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Retail Buying

Notes
 Second priority vendors: all new vendors that have not yet been evaluated against
social compliance criteria; and
 Third priority vendors: all remaining suppliers.
Although all vendors are on the same audit schedule, being scheduled for audits every six
months or year depending on the grade received in their most recent audit, HBC uses the
priority system to audit vendors strategically, allowing for audit flexibility to reflect the
changing nature of the relationship to its vendors. For instance, one vendor may be high
priority only for one season if they produce seasonal goods for HBC, and then slip down
to third priority. Another may be a new vendor (second priority) to begin with, and
purchases may increase quickly enough to push them into high priority. HBC uses this
system to ensure that the time and expense of both HBC staff and vendors is focused on its
top vendors at the time. High priority vendors are therefore more likely to be audited
more often than other vendors.
Three-Strike Policy
Vendors are required to fully disclose factory locations, pay for audits, and participate in
the Social Compliance Program. The three-strike policy applies to vendors who default
on elements of the CVC three times in an 18-month period. They are suspended from
doing business with HBC for a minimum of two years. Audit results for 2006 found that 32
vendors received one strike each. The audit results show that most vendors complied with
HBC’s Code; however, factory issues are consistent year over year: employee health and
safety, problems with hours and/or overtime, and insufficient wages and benefits.
Benefits, Challenges and Collaboration

Benefits
HBC benefits from their ethical sourcing program by helping achieve its sustainable
business goals in sourcing and selling products. The program provides a means for vendors
to learn of poor performance areas and to continuously improve their operations and
support their factory workers. As well, HBC can attract customers who prefer to shop at a
reputable retailer with shared Canadian ethical values. Many HBC employees are proud
to be associated with a socially responsible company. Additional benefits include improved
quality of supplier business relationships and improved overall product quality. Vendors
also benefit from the SCP, as compliance with the program puts them in a better position
to continue business not only with HBC, but with other customers as well.
Challenges
As with any change, HBC experienced growing pains as they began implementing the
program: employees, buyers and suppliers faced the challenge of understanding the new
Social Compliance Program and the associated policies and procedures. Suppliers
demonstrated some initial resistance to implementing the changes required as a result of
the factory audits. Since purchasing is a timeline-driven activity, the biggest obstacle has
been for HBC’s buyers to adjust their schedules to allow adequate time for the auditing
program’s results to be integrated into purchasing decisions.

Collaboration
HBC joins in collaborative industry efforts to advance ethical sourcing globally by
participating in the Retail Council of Canada’s sponsored initiative, the Canadian Retailers
Advancing Responsible Trade (CRART) group, which includes leading retailers and experts
representing consumer, academic and industry perspectives. Their mandate is to encourage
the adoption of responsible trading practices by Canadian retailers and to be a source of
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