factory inspection and improvement
We are careful about who we decide to do business with. All factories must be approved through a pre-sourcing audit before an AEO production order may be placed, and factories with orange or red ratings are not approved for business. In 2016, we did not approve 34 factories unless orange-rated and red-rated findings were remediated.
Our suppliers often have subcontractors assist them in meeting our production needs. As part of our commitment to addressing compliance issues in the deeper tiers of our supply chain, we’ve increased restrictions on unauthorized subcontracting by requiring information to be submitted before work can be subcontracted out. Penalties for unauthorized subcontractors include fines, decreases in AEO orders, and possible termination of business.
our inspection approach
Our factory audits assess labor, governance, environment, health, and safety conditions against local and international laws and regulations.
All of the apparel factories we actively source from are visited and inspected every year by our internal team or third-party auditing partners.
Our approach is focused on transparency and remediation, so most of our audits are semi-announced to help us build trust with our factory partners. We have a group of AEO associates in Hong Kong and Bangladesh that conduct a portion of our audits and work closely with factories on remediation.
AEO is committed to working with our factory partners to properly protect the workers and environment across our supply chain.
FACTORY RATING SYSTEM
In 2015, we rolled out an enhanced factory rating system to better measure supplier performance and drive improvement. When non-compliances are identified, we work with factories to remediate every finding, addressing red- and orange-rated findings with urgency. While there’s still a lot of work to be done, we are encouraged by our audit results, which show that the majority of our factory suppliers are rated yellow. Factory ratings are incorporated into AEO’s supplier scorecards which measure supplier performance in a number of areas, including social compliance.