WHO WE ARE
New Balance is committed to doing business with Responsible Leadership, which means striving to have a positive impact in the communities in which we operate. We seek to ensure that the people who make our products – no matter where they are in the world – are treated with dignity and respect. We also believe in protecting our planet. We are constantly looking for ways to minimize and prevent negative environmental impacts in our operations and our global supply chain.
We have also remained firm in our long-standing commitment to manufacturing and our unwavering belief that making things matters. As a company that still owns facilities that directly manufacture some of the shoes we sell, we are a better partner for the suppliers with which we work all around the world.
New Balance has been rooted in innovation ever since William Riley, a young English immigrant, designed his first flexible arch insert in 1906. The arch was inspired by his observation that his backyard chickens, standing on three claws, achieved perfect balance.
Today, innovation and entrepreneurial spirit - together with quality, craftsmanship and a dose of risk taking - continue to drive our global business success.
But that's not the whole story. From the beginning of their leadership in the 1970s, Jim and Anne Davis sought to build a values-based company infused with a culture of respect and responsible leadership.
The New Balance core values of Teamwork, Integrity and Total Customer Satisfaction keep us focused not only on winning, but on how we win.
These values lead us to invest in our associates by helping them develop their skills and talents to unlock their best performance. Our values also drive our long-standing commitment to the communities that host us and guide our work to strengthen and sustain healthy neighborhoods.
Values matter, character counts. The values that got us here today will continue to guide us into the future. They have been our shining beacon throughout our history, our unwavering commitment to conduct business with purpose and business with values. As we grow, we must ensure our growth has a greater purpose - to leave a mark on this world and to impact the lives of those around us and for generations to come.Anne Davis, Vice Chairman, New Balance
William J. Riley sees an opportunity behind a simple chicken’s foot, creating arch supports and prescription footwear to alleviate the foot pain of people working on their feet all day
The first New Balance running shoe, a spiked model with uppers of leather, is delivered to the Boston Brown Bag Harriers, a local running club
Eleanor and Paul Kidd purchase New Balance, infusing the company with new energy. Contributing to the American Red Cross in 1954, they begin a New Balance legacy of charitable support
The Trackster is the first New Balance shoe to cross a marathon finish line. Introduced in multiple widths in 1960, it epitomized performance and style
Jim Davis assumes ownership of New Balance, with six employees making 30 pairs of shoes a day and annual sales just shy of $1 million
New Balance adds the iconic N on shoes
The 320 is ranked #1 by Running World, catapulting New Balance to the forefront of modern athletic shoe design.
New Balance introduces its first apparel line, featuring GORE-TEX® suits, nylon and mesh singlets, and tricot shorts and tops
New Balance Foundation is established to fulfill the company’s commitment to the communities where its facilities are located
The 990, the cornerstone of the New Balance running line, is introduced, retailing at an industry-high $100
New Balance reaches $1 billion in sales
Jim and Anne Davis broaden the executive leadership team, hiring Rob DeMartini as Chief Executive Officer
A New Balance Sports Research Lab opens in Lawrence, MA to advance new products and innovation through the study of athletes, biomechanics and sport
The Custom 574, New Balance’s first customizable athletic shoe, is introduced, allowing consumers to order one-of-a-kind shoes that are made in the company’s New England factories
New Balance opens its new headquarters at Boston Landing with a $3 million grant to the West End House Boys & Girls Club, representing its unwavering commitment to New Balance communities around the world
New Balance reaches $4 billion in global revenue
New Balance sponsors the TCS New York City Marathon as part of a multi-year agreement to engage with New York Road Runners (NYRR) events, programs and youth running initiatives
New Balance launches Fearlessly Independent Since 1906, an inspirational global brand communication platform that reflects the heritage and non-conventional values of the global sports company
An unwavering commitment to an ongoing journey.
New Balance is a values-led organization. We seek to operate with integrity and unity in all aspects of our business. We have always defined ourselves by our actions. Diversity, Equity and Inclusion at New Balance is an ever-evolving journey and an unwavering commitment.
We are proud of our global team that represents many backgrounds, our culture of inclusion, and our commitment to bettering our world. We will not stand for injustice and racism and we believe that collectively we can make a difference. Our focus lies on pairing the energy and passion of our associates with our global resources to support our communities.
We are committed to our Diversity, Equity and Inclusion journey and we have worked together to enhance and evolve our efforts in recent months, building a strong foundation that will continue to move us forward. Our strategy is guided by our core values of integrity, teamwork and total customer satisfaction, as well as our commitment to building a workplace that reflects the diverse communities we serve and partnering across our company to drive meaningful change.
