Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
MATTEL RESPONSE TO ICCA VENDOR REPORT
May 11, 2004
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Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
The plan outlined in this letter is in response to the vendor audit results released by the International Center for Corporate Accountability (ICCA) on January 27, 2004. Mattel has performed an in-depth review analyzing audit reports on the 12 vendor manufacturing facilities. Mattel has committed both Corporate and Local resources to review findings and discuss corrective action plans with vendors. Furthermore, the company is working with each vendor on implementing a management systems approach for sustaining compliance with Mattel’s GMP. Mattel appreciates the thoroughness and objectivity of the ICCA audits. While the ICCA report listed many specific issues, Mattel has grouped these findings into six key areas that have been targeted for improvement. The areas that Mattel is concentrating efforts include: 1. Wages & Working Hours – In response to ICCA’s finding that vendors were scheduling work hours in excess of Mattel’s 60 hour per week requirement we offer the following. At the time of ICCA’s audits, Mattel’s GMP specified a maximum of 60 hours. However, Mattel has since elected to modify its GMP requirements to allow a maximum of 72 hours per week during peak periods and other extraordinary situations. This change was prompted to provide a reasonable maximum in terms of working hours, taking in to consideration the waiver system that exists in China. Basically, manufacturers are able to obtain waivers from local authorities allowing working hours in excess of the national law. These waivers can be fairly liberal in terms of hours allowed. Mattel has elected to limit the maximum number of working hours to 60 per week during normal operations, and 72 hours per week during peak periods and other extraordinary situations, provided that overtime is voluntary, the workers are paid appropriately and work hours in excess of 60 hours per week, but less than 72 hours per week, do not exceed 1/3 of the year for each employee. Furthermore, workers must receive one day off per week except during times of extraordinary circumstances, then a worker is allowed to work a seventh day but cannot work more than 13 days consecutively. This represents a modification to Mattel’s GMP program, which has been clearly communicated to all vendor facilities making product for Mattel. Mattel continues to emphasize with vendors that all work must be voluntary, the workers must be
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Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
paid appropriately and the extension of work hours and the workweek must not exceed 1/3 of the year for each employee. ICCA also highlighted current inconsistencies associated with a policy in China that allows factories to obtain waivers from local authorities permitting factories to exceed the maximum working hours designated by national law in China. It is because of these inconsistencies that Mattel established a policy as outlined above that, without regard to what would be allowed by a local waiver, limits work hours to a maximum of 60 hours during normal operations, and a maximum of 72 hours during peak production periods or other extraordinary circumstances. While Mattel’s GMP also requires that a valid waiver from local authorities be obtained, Mattel’s GMP is the ultimate limiting factor in terms of working hours. Finally, it should be emphasized again that Mattel’s GMP requires that overtime must be voluntary, employees must be paid appropriately and overtime hours must not exceed those specified in Mattel’s GMP. Mattel feels that this step has had a dramatic, positive impact on working conditions in factories manufacturing product for Mattel. In order to monitor compliance with this standard the company is requiring all vendors to develop a management system, that clearly documents instances when workers exceed the 60-hour workweek, as well as work on the seventh day. Furthermore, if the vendor gives workers time off in lieu of double pay it must be given within the next pay cycle and documented in a system that is easily understandable and verifiable. 2. Benefits – The benefits of concern identified in the ICCA report include: Annual leave, Maternity leave and Social Security. In order to address these issues clearly with workers so that they understand their benefits, Mattel will require vendors to implement the following structure. First, there must be a clearly defined policy in place that addresses each of these benefits. Furthermore, during initial training this policy must be communicated to all workers. Specifically, Mattel will require that annual leave be granted to all workers who are employed for a continuous 12-month period regardless of the length of their contract. The annual leave benefit must be in compliance with the
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Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
country regulation, which allows a worker to receive five days of pay. Mattel will conduct a random sample audit of 30% of the records to determine vendor’s compliance with this requirement. For the maternity leave benefit, Mattel will require all vendors to offer maternity leave to all workers. The maternity leave benefit must be in compliance with country regulation, which allows for 90 days of paid maternity leave. Mattel will work closely with vendors to ensure that this benefit is offered and implemented. The social security benefit will be based on the local government standard. Mattel will ensure that all vendors receive an annual certification from the local bureau that they have complied with their social security benefit requirement. 3. GMP Awareness – The majority of suppliers manufacturing products for Mattel also are producing for other companies, both within and outside of the toy industry. Because of the existence of multiple codes of business conduct, it is difficult for employees at these factories to be fully informed concerning each company’s individual code. However, to address this issue pragmatically Mattel will work with vendors on their new worker orientation program. Mattel will review vendor orientation programs to ensure that they contain the following general information: facility tour; wage structure and calculations; review of employment relationship and explanation of the pay stub; regular and overtime working hours; benefits; dormitory and canteen contributions and polices & procedures; compliant procedures; disciplinary procedures and fines if allowed; security deposits; and self improvement opportunities. Furthermore, Mattel will ensure that new worker orientation also includes at a minimum the following Environmental, Health & Safety topics: emergency evacuation procedures; methods for reporting emergency situations; and sources of information concerning hazards in their respective work areas. Lastly, this is one of the many reasons that Mattel fully supports the implementation of an industry-wide code of business conduct for the toy industry and was the first company to announce plans to begin transitioning to this industry wide code during 2004. 4. Workplace Safety – After reviewing the ICCA audit report, Mattel has determined that the following three safety program areas will address the majority of concerns raised by ICCA.
