Race to the Top - VietnamA systematic approach towards sustainable apparel

production at scale in Vietnam

Creating conditions for large scale improvements in the social and environmental

impact of apparel production in Vietnam*, by:

• proving and improving the (economic, societal, reputational) benefits of a sustainable

apparel industry for the government, the industry, workers and communities

• creating a supportive policy and regulatory environment for sustainable apparel production;

• improving the business rationale** for manufacturers and mills to invest in sustainable

apparel production;

• creating cost-efficiencies by coordinated and innovative interventions at country-level.

* The approach can be scaled up to other countries once the proof of concept is there.

**The term business rationale comprises the financial return for certain investments, the priority of these investments

versus other investments, as well as the enabling conditions required to prioritize the investment such as access to

capital, financial literacy, etc.

Race to the Top Vision

Works towards systemic change

Leverages core competencies all key stakeholders & coordinates actions

Builds interventions on a business rationale, working with private sector, governments, and multilateral organizations

Has a strong focus on innovations, that go beyond compliance and catalyze a race to the top on labor and environmental standards

Achieving scale at country level & scalable model for other countries

Creates shared value by connecting societal and economic progress

Local ownership embedded in the approach

Why is the Race to the Top a unique approach?

A leading apparel producing and exporting country

• World’s #4 in terms of apparel exports

• Exports to the USA (48%), EU (15%), Japan (13%)

• 4000 enterprises, of which 700 exporting factories

Economic importance of apparel production for Vietnam

• Second biggest export industry, 15% of total exports

• 2.5 million workers, of which 80% are women

• A key source of industrial employment, especially for women

• A leading industry for overall growth and industrialization

Vietnam is growing in importance as a sourcing country…

• Stable political environment

• An attractive alternative for Bangladesh and China

• When the Trans Pacific Partnership will take effect (expected in 2016), exports to the US will be

tariff free.

• Free Trade Agreement (FTA) is also negotiated between EU and Vietnam.

• Long tradition of consisting of CMT operations, but has recently been heavily investing in

backward linkages in the supply chain (fabric production)

• Foreign investment in industrial parks for apparel production is growing

Vietnam Country Context (1)

… and has a clear sustainable growth agenda strongly supported by the government

• “The Vietnamese government sees sustainable apparel not as a challenge but as an opportunity

to increase its textile industry’s value in the global supply chain and to increase its

competitiveness.” (1)

• Welcomes and promotes the investment in sustainable textile machinery and technologies. (1)

• Welcomes standards and assessment tools on child labour and health and safety and the

provision of sustainable livelihoods for apparel workers.(1)

• Strong incentives to attract foreign investment.

Key challenges to ensure that this rapid growth will be sustainable

• Improving productivity

• Improving labor skills

• Investments in new machinery, equipment, and technology

• Infrastructure (e.g. waste water treatment) supporting the increased investments in materials

production

• Labor challenges: ensuring good industrial relations, overtime and rest time pay, OH&S, contract

and work rules that comply with the labor law, verifying workers’ ages.(2)

(1) SPEECH of H.E. Deputy Minister of Natural Resources and Environment Tran Hong Ha at the Global Green Growth Forum

2014

(2) Better Work Vietnam, Fact Sheet, http://betterwork.org/vietnam/wp-content/uploads/BWV-Factsheet_2014_English_V2.pdf

Vietnam Country Context (2)

From an industry perspective, the following factors encourage a systematic Race to the Top

approach:

• Brands and buyers are keen on reducing country-level risk, and related to this, there is a strong

belief that investing in the conditions for sustainable production should take place before rapid

growth takes place, instead of investing in improving unsustainable conditions and practices

afterwards.

• There is a need for a larger scale move beyond compliance to innovative approaches that drive

system change.

• There is a need for more coordination of complementary activities, instead of the duplication of

similar initiatives.

• Action beyond the supply chain is required to have sustainable impact, i.e. governments, sector

associations, and communities need to be involved to enhance and scale up sustainable impact.

• There is an interesting move in other sectors towards ‘sustainable supply sheds’ or ‘ territorial

performance systems’ whereby attempts are made at improving the entire system of public and

private incentives for sustainable production in key sourcing areas. Examples are found in the soy,

beef, and palm oil sectors.