This Is Our Path Forward
(A Work in Progress)
January 2020: Expanded DE&I associate engagement and resources, as well as activities to commemorate cultural heritages and holidays during the year
June 2020: Established diversity, equity and inclusion cross-functional leadership taskforce to elevate and accelerate the DE&I strategy creation and implementation
July 2020: Prioritized DE&I strategic pillars and developed detailed workstream action plans
August 2020: Conducted a global associate DE&I diagnostic study to understand the experiences of New Balance associates in the workplace
August 2020: Evolved New Balance U.S. 2021 holiday schedules to recognize Martin Luther King Jr. Day, Juneteenth and Veteran’s Day.
September 2020: Launched required unconscious bias training for corporate associates in North America
October 2020: Previewed details of our DE&I strategic plan with North America associates to introduce new tools and formalized programs
To advance our DE&I goals, we have identified the following four priority areas as the foundation of our long-term plan:
Education & Awareness: Learning & Development; Communications
We will ensure broad understanding of our strategic priorities and expectations. Our Communications and DE&I learning and development curriculum will increase awareness and build skills to foster equity and inclusion across the organization and engage associates in our continued cultural transformation.
Talent Sourcing & Associate Growth: Talent Acquisition; Performance Management; Talent & Career Planning
We know that diversity makes us better and stronger as a company. We are committed to reviewing our recruiting processes, candidate sourcing, job descriptions, and the interview process at all levels of the company to proactively attract a more diverse talent pipeline. We will increase attraction and conversion of diverse applicants by enhancing partnerships, bolstering employment brand, and instituting inclusive hiring practices. We will bring greater rigor, transparency, and accountability within performance management to promote equity and fairness for all associates, and support the growth, retention and career sponsorship of BIPOC, LGBTQ+ and women at all levels of the company.
Engagement: Associate Involvement
We will continue to champion a culture that embraces and celebrates diversity. We will grow our strong culture to become more inclusive and provide associates new opportunities to participate, stay informed, and be supported in meaningful ways.
We believe it is our responsibility to recognize historic milestones and community-specific commemorative observations around the world which represent the values and priorities of our associates and society as a whole. We will continue to expand our cultural initiatives for associates to build greater awareness, respect, and inclusion into our company’s culture.
Leading with Data: Data & Measurement
We will remain committed to being transparent about our workforce needs and empower managers, at all levels with key metrics to track progress and success of DE&I initiatives.
ALLIANCES AND ADVOCACY
We are committed to supporting the communities where we operate and those who are the most vulnerable to inequalities. In all our engagements, we want to reflect our values and the diversity of our communities. In addition to continuing to collaborate and support organizations such as GLSEN, 1% for the Planet, The Partnership and WOMEN Unlimited, INC, we will also pursue new initiatives with organizations at the national and regional level that help advance our objectives for equity and justice.
NEW BALANCE FOUNDATION – INVESTING IN OUR COMMUNITIES
Since 1981, the New Balance Foundation has worked diligently toward solutions, closing opportunity and achievement gaps, and fueling positive systemic change in partnership with its network of 65 grantees, including Harlem Lacrosse, Good Sports, Playworks and local Boys & Girls Clubs, engaging thousands of youth and underserved families. With more than $100 million in total grants provided to non-profits through 2019, the New Balance Foundation continues to identify causes and organizations to support that are making a meaningful impact in their communities. For more information on the New Balance Foundation’s regular annual giving efforts visit here: www.newbalancefoundation.org
VOLUNTEERING IN OUR COMMUNITIES
To support our associates in their giving efforts, New Balance offers "Give Back Benefits" to associates to support causes and organizations that are meaningful to them in the US. These benefits include Personal Volunteer Time, Corporate Match ($500 per associate per year) and Dollars for Doers ($500 per associate per year).
SUPPORTING DIVERSITY IN OUR INDUSTRY
We believe that both our business and industry need to reflect the communities we serve. We will continue working with existing and academic institutions to find innovative ways to promote diversity within the footwear, apparel and sport industries.
We are building upon our global program with PENSOLE, launched in 2017. PENSOLE is a leading academic-based organization that provides talented young design students – regardless of socio-economic background - with the opportunity to learn footwear design, apparel design and product/brand marketing.
In 2018, a $5 million donation from New Balance created the Sports Leadership & Administration Bachelor of Arts program at UMASS Boston, designed for diverse undergraduates aspiring to pursue careers and leadership positions in the sports administration and management field. New Balance’s support includes scholarship and internship programs.
New Balance is committed to fair and ethical business practices around the world.
