Monitoring Compliance

Rating suppliers

The SEA Key Performance Indicator (KPI) is a rating tool to evaluate our direct suppliers' social compliance resources, capability and performance in a comprehensive way.

The SEA KPI comprises six fundamental elements of social compliance that are described as Units of Measure (UoM):

1. Measuring management commitment and responsiveness to a strategic compliance plan. This planning document defines each unit of measure from the supplier KPI so there is a direct linkage between 12-month compliance activities and opportunities for improvement identified during SEA monitoring. Additionally, the plan spells out details for employee retention, compliance-related investment, relationships with third parties and local government, crisis management and project development on critical compliance issues.

2. Measuring supplier management systems for HR and HSE includes an evaluation of certifications for environment and health and safety, development of HR and HSE systems, retention of qualified professionals for those management systems and internal audit assessments of labour and HSE practices.

3. Measuring worker-management communication and industrial relations focuses on the factory's ability to resolve disputes, respect forms of worker representation, develop effective grievance procedures and promote sustainable worker-management communication. There is an evaluation of the communication committee's effectiveness and sustainability and the training needs assessment used by the factory to develop worker and management training.

4. Measuring the delivery and effectiveness of internal training for factory staff focuses on the process for a training needs assessment, the scheduling and execution of the training programme and the budget allocated for training. Trainers are evaluated for their skill, knowledge and experience. Factory records for training and the protocols for reporting these activities are also reviewed.

5. Measuring transparency in communication and reporting focuses on pro-active factory reporting of self-assessment audits and action plan progress. There are additional benchmarks for determining if workers are coached, verification of document authenticity and communication of the Workplace Standards to the workforce and subcontractors.

6. Measurements for compliance activities that focus on the factory's management response to findings of non-compliance, remediation or enforcement actions.

The factory UoM scores create a KPI cumulative score that falls in one of the following performance bands:

Grade KPI score band Performance description
1C 0-29% There are numerous severe non-compliance issues. There are no compliance management and compliance practices in place. The factory has been given notice that business will be terminated unless there is immediate improvement.
2C 30-59% There are some non-compliance issues and no compliance management systems. However, there are some effective compliance practices being delivered.
3C 60-79% There are minor non-compliance issues. The factory has compliance management systems and some effective compliance practices in place.
4C 80-89% Generally there are no non-compliance issues. The factory has compliance management systems in place, and most of the components are effective.
5C 90-100% There are no non-compliance issues and all of the factory's management systems and practices are well delivered and effective.

These KPI ratings were used to inform the clusters approach we have developed this year.

The Performance section contains the KPIs of our active suppliers and how these have developed over the last three years.

A separate Environmental KPI was piloted with selected factories in Asia during 2010. This KPI is described in the Environment section.

Reading this report

Performance counts and reporting is about making performance clear to readers.

So in this year's report each page identifies which Global Reporting Initiative (GRI) indicators it addresses, complementing the GRI Index.