Warning letters are an essential part of our enforcement efforts and are triggered when we find ongoing serious non-compliance issues that need to be addressed by our suppliers. In 2010, we issued a total of 50 warning letters across twelve countries.
The largest number of warning letters continued to be issued in Asia, where nearly 70% of all supplier factories are located. Compared to the previous two years, the number of first warning letters has increased considerably which automatically results in a higher number of total warning letters issued to suppliers. The increased number of first warning letters reflects SEA's overall efforts in 2010 at raising the bar on supplier performance, with reduced tolerance for ongoing non-compliances. It also reflects pressures within the supply chain, due to capacity constraints that resulted in a higher frequency of excessive working hours' cases across Asia. It is difficult to generalise as to the grounds for a warning letter, as this may be issued based on a single non-conformance which is unresolved, or multiple breaches of our Standards. The range of issues that resulted in warning letters in 2010 included poor management commitment, excessive working hours, falsified time and payment records, underpayment of wages, non-payment of back-wages, inadequate social security, medical insurances or other benefits, poor electrical, fire or chemical safety, insufficient training to workers, supervisors and managers, poor communication and transparency problems.
The reduction in warning letters 2 and 3 shows that suppliers are reacting to the first warning letter and correcting the identified threshold, non-compliant issues more expediently.