We strive to hold ourselves to the highest standard of ethical conduct, to avoid even the appearance of impropriety in our actions and to act in compliance with laws.
New Balance maintains the following governing standards and policies that set out the basic principles for how we do business.
New Balance is committed to dialogue and transparency on issues of Responsible Leadership and Corporate Governance. We report on matters in compliance with laws around the world.
New Balance is committed to doing business with manufacturers and suppliers that share our commitment to labor and environmental best practices. New Balance suppliers must agree to abide by our Code of Conduct, which defines our basic standards and expectations. The Code, which is based on international laws such as the Universal Declaration on Human Rights and the International Labor Organization (ILO)’s Core Conventions, as well as national and local laws, has been translated into more than 30 languages and must be posted in supplier factories in the language(s) of the employees. We have also developed a Supplier Standards Manual, which provides suppliers with detailed guidance on how to implement each element of the Code. This Manual is updated regularly to provide additional direction on how to respect Code standards.
Our Code of Conduct addresses the following principles:
- Compliance with local, national and international laws
- Working conditions
- Hours and wages
- Terms of employment
- Workplace health and safety
- Prohibition of child labor
- Prohibition of forced labor
- Maintaining a workplace free of discrimination and harassment
- Environmental protection
We recognize that no supplier is perfect. That’s why our long-term goal is to support an environment of continuous learning and improvement in our supply chain. Suppliers seeking to do business with New Balance must sign a supply agreement that includes the obligation to abide by our Code of Conduct. Suppliers must also pass a social and environmental compliance audit before production orders can be placed. Approved suppliers undergo a compliance assessment at least annually. When suppliers fall short of New Balance standards, our team works with them to remediate issues and improve workplace practices. A majority of our suppliers are able to address issues quickly and show significant improvement in high priority areas. However, we can and do occasionally terminate our business relationships due to serious or persistent compliance violations. In 2017, New Balance ended one business relationship with a supplier due to that supplier’s falsification of records.
Zero Tolerance Issues
New Balance defines 23 noncompliance issues as “zero tolerance” – i.e., serious issues that jeopardize the life, health or safety of employees and compromise fundamental rights. Examples of zero tolerance issues include: child labor, locked or blocked emergency exits, absent or malfunctioning fire alarms, retention of workers’ original identification papers, illegal disposal of hazardous waste and falsification of records.
Any zero tolerance finding results in an automatic audit failure and requires immediate remediation. New Balance production may be put on hold until the issue is resolved. For new suppliers, New Balance will not approve a supplier for production until, at minimum, all zero tolerance issues are resolved and the supplier has successfully passed a follow-up audit.
The New Balance Responsible Leadership Steering Committee, which is comprised of the Chief Executive Officer (CEO) and senior leaders, maintains oversight of the company’s corporate responsibility policies and programs, including owned and contract manufacturer working conditions, health and safety, human rights and environmental issues. The head of Global Compliance reports to the General Counsel, meets with New Balance shareholders on a quarterly basis and reports to the Steering Committee at least annually.
The head of Global Compliance, while independent from product development and sourcing, is a member of the company’s Value Chain Leadership Team (VCLT), a cross-functional group of executives with responsibility across the supply chain. VCLT meetings include a dedicated regular session to review New Balance environmental, health and safety, and labor practices in owned and contract manufacturers. The VCLT ensures that our Value Chain annual goals include Responsible Leadership priorities and feed into the company’s overall strategic plan. In addition, members of the Global Compliance department regularly participate in strategic business review meetings with suppliers and in meetings at all levels with New Balance sourcing teams to review supplier performance and discuss issues and challenges as they arise. These daily interactions help support responsible purchasing practices and facilitate communication and joint problem solving between the sourcing and compliance functions.
New Balance maintains a team of approximately 20 professionals located in five countries who are dedicated to ensuring social and environmental responsibility in our global supply chain. On a daily basis, our team conducts announced and unannounced supplier visits to assess performance, as well as works with suppliers to remediate issues, offer technical expertise and conduct training sessions.
New Balance sources products from approximately 170 suppliers in more than 30 countries. In 2017, New Balance conducted pre-sourcing audits for 38 prospective new suppliers, of which 82% were eventually approved for production. Prospective suppliers that fail an initial audit may undergo a follow-up audit. However, the bar for entry into our supply chain is high: in 2017, we did not approve nearly one in five prospective suppliers for New Balance production due to inability to meet our minimum social and environmental standards.
