The Complexity of Ethical Manufacturing with Avedis Seferian of WRAP

Avedis Seferian  00:05

I don't remember if this was one of the visuals that you and I exchanged when we were together, but going to the factories in Vietnam, where you come in and you know, 20 years ago, there were a bunch of bicycles outside now there's much more motorcycles, instead. Sustained workers are making more and able to provide better for themselves and for their families. So truly a gratifying proposition, not to suggest that there isn't more to be done. There absolutely is and there are many areas where we're falling frighteningly short of there is great progress being made and this industry does not get the credit it deserves for the upliftment of some of the poorest people in some of the poorest parts of the world that it has made possible.

Emily Lane  01:01

Welcome to Clothing Coulture, a fashion industry podcast at the intersection of technology and innovation. I'm Emily Lane.

Bret Schnitker  01:09

And I'm Bret Schnitker. We speak with experts and disruptors who are moving the industry forward and discuss solutions to real industry challenges.

Emily Lane  01:17

Clothing Coulture is produced by Stars Design Group, a global design and production house with more than 30 years of experience.

Emily Lane  01:28

Welcome to another episode of Clothing Coulture. Today, We are very excited about our conversation we are meeting with the President of rap Avedia Seferian Hello, Avedis, Welcome.

Avedis Seferian  01:42

Hello, Em Hi, Bret. Happy to be here.

Bret Schnitker  01:45

It's great to have you on.

Emily Lane  01:46

We had an extraordinary conversation with a Avedis not too long ago, as we were both attending a conference in Vegas. And we wish we could just recapture that exact conversation because we really weaved through a lot of global dynamics and the work that Avedis does and the importance of it and it was so good that we said well, let's try to recapture it at least and have it on on Clothing Coulture. So here we are.

Bret Schnitker  02:13

It was great to get more insights and and into what is going on with WRAP We've, I think WRAP really kind of formalized itself in earnest in 2004. We started really kind of working with WRAP 2006, 2008 There wasn't a ton of traction globally, but we loved what they stood for. Today, we kind of push all of our factories toward a social certification and rap is certainly at the top of our list. And and we're excited to hear about the journey of rap and and you joined subsequently a little bit later as President I believe.

Avedis Seferian  02:49

Well, I 2004 was when I joined WRAP. But yes, I became president and CEO in 2012.

Bret Schnitker  02:55

Okay, great.

Emily Lane  02:56

So how did you get in the apparel industry? So many times when people come to Bret and they're trying to get in the industry?

Bret Schnitker  03:04

I warn them not too

Emily Lane  03:09

How did you make this transition? Because I believe you're an attorney by trade, right?

Avedis Seferian  03:13

That's right, Emily, and I totally get that Bret warning. received something similar when I first set foot in the arena, so to speak. And it really was was serendipity. As you mentioned, I'm an attorney. And so happened that the law professor at Georgetown whose RA I had been during my years there was at the time on the board of WRAP, and they had a little project that they could use some help with, that didn't necessarily need a lawyer, but it would help was tied to some kind of proprietary software they were developing. And so I said sure I'll take on the role of was really a glorified internship is the best way to describe it at the time, and I was I had just gotten was working with a small law firm at the time. And you know how the practice of law is in this country, it's very much billable, hours driven. And it wasn't like I wasn't enjoying the practice. But it was interesting to look at what other opportunities might be available. And during that short period with WRAP, I really got to appreciate the mission and the vision of this organization, which when you boil it down to its essence is fundamentally a rule of law program. We are out there trying to make sure that factories all over the world comply with rules and regulations that apply to them their local laws, international norms, buyer expectations, what have you. So it seemed to me like it would be a good idea for the organization to have its certification program. You run by a lawyer, and they will kinda have to agree at the time and as I mentioned a few years down the road when my predecessor retired, I tossed my hat in In the room for the top job, and the board and their wisdom, decided to promote from within. So here I am, really wasn't the plan when I went to law school, but it is very helpful in this line of work, as I'm sure, Bret, you'll agree to have that kind of training and be able to bring it to bear when you're making decisions, which ultimately boil down to due diligence in supply chains. Something that's obviously becoming much more important now, from the Legislative point of view as well.

Bret Schnitker  05:28

Yeah, I think, you know, I've been in the business forever, you know, I like to, say, 10s, of years, more than 30. And I've seen a dramatic shift in workers welfare rights, you and I spoke when I had been in Ethiopia for about, I guess it was a little over three years, and one of the larger factories in the north, which you were familiar with, I was on the ground as they were going through WRAP certification, etc. And, and, you know, it's, it's extremely gratifying to me to see that shift in workers rights, these people are hard, diligent workers oftentimes don't have a lot of other choices, you know, for a career path. And to have organizations out there, I would say, on a, on a spectrum of not only certifying workers rights, but helping to support workers rights and grow that, you know, everyone talks about sustainability, three pillars of sustainability, one of those pillars is people. And I would say, as an industry in general, we talked about this on other podcasts, the overall sustainability, kind of conversation for apparel, we failed pretty miserably, we got a long way to go. But that one leg, this people leg, I would tell you over 30 years, it has been dramatically shifted by organizations like yourself. And, you know, as we talked about in the beginning of the podcast, I feel really fortunate to have you on this morning, because we have the opportunity to continue to spread the word for people that are getting in the industry that are making decisions about social compliance, about presenting rap to our audience and letting them know that there are these organizations that exist out there that are making a real change. For those of our audience who really don't understand the detailed landscape of social compliance, can you fill them out a little bit about, on what WRAP does with factories and how that impacts our clients in decision making when they go to explore a partnership, internationally.