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Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
The first area is the Industrial Hygiene assessment program. At a minimum, the program must include the following assessments. Baseline sound level evaluations must be conducted to identify high noise areas and/or operations. In areas were noise levels exceed 85 dBA, a hearing protection program must be developed and implemented. Hearing protection must be provided to employees and signs posted in their work areas noting that hearing protection is required. The facility must conduct air sampling for all processes that create potential worker exposures to vapors, dusts, fumes and/or mists. All air sampling must be documented and any over exposures must have a corrective action plan, which is documented and implemented with periodic follow-ups. The second area that Mattel has focused on is the Personal Protection Equipment (PPE) program. Mattel will review and provide feedback on each vendor’s PPE assessment program. Mattel will ensure that the facility PPE assessment program correctly addresses each work area with a PPE requirement. In areas where PPE is being used, Mattel will require that workers receive training on the proper care and usage of their PPE. The third area that Mattel will concentrate on is the Electrical Safety program. Mattel is currently working with each vendor to review the wiring hazardous that were identified in the ICCA report. We are developing project plans with vendors to phase in new wiring construction in those areas that have been identified as deficient by an outside electrical contractor. 5. Fire Safety – Mattel is working directly with its loss control department and an outside engineering and risk management company to individually assess each vendor’s fire suppression system. The outside independent engineering firm will provide Mattel and the vendor with a gaps analysis of their current fire system against the Mattel standard. Once the gaps analysis has been completed, if necessary, Mattel will work directly with vendors to establish a project plan, which addresses gaps against the Mattel standards. 6. Environment – After reviewing the ICCA audit report, Mattel has determined that the following three environmental program areas will address the majority of concerns raised by ICCA.
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Mattel, Inc.
333 Continental Boulevard El Segundo, California 90245 Phone: 1 (310) 252-2000 Facsimile: 1 (310) 252-2180
The first area is the Air Emissions program. Mattel will work directly with each vendor facility to ensure that they have documented all roof and wall penetrations associated with air emissions from their manufacturing processes. Furthermore, Mattel will ensure that each facility has the appropriate permits for their process air emissions. Lastly, all air emissions will be quantified by methods such as monitoring or mass balance and compared to local standards and permit conditions on a regular basis. The second area is the Process Waste Water Discharge program. Mattel will work with vendor facilities to ensure that they have identified all wastewater discharge from their manufacturing operations. Furthermore, Mattel will require that wastewater streams are quantified by sampling and analysis, and compared to local standards and permit conditions. Where there are instances of non-compliance Mattel, will work closely with vendors to develop a feasible corrective action plan. The third and final area is the Hazardous Waste Management program. Mattel will require vendors to identify, quantify and characterize hazardous waste that is generated from their manufacturing processes. Furthermore, hazardous waste that is generated onsite must be handled and stored in a safe and controlled manner to protect both workers and the environment. We require that all workers who handle hazardous waste be trained and that all hazardous waste be disposed of through a licensed contractor approved by the China Environmental Protection Bureau. Lastly, Mattel will work with vendors to determine if there are any opportunities to reduce the amount or type of hazardous waste being generated from their manufacturing operations. In response to the issues outlined in the detailed audit report by ICCA, Mattel will work with ICCA on detailed corrective actions at each vendor. Furthermore, Mattel and ICCA will undertake a verification process later this year to determine vendor’s compliance with responses outlined in this letter.
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