Industry Context

Race to the Top - Process

Building the stakeholdergroup

Create sharedunderstandingof the system

Design

Commitment & partnerships

Execution andcoordination

Replication readiness

Pre-work:start steeringgroup andapproach

Q4 2014 Q4 2015

Innovation

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

• A representative steering group

• A briefing document including an overview of sustainability

hotspots and incentives for change, initiatives and gaps

• A systems map visualizing the key issues and actors

• Stakeholder map and invitee list for the System in the

Room event (both living documents, work in progress)

Deliverables

• Identify and include key stakeholders in steering group, with

special emphasis on Vietnamese stakeholders

• Sustainability hotspot analysis of mills and manufacturers in

Vietnam based on existing data (Higg; ILO/BW; company

audits)

• Analysis of the apparel system actors & factors enabling

these hotpots

• Inquiry of incentives or drivers for change: existing

incentives and gap analyses on (lacking) incentives for

change

• Stakeholder mapping: identification of key change agents

Activities

• A common vision and a shared knowledge and fact base of key issues and incentives for change

• Building a committed steering group that represents a microcosm of the system

Objectives

Roles

• Steering group (SG) will commission a consultant to manage that executes the activities and ensure the deliverables

• IDH develops draft Scope of Work, contracts consultant(s) ,and facilitates approval and steering process

• SG members approve Scope of Work & consultant selection; input into and approve briefing document

• SG members and other relevant change agents provide relevant data for the analyses.

-> Time investment SG members: min. 1 interview and bi-weekly progress calls

• Some SG members and other change agents may be requested by the SG to do (part of) hotspot or stakeholder analyses

Phase 1. Building the stakeholder coalition and analysis for a

shared understanding of the system (Jan-May 2015)

• Sets of innovations that will drive system change

• Identified actors that will bring these innovations into the

System in the Room event (next phase)

Deliverables

• Inquire innovations world wide and from different sectors

that drive change on the main system challenges identified.

For example innovation in the areas of: capacity building,

technology, cost effective scaling of interventions, supply

chain policy, government policy, finance, monitoring, etc.

• Brainstorm and adapt the innovations to the apparel system

in Vietnam

Activities

• Identify innovations that will close the incentive gaps and seize opportunities

• Identify further conditions required to enable and drive improvements

Objectives

Roles

• Steering group (SG) will commission a consultant to manage and execute the activities and ensure the deliverables

• IDH develops draft Scope of Work, contracts consultant(s) ,and facilitates approval and steering process

• SG members approve Scope of Work & consultant selection and, together with other relevant change agents, provide

relevant in-house expertise and access to relevant actors in their network

-> Time investment SG members: min. 1 interview and bi-weekly progress calls

Phase 2. Innovations to improve or identify new incentives for

change (May-July 2015)

Phase 3. Design an intervention package that will drive sustainable

change in the production of garment in Vietnam (Jul-Sept 2015)

• A successful system in the room event

• A set of co-created prototypes of interventions agreed

upon by the key change agents in the system

• Rough draft project plans for these interventions

• Leaders of these interventions have been identified

Deliverables

• Based on the outcomes of phase 2, design in a process of co-

creation a set of coordinated interventions to present at the

System in the Room event

• In parallel, inquire roles of system actors in these

interventions

• A two-day ‘System in the room event’ in Vietnam where the

key system actors can get connected, share a common vision

& agree on a set of initiatives that move towards that vision.

Activities

• Design a set of coordinated interventions that will drive system change

• Get commitments of different systems actors to participate in and contribute to these interventions

Objectives

Roles

• A consultant will be available to support (groups of) system actors to develop prototypes of interventions, but system actors

can also come up with their own proposals for interventions.

• IDH develops draft Scope of Work, contracts consultant(s) ,and facilitates approval and steering process.

• SG approves Scope of Work & consultant selection.