Avedis Seferian  07:34

Happy happy to do so Bret, and certainly appreciate the opportunity. So WRAP Worldwide Responsible Accredited Production, as you all mentioned, is an independent Social Compliance Certification Program been around for over a couple of decades now. And what we do is we promote safe, lawful, humane and ethical manufacturing conditions throughout the world. We've made the conscious decision since our founding to concentrate our efforts on the sewn product sector, there are pure organizations out there that do somewhat similar work to what we do that engage different industries, but we have always felt that there is extra value to be had in concentrating on the industry that we can become deep experts in as opposed to trying to be all things to all people. So we concentrate on this industry. But our you know, Industry Focus may be limited geographic focus is not the W stands for worldwide, as you said, frankly, we certify factories all over the world. In fact, as of right now, it's closing on the end of the year, we have north of 3200 factories certified in about 42 different countries around the world, altogether, employing just north of three and a quarter million workers, which obviously means we have a very large footprint that we're quite proud of, and the details of what we do, as you were saying, Bret for those that are not familiar, it fundamentally is a social audit, we visit every one of these factories, physically inspect the entirety of the of the property, including, you know, dormitories or any other such on site, habitation that they might provide, and make sure that they are in compliance with applicable laws and regulations starting with whatever local rules that are in place that they are bound by and then adding on sort of internationally accepted minimum working conditions, norms and requirements and buyer expectations. Now, value proposition of what we do is quite simple, right? As you know quite well over the course of those 10s of years that you've been in the industry. The fundamental sourcing model has changed significantly over half a century ago. It was still a lot of owned and operated as kind of being the way that a brand would manufacture its product. Today it is primarily overwhelming. li outsourcing. And what that means is that the actual manufacturing of the product is happening in a facility that is not owned or operated by the brand, which raises questions about visibility into those facilities, you know, you don't run it, you're not there every day, you're not making decisions to hire the workers and how you go about actually organizing the workday. So how does one validate that the potential vendor that one is seeking to place an order in needs, the standards that you're going to be held accountable towards? That's the value of an independent assessment. And that allows us to function as a nonprofit, we don't, we're not in this for the money, because we're able to have a model that allows individual factories to pay just a little bit on a per factory basis, so that we can come and do the work by over the 3200 and plus factories in the program. sufficiently fund the existence of WRAP and the work that we do.

Bret Schnitker  10:53

That's wonderful for those that are for those who are a little skeptical, are you a one hit, kind of go in and, you know, certify the factory and move on? Or is there is there a process to ensure that they're engaging this at a consistent, consistent kind of pace.

Avedis Seferian  11:12

It is, of course, the ladder and it's a two levels, it's not simply, we come in and we do one look at the factory and decide whether or not they pass or fail, so to speak. It is a management systems based process, but is an actual audit, we're not simply checking that you have systems, we're checking that they work, and that you are indeed, meeting these standards. And a factory quite often will be found wanting in a few areas. And that's not the end of the story. It's not just one bite at the apple, the process incorporates a corrective action plan approach. And if there are areas that the factory is not yet up to code, so to speak, there is the corrective action plan developed to help them get there. And then we revisit and inspect to make sure that they have indeed, achieved it. And when they do meet the standard, that is when they get certified, which is what is the true value proposition for a buyer, a certificate that tells them, hey, this factory has been inspected. Not only that, it's not simply an audit, where you will have to decide as the buyer whether or not the findings meet your requirements. But it is a certificate that says the findings have met these international standards and norms. And you can confidently place an order in that factory. And then on an annual basis, the process gets repeated. Because then as you said, it's not simply a one time thing. factories, as you know very well are very dynamic places high labor turnover, they change all the time, you have to go back with some periodicity to make sure that the conditions remain at the optimal level. And that's generally a annual cycle in most most cases. And that's how we keep the certificate valid and fresh, and obviously dependable when it comes to a buyer seeking validation for working conditions and the fact that they want to place orders

Emily Lane  13:05

What is that, you know, as we've talked to factories, you know, we're, we have a broad scope of factories that we partner with as well. And we're always, always vetting new partners also in, you know, some of the concerns that some factories have are the time the cost factor and going through the certifications, they want it they realize the value of it and but but their their concerns lie financially in time,

Bret Schnitker  13:37

especially the smaller medium factories.

Emily Lane  13:39

Do you have any any thoughts or insights as to maybe availability of a program like yours for a factory that's small medium?

Avedis Seferian  13:50

Yeah. So so great. Great question, Emily. And this was one of the things we talked about when we were in Vegas a few months ago. And that there's a couple of comments I'd like to make on it. One. I'll answer the specific question. But let me as background provide one piece of lamentation for wanting a better way of putting it right that we've sort of run into in this industry as sort of an endemic problem that I've struggled to find a good solution for. And that is, this entire industry is built on really a short term thinking model, right? We we've got very low margins. We've got a lot of big public traded companies that are looking for quarterly sort of indicators as the most important thing that they're focused on. We've got factories that are generally easy to set up at the cut and sew level. But because of that are often undercapitalized and work payroll, to payroll, all of which really creates an environment that is not conducive at all to the kind of thinking that needs to go into successful social compliance manager. systems, which is by definition, long term thinking, you need to think of the audit, or think of whatever it takes to get those systems in place as investments, right, not as costs. Because if you see something as a cost, right, the natural human reaction, and the smart reaction is to try to minimize that cost, right. But if you think of something as an investment, then you recognize there's a cost attached to it. But there's also a return. And as long as the return is more than the cost is going to be worth investing in, even if the cost is high. Right? Our problem in this space is that the way the financials are set up, the way the model works, is, makes it hard for that long term thinking, because you're dealing really payroll to payroll at the factory level, or just quarterly report a quarterly report at the big publicly traded company level. So that makes it very difficult for the factory to think of an audit as anything other than a cost, right, I really do hope that we are going to get to where social compliance audits are seen much in the same light as financial audits are right, not as a cost. But as an investment in validating your systems. You know, it might be too much to say that, you know, a big, publicly traded company looks forward to their financial audit, but they certainly don't try to duck it, it don't try to show

