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                                           Project Kaleidoscope

     McDonald’s Corporation (McDonald’s), The Walt Disney Company (Disney) and a group of faith-based, socially responsible and institutional investors whose work focuses on labor rights, are working on a unique project to determine how factory-based compliance with corporate codes of conduct can be improved and sustained over time.

     The project, named Project Kaleidoscope, was launched as part of an ongoing effort by both companies to improve the effectiveness of their labor standards compliance programs.  The companies and investors (the “Working Group”) are developing a new compliance approach at 10 factories in China that produce toys, footwear and apparel.  This approach seeks, among other things, to develop factory-based systems that can further pinpoint the source of recurring compliance issues with the objective of resolving and preventing them from recurring.  The broader project objective is to identify effective practices that can be applied across different industries, geographic regions and socio-economic and regulatory systems.  The factories’ performance will be evaluated according to a common set of project employment and workplace standards, including such things as compliance with standards relating to wages, working hours, workplace safety, child labor, and a range of other labor standards identified by the Working Group based on commonly accepted principles.

     The project is testing the premise that a successfully implemented internal factory compliance system will enhance the ability of factories to correct problems as they occur, while also creating a culture of compliance.

     A project imperative has been the engagement of various stakeholders to take advantage of broad perspectives and engender a sense of shared accountability.  The Working Group is collaborating with local civil society organizations (CSOs) in China, supply chain organizations, including individual factories, as well as external and internal social compliance monitors to develop practical compliance methods, including assessment, training, education and communication tools.  The systems approach is designed to include factory management, supervisors and workers as participants in the on-going work of sustained compliance.

The central premises of Project Kaleidoscope include:

 - Sustained compliance is possible
 - The factories themselves must become part of the system responsible for compliance
 - A new inclusive approach to compliance will enable timely corrective action

     This report provides an interim snapshot of the project goals, key participants, and the progress to date on testing a model for sustaining compliance with established labor standards.  The Working Group will issue a more detailed public report upon completion of the project, which is expected to be in late 2005.

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