A list of our Tier One finished product suppliers is published at least annually and includes name, address, country, number of workers and product type for New Balance-owned facilities and contract suppliers sourced directly or through agents. Our supplier list also includes some Tier Two processing suppliers for major components (e.g., footwear uppers and soles). We also publish a list of suppliers used by New Balance licensees. The supplier lists disclose the vast majority of manufacturing locations for New Balance-branded products. We are currently working to enhance our systems to enable greater supply chain transparency reporting and hope to make additional information on our suppliers available in the future.
For more information on our supply chain transparency initiatives, please see IPE Green Supply Chain Map and CITI Case Study.
For more information on our Tier Two suppliers, including a list of our Tier Two “wet processing” suppliers, please see Beyond Tier One below.
Beyond Tier One
Global supply chains are complex. Supply chains for footwear and apparel include not just manufacturers of finished products – “Tier One” suppliers with which New Balance and other brands contract directly – but also many other types of suppliers further upstream, from raw material suppliers (e.g., leather, rubber, cotton) to subcontractors that specialize in certain processes (e.g., screen printing, embroidery). While few companies have the visibility or technology today to drive improvements beyond Tier One suppliers all the way back to the farm or ranch, we recognize that human rights concerns and negative environmental impacts are often more prevalent in the upstream supply chain.
That’s why New Balance is expanding our oversight beyond Tier One to understand our upstream supply chain and take meaningful steps to source and process materials in a way that aligns with our company’s values. So far, our efforts have focused on two areas: (1) auditing selected subcontractors that perform supporting processes for our Tier One suppliers; and (2) analyzing risks and impacts within our Tier Two material supply chain to identify strategically where our intervention can have the greatest positive impact.
In 2016, New Balance began auditing subcontractors that work for our Tier One footwear suppliers. These subcontractors conduct specialized processes that Tier One factories may not have the capacity or capability to do in-house, such as screen printing, high-frequency welding and embroidery. Subcontractors do not assemble final products. We worked closely with our Tier One suppliers to review the audit findings and remediate issues.
Subcontractors typically receive less oversight from brands than Tier One manufacturers. Not surprisingly, the conditions we found were generally worse than what we find in our Tier One finished goods suppliers. In 2016, New Balance audited 51 footwear subcontractors, of which 15 (29%) failed to meet New Balance minimum compliance standards. By the end of 2016, 44 factories (86%) met at least minimum standards, four were still undergoing remediation and three had been terminated. By the end of 2017, 50 of 53 subcontractors had achieved at least a passing rating. Since then, remediation has either been completed or is in progress for the remaining two subcontractors, while the third has been terminated.
Our work with subcontractors shows the extensive social and environmental challenges beyond the Tier One level. We are analyzing our findings from this program to inform our strategy and standards for subcontractors and other Tier Two suppliers in the future.
Tier Two Risk Assessment
In 2017, we began mapping our Tier Two footwear and apparel material suppliers. This work identified nearly 500 material suppliers in over 20 countries, including material, component, trim and chemical manufacturers, and facilities responsible for key related processes, such as dyeing, printing, washing and finishing.
In 2018, New Balance worked with third-party experts to conduct a human rights and environmental risk assessment for our Tier Two supply chain, guided by the United Nations (UN) Guiding Principles on Business and Human Rights and the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. Our assessment focuses on 12 risk areas identified by the OECD Guidance, including issues such as child and forced labor, sexual harassment and gender-based violence in the workplace, working time and wages, water and greenhouse gas emissions. Results will help us prioritize the most salient risks within our Tier Two supply chain.
In the meantime, we have already engaged in collaborative efforts at the Tier Two level. Because of concerns related to water consumption, pollution and scarcity in Tier Two suppliers, most of our initial engagement has focused on strategic suppliers with wet processing, such as dyeing and finishing treatments. For a list of our Tier Two wet processing suppliers, please click here and see our case study on Clean by Design.
For information on our work to address forced labor risks at the Tier Two level, please see our case study on Forced Labor in Taiwan.
New Balance contracts with more than 25 licensees producing accessories and other specialty products in approximately 200 factories across the world. We require our licensees to ensure that the factories with which they contract also abide by the New Balance Code of Conduct and meet the same minimum standards as direct New Balance suppliers. Our licensee compliance program requirements can be found in the New Balance Licensee Compliance Manual.
Licensees sourcing New Balance branded-products are expected to meet or exceed New Balance compliance standards in the areas of labor, employee health and safety, and the environment. Where appropriate, the New Balance Global Compliance team provides tools and training to help licensees assist their factories to improve performance in these areas over time.
New Balance requires licensees to meet three annual compliance requirements:
- Factory authorization – factories where licensed product is manufactured must pass an annual New Balance compliance assessment by an approved professional audit firm.