Bret Schnitker  16:25

Most don't

Avedis Seferian  16:25

Because they appreciate the value, it brings them as a chance to validate their systems to chiastic independently prove that they are doing right by their investors, the same kind of thinking has to make its way into the minds of folks engaged in social audits. But the reality is costs are a constraint. So what does WRAP do about it? A very good and important question and one that hopefully we have a good answer for and that over the years, we have tried to keep first of all, our cost low to begin with. In fact, up until very recently, we have not raised our Annual Registration Fee for more than a decade, the last time we raise prices was back in 2010, to the levels that they've been at for as I said the past 12 years at about 1195 USD per factory. Last quarter, we finally made an announcement that it was time to adjust our pricing policy. But rather than just raised our price, we've actually lowered the price for small factories, precisely the point you were making Bret, they are the ones that have the sort of biggest constraint on their finances. And so we're actually lowering the registration fee for factories below 200 workers, it's going to be very low 650 for those below 100, 950 for those below 200. So actually lowering the fees, and only raising them for factories that are bigger than that, and therefore will be more public better position to bear that burden. So very nice that reality and are moving to make it more accessible to do a rap audit precisely with that in mind.

Avedis Seferian  16:40

That's very strategic. I mean, volume based business makes all the sense in the world, you have a larger factory pay a little more, and that helps the little guys can onboard to, indeed, what

Emily Lane  18:11

would you say? Is the percentage of factories that you go into that passcertification versus fail completely? Or that just you develop that, that that that plan to help get them up to par?

Avedis Seferian  18:28

Yeah, that's a great question. And there's actually two answers, we find that first time factories that are coming to us, for the first time haven't had social audits done, you know, before for some other program or are new to the business in general, tend not to pass the first time around, right, we tend to have a pretty high rate of needing a reaudit meeting and corrective action plan, north of half of those factories will require some kind of reassessment some kind of corrective action plan. But factories that have been certified and come back to us for renewal have a much higher passing rate, most of those do tend to pass that first time around, there might be some close to about a third of them that might need a little additional tweaking. So it really is a question of developing good habits, management systems and maintaining them as a standard operating procedure that makes the determination as to whether or not you pass quote unquote, the audit during that first visit, or you're going to need some corrective action because you're just still new to this process and developing the kinds of systems that you will need to put in place but once in place and properly maintained, ensure future audits are much more straightforward.

Bret Schnitker  19:40

That's great. Once you get audited, and I've walked into a lot of these factories, I see levels gold platinum. Can you give us a little information about why there's these different precious metal levels, you're awarding factorys?

Avedis Seferian  19:56

Sure, and that's also tied to trying to make sure we that we reward good behavior and reduce financial burden on factories, right? A standard certificate is that gold one year certificate, as mentioned, and you come back annually to renew it. But if you establish a good track record with us three years in a row, clean audits, no gaps between your certifications, you're showing us that you take this seriously, you're maintaining systems. And for three years in a row, now you've passed each audit. At that first attempt, we reward you with a platinum certificate, which is good for two years, which means the next time you have to be audited more before, you know another two years, thereby reducing costs even further for the factories that have indeed shown that they are taking this seriously have systems in place, and are able to maintain them with with the rigor that gives us the confidence to say, All right, we can skip a year of audits for you

Bret Schnitker  20:50

Got it.

Emily Lane  20:52

You know, we can imagine challenges that you would walk in and go, no, they're not ready for this. There's some, you know, some easy, easy ones that we all understand, what are some other key challenges that would cause a failure that may maybe aren't obvious to, you know, people coming through a factory?

Avedis Seferian  21:14

No, that's another great question. And we can go through the litany of specific types of problems. Most commonly, you're going to find, you know, issues about health and safety and, and kind of other, hopefully easily correctable things. But fundamentally, to me, the the warning sign I look for when I'm talking with with factory ownership, or management is really the old adage about tone being set at the top, if you're talking to the owner, and Bret, you've had many of these conversations, or you're talking to the main guy, the general manager, and you're simply not getting a sense that this is important to them, I can assure you, it's not going to be important to the line managers not going to be important to the folks that are the supervisory level, and you're going to have a factory, it's going to have problems. So if you do, at the very least, you know, want to begin getting a sense of that factory, as a buyer, get a sense of how seriously you feel this issue social compliance, you know, maintaining good working conditions is on level of importance when you're talking to the owners, when you talk to your managers. And if it is something they're claiming is important. Are they actually providing resources to back up that claim? It's easy to say, oh, yeah, that matters to us, right. But if you're not seeing somebody tasks with that responsibility, if you're not seeing somebody given the resources to actually do the work, then again, you know, it's all empty talk. So fundamentally, the the sort of proof of the pudding is often at that level as whether or not you're seeing the engagement. Now, you may have good engagement, you may have the resources, and you still have problems at the ground level, because the individual pieces go wrong, and we can talk about that. But that big picture stuff is really fundamental. Without that, all the corrections you make at that ground level are going to be like bandages that are put over a wound that are going to fall off and you're not actually addressing the underlying issue. That's to me, where we concentrate most of our efforts in trying to get folks to understand the the why of it, the how and the walk then become much easier.

