Interview with Mr David Horlock

Intertek is one of the top three global players in the global compliance sector. We basically offer testing , inspection, audit and training services, to ensure products meet their defined regulatory and safety requirements, quality specifications, social, ethical and environmental requirements. For more than 100 years, companies around the world have depended on Intertek to ensure the quality and safety of their products, processes and systems.

In textile sector we are largest global provider from quality assurance services consisting of pre-shipment inspections, factory assessments to qualify suppliers and testing of product to regulatory and quality standards. In that, we consider testing for performance characteristic such as wear, shrinkages, washability, color fastness, strength test and measurements for size and fit. For safety characteristics we look as such things as chemicals, residues or heavy metals used in any textile or footwear article and flammability for sleepware.

The biggest share of our consumer products business is from textile, apparel and footwear sector.

I think this statement is very true because if we look back some years back, the definition of quality was very much limited to physical properties, functionality and price. But for the market today customers are becoming more concerned about social and environmental issues. Brands are sourced internationally and in doing so have more exposure to reputational risk in the supply chain associated with traceability, social, environmental and security issues.

Consumers and media are becoming better educated and will keep brands more accountable for the integrity of their supply chains.. They want to know; what impact these products have on the lives of the people who make them such as work conditions, health and safety, wages etc; With regards to the environment, is the factory meeting its regulatory obligations, minimizing pollution, recycling, using renewable raw material and energy, reducing its carbon footprint and so forth.

We have seen the proliferation of such social, environmental and ethical supply chain traceability issues in the Agri-food industry where we now have programs like Forest Stewardship Council (FSC) which focuses on sustainable forest production, Marine Stewardship Council (MSC) which looks at sustainable fisheries. We have Organic Certification, Dolphin Safe Tuna, Genetically Modified Organisms, Global GAP -Good Agriculture Practices which looks at responsible farming in context of the safe usage of pesticides or herbicides and fertilizers.

With such traceability challenges, we cannot just test products to find out if they are environmentally responsible, socially responsible or is this dolphin safe tuna, or is this organic cotton. We also have to validate this claim / notion by way of process assessments.

These concerns are what we classify as ‘Reputational risks’. Big brands and retailers are very concerned about their brand image which takes years to get established, but can be destroyed over night by negative reputational risk.

The definition of sustainability is; is your business going to be around in the future because you are taking the right and proper actions today? ‘Sustainable’ is not to be taken as a short term gain for which we do the wrong thing, exploit a resource or situation and only engage public relations in thinking and broadcasting but not acting and really being truly green. Sustainability is longevity and longevity only comes with consistently doing the right thing. We rely on major global brands to do the right thing. The vast majority of key brands today are invested in doing the right thing because they want to have sustainable businesses. To be successful they need to manage their reputational risk at every stage in the supply chain.

These organizations need to have social, environment, safety, regulatory and quality attributes delivering to its overall brand value and proposition right. To them this is an investment and not a cost. To them it is about doing the right thing and being a sustainable business. A bad reputation is very damaging to any business in today’s vocal and visible media.

Now on the point of how much capital intensive it is, I would say, it depends on which business you are in. For example, if you’re a Textile Mill and using a lot of performance chemicals for washing, dyeing and treating fabrics and garments, it could be a lot more expensive as you need water treatment plants and more.

As far as the garment manufacturing industry is concerned, I think they can reduce being capital intensive since there are many good practices like reducing energy and electricity usage whether its fuel, petroleum or gas; sourcing raw material from environmentally responsible suppliers; and ensuring the packaging material used is made up of renewable and bio degradable substances.

Companies can also work on designing eco friendly products or advocating eco friendly ways of using products. For example, a famous apparel company found that 80% of the carbon footprint of jeans is not as a result of growing cotton, transportation or manufacturing it but is instead due to the actions of the end user – ie the consumer. When the jeans are washed in a washing machine with warm water, the carbon footprint escalates dramatically. So the company is considering designing cold wash fabrics with awareness campaigns to promote cold washing while simultaneously reducing the energy use and carbon footprint.

A combination of the above good practices such as reduce, reuse, recycling water, using less energy, asking staff to use electricity in a conservative manner; material design efficiency and lean management concepts not only supports sustainability but also helps companies save on operational costs.

This perception is misguided and can depend on the maturity of the manufacturer and its management.

History has so far demonstrated that successful businesses will be the ones that understand these requirements as a pre-requisite to doing business and should be priced into the products themselves.

Producing Safe Products, Complying with regulations, being Socially and Environmentally responsible is a basic human desire and need. This is not something for which you can always demand a premium. Your customers are already assuming that you are doing the right thing. You can not say that if I do all these good things will you pay me more. It is already assumed, given and expected by customers.

The top of the supply chain is occupied by global brands and retailers that interface with everyday customers in global markets who understand this very well. They are often the major change agents enforcing these requirements with foreign manufacturers in developing countries. If they get it wrong then their brands are at the mercy of the international media. Their reputational risk is huge if something goes wrong – hence why they are adamant about managing and monitoring their operations with as close to possible perfection.

My message to foreign manufacturers is to look at these new standards and requirements as opportunities to gain preferred supplier status. Think of them as a prerequisite to future, sustainable business.

Secondly, if you become a successful exporter then you also develop the right ingredients and brand credentials to become a successful domestic brand.

Well, the manufacturer has two choices; One they can wait until they are asked by the buyer to meet or demonstrate strict requirements or two, they can be pro-active and ask Intertek to help prepare and qualify them in becoming a successful exporter and show them how to demonstrate a high level of trust and confidence in safety, regulatory and reputational risk issues.

The first wait and see option can become very stressful when a 3rd party is injected into your organization like a policemen, because you are suddenly attempting to comply within a very short time frame, under a lot of stress and under the spotlight.

