We believe we have made strides in promoting responsible working conditions throughout our supply chain and among our licensees and their manufacturers in the years since the inception of our International Labor Standards program. For example, we have conducted approximately 60,000 assessments of factories since 1996 and forged productive relationships with some of our licensees to help them develop social compliance programs. These examples are a result of Disney's commitment of labor and financial resources toward a program we believe is vital for our brand and our commitment to socially responsible corporate policies and practices.
While our ILS team has consistently acted to address labor issues as they have been discovered in factories working on our behalf, we know there is more to be done to create systemic, lasting improvements. We are committed to continuing the evolution of our program to meet these ongoing challenges. Below is a collection of ILS indicators for 2008.
Factory Assessment Coverage
Assessment coverage indicates the percentage of factories we or our business partners are able to visit for the purposes of conducting a social compliance assessment. With approximately 23,000 factories active in the course of a single year, some for short periods of time, it is virtually impossible to assess every facility. Accordingly, our ILS program concentrates its resources in countries that we designate as high risk, which we describe under the "Targeted Assessments” discussion. Nonetheless, increasing assessment coverage is a critical goal we are currently evaluating.
The data below reflects on-site factory assessments conducted by Disney internal social compliance monitors and by the external monitoring firms that we retain directly, as well as assessments conducted by or contracted for by our licensees and vendors. During fiscal year 2008, approximately 3,500 factories were assessed by Disney or our licensees and vendors. These factory assessments add up to approximately 4,400 separate assessments.
To improve these factory assessment coverage ratios, we will begin implementing a requirement in 2009 for our licensees and vendors to submit factory assessment reports for their factory base prior to the start of production.
Findings of Compliance Assessments
The following data in Charts 29 and 30 reflect the percentage of assessments in our fiscal year 2008 in which we found noncompliance with elements of our Code of Conduct. As described earlier in this report, we attempt to target our factory assessments to areas we believe may be higher risk, or in other words, more likely to have a violation. Therefore, the data we are reporting for incidence are not representative of all factories related to Disney's chain of suppliers.
In aggregate, we have found that factories generally improve after the initial assessment, and it does appear that the act of monitoring and the identification of issues help facilitate some remediation. However, the degree of initial noncompliance, and the progress made after the first assessment, still fall short of our expectations.
We also categorize the data by priority (high, medium, low). We use these designations to prioritize our remediation strategy. Each violation identified during an assessment is expected to be corrected. High priority categories – generally those consistent with ILO core conventions – are deemed severe and need to be corrected immediately. Medium priority violations may require changes in payroll systems or other internal mechanisms which may take time to correct. Low-priority violations are important, but other issues should be prioritized first. Specific noncompliance findings within the categories of Health & Safety and Monitoring and Compliance are categorized as high, medium or low depending upon the particular issue.
We have also broken down the findings from our compliance assessments into regions (see Chart 30) to provide additional detail about the results of the factory assessment program. The table does not include the findings of compliance assessments for Australia, New Zealand, Japan, and Africa as the low number of factory assessments in these countries resulted in an insignificant data sample. The table does not include the findings of follow-up assessments for Europe and USA & Canada, as the low number of assessments resulted in an insignificant data sample. The data reveals that compliance violations exist in every region but that there are some with a higher degree of non-compliance.
Ongoing Challenges and Opportunities
While we have made progress in implementing our ILS program, we face several ongoing challenges. The following represents possible approaches to these issues.
What We Are Doing About It
Our goal is to have a supply chain that mirrors Disney's own desire to operate as a responsible business. We have learned a tremendous amount since 1996, when we launched our International Labor Standards program, and have put forth a concerted effort to monitor factories, enforce expectations for compliance and work collaboratively with our licensees and vendors. We have also expanded our engagement with external stakeholders. However, this still has not resulted in a supply chain that meets our expectations.
As a result, we have committed additional resources to revising and updating the ILS program to meet the challenges of our global supply chain. In 2008, Disney's ILS program was reorganized to make it formally part of the Corporate Responsibility group, and we commenced a strategic review of how our people, processes and technology can better support our ambitions to improve factory labor standards. We look forward to sharing the results of this work in our next corporate responsibility report. For now, we can share a few central themes we're focused on.
Greater Supply Chain Ownership
Stakeholder Engagement and Collaboration