Emily Lane  23:27

We have been so encouraged about a lot of what we're seeing, especially in India, there's this huge dedication toward betterment of the their employees, the life of their employees, the their education levels, their work life balance. We've just it's that they have, we've seen so many wonderful programs. What are some things that you've seen out there that are trending now in the factory world that you're excited to see as you were on the ground?

Avedis Seferian  24:05

It is an exciting time! And I go back to what Bret said early in this conversation, which is that there's a lot of work that still needs to be done on sustainability in our in our industry. No one really can legitimately question that reality. But at the same time, I caution folks to never conflate that proposition with the concept that no progress at all has been made. Because that is manifestly untrue. There's been a lot of great work done, as you said, and anyone who's been in the space as long as Bret has or as long as I have and has been to factories will hand on heart to be able to tell you that walking into a typical factory today versus looking into one 20 years ago. You see the difference you see a much better much safer, much more worker friendly, much more respectful space, on average. There are obviously exceptions Right. But there has definitely been, there's been tremendous progress made. And all of it is tied to some of those issues that you talked about Emily, understanding that a happy worker is a more productive worker, right? It's not rocket science, it's also a happy worker is a worker that stays with you longer. And in this industry, in particular, that's a big deal, because this is a very high labor turnover industry. And the fact is that the opportunity costs involved in losing a good worker are significant, it takes time to find a new replacement time to train them up to the level where the old worker was, when he or she left, right, all of that is dollars that goes to the bottom line. So understanding both the sort of business benefits as well as the moral case for it, which is an obvious and easy one to make are as a as a confluence of factors leading the level of improvements that we're seeing. So what are some of the exciting things we see, as you mentioned, worker literacy programs, understanding that these workers are traditionally going to be coming in with little or no training. I mean, that's one of the beauties, in some ways of this industry. I know, we come in for a lot of stick from, you know, many in the civil society space. But this industry more than most, has done the lion's work of lion's share of the work in getting people out from poverty into sort of the beginning steps towards a middle class life, because this is an industry that you can come into with little to no training, it's pretty labor intensive. So it has a lot of people, there's a reason why it is thriving in kind of the high population parts of the world, and gives folks jobs that can then enable them. And this is one of the things I hear very often when I go talk to workers in factories, right? They do this, to make sure that their children don't have to like to be able to have them go to school to be able to have them get an education and do other things that they had not been able to, you know, because of their economic circumstances. But now they have jobs that enabled them to imagine a life where their children are going to be in a better place. So worker literacy programs, the ability to teach workers, you know, just how to make the most of that of that money that they're receiving. This is an industry that in many, many parts of the world is heavily skewed towards female workers. So there's a lot of really good work being done on on fundamental things like just just, you know, feminine hygiene and all that. But even more important higher level things like empowerment, understanding of the the, the place in society, that that that women ought to have and ought to be entitled to. And one of those combined very well, for example, is in financial literacy programs for women, who are then much more empowered to be able to do with their money and their savings, things that they want to do, as opposed to, you know, just handing them off to someone else who might squander them or otherwise abuse or misuse those funds.

Bret Schnitker  28:03

We've seen some interesting businesses in El Salvador where women have actually become the breadwinners. Yeah, I mean, it's pretty amazing.

Emily Lane  28:09

Taking on more leadership roles. And yeah, those those programs have been successful. That's really encouraging to see. Yeah.

Avedis Seferian  28:15

And that then becomes the next level, right? Because a chunk of these workers that ended up becoming supervisors end up becoming managers. I mean, there are some factories that have been in the WRAP program for a very long time, where we've seen workers grow from coming in, no education, just starting out as a sew machine operator, to now being a manager to now being the human resource manager. In fact, in one memorable case that I recently came across, it's truly gratifying to see kind of this evolution, right. And Bret, I don't remember if this was one of the visuals that you and I had exchanged when we were together, but going to those factories in Vietnam, where you come in, and you know, 20 years ago, there were a bunch of bicycles outside now there's much more motorcycles vehicle instead, that sustained workers now making more and able to provide better for themselves and for their family. So truly a gratifying proposition, not to suggest that there isn't more to be done. There absolutely is. And there are many areas where we're falling, frighteningly short, there is great progress being made. And this industry does not get the credit it deserves for the upliftment of some of the poorest people in some of the poorest parts of the world that it has made possible.

Bret Schnitker  29:25

Yeah just you know, this industry as I travel, you know, over 70 countries, I guess now, you know, as a lot of these countries that like if I was in Africa or Ethiopia moving from an agrarian economy to an industrial economy, apparel is that first step it's the very first step and you know, you see more more countries that have been further along the path they start an apparel move into appliances and then ultimately into high tech in the in the life, the quality of life for a worker and the income levels, you know, fallen

Emily Lane  30:06

Do you find that you're working in your you have certifications in 42 countries? Now? Do you find that there's kind of a groundswell? Like, if you've got certification momentum in one country, all of a sudden, more and more factories are hopping on board due to needing to be competitive?

Avedis Seferian  30:25

Yeah, that's certainly what we hope to see often often is the case when, when you start to recognize that, you're just not going to be able to get an order, from, you know, the kind of buyer you want. Whether for volume purposes or margin purposes, because you're not gonna be able to validate to their satisfaction that you meet their expectations, then yes, you're creating the competitive pressure to get certified. And when you see your neighboring factory achieve that and get the benefits, you obviously want to emulate them as well. So it is a you know, rising tide lifts all plus all boats type scenario. What we do worry about is the discussion we had earlier, right? If there are financial constraints as to why you're not gonna be able to get there, and how do we overcome that? How do we make sure that it is a positive experience and and something that can be seen as an investment? That's where we spend a lot of our time talking to factories, but absolutely nothing, nothing helps make our case more than being able to point to appear and say, See, they took advantage and got the benefits? And you should to!