• SG members, together with other system actors, contribute to the design of interventions by participating in the System in

the Room event preparations with the intention to engage and play an active role in the interventions that will drive the

collective vision forward. In addition, each intervention will have a ‘leader’ coming from the group of SG members and/or the

wider group of system actors

-> Time investment SG members: min. bi-weekly calls & a 2 days system in the room event (excluding travel); time for building

internal support within the organization for committing to (certain) interventions; additional time for the ‘intervention leader’ role.

• Partnerships with elaborated implementation

plans

Deliverables

• Elaborate the proposals for interventions generated in the System in the

Room event into concrete implementation plans, including e.g. business

case, secure funding, etc. (2 months)

• Extend and formalize partnerships where required

• Reconfirm partnerships at 3GF partnership meeting October 2015

Activities

Objectives

Roles

Phases 4. Partnerships (Oct-Nov 2015)

• SG will confirm who are the ‘intervention leaders’

• Intervention leaders will take ownership of developing implementation plans and partnerships

• IDH will provide program management support to intervention leaders where needed

-> Time investment SG members: min. 2 calls; leaders of interventions min. 5 days

• Establish partnerships

• Elaborate implementation plans for the interventions agreed upon in phase 3

• Coordinated execution of interventions

• Quarterly progress updates

• Governance embedded in Vietnamese

structures

• Lessons learnt are documented and shared

for replication in other countries.

Deliverables

• Post-system ‘light’ governance activities, such as quarterly progress

reports shared among peers based on agreed progress indicators

• Quarterly calls with intervention leaders

• Share progress & leverage partnership at 3GF summit April 2016

• Develop a plan to execute the transition from governance by the Steering

Group to governance structures embedded in the system in Vietnam

• Set up replication committee for replication in other countries. A role for

the replication committee will be to compile and share the lessons learnt.

Activities

Objectives

Roles

Phases 5. Coordination and monitoring of execution, governance

transition, and replication readiness (Dec 2015 and onwards)

• Ensure the coordinated execution of interventions

• Transition of program management by the Steering Group to Vietnamese project management

• SG to agree on governance transition plan, the setup of a replication committee, and the form and frequency of progress

updates and monitoring.

• Leaders of interventions to participate in quarterly progress calls

• IDH can upon request of the SG support in monitoring activities, developing the governance transition plan, and in compiling

and documenting the lessons learnt together with the replication committee

-> Time investment SG members: min. 1 call ; leaders of interventions min. 4 calls. Additional time investment for those SG

members that opt to be part of the replication committee.

Planning

2015 2016

Phase Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1. SG building and Analysis

2. Innovation

3. Design

4. Partnerships

5. Coordinationand replication readiness

Governance

• The Global Steering Group (SG) is responsible for the overall program strategy and progress. It includes a balanced

representation of industry & public representatives. The members select a chair.

• The Vietnam PPP Group is responsible for the strategy and progress of taskforces focused on the Vietnamese context. It

represents a microcosm of the system and consists of min. of 1 representative of each key system actor, and is extended in

particular with Vietnamese change agents at the start of the initiative, including Vietnamese government. Vietnamese formal

PPP policy principles will guide the selection of the chair. The SG chair co-chairs the Vietnam PPP Group ensuring alignment.

• Observers closely observe (by participating in meetings) progress and provide advise to the programs’ strategy and progress.

• Program Management (PM) support to the SG and Vietnam PPP is provided by IDH. Its roles are facilitating and preparing

meetings, financial management, planning& monitoring, SoWs, contracting and day to day oversight of implementation.

• System Actors are key systems actors that will be identified along the way as having a key role in driving or implementing

change in the system, as well as providing useful input into the analysis and innovation phases. System Actors can move into

task forces or take on the role of consultant when requested by the SG, Vietnam PPP Group, and PM.

• Task forces are formed when higher level/frequency of engagement is required on specific topics or work streams. GSG and

Vietnam PPP group members and other system actors can be part of the task force. The task force meetings may be facilitated

and prepared by the PM or consultants.

• Consultants are contracted by the PM upon approval of the SG for executing specific tasks against agreed deliverables. These

consultants can be independent experts or change agents requested by the SG/PM to perform a specific analysis or other task.

Task

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Global Steering Group

Consultants

Program management

System Actors

Vietnam PPP Group Observers