As a manufacturer of Exclusive Brand products, we understand the importance of developing and maintaining an ethical supply chain. Through our efforts in this area, we hope to improve global working conditions and minimize environmental impact, advance product safety and standards, and support diversity in the business community.

Today, Best Buy's Exclusive Brands sales represent a small but growing component of company revenue. As this part of our business expands, upholding an ethical supply chain becomes increasingly necessary to ensure our products are manufactured with respect for worker rights, protection of the environment and consumer safety. While manufacturing expertise, lower labor costs and an efficient global supply chain make production in southeastern Asia a viable proposition, our operations there have not been without challenges. We face inherent challenges that are complicated, multifaceted and require all stakeholders working together to seek solutions.

In particular, labor issues are fueled by a lack of trust between management and workers and lax labor laws. Some of these supply chain challenges can be unintentionally aggravated by the companies through inconsistent ordering patterns or an inability to develop long-term relationships with suppliers.

 

Supplier Compliance Standards

Best Buy is dedicated to seeking solutions to these challenges. Our ethical manufacturing program starts with our Supplier Compliance Standards [DOC]. These standards embody those embraced they the Fair Labor Association Workplace Code of Conduct and the core labor standards of the International Labor Organization. In addition, these standards address expectations for environmental stewardship and international security requirements.

In April 2007, our factory audit program was refined in order to become more effective at issue identification and remediation. Beyond identifying non-compliance, the revised program evaluates each factory's management practices so we can better assess their ability to meet our standards. While the rate of non-compliance was reduced for several of our standards in fiscal 2009, the systemic nature of compensation and hour non-compliance represent two of the challenges we continue to face at manufacturing factories. By improving our ability to identify instances of non-compliance, we are better positioned to address the root causes through targeted trainings, capacity building programs and clearer expectations from our sourcing team. These steps have helped to improve overall factory performance from fiscal 2008 to fiscal 2009.

Overall while we believe some of our efforts in this area are strong, we are also aware that many in our industry have been refining their programs and processes for decades. In fiscal 2010, we hope to further our collaboration with a variety of industry coalitions, NGOs, academics and others to improve our performance in the areas of ethical manufacturing, product safety and supplier diversity.