Bret Schnitker  31:36

Yeah, that's wonderful. When we, you know, when we travel around and we look at different factories, the larger ones have a wall of certifications, right? And when you and your business do your SWOT analysis, you know, there's BSCI, Scope, Better Work, it goes on and on SA what separates WRAP when you're looking at that analysis from these other organizations? And what should our, our listeners kind of look to when when they're walking through these factories?

Avedis Seferian  32:03

I love that question. And I'll answer it. And I'll also give me a chance to get on one of my favorite hobby horses. You might regret asking it.

Bret Schnitker  32:11

I never regret that. I have my own soapboxes.

Avedis Seferian  32:17

The first part of it, you know what separates WRAP? There's really three things that I tend to point to that distinguish WRAP distinguishes WRAP from all those peer organizations you mentioned. First and foremost, as I've already alluded to earlier, we are a certification program, right? Almost all of those other peer organizations that you mentioned, are audit only, right? Whether it's BSCI, or whether it's Sedex. They do an audit you get you get a report against a standard. But that's it, what you're getting is simply a readout of the conditions in the factory, it's up to the buyer to then decide, is this enough for them? It's up to the buyer to then decide if this area was found sort. In the audit, what are we going to do about it? Who's going to correct it? Who's going to check that it's been corrected? Right? We take that audit report. And if it's found one thing in areas, as I mentioned, we're the ones that bake into our process, a corrective action plan, we work with the factory to generate the necessary corrective actions, we validate that they've been done, they've been put in place, and that the level is now where it needs to be before we issue a certificate. So that's one very important value proposition for a buyer, they get a certificate, and they have the report but detailed audit report behind it, which good buyers should what they should want to have a deep sense of what's going on in the factory. But they do have an assurance that any problems that had been found have been corrected, as opposed to simply getting an audit report that they then have to decide what to do with and take actions which they have to follow up on themselves. So that's that's one big distinguishing factor. The other big sort of distinguishing factor is that all those peer organizations that you mentioned, operate a membership model. They are member organizations, brands and retailers whose supply chains they're validating, actually are their members. They're the ones who pay into the organization. They're the ones who fund your organization. Now, nothing wrong with a membership model. There are many settings in which that's exactly what you want it trade associations and the like. That's precisely what you want, because you're, you know, addressing the interests of that group. But for certification, I do think that being purely independent of the supply chain is important gives you a little bit more credibility because you have no dog in the fight. When I make a decision at WRAP as to whether or not to certify a factory. I have absolutely no need to consider whether that factory is a major supplier to a big brand that happens to be my biggest member. That does not factor into our capitalist at all. Because we are purely a fee for service organization. We are not funded by member dues. We're not funded by government grants or institutional money either so our board is independent. There is no pressure coming on us from anybody in this space that would possibly influence decision making, that's the other second of the distinguishing factors. And the third, now more and more as we do these due diligence exercises, we're finding suppliers being asked to also validate their security practices, especially if you're going to import into the United States, you're probably familiar no with the CTPAT program, Custom Trade Partnership Against Terrorism program and that requirement that members of that program, inspect their vendors to ensure that they meet certain minimum requirements before they export product into the United States. So we have from the beginning incorporated security requirements into the WRAP audit protocol of our 12 principles, principles 11 and 12. That last one, in particular focus on supply chain security. So a WRAP audit not only checks for social compliance from a workers rights perspective, but also compliance from a security perspective, enabling us with a single audit to satisfy to due diligence needs. So for example, Walmart recognizes WRAP as meeting not just their social complexities, but also their security needs. So one audit is all a factory needs to satisfy Walmart on those two counts, were the only one in our peerspace that can say that. So those are three things that distinguish us, and what you should look for, to answer the question specifically, but the soapbox I'm about to get on, has to do with that last point, brace yourself. And tie to that first image, you sort of sketch for us right off that wall of certificates out there. There are too many of these audits happening, right. And then audit fatigue is a real phenomenon that is hurting these factories, because they're the ones that have to bear the cost of these audits,

Bret Schnitker  36:45

and they don't know where to go, they don't know where to turn to because everyone has different request requirements.

Avedis Seferian  36:51

the fundamental flaw in the model, the reason the main driver of this audit, fatigues isn't that you've got a WRAP and a couple of other independent programs out there, there's only a handful of credible independent programs. The real driver is too many brands and retailers to this day still insist on doing their own proprietary audits, when when they have a WRAP to show or someone some other credible program to show

Bret Schnitker  37:16

and they're woefully lacking, these people don't have the experience to do it on it.

Avedis Seferian  37:22

They don't it's not a credible audit, because it's their own people checking their own vendors, they don't know it. And even if they have the experience, I mean, I will go so far as to say that some in house auditors at some major brands are really big audit, for sure, but they're still not independent. They're still the fox guarding the henhouse. Yet they insist on doing this, even if they have factories that show them a WRAP certificate, because they just want to do their own thing. Right. Yeah. And that is the fundamental driver of audit fatigue in this day and age. And the solution that we promulgate is really, I mean, I would love for the answer to be just do WRAP. But that would be that makes that that makes me just as much of a cultprit as them because I'm only giving one option to a factory, the solution has to be simple. You've got a handful of credible programs out there, right? You mentioned some of them, any one of these, and they're not all exactly the same, but they're all kind of in the same ballpark. Any one of these that you see at a factory brand retailer, you know, look for the report, look for the audit. I mean, if you're satisfied that the corrective actions have been done, which is the benefit a certification program gives you, by the way, don't insist on your own audit. What are you going to get from repeating an exercise that has already been credibly independently done just recently, that you're that you're imposing an extra cost on this factory for? Right. And those costs are real, right? I don't remember again, if I told you when we when we talked because probably not because the survey was not quite done yet. But we recently did a survey of overflight was 525 factories that responded to our questionnaire from 32 different countries, very much representative of the entire sample size, small factories, medium sized factories, large factories, that we asked a series of questions tied to audit fatigue on and that included, you know, how many audits were done, right? How many audits did you have to go through, and it was incredible. More than half of the factories that we heard back from had to have three or more audits each year. And that's the fortunate ones were on that lower end, we had, you know, almost 10%, having more than 10 audits a year.