- Product safety testing – licensees are required to meet New Balance product chemistry standards in the New Balance Restricted Substances Manual. New Balance seeks to replace chemicals that are harmful to people and the environment with safer, sustainable alternatives.
- Customs-Trade Partnership Against Terrorism (C-TPAT) compliance – New Balance participates in the C-TPAT supply chain security program, which is aimed at strengthening international supply chains and improving United States (US) border security. Licensees importing product for sale in the US are required to meet C-TPAT minimum security criteria.
Licensees that are unable to meet the above requirements may lose authorization to produce and sell New Balance-branded products. In 2017, New Balance conducted workshops for licensees in the US and Japan on New Balance standards and critical industry issues.
New Balance seeks to work with suppliers that share our commitment to fair and safe labor and environmental practices. Due to our long history in the industry, we have been working with many of the same footwear suppliers for decades. Even with our company’s growth during the past five years, our total number of suppliers has remained relatively stable. We invest in long-term relationships with suppliers that share our values – both for the quality of our products and respect for the people who make them, as well as a commitment to continuous improvement. We strive to foster an environment for open and transparent dialogue through strategic business review meetings with a cross-functional team of executives and ongoing workshops for joint learning and training.
We meet regularly with our suppliers to discuss and provide guidance on how to address top noncompliance findings and critical issues facing our industry. Our Global Compliance team regularly hosts supplier meetings and participates in supplier summits organized by our Sourcing teams to provide updates and training to top supplier management. In 2017, our team provided training to more than 90 suppliers and vendors and 11 licensees. Training is often comprised of presentations followed by questions and answers, as well as role playing, case studies and panel discussions. Topics range from raising awareness on modern slavery issues in our industry to preventing zero tolerance issues.
We encourage suppliers to talk to and learn from each other. In 2009, New Balance launched the Environment, Health and Safety (EHS) Alliance workshop for supplier-based Corporate Social Responsibility (CSR) representatives in China. The initial workshop, held in April 2009, involved CSR personnel from 12 different factories and was intended to be a platform for sharing best practices. New Balance challenged the first group of nine participating factories to meet injury reduction targets, resulting in an overall reduction of workplace injuries by 10% each year over the course of the first three years of the program (2009-2012).
The EHS Alliance – now known as the New Balance CSR Alliance – continues in China today, with two-day workshops held quarterly on topics of interest to factories. Participants stay in touch and continue to exchange ideas between meetings via a dedicated WeChat group. In 2015, we also expanded the program to Vietnam and Indonesia. While today’s workshop subjects cover more than EHS, the goal remains the same: to equip factory-based CSR personnel with the tools and skills needed to demonstrate responsible leadership in the footwear, apparel and equipment manufacturing industries.
Over time, leadership of the CSR Alliance Program is shifting from New Balance to suppliers themselves, with a long-term goal of self-governance. Programs are led by committees composed of factory representatives working together with local New Balance staff to organize activities and determine yearly targets and training topics.
Meeting basic compliance standards is the foundation of our work, but it is just the beginning. New Balance seeks to work with suppliers who lead in all aspects of business – from innovation and quality to social and environmental best practices. Experience teaches us that these areas are often interrelated – and the best manufacturers in the world excel at all of them.
Encouraging practices that go beyond compliance requires a different kind of business relationship. Once a supplier demonstrates the ability to maintain basic compliance consistently, we focus on providing technical and consulting support towards the implementation of best practices. In 2017, we piloted a new “Beyond Compliance” management framework with six suppliers to measure and reward leading practices in key labor, health and safety, and environmental areas. In 2018, we are implementing this framework with our footwear suppliers that have demonstrated readiness to advance beyond the basics – and have evolved our supplier scorecard methodology to include Beyond Compliance metrics.
The New Balance supplier scorecard rewards suppliers for (a) creating an effective strategy, (b) proactively engaging in projects, and (c) demonstrating measurable and sustained improvement in defined performance metrics. These elements of ‘Strategy, Engagement and Performance’ are the pillars of a growth mindset and are intended to work together as a system. Our approach to scoring reinforces the idea that growth and improvement are desirable, and that the best suppliers are ones that put effective systems in place and continuously strive to lead.
Our current focus areas include driving best practices in the areas of Energy Management, Fire Safety and Workplace Dialogue:
- Energy Management links to our supply chain energy program by promoting best practice in energy efficiency and greenhouse gas reductions.
- Fire Safety drives best practices in fire safety systems and management, incorporating advanced risk assessments, inspections, drills, onsite fire brigades, integrated alarms, advanced electrical safety audits, etc.