The second option is more along the lines of partnership. Here the factory becomes proactive and says, “I want to be a successful exporter and be aware of all key safety regulations, product testing requirements and reputational risk issues. I want Intertek to help me prepare to qualify my products, people and processes, and to ultimately gain the trust and confidence needed.“ Such an approach will cost money up front but is more cost effective in the long run, less stressful and enables you to showcase your credentials with confidence.

Intertek is well positioned to help factories become internationally compliant and competitive. We truly understand the safety, regulatory and reputational risk requirement of the industry. We have been servicing the compliance testing, inspection and assessment requirements of many global brands and retailers for many years. Many of them are already sourcing products from India.

We can help the factories by partnering with them to help with product design, and evaluation for compliance and regulatory testing in pre and post production.

As the worlds largest assessment company in the Consumer Products sector, we are listening to our clients needs and what we have done is to innovate and deliver to the market the next generation of auditing services includes:

•Workplace Condition Assessment (WCA) – Social •Think Green Initiative (TGI) - Environment •Global Security Verification (GSV) - Security •Mill Qualification Program (MQP) – Fabric Quality •Supplier Qualification Program (SQP) - Quality

We have a web based operation platform to manage the entire auditing process and at the same time deliver meaningful data providing greater performance visibility to act on key issues and even tell the world your story through measured results.

All Intertek programs are community based programs where the factory owns the report; Benchmarking data is able to share this with a multitude of buyers. Our most mature program is GSV (Global Security Verification) which has resulted in many factories reducing their C-TPAT or Security audits by 40-60% due to the current and growing program recognition by multiple brands and retailers. We see exactly the same trend occurring with our new programs including “Workplace Condition Assessment” and the “Think Green Initiative”.

However, the biggest business benefit is putting you in a position whereby you are able to evaluate your performance against your industry peers. Moving from the unknown to the known means you make better and more informed decision. This is why we coined the phrase, measured results for improved performance.

Factories are provided a detailed report with graphic benchmarking offering the following benefits :

-Performance analysis and benchmarks across region, industry, product category and vendors more effectively communicates performance issues, trends and progress - Community recognition by brands and Retailers will reduce audit cost and fatigue over time - Benchmarking and automated CAPA process drives improvement through competitive analysis - Factories take full ownership, own the information and can showcase Performance Outcomes - Better allocation of resources to areas requiring greatest attention against industry benchmarks - Achieving good corporate governance and preferred supplier status - Improving Trust and Confidence with suppliers through greater transparency of performance. - Graphical reporting and the Achievement Award allows suppliers to showcase performance

This is very powerful because it can help facilitate the process of improving the competitiveness of India’s business sectors.

Intertek is a listed company on the London stock exchange and present in 100 countries around the world with 26,000 employees. Our country businesses are led by local country managers who are able to think global and act local in order to customize our solution to meet local needs and the needs applicable to the relevant export markets.

For example, where ever, we do environmental audits we do it based on individual country’s environmental laws. The same applies to work place condition assessments which are based on local labour laws.

When we do testing of a product which is duty bound for exports, we adapt the testing program based on the country regulations in which the products shall be sold. For example, say an Indian manufactures who is exporting to UK, US, Germany, Japan or Korea etc– all these shall have different regulatory requirements which we communicate to customize a packaged solution. So in a sense, we think global and act local.

Everybody is been thinking green lately. You could say this is in response to societies concerns about the obvious deterioration of our planets environment. As a global community we have been doing a lot of thinking but not necessarily acting green. Society has a choice about the way we conduct business and its impact on the planet. We can focus on maximizing profit at any cost which is short term, or we can look for more sustainable business models for the actual future.

It is generally apparent that the world adopted the maximizing profit model at any cost because the by product of doing that is- we are running out of natural resources, our forests have been cut down, we have scarce fish resources left which continue to dwindle. We pollute our rivers and water ways, reduce our biodiversity resulting in mass extinction of species and mono culture farming and destroy our atmosphere with the by products of fossil fuel.

We know the mistakes that have been made by the Developed economies because many of them are only recovering from their own environmental destruction. Their mistakes and problems have become the basis for the new environmental rules and regulations being imposed on the developed world today. This may seem unfair at times but the reality is that we can not afford to make the same mistake as the Western World did through the great industrial revolution from 1760 to 1850. The simple reason being that back in 1800 the worlds population was 1 billion. Today is almost 7 Billion and growing at the rate of 1 Billion every 12-15 years. With the developing world aspiring to the same living standard and level of affluence as the developed world we have no option but to find a more sustainable business model.

The major brands and retailers will respond to this challenges and Intertek is taking a leadership position in helping them green up their supply chains. In doing this we developed a program called ‘Think Green Initiative’. This program enables those who think green to act green and the by product of acting green is actually becoming green. Our program consists of 8 modules which include:

Two Core Compliance Modules * Environmental Legal Compliance Review * Environmental Management System

Six Environmental Modules * Water * Air Emissions * Energy * Noise Emissions * Hazardous Materials, Equipment and Waste * Sustainable Production

We basically provide the mechanism to put clients onto auto pilot in acting and becoming green. The benefits are many. It helps set measuring standard on environmental performances. It helps establishing benchmarking against peers. It helps to identify and prioritize KPIs. It drives sustainable production. It minimizes waste and environmental impact- thus enhancing enterprise’s vitality and social responsibility, and ultimately helping reduce operational costs drastically. Most importantly it helps you showcase your green and environmental credentials to potential business partners.

For those that want to become early adopters and paradigm pioneers, Intertek is running a number of pilot programs in India - explained below. Those interested can contact the local Intertek Office for more information. Please click here.

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