Emily Lane  39:33

Wow.

Avedis Seferian  39:34

That's ridiculous. Right? And that's just the number of audits, right? These all are associated with certain number of mandates, and you have to pay for those audit mandates, right. And typically, we asked them how much money did you spend? And again, well north of half spent more than $5,000 a year and more than seven and north of 7% spend more than $20,000 a year on social audit, this is really an incredibly onerous expense because that money is ultimately coming out of their own bottom line

Emily Lane  40:11

Could be served in a much better place.

Avedis Seferian  40:14

Exactly. And I could go on and give you more details about that, you know, you can obviously download our white paper on it from our website, but I will leave you with one statistic that to me was the most damning one, right? We asked them, and these are all by definition WRAP certified factories, right. And many of them had other certificates, they could show as well from the independent space, but we asked them to how many of you had to have one or more audits done by a buyer that they insisted on doing their own proprietary code, even though you showed them a WRAP certificate? Or some other independent program? The answer 76%

Bret Schnitker  40:49

Wow

Avedis Seferian  40:50

76% of the factories had a at least one if not more buyer insists on their own proprietary audit, despite them having a crap certificate to show.

Bret Schnitker  40:59

So isn't that maybe a education challenge? I mean, no, would you take that as hey, we need to get the word out on what we actually do with our audits to ensure that there's more, I guess, confidence in in the audit itself, saving these factories time? I mean, I can tell you, for myself, I don't I see the certificates. But I don't feel like there's a lot of information that's out there. We live in a world of immediate information out there. And I don't see a lot of information out there from these audit organization saying, Hey, if you're the industry, hey, take a look at what we do, we can save you a ton of time. Right? What's wrapped doing about that today, when you're talking about social media space, or, you know, videos or education.

Avedis Seferian  41:46

Unquestionably, some of that is true, right, which is why opportunities like this one to come on a well respected platform like yours is so gratifying to us, because it's part of our larger mission to educate the space. But the practical reality of why some of these brands and retailers insist continue to insist on their own proprietary audits is simply a lack of understanding on their part of why it's such a bad idea. So the education isn't limited to what WRAP does, but also to what why you shouldn't be doing that. Some of it is just inertia, some of it is information in a different way they want the data sort of collected a certain way. That's why they insist on their own audit because they like this order of questions. And this sort of setup of stats to fit their proprietary data systems, all of which is surmountable with modern technology, because we can take the WRAP data. And this is one of the things we're educating all the skeptical buyers out there about a lot. We can take data from a WRAP audit, and through an API, translate it to whatever order of questions and whatever sequence of information you want to take into your system. So this excuse of the data is why we do it this way, is no longer a valid excuse.

Bret Schnitker  43:06

I think that's great information for sure. For the for the listeners today.

Avedis Seferian  43:10

Absolutely. And more importantly, and we hinted at this earlier in the conversation, as we now enter an era where you've got legislation mandating human rights, due diligence coming out of Europe coming out of various US states, and some versions of it already. Federal law here, you are starting to see an increasing clamor, increasing demand on the part of legislators for independent assessments, right, just like in the financial sector, you might have the best accountants, you know, Mr. Big publicly traded company, but we're not going to be able to rely on their assessment of your financials to say everything is kosher. Likewise, you might have good auditors. I'm not disputing that. But if they're in house, and they're your own foxes guarding your hen houses, that's not going to fly. So that independence piece is going to be another reason why these proprietary audit programs are in my opinion, eventually going to feed are going to have to fade because they're not going to be fit for purpose for these brands and retailers anymore.

Bret Schnitker  44:10

Yeah, I would say, you know, in my conversations with clients in general, it's this fear or concern, they, you know, when I look broad base through the United States, we abdicated manufacturing years ago, you know, when we go through education programs for colleges and universities, there's no real masters or, you know, large degrees in apparel manufacturing in the US and, you know, for people to get on a plane and travel all around the world and really understand all the nuances that exist in our world outside of the borders of the US. These people just aren't doing that to the level that maybe we did in the past, and they're afraid much like with quality, you know, one to five star rating, you got a product that goes out, it's got a five star rating, you're good to go. You do something as a mistake, you get a one star rating Your show is over. Much like a social compliance, you can have a wonderful product, you can think that you've gone through all the efforts, all of a sudden you show up with some factory, Rana Plaza, etc, etc. That happens, and you're fighting against social challenge because people are outraged, obviously, by the by the occurrence that has happened. And so this insecurity sits in the back of these large organizations saying, hey, what if, and I, and I, and I think I would urge and double down on the fact that with better education from the social organizations, much like what we've learned today, this has been crazy informative about the efforts that you go through, to ensure that factors are not only certified once, but there's a continual, ongoing process for that, figuring out ways and you know, I think it was great at the Deliver conference, you being a keynote speaker there and, and having all these different conversations, getting the word out through social media, getting the word out through education programs, about exactly what you're doing, I think could ally some of these fears and concerns with these large organizations, because that's what the feedback I get, like, I don't really understand the process, they go through at different levels. Certainly, you know, people within large organizations have more experience, we live on a spectrum. But overall, I hear this insecurity, we don't want to be on the evening news, in a factory that's been challenged. And so, you know, I would urge more education. And I'm glad that you're on the on the program to have that dialogue.