- Workplace Dialogue promotes meaningful engagement between workers and factory management, giving workers a way to voice their needs and creating an environment in which workers are heard and respected. Many initiatives come within this framework, from surveying workers formally about their needs and desires to promoting fully functioning worker-management committees. We see this work as a building block towards greater worker empowerment in the workplace.
The United Nations (UN) Sustainable Development Goals (SDGs) provide a framework that can help companies target actions to address the most pressing global development needs. New Balance evaluated the SDGs to determine where our work aligns with UN goals and where we can have the greatest positive impact. As a result, we have prioritized the following SDGs:
Predicting what consumers want to buy is more art than science. We strive to create products that excite our consumers and deliver the quality and performance they expect of our brand. We recognize that sometimes the way in which we design product and place orders – particularly when the process doesn’t go exactly as planned – can have an impact on working conditions in our supply chain. For example, product seasonality, inaccurate forecasting of orders, or late changes to design or material specifications, can lead to volatility in production needs, which in turn may create challenges at the factory level if demand exceeds capacity.
The New Balance Sourcing Guidelines lay the foundation for our sourcing practices and include, but are not limited to, expectations around realistic factory loading, sourcing mix, capacity planning and costing strategy. Sourcing leadership for all product categories meets regularly with Compliance leadership to review and discuss open issues. Compliance is also fully integrated into supplier meetings organized by the Sourcing department to help ensure consistent communication.
In 2017, New Balance participated in the Better Buying initiative to encourage our footwear and apparel suppliers to provide candid feedback about our practices. Just as we hold our suppliers to high standards, we also seek to hold ourselves to high standards and feedback helps us to improve. If sourcing and compliance priorities seem to be at odds, we encourage suppliers to talk openly with us. Meeting the ever-changing needs of consumers in a constantly shifting retail environment is not easy, but New Balance is committed to working with suppliers to create the best products while upholding our social and environmental responsibility standards.
Aligning Sourcing and Compliance Priorities
We recognize that, sometimes, sourcing and compliance priorities may seem at odds. For example, a supplier might believe that asking workers to work a high number of overtime hours is the only way to meet a tight order delivery deadline. To help ensure that we are not asking the suppliers to meet order requirements that would violate working hour rules, we encourage our suppliers to talk openly with us. When a supplier raises a concern with the New Balance Order Management team, we work together to determine if it is possible to open up additional production capacity (i.e., through changing delivery dates of other less urgent purchase orders) to complete the urgent order without excessive overtime. Our footwear supplier scorecard reflects this alignment. For example, a footwear supplier will not gain scorecard points for “on-time delivery” by violating compliance standards on overtime. New Balance requires footwear suppliers to obtain New Balance authorization for overtime hours. If a footwear supplier works unauthorized excessive overtime hours in order to meet a delivery deadline, that supplier will actually lose points for “on-time delivery” in direct proportion to the amount of unauthorized excessive hours worked.
Factory audits are an important part of the New Balance Global Compliance program. However, they are only one tool – and an imperfect one at that. Audits help to identify issues at a single point in time. Audits alone do not fix problems or prevent them from reoccurring.
Many times, the hardest work begins once an audit is completed. New Balance helps suppliers develop a Corrective Action Plan (CAP) to explain how they will address issues identified during an audit. We encourage suppliers to prioritize areas that will have the greatest positive impact on workers and the environment. We also ask suppliers to identify the root causes of problems and put in place systems, policies and procedures that will not only fix issues but prevent them from reoccurring. Where needed, we provide training and refer suppliers to external technical resources. In our experience, suppliers that implement proactive management systems around good health and safety, environmental and human resources practices exhibit much more consistent compliance performance over time.
New Balance aims to audit all active Tier One (finished product) suppliers on at least an annual basis, regardless of size or location. In 2017, we audited 96% of our Tier One suppliers. The handful of exceptions included suppliers participating in another recognized audit program, New Balance-owned facilities managed by our internal human resources and health and safety teams and year-end scheduling conflicts.
In 2017, 86% of New Balance suppliers achieved at least a two-star audit rating. We rate suppliers from zero (failing) to five stars (best performance). Suppliers must score at least two stars in order to pass an audit; this level indicates that they meet New Balance minimum compliance standards. Suppliers scoring three stars and above are demonstrating progressive levels of good industry practices. Suppliers that do not pass an audit are required to implement a Corrective Action Plan and, at minimum, undergo a follow-up audit to demonstrate progress. Wherever possible, we are committed to working with suppliers to try to solve problems, rather than just terminating our business relationship, since that may unintentionally end up creating a situation that is worse for workers.
