HIGHLIGHTS OF 2013 SGS SURVEY STUDY ON CHINA SUPPLIER’S SUSTAINABILITY PERFORMANCE

GLOBAL SOFTLINES

19 June 2014

PERFORMANCE

AGENDA

� 2013 Social Audit Review

� Current Status of Suppliers’

Social Compliance

• Wages and Benefits

• Working hours

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• Working hours

• Health and Safety

� Main Findings from Factory

Survey

� The challenges to

enterprises and workers

Satisfaction Level

BACKGROUND

Based on 2013 CHINA Social

Audit & Factory Survey Analysis

� An added-value Report to SGS

clients

� An annual overview of

3Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

� An annual overview of

Corporate Social Responsibility

and Supplier Performance in

China.

� Over 12,000 social audits and a

survey of 845 factory managers

and 3000 workers

2013 SOCIAL AUDIT REVIEWTHE GEOGRAPHICAL SPREAD OF SOCIAL AUDITS

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2013 SOCIAL AUDIT REVIEW

-NONCOMPLIANCE PERCENTAGE

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2013 SOCIAL AUDIT REVIEW

-NONCOMPLIANCE PERCENTAGE

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SOCIAL AUDIT REVIEW OF Y2013

---COMPENSATION AND BENEFITS

Compensation

Inadequate Minimum

Wage

Inadequate

Benefits

Inadequate OT

Premium

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12.7% 30.0% 44.3%

In comparison with the results of the survey I Y2012,

Inadequate Minimum Wage, which is a critical non-

compliance affirmed by most buyers, remains at the same

ratio of occurance in 12.7% of social audits. Inadequate OT

premium has slightly declined by 1% but remains at 44.3%.

However, findings of Inadequate Benefits have risen to 30%

which is 4% higher than in 2012.

Minimum Wage Growth in China-1

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Minimum Wage Growth in China-2

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Minimum Wage Growth in China-3

10Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

SOCIAL AUDIT REVIEW OF Y2013

---WORKING HOURS

Working Hours

Incomplete time

records

Inconsistent or

Falsified time

records

Weekly working

hours exceed

client’s

requirement

One day off

per seven

days not

guaranteed

OT exceed

36 hours

per month

11Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

requirement guaranteed

14.0% 15.9% 46.8% 52.3% 66.6%

Reasons?

SOCIAL AUDIT REVIEW OF Y2013

---HEALTH & SAFETY

Health & Safety

Inadequate

emergency

12Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

emergency

exit or mix use of

dormitory and

production/storage

area

ChemicalFire

protection

Certification

and

Registration

General

H&S

13.8% 34.9% 36.5% 37.0% 72.6%

MAIN FINDINGS FROM FACTORY SURVEY

� Working Hours:

• More than 60% of the management

respondents cannot ensure the workers’

overtime hours in accordance with China

Labor Law.

� Compensation:

• 80% management respondents claim that

13Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

• 80% management respondents claim that

worker salaries constitute at least 20% of

their total expenses. The proportion even

reaches up to 60% claimed by 10% of the

managements.

� Benefits:

• Over half of the management respondents

admit that they cannot provide social

insurance to all workers. About 31% workers

are unwilling to pay for social insurance.

CHALLENGES TO ENTERPRISES

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Similarly to the survey last year, labor shortage and increasing labor and raw material cost are still the top two biggest challenges to the manufacturers in China and proportion of managements who choose these two has enlarged from 58% in 2012 to 64% in 2013. 20% of the sampled facilities are facing lack of orders which is 4% higher than Y2012. Other pressures are from high employee turnover and clients’ requirement etc. that account for 16% in total.

WORKERS SATISFACTION

15Highlights of 2013 SGS Survey Study on China Supplier’s Sustainability Performance ¦ SGS Global Softlines ¦ JUN 2014© SGS Group Management SA – 2014 – All rights reserved – SGS is a registered trademark of SGS Group Management SAThis document is propriety and confidential information of SGS – Disclosure to third party subject to SGS prior approval

Mr. Alvin Xie

Alvin.Xie@sgs.com

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Find us on www.sgs.com/softlines

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