Avedis Seferian  46:31

I am to and completely agree with you. It is a big part of our mission. Obviously, we are a certification organization. But in many ways, we are an educational organization as well, talking to manufacturers talking to you know, brands or retailers talking to governments, to get them to understand the importance of doing this and doing it right, in an independent and credible fashion. So really, really important to keep the fact that-

Emily Lane  47:02

Bret, you mentioned something that triggered a question for me, you you mentioned Rana Plaza, and, you know, we look at global issues that cause a lot of controversy. And, you know, makes me think of Avedis, how, you know, you're going into all these different countries that have different lifestyles, and we have have different issues. And it's got to be a challenge, walking into a country, not not wearing our western lenses, but looking at it locally. Are there, I think it'd be interesting to just understand a little bit about the challenge that presents and how you overcome that.

Avedis Seferian  47:52

Yeah, thanks. And that that's an extremely important point. Because one of the criticisms that the sorts of work that we do does occasionally come up against is you're just imposing Western standards on places that are different. And it's, it's not fair. And if that criticism were true, I would certainly agree that it's not fair. But we try very hard not to fall into that kind of thinking, by doing a couple of things. First and foremost. Even though we are you're a US nonprofit, and we have offices around the world, but you know, we're based here, we make sure that our audits are conducted by local auditors, right, we're not sending people from, you know, Washington, DC, to Chittagong, or, you know, Hanoi to inspect factories, we're using folks who are on the ground there who speak the language, know the culture understand the context in which they are inspecting these facilities to go and do these audits. So that's very important, right, so that you have a comfort level that the workers can have, because the auditor is someone they can speak to in their languages from their culture knows their their context, and, you know, the entire sort of ecosystem in which this is being conducted. Secondly, while we do obviously have principles that are universal in the sense that they apply, no matter which country the audit is being conducted in, what they end up actually meaning on the ground is often a function of what the local law law requires, right? So a very simple example is the question of minimum age, right? Talk about that issue. And in many ways, Brett knows this from from his history with the space. That's kind of where this industry first emerged, right? This was around child laborers in the 90s. We obviously don't condone that in any way, don't tolerate it. But what the definition of child labor is, is actually dependent on local laws. There are minimums that are set by the ILO conventions. All right, 14 for developing country. But if a country has a higher minimum age, like, for example China does, then we don't go out imposing, you know, a number that has come out from the west or from anywhere else, we pull upon what the local law requires. So in Bangladesh, 14 is what the law says. And that's what we will measure a factories compliance against. In China, it's 16. So we measure it against that, right. So we are very sensitive to the fact that ground realities are ultimately what what these workers are pulling in, and you cannot bind yourself to them, you want there to be minimum standards, you want there to be a an absolute sort of respect for worker rights. But what that specifically ends up looking like is going to be conditioned in many ways on local situations and local laws. Another good example, obviously, is wages, right? You don't have a single number that you say everybody must make anywhere in the world, it is very much driven by what local rules are and what local standards require. So we are very sensitive to this idea that we are not going to impose some sort of Western hegemonic thinking on on local factories, regardless of where they are, we go in sensitive to local conditions to local laws, local standards, and make sure that these factories are in compliance with that, in that context.

Bret Schnitker  51:24

Yeah, we can - go ahead

Avedis Seferian  51:27

Bret, to speed limits, right, we don't have a single one on all roads, right, depends on whether it's highway, whether it's country road, whether it's one pasture school, or whether it's, you know, in a busy, suburban area, that sets the level. Now the idea that you shouldn't be driving fast, is universal or too fast. But what that level is, is going to be very much context driven.

Bret Schnitker  51:49

Agreed. And, you know, we live in such a complicated landscape. I remember talking in Vegas about, you know, when I was a really young buyer, and you mentioned child labor, and you know, I leave the US and I have a very, very fixed firm opinion about child labor, hey, it's bad, right? Even though, you know, I was a young kid on a farm, and I remember working really hard to do that. But when I traveled and I won't name the particular country, but when the child labor laws kind of came in and and you know, very early on in this whole process, you know, I went out with this firm, fixed depending I started dialoguing with these factories. And of course, there's this wide spectrum, you know, that, that goes without saying, but some of these factories had had these children in the factories, and they were sweeping floors, they were orphans, and they'd give them rice and some shelter. And immediately when the child labor laws were put into, you know, put into place for the better good have all these, these factories were like, Oh, my God, we had to kick them out to the streets. And there were some statistics at that time, how many children were in much better, or much worse conditions than they were being utilized in the factories at that point. And, and we like in the US so many times to be saying, hey, the world's just like us, there's welfare programs and everything that does not exist around the world. And and you know, the complexity of what you must go through, in your business in all of these countries, with all of these changing times that are going on, is just daunting to me, I've just, you know, I give you guys lots of respect, because how do you balance the ramification for making a decision? Because many times like that, you know, years ago, the child labor situation in this one particular country, there was no solution, right? It was like, Hey, we just got to do it, because it's a terrible thing. We're gonna eliminate it. But the ramification, there was no solution for so, you know, I think, you know, thinking through decisions, and understanding what ramifications are for particular countries has got to be part of this whole social, you know, putting things in place to make sure that these things don't happen to that there is better conditions for these for these occurrences that happened. Rana Plaza is another example. You know, I give our industry a lot of flack for that Rana Plaza situation. When that happened. It was a terrible situation. A lot of workers were killed. It was a terrible organization, the building should have been clearly condemned. And what did many of us do in this? You know, and I've got a lot of clients that were involved in that years past. What did they do? Did they come together as a united front and say, this can never happen again, we're going to invest in Bangladesh and change working conditions for the worker. Unfortunately, a lot of them just ran, it was just a hot potato, and they wanted to leave it and so, so much of what I think there's just so much work still left yet to be done on that social compliance front. That is we set standards, both looking at local laws and putting, you know, I think part of it is we as a nation want to have better working conditions for our employees and we Want to kind of be that Guiding Light, hopefully still for the world, in a lot of different areas. As we start thinking about all these different changing conditions and workers welfare rights, we should also have some solutions in place working with governments to solve some of these long term issues. Yeah,