Out of the 14% (23 suppliers) that failed their audit in 2017, nine did not have any zero tolerance issues. The most common non-zero tolerance findings were related to excessive working hours, which are widespread throughout the apparel and footwear industry and take time to resolve even though we take them seriously. We also recently strengthened our environmental requirements, which include higher severity ratings for environmental noncompliance, so a number of findings were related to environmental issues such as permitting and waste management. Fourteen of the failed suppliers had zero tolerance findings. For 10 of these suppliers, the issues have either been remediated or we are working with suppliers on corrective actions. In one case, we are in the process of exiting the facility. In three of the cases, we terminated relationship with the supplier – two were terminated due to sourcing and/or business reasons and one was terminated due to compliance reasons and the supplier’s falsification of records.
Out of all audits New Balance conducted or assessed in 2017, the top three noncompliance issues included:
- Working Hours: Employees worked more than 60 hours a week or did not get one day of rest in seven. Meeting international standards on working hours remains a persistent and widespread challenge throughout our industry. This issue will not be solved quickly, but we are tackling it on multiple fronts together with our sourcing and planning teams and talking with our suppliers about production issues that lead to working hour violations. For more information, please click here.
- Employment Benefits: Local labor laws vary globally and we often find that employees may not receive employment benefits as required by law. This finding includes a variety of issues, from the inadvertent miscalculation of allowances and annual leave to incomplete social insurance payments in China. In many cases, a supplier’s human resource management team may not be aware of a miscalculation, or does not understand the local law, or there may be cultural issues where – for example – employees prefer to receive more take-home pay rather than have salary contributions made to state pension plans. We continue to work with suppliers to correct the problems when found, help them understand the local legal requirements and make improvements in their human resource management systems.
- Emergency Exits: Unfortunately, we still find basic compliance issues in some factories, such as the lack of clear markings for emergency exits and/or the lack of functional emergency lights. Such issues may result from recent changes in a factory’s layout for production reasons or poor maintenance or housekeeping. Fortunately, such noncompliance issues can be corrected quickly. However, the fact that we still regularly find basic problems demonstrates that suppliers need more awareness and training about how to maintain basic compliance on an ongoing basis – and in a sustained way – so that such issues don’t continue to reoccur.
To learn about the work we are doing with suppliers to go beyond basic requirements and implement industry best practices, see Beyond Compliance.
We seek to do business with suppliers that are going beyond the minimum standards outlined in our Code of Conduct and working to implement social and environmental best practices. New Balance has developed a supplier scorecard that integrates compliance performance with measures of sourcing performance, such as quality, delivery, cost and speed-to-market. The scorecard is used to inform future sourcing plans and order allocations. We also encourage excellence through annual awards and recognition for outstanding social and environmental performance based on scorecard results.
New Balance recognizes that the challenges we face in global supply chains are complex and that no single company can solve them alone. Engaging with external stakeholders broadens our perspective, helps us to identify risks, and most importantly, gives us mechanisms to work with others on coordinated solutions to difficult problems. Some stakeholders assist in the remediation of noncompliance issues. Others bring expertise to educate and help train both our team and suppliers on specific supply chain issues. We work with stakeholders based on the footprint of our supply chain, with a particular focus on countries with significant human rights and environmental challenges.
Our external stakeholders include non-governmental organizations (NGOs), civil society organizations (CSOs), trade unions, factory workers, wholesale customers and retailers, consumers, national and local governments, intergovernmental organizations, multi-lateral and bi-lateral aid agencies, industry associations and industry peers. We work with stakeholders on a nearly daily basis in a variety of ways, from high-level meetings, to training and workshops, to on-the-ground investigations and interventions.
This table lists key stakeholders, including global multi-stakeholder initiatives, NGOs, and CSOs*, with which New Balance works.
|Stakeholder||Issue/Scope of Engagement|
|Americas Group coordinated by the Maquila Solidarity Network (MSN)||Labor rights in Mexico and Central America|
|Apparel and Footwear International RSL Management (AFIRM)||Industry Restricted Substances List (RSL)|
|Better Work||Buyer Partner; country programs in Cambodia, Haiti, Indonesia, Jordan, Vietnam|
|BSR (Business for Social Responsibility)||Member; participant in various supply chain and human rights working groups; BSR HERproject|
|Carbon Performance Improvement Initiative (CPI2)||Energy efficiency and climate|
|Environmental Defense Fund (EDF)||Climate Corps; energy efficiency and climate|
|Fair Factories Clearinghouse (FFC)||Member|
|Fair Labor Association (FLA)||Accredited Participating Company; member of the Board of Directors from 2012 to present|
|Green Chemistry & Commerce Council (GC3)||Green chemistry|
|International Finance Corporation (IFC)||Energy efficiency and climate|
|Leather Working Group (LWG)||Member|
|National Resource Defense Council (NRDC)||Clean by Design; CITI Index; environmental protection and preservation|
|Sustainable Apparel Coalition (SAC)||Founding Member|
|Zero Discharge of Hazardous Chemicals Foundation (ZDHC)||Participating Company and member of the Board of Directors from 2015-2018|
In June 2014, the FLA Board of Directors voted to grant accreditation to the New Balance Global Compliance program based on proven adherence to FLA's Workplace Code of Conduct and the Principles of Fair Labor and Responsible Sourcing. To become accredited, companies are assessed on the basis of fulfillment of the Principles of Fair Labor and Responsible Sourcing, which include:
- Adopting and communicating workplace standards.
