clothes would be produced. So 60% of retailers are not necessarily getting in touch with the government.

My first question is for Mr. Chant. I'm not picking on Loblaws, because I think you've done a lot of things since Rana Plaza. I ask this because this may be how a lot of other companies are still operating, but when you first went to Bangladesh, did you identify a manufacturer and then, based on your assessment of their capability to do the job and the cost they were going to charge you, decide on that basis? Were those pretty well the criteria for your deciding that yes, you would sign a contract?

[Bob Chant]

Yes.

Certainly we would do due diligence in regard to the integrity and the history of the agent or the vendor whom we contract with, whether a factory-owner or not. Then before a purchase order would be cut, an inspection of the factory they were going to be sourcing from on our behalf would be completed.

The difference between the pre- and post-Rana Plaza period is that we didn't inspect for building integrity. We do not make it a practice, and I'd actually be quite surprised if any other retailer would sit here in my place and say they make it a practice of checking in with the high commission in every country they source from. I don't see the need for that, to be honest.

I believe the customers of Loblaw stores and our banner stores, whether Joe Fresh or any other of our banners, believe it's up to us to have the integrity to do the right thing and to be sourcing ethically, and don't believe that it's up to the Government of Canada to tell us how to source our products around the world. I honestly don't think that's a practical solution. I'm not sure if you're suggesting that.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

No, I'm not.

All right. So far, to your knowledge, you are the only Canadian company to have signed the accord in Bangladesh.

So I'll ask Madame Brisebois a question.

You represent retailers, and I'm eager to know, from your experience—and I don't know how many Canadian companies other than Loblaw or Joe Fresh are in Bangladesh having garments made—what your interface to them is on issues that might be related to corporate and social responsibility. Or, is that an area you don't touch on when you provide the services you do to Canadian retailers?

[Diane Brisebois]

Thank you, Mr. Garneau.

We, in fact, interact with them very closely on CSR practices; and, as Mr. Chant mentioned, we interact even more aggressively with all of our merchants, especially those we knew were importing garments from Bangladesh, following the Rana Plaza disaster.

So we have been working closely with all our retailers to encourage them to join either the accord or the alliance and to review their practices in regard to supply chain management, a lot of those practices highlighted by Mr. Chant. So in fact an association such as the Retail Council of Canada plays an important role. The only thing it does not do, in our case, is specifically to tell merchants which organization they should associate with or what initiative they should support, assuming we believe that those initiatives are doing good, as we believe both the accord and the alliance are.

I hope that has answered your question.

[Marc Garneau, Liberal, Westmount—Ville-Marie, QC]

Thank you. I have a follow-on question.

The department has said that perhaps 60% of companies, retailers, don't come to us and ask, do you have any advice to give us as we seek to do business in Bangladesh? Certainly once you're contacted it sounds like you provide all the kinds of information we're talking about. But is it possible that retailers can go and do business in Bangladesh and that you don't hear about it? Do you have a tracking arrangement whereby you can identify that this company is going over there, so let's make sure we have a chance to speak to them?

[Diane Brisebois]

There's no tracking or list that exists, Mr. Garneau, telling you that the following 30 companies are in fact sourcing from Bangladesh. In fact, that is sometimes a bit more difficult unless the country is identified on the label of the product, and we go from one store to another.

There are groups of companies that are very sophisticated and that we know source from different parts of the world, including China, Bangladesh, and Cambodia. They're easy to identify. But certainly there are some out there that are using, at times, third parties, and are not as sophisticated and may need more assistance.

As one of the members of the committee mentioned earlier, you also need leadership from the top of the company—as Mr. Weston exemplifies—to ensure that they are asking questions of their buyers. Where are the products coming from? Are we doing all the right things? Do we have a CSR code in place? Do we know if, in fact, it's respected in practice?

So I think associations like the Retail Council, with government, can in fact develop a lot of tools and try to get them to as many companies as possible to ensure that we increase education and knowledge.

I don't know if I'm answered your question, Mr. Garneau, but I hope I have.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We'll start the second round of five minutes with Mr. Goldring, please.