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An update from ICTI CARE - Mitigating risks and strengthening program integrity


In late June 2016, ICTI CARE became aware of concerns raised by the Guangdong Toy Association (GDTA).  The Board of ICTI CARE immediately instigated a full investigation, on concerns relating to the behavior of 3rd party auditors who conduct factory audits to assess compliance to the ICTI CARE Standard.

The integrity of the ICTI CARE Program is our core priority. Any accusations relating to bribery are therefore of great concern to us. ICTI CARE has effective processes in place to prevent, detect and address issues related to bribery.  Actions include investigating every reported incident and suspected occurrence, and to take any necessary follow-up action.  ICTI CARE's processes are robust, and have been developed to ensure that standards are met and adapted to the evolving challenges in toy manufacturing countries.  

ICTI CARE is always prepared to investigate, review and take all necessary action to address its processes in light of any integrity concerns that arise. The repercussions from an investigation can include terminating its relationship with an audit firm, and individual auditor and terminating a factory's certification.

Some of the allegations in the GDTA statement are manifestly inaccurate.  For example, there is no issue with the legality of ICTI CARE's operations under the laws of Mainland China. ICTI CARE is not a "monopoly", but operates a program which factories and toy companies may join voluntarily.     

On 01 September 2016, ICTI CARE CEO & President Ms Giblin met GDTA President, Mr Li, to discuss the statement.  During this meeting, Ms Giblin requested further information be shared so that a robust investigation could be undertaken in response to the GDTA's concerns. Mr Li was unable to provide any further information.

ICTI CARE also appointed independent legal advisors, Howse Williams Bowers (HWB), a Hong Kong law firm, to review the GDTA statement and undertake an independent investigation of the issues raised in it.  They have now completed their investigation and provided the Board of ICTI CARE with a report of their actions, findings and recommendations.

This statement provides an update on the outcome of the investigation progress, including actions taken to further enhance the integrity of the ICTI CARE program.

In view of the unparticularised nature of most of the allegations, the time that has elapsed, the unavailability of any witnesses with first-hand knowledge of the facts, HWB undertook a targeted investigation aimed at identifying whether there was any evidence to substantiate the specific allegations of bribery made in relation to the Shenzhen Sunshine Plastics Factory and 3rd party auditors employed by Bureau Veritas in connection with an audit in 2008.

HWB's investigation involved a review of the relevant audit reports prepared by Bureau Veritas and the Corrective Actions Plans signed by the relevant audit firms and Shenzhen Sunshine Plastics Factory. This is indicative of the level of participation and transparency between the audit firms and the factory during the audit process.    

The GDTA statement suggests issues at the factory were minor. However, the HWB review showed that the factory had critical non-compliances against the ICTI CARE Standard.  These were serious issues, including underage workers, forced labor, poor fire safety, and wages. The factory was given the usual opportunities and timescales to remedy these issues but they had failed to do so. It is therefore correct, given the serious nature of the non-compliances, that this factory was unable to retain their ICTI CARE Certification. 

The audit firm involved could not state unequivocally whether the alleged incident took place. Given the inability to directly interview the individual auditors or the factory managers / owners involved, it is not possible to entirely rule out the possibility that there was an instance of bribery as alleged by the GDTA. However, there is no evidence to substantiate the bribery allegations, and the integrity of the ICTI CARE Certification process does not appear to have been impaired. It is clear that this factory would not have been able to retain its ICTI CARE Certification given the seriousness of the non-compliances found and which were not resolved as is required.   

Nevertheless, the integrity of the ICTI CARE Program is critical to the ICTI CARE's reputation and credibility. To reinforce this, and to maintain the confidence of all stakeholders, the Board has agreed to undertake further actions to ensure that the program and the organization is held in the highest regard. 

The ICTI CARE Board has appointed Control Risks Group Holdings Limited (CRG).  A global risk and strategic consulting firm specializing in political, security and integrity risk supporting more than 2/3rds of Fortune 500 Companies.  CRG are conducting a thorough review of ICTI CARE’s processes including the appointment and monitoring  of 3rd party audit firms.  CRG will make recommendations that will support the overall integrity of the ICTI CARE Program and help us serve our Stakeholders more effectively, efficiently and transparently in the future.

Factory audits are a key component of the ICTI CARE Certification Program, which is why we   strive to  partner with the best 3rd party audit companies. ICTI CARE maintains a panel of independent 3rd  party audit companies who conduct factory audits on its behalf. Certification is only awarded when factories demonstrate they meet the standards set out in the ICTI CARE Code.   ICTI CARE has recently commenced a review of the current ICTI CARE approved 3rd party audit company panel. 

In appointing new audit companies to the ICTI CARE audit panel, we will focus even more closely on integrity and risk management. Audit companies on the panel will be required to sign a written service agreement  with terms of engagement in which they undertake to maintain high standards of  professional competence and integrity throughout their appointment and abide by all due diligence checks and verification processes requested by ICTI CARE.

The appointment of the new 3rd party audit company, and individual auditors who work within it, will take place under the guidance of our legal advisors at HWB and in line with recommendations made by CRG.

We will also strengthen our own internal team to provide greater monitoring of the audit process along with the implementation of the new feedback mechanisms for factories. 

To extend the scope of the ICTI CARE  program, we are also looking for audit partners who can provide additional services and support, to build capacity and drive improvement at the factory level.  This will complement the work of our newly created ICTI CARE capacity building team based in Shenzhen.   In parallel with the review, we have also assigned extra resources to support the Program, which includes the appointment of a dedicated Program Integrity Manager, as well as setting up a new cross-departmental working group focused on improving the ICTI CARE audit process experience.

Finally the ICTI CARE Board and team want to thank all stakeholders who have worked with us in recent months and continue to support us in the future. 

On 20 October 2016, during the Shanghai Toy Fair, an industry roundtable meeting was co-hosted by ICTI CARE and the China Toy Association (CTJPA).  This meeting brought China Mainland Toy Associations, the Hong Kong Toy Association and leading China based Factories together.  At this meeting the China Toy Manufacturing Industry endorsed the ICTI CARE Program and provided their continuous commitment in supporting the Program in the future.

Working to improve standards and to protect the lives of workers is challenging, but we remain committed to delivering our core objectives of protecting workers, improving standards and reducing duplication, we will achieve this by continuing to be the program of choice for the toy industry.

We will continue to share news of our program and future initiatives to protect and enhance the wellbeing of workers in the toy industry, as well as our on-going activities and progress to strengthen program integrity.