justassurance[1] was commissioned by Traidcraft[2] to provide assurance of its 2006/07 Social Accounts. justassurance was paid £16,000 for this work. justassurance has no other relationships with Traidcraft that might compromise its independence.
justassurance has sought to act impartially with respect to Traidcraft’s various stakeholders. Statements of independence, impartiality and conflict of interest, together with the qualifications of the Principal Assurance Providers, are detailed at www.justassurance.org
The Directors of Traidcraft are responsible for the content of the Traidcraft Social Accounts 2006/07. This statement represents the justassuranceview of the Social Accounts and is primarily concerned with the interests of Traidcraft’s stakeholders.
To prepare this statement, we reviewed the scope of the Social Accounts, assessed areas of risk, interviewed managers, scrutinised the Social Accounts, the underlying data and documents and considered the efficacy of the management systems.
We are satisfied that we have been allowed unhindered access to the financial accounts, documentation and reports covering its activities and stakeholder engagements and to managers and staff. We provided some feedback to Traidcraft on aspects of the Social Accounts and the design of the staff survey relating to its auditability.
Our approach to assurance is in accordance with AA1000 Assurance Standard, which requires us to review the completeness, materiality and responsiveness of the Social Accounts.
Opinion
On the basis of the work undertaken, and subject to the more detailed commentary below, we believe the Social Accounts properly describe Traidcraft’s relationships with its stakeholders.
Completeness
Traidcraft has identified its key stakeholders and continues to engage with them through a variety of means. All Traidcraft’s stakeholders and, as far as we are able to ascertain, all the activities of the organisation have been included in the accounting process.
For some stakeholders, which this year included staff and donors, Traidcraft conducts formal surveys of opinion. Consultation with these stakeholders would benefit from the adoption of other techniques, as has been done in the past, to discover new issues of concern and to confirm that the issues already covered by the surveys remain the most material. Future Social Accounts could, as result, incorporate the ‘voice of the stakeholder’ more prominently. It is very welcome in this connection to see the Staff Association taking a far more active role than in previous years. We look forward to seeing the fruits of this in future years’ accounts.
However, while the Social Accounts paint a complete picture, the reporting of activities is in some areas at a very general level and has not included information that we have reviewed in the course of our audit and consider material to the interests of stakeholders. We consider the reporting on producer support in general, and product design and development, quality management and logistics, in particular, to be incomplete. We are also aware of a considerable body of material reflecting producers, their intermediaries and communities views captured through numerous visits and would encourage Traidcraft to include representative reporting of producer’s views and responses in future Social Accounts.
With the increasing profile of the regional offices, it will also be important to see a gradually fuller account of their activities and impacts, both social and environmental, in future. The potential establishment of Committees of Reference and reporting on their activities would significantly strengthen the accountability of Traidcraft’s activities overall.
We welcome the adoption of a series of policies for conflict of interest, engagement, complaints and whistleblowing amongst others. It will be important to ensure that beyond the legal requirements for these policies, they also consistently address the ethical commitment of Traidcraft.
The growth in campaigner numbers and the success and growing influence of Traidcraft Exchange more generally brings with it an increasing need to ensure that its campaign aims are reflected as fully as possible in Traidcraft plc’s practice. This will become an increasingly important issue as Traidcraft becomes more closely involved with the mainstreaming of fair trade through large retailers.
Materiality
We believe the Social Accounts address the material impacts of Traidcraft on its stakeholders. In large part this is because its activities are built around the Foundation Principles, which also structure one of the views of the accounts. However the detailed justification for focusing on the specific issues reported could be strengthened.
Within Traidcraft plc, an issue which will become increasingly important is a means to ensure that the organizations with which it works in its core business are sufficiently aligned with Traidcraft’s overall objectives and ethos. In addition, while a full list of Traidcraft Exchange projects is given, a more nuanced picture could be painted of their progress, setting out some of the challenges as well as the undoubted successes.
We note the appointment to a new post of UK Purchasing and Ethical Sourcing manger in December. The work already undertaken in relation to some major supply contracts has been beneficial to the interests of all Traidcraft’s stakeholders in aligning supply policies and practice with Traidcraft’s Foundation Principles. This work and the introduction of cross departmental Profit Improvement Teams are already favourably impacting costs and efficiency.
We have reviewed evidence of regular exchanges of views between company management and its main UK contractors and suppliers and are satisfied that the company is committed to collaborative and sustainable relationships with its suppliers. We believe it would be useful to provide evidence in the Social Accounts that the material interests of these suppliers are considered and invite directors to consider the most appropriate way of doing this.