Avedis Seferian  55:16

no, you make an excellent point, Bret It is a complicated reality. And then we have to be cognizant of that. And sometimes you, you know, run into those situations, as you described it, folks decide the easiest thing to do is to cut and run. Yeah, and that's just the truth. But as you know, others did indeed invest in Bangladesh and your the alliance and the accord were established and did a wonderful job over the decades that followed, to the point where today, Bangladesh really boasts some of the safest factories in the world. And there has been progress made. So one should not be blind to the fact that there are challenges. But as we've already said, it does not mean that no progress has been made, there has been, there have been folks that have invested. And to your earlier point about the nuances of, you know, challenging topics like child labor, I mean, those are realities we deal with all the time. And as you said, it isn't simply a question of waving a wand and say, Well, no, there shall be no child labor. And assuming everything falls in place, if you can't work in that factory, you know, that 12 year old isn't necessarily going to school. Yeah,

Bret Schnitker  56:22

and it's heartbreaking. To be honest, it's heartbreaking when you What do you want.

Avedis Seferian  56:27

They might even be worse off. So that's where the point you made at the end is so important, it isn't simply a function of point of the factory and say, you know, you're, you're to blame, and you fix it, or point to the brand and say, it's your responsibility, you make it happen, you have to see this holistically. It isn't simply one actor in the supply chain, or in the larger ecosystem, that has to bear the burden of responsibility for good, good behavior, governments have a role to play. And they also often abdicate, not necessarily with any evil intent, but because they don't have the resources, but they have to step up. And they have to make sure that they're doing their bit buyers, you know, act play a role as well, it isn't simply on the factory, they have a responsibility to make sure that they are responsible in their purchasing practices. And of course, the factories have a big role to play as well. And this is where independent validation, like the ones that WRAP provides can come in so handy, because we don't have a dog in the fight. We're not buying or selling, we're not in the supply chain, from a sort of financial economic incentive perspective, we can have that validation provided independently, that can that can be of value so that you don't have to cut and run, you are able to come in and say, All right, here's how we can take an approach that gets this factory to a place where we're comfortable working with, and have a independent process that matter, like manages all of this.

Emily Lane  57:46

I love what you say, holistically, you know, we've got to look at this. From a holistic standpoint, and truly solutions come from collaboration from all parties, education, having conversation around the issues and working together.

Bret Schnitker  58:02

Well and a  group like WRAP actually embracing action, you know, our industry wouldn't have changed. I don't believe without groups like WRAP. I mean, I think that it requires these people to understand one, the challenges that exist and take action on those challenges. And then, you know, much like sustainability, we're not going to change the sustainability conversation overnight. It's we're not going to have solutions for plastics in our oceans and land overnight. But with continued action comes change. And, and I really appreciate the efforts that you guys are making.

Avedis Seferian  58:40

Thank you. It's very gratifying to hear you say that very gratifying to hear you take that kind of philosophical approach as well, because all too often, groups like mine, and you know, even others, sort of just just the brands and retailers are criticized by activist organizations for not doing enough or not, you know, making change happen, you know, overnight. And it's just not possible to do that it is a process, it is something that is going to be impossible to do by any one player. It has to be done holistically. And so while you might want to have this idealistic view, it's just not a feasible one.

Bret Schnitker  59:17

It's not a realistic view.

Avedis Seferian  59:19

Exactly, I believe in in there being sort of ideal working conditions. But I cast myself more as a pragmatic idealist. Want to get there. It's a journey. You're never going to actually ever arrive at a point where you say, Oh, we're done. Sustainability is solved, nothing more to do. And there's always going to be more to do, it's always going to be a journey. And that's the point. It's about making progress along that path. And not being able to say, oh, yeah, we're there because that's just not itself realistic. So I really am grateful that we have folks like you pushing that message and pushing that philosophy, because that's the only way to achieve it. We tried to say the only thing that we want is perfection. We're never gonna get there. Yeah. It's self defeating.

Bret Schnitker  1:00:07

Yeah, we hear all the time. You know, change comes with action. But the reality is change comes with consistent action and time. It requires both.

Emily Lane  1:00:18

Well, with that, I'm going to wrap this conversation with WRAP because we could have an all day all day conversation, no doubt, but-

Bret Schnitker  1:00:28

I felt like we wouldn't have had to do it in such a fascinating dialogue.

Emily Lane  1:00:33

Yeah Absolutely, Thank you so much of Avedis for joining us in this conversation today. I hope we keep the conversations going. No doubt, you'll be continuing to do a wonderful work that we're going to want to learn about and hear about. And so thank you for joining us. And thank you, everybody for joining us on Clothing Coulture the podcast, make sure to subscribe to stay apprised of upcoming episodes.