BUSINESS INTEGRATION
Our goal is to seamlessly integrate our human rights commitments with the day-to-day functions of our business. Achieving further business integration, while maintaining the credibility of an independently operating human rights department, is one key to making a long-term positive impact in the lives of workers within our supply chain.

Our operating guidelines define how our human rights standards are to be integrated into our purchasing process, and include provisions for the ethical termination of a factory we no longer wish to use.

To meet this goal, our human rights team works with sourcing and production to:

• Gain full disclosure of business partners used for Reebok production

• Help understand the human rights risks presented by different agents, factories and source countries

• Communicate and support assessment and remediation efforts along our supply chain

• Select and build long-term relationships with suppliers that can meet our human rights standards, as well as our traditional business requirements

• Reduce impacts, where possible, on workers when exiting a factory

In turn, our sourcing and production are helping the human rights department to better learn the intricacies of our business model so that we can craft policies and develop new programs that improve the effectiveness and efficiency of our work together, and are more in keeping with our production cycles.

Although we’ve made considerable progress, full integration of our human rights guidelines into the creation and execution of sourcing and production strategies is a work-in-progress.

We recognize that inefficiencies in our purchasing practices sometimes contribute to violations of our Standards. It is not always possible to determine whether production lead times and prices accepted by suppliers are consistent with full implementation of our Standards. For example, we may have to make alterations to an order on short notice after an item is in production. Many of our suppliers have the expertise to manage such changes and deliver on time without compliance violations. However, some may be unable to complete an order without requiring excessive working hours. We need to be aware of these potential issues in the future.

Historically the human rights department has a veto power over whether a factory is authorized for Reebok production. Better integration will require innovation toward rewarding factories with the highest human rights standards, along with other traditional measures such as cost, lead-time, and quality. The high “churn rate” of suppliers we use is an indicator of the work that needs to be done on this issue: of the 233 factories added to our supply base in China in 2004 and 2005, 42% are no longer active for Reebok production. The high turnover rate is driven by both human rights and sourcing and production department decisions. A clear strategy for linking all of the determining factors in order to terminate relationships with overall poor performers (for both business and human rights reasons) while rewarding the best is an ongoing challenge and it will be a focus of our future work.

For Reebok sourcing and production perspectives on business integration, as well as the perspective of a non-governmental organization please visit: PERSPECTIVES ON BUSINESS PRACTICES