Traidcraft’s most valuable feedback from shareholders is through the questions asked at its Annual General Meeting, which all shareholders and other stakeholders are invited to attend or submit written questions. While this information is necessarily out of phase with the current Social Accounts, it represents a considerable commitment to understanding and responding to issues material to Traidcraft’s shareholders.
Environment
Traidcraft has delivered on its commitment to develop its environmental policy in line with good practice and continues to develop environmental accounts for its core operations. This year there is a much fuller account of Traidcraft’s ‘direct’ environmental impacts and its contribution to climate change through carbon emissions in particular. However it is not yet clear what proportion of its total emission the carbon accounted for represents. Beyond this Traidcraft clearly has a range of environmental impacts, including packaging and waste amongst others. We hope that the scope of its direct environmental accounting will gradually increase.
Moving forwards, there would be merit in assessing whether the greatest environmental impacts arise from its direct impacts or lie elsewhere in Traidcrafts's value chain - namely in producer operations outside the company's direct control. Beyond this, while Traidcraft’s stakeholders have declared their highest priority to be social impact, it remains important to continue to consider and address the proper contribution of Traidcraft to sustainability in its widest sense. Traidcraft should report upon its findings in future Social Accounts.
Producers
Traidcraft’s Purchasing Policy is based on three critical commitments: the payment of fair prices; the development of long term partnerships and ensuring that producers and their communities benefit from fair trade.
The consideration of the impact and benefits of fair trade is fundamental to achieving the organisation’s mission of ‘ fighting poverty through trade’ . In our statement last year we recommended that Traidcraft seek to develop with producers a more systematic approach to identifying and reporting impacts and benefits. We welcome progress that has been made in developing assessment tools and initiating trials with producers.
The Social Accounts states that it has been difficult to achieve target purchases from producers. The issue of effectively managing orders in relation to producer capacity and Traidcraft’s commitments to them was raised during last year’s audit. We have monitored progress of Traidcraft’s Producer Review system during the year and welcome the substantial progress that has been made, including a number of recommendations made in the cross functional Producer Review Group meeting during our audit, though outside the reporting period. Among other developments we welcome the shift from using ‘goods received’ data to using ‘orders placed’ data in the analysis of commitments to producers, which brings the process more into line with the ‘real-time’ business cycle.
Around 80% of the products Traidcraft sells are foods where the majority of the developing world ingredients are sourced under the terms of established ‘fair trade labelling’ schemes. For the remaining products, mainly non-food products, we repeat our recommendation from last year that the revised Producer Review process should record regular reviews with producers and suppliers on the production costs and pricing of the products they supply.
The work of Traidcraft’s Design and Product Development team has a very significant impact on the ability of producers to meet the requirements of Traidcraft’s own sales channels and other customers. There are material benefits to the producers and to direct and retail customers. We would welcome the inclusion of specific information about the department’s work and its relationship to sales in future Social Accounts.
Traidcraft has a sophisticated system of quality management focused on assisting producers in achieving consistent export quality in the goods they supply. The number of visits made to producers reported this year provides evidence of the company’s commitment to developing long-term commercially sustainable relationships. We would welcome more detail of the work undertaken and its impact in future Social Accounts.
Responsiveness
Responsiveness is concerned with Traidcraft’s reactions to stakeholder issues, including the quality of communication with them.
To assess Traidcraft’s responsiveness adequately, it will be helpful to have additional stakeholder input. We encourage Traidcraft to work towards a fuller engagement with stakeholders including customers and staff.
To its credit Traidcraft has been transparent about the difficulties it has faced with stock availability and with the rise in customer complaints. In the future it would be helpful to see the achievement of targets to improve performance in these areas.
We note Traidcraft’s real commitment to maintaining staff levels, despite a difficult sales picture, in order to meet the longer term organizational goals.
Last year there were a number of issues raised by staff that were subsequently successfully addressed and are now of less concern to them. However staff continue to point to a need to improve the co-ordination between different Traidcraft functions.
The Social Accounts would benefit from including a short summary of the key impact areas, performance achieved and targets for both Traidcraft plc and Traidcraft Exchange.
This year the organization and co-presentation of the financial and social accounts supports a more complete and integrated view of Traidcraft’s impact, which is welcome. Overall, the detail and honesty to be found in Traidcraft’s Social Accounts continues to position them as one of the leading exemplars of social reporting.
Just Assurance Network Ltd
Bath, UK, June 2007
Mark Line, Director, justassurance
Adrian Henriques, Principal Assurance provider, justassurance
Richard Evans, Principal Assurance provider, justassurance
[1] ‘
justassurance’ here refers to Just Assurance Network Ltd, trading as
justassurance. See
www.justassurance.org/ [2] ‘Traidcraft’ here refers to both Traidcraft plc and Traidcraft Exchange.