- Training staff to assess and remediate noncompliance issues.
- Conducting internal assessments of facilities.
- Providing workers with confidential reporting channels.
In 2018, New Balance was reaccredited by the Fair Labor Association. For a copy of the New Balance Reaccreditation Report please see: http://www.fairlabor.org/report/new-balance-athletics-inc-assessment-reaccreditation
In order to ensure members are implementing the FLA Workplace Code of Conduct, FLA conducts independent monitoring assessments annually from a sample of its members’ suppliers. The FLA's Sustainable Compliance methodology (SCI) used in their assessments aims to identify systemic issues and drive sustainable improvements in management systems to better employment practices and working conditions. To access FLA audits for New Balance suppliers, please see the following link: http://www.fairlabor.org/transparency/workplace-monitoring-reports
Read more on New Balance’s work as part of the FLA Fair Compensation Project.
Better Work, a partnership between the United Nations’ International Labour Organization (ILO) and the International Finance Corporation (IFC), a member of the World Bank Group, improves working conditions and respect for labor rights in the global garment industry. New Balance is a Buyer Partner in the program and currently participates in Better Work in Cambodia, Haiti, Indonesia, Jordan and Vietnam.
Better Work provides monitoring, training and advisory services to participating factories to help them comply with ILO core labor standards as well as local labor and workplace safety laws. Better Work helps factories build better human resource management practices, and provides training on workplace communication, preventing harassment and improving occupational safety and health. A key component of the program is encouraging dialogue-based problem solving. Through the creation of bipartite committees of managers and workers, Better Work can help increase workplace cooperation and provide factories with the tools to self-diagnose and fix problems themselves. In addition to factory-specific monitoring and advisory services, Better Work brings together buyers, suppliers and government representatives to tackle country-wide labor issues.
Click here for an informational video about Better Work Vietnam that includes an interview with a New Balance team member.
Stakeholder Engagement in Action:
Respecting the Right to Freedom of Association in Mexico
Factory workers in Mexico face a unique challenge when it comes to the right to freedom of association, one of the 11 principles in the New Balance Code of Conduct. Suppliers and other employers in Mexico routinely sign agreements, commonly known as “protection contracts,” with unrepresentative unions without workers’ knowledge or consent. Although protection contracts resemble legitimate collective bargaining agreements, they do not represent workers' interests and seldom include wages or benefits beyond what workers are entitled to by law. In order to get a job, workers are required to affiliate to the company-controlled union and pay regular union dues. Often, workers are unaware that there is a collective agreement. They do not receive a copy of the agreement and their salaries and benefits are negotiated without their input. Workers have no opportunity to avail themselves of a union grievance system. The International Labor Organization (ILO) has recognized protection contracts as an obstacle to freedom of association and has called upon the Mexican government to revise its laws to stop the widespread use of protection contracts.
Mandatory worker affiliation with illegitimate unions represents a violation of our Code of Conduct. For the past several years, New Balance has been working with the Americas Group, a multi-stakeholder initiative that includes other apparel and footwear brands and civil society organizations, to promote fair labor practices in Mexico and Central America. Through the Americas Group, we helped to develop guidance documents and train auditors to identify protection contracts and verify whether suppliers are taking steps to ensure that the rights of workers to freedom of association and collective bargaining are being respected.
In 2015 and 2017, New Balance co-signed letters to the Mexican Secretary of Labor urging labor reforms to protect workers' rights to freedom of association and collective bargaining. In these letters, we recognized that protection contracts signed by illegitimate unions without workers’ knowledge or consent are violations of our Codes of Conduct and international labor standards and pressed the Mexican government to enact labor reforms to ensure greater respect for worker rights. In 2017, Mexico revised its constitution to require more transparency and impartiality in the registration of unions and collective bargaining agreements.