DEVELOPING
INTERNAL CAPACITY
ETI Seminar Report 1
July 1998
As part of its 'Learning from Doing' programme, the Ethical
Trading Initiative is running a series of seminars over its three-year
lifetime. This briefing presents a synopsis of the first seminar - 'Developing
Internal Capacity' - which was held in London on 25th June 1998.
Additional web version material (not in printed copy):
[ETI Library]
Main conclusions from the seminar
- Monitoring should not be viewed as the policing of
suppliers, but as a means of educating and encouraging suppliers to take
ownership of standards enforcement
- Prioritising and systematising can keep monitoring efforts
manageable
- Collaboration within a sector can drive down monitoring
costs through information-sharing and maximise influence with suppliers
- Human rights and labour rights issues are too complex to be
inward-looking: companies can enhance capacity by building relationships with
external organisations and engaging external monitors with valuable expertise
- Developing internal capacity is critical to integrating
human rights policies into core business activities, since external parties are
less able to effect organisational change
- Success in developing internal capacity is entirely linked
to the degree of company commitment and in particular to the active engagement
of the senior management team
- Awareness and training (of monitors, factory managers,
quality control staff, etc.) is key to capacity building.
Aron Cramer, BSR
In his presentation, Aron addressed why monitoring is important,
how effective monitoring can be promoted, and what capacities are required for
internal monitoring. He described a BSR initiative for internal capacity
building and highlighted the lessons learned about best-practice monitoring. He
summed up by outlining what he believes to lie ahead in this field over the
next five years.
Why monitor?
Human rights monitoring is important not only for ultimate goals
of enforcing labour standards and gaining credibility, but also for
'operationalising' an ethical strategy. Supplier co-operation is best
facilitated when monitoring is seen not as policing but as an educational
process to encourage suppliers to take ownership of the enforcement of
standards. By providing feedback into management decisions, monitoring helps
integrate these issues into daily business operations.
Effective internal monitoring
- Identification of supply chain
- Clear guidelines and standards
- Communicating with - not to - suppliers: 'improvement over
time' rather than 'comply or die'
- Clearly defined monitoring process
- Monitor toolkit
- Supplier toolkit
- Responsive monitoring plan
- Remedial action plan
- Outreach to involve external parties
- Transparency
- Database of suppliers recording problems and successes.
Capacities required
- Comprehensiveness
- Potential conflicts of interest addressed
- Co-operation with suppliers
- Focus on continuous improvement
- Incorporation of external learning
- Demonstration of results to earn trust and credibility.
Main points
- Different sectors require different approaches
- Internal efforts are critical to integrating human rights
into core business activities, since external monitoring bodies are less able
to effect change
- Commitment and capacity are entirely linked
- External and independent monitoring can help to build and
enhance internal capacity by contributing valuable expertise (e.g. local NGOs).
The next five years
The path ahead promises to be one of experimentation and
learning. Issues such as the value of dedicated company staff, determining how
to make independent monitoring effective, and the challenge of employee
information-gathering must all be addressed. Companies can maximise leverage
and drive down costs by sharing information on compliance. Such collaboration
will enable all parties to embrace comprehensive approaches, which acknowledge
that, though tempting, "easy answers are often sloppy answers".
Doug Cahn, Reebok
Doug drew attention to popular myths about business
relationships with suppliers, and went on to describe a number of Reebok's
experiences of the complex task of monitoring labour standards, highlighting
various of the lessons learned.
Myths
- Adopting a code of conduct is enough to protect against the
use of sweatshops
- Global brands have complete control over suppliers
- Businesses easily know where their products are
manufactured at all times
- Terminating business with suppliers who have substandard
conditions is the best response to abuses
- Gaining alignment from factory managers on standards is
easy. Lessons learned
Lessons learned
Learning by doing
- People of the same gender and approximately the same age as
workers are best to conduct worker interviews because they are most likely to
gain workers' trust
- When factory questionnaires are returned with incomplete
answers, it may mean that better education of suppliers about the need for
monitoring is necessary
- Determining whether you have established effective
communication with workers can be complex. Few comments from workers may mean
that workers are content or it may mean that they do not feel comfortable
communicating grievances. Solutions to promote open communication directly with
Reebok include posted telephone numbers, pre-paid postage mailers, and
suggestion boxes
- Monitors discovered they could assist information-gathering
efforts by building relationships with NGOs.
Types of monitoring
- Factory self-assessment
- Company monitoring
- External monitoring
- Independent monitoring
- Scheduled vs. unscheduled (scheduled shows the commitment
of management to implement a monitoring system; unscheduled verifies the
permanence of changes made).
Focus - don't bite off more than you can chew!
To audit all aspects of a code of conduct at one go can be
overwhelming. It has been important to prioritise using strategies such as
quarterly monitoring with a singular focus. An expectation of regular
monitoring can be fostered, where the focus evolves from relatively
straight-forward issues like health and safety to more controversial and
sensitive issues such as non-discrimination, freedom of association, and child
labour.
Gaining commitment and mobilising resources
- Getting senior management on board - through communication
tools, business events to share common experiences, etc. - is the surest way of
creating a corporate culture supportive of human rights policy. Without this,
even the most able human rights team is powerless to effect change
- Support of manufacturing teams can be won through
third-party training which raises awareness that they are not alone in
struggling with these issues
- Quality control/quality assurance staff need awareness
training so that they can act as the monitors' extra eyes and ears in factories
- Supplier management teams can be encouraged to take
responsibility by training managers and clearly communicating standards and
implementation requirements
- A direct link to the Chief Executive which is not mediated
by reporting relationships to stakeholders with other primary interests (such
as purchasing, manufacturing, public relations).
Additional Material
Discussion Points
On recognising success:
- Distinctions between short- and long-term perspectives, and
between sectors at different starting points, dictate which benchmarks carry
most weight.
- The key question is success for whom? For trade unions it
might be the number of organised shops; for global brands it may be the absence
of a bad story. Success can be a moving target because of changing agendas. The
key point may therefore be continual improvement.
- Success should not be narrowly defined in terms of
improvements related to monitoring. One needs to ask what the impact is on the
wider developmental process: i.e. we should be looking for expected and
unexpected outcomes.
- 'Continuous improvement' is problematic for trade unions
since it seems to suggest that codes of conduct go on forever. Once the code is
in place, workers and their representatives should address additional issues
through standard collective bargaining means. While there are issues of
capacity-building, there is a need for time-bound programmes and remedial
action plans in cases of serious violations.
On dealing with the costs of developing internal capacity:
- It is difficult to cost across sectors: much depends on the
size of the supplier base, where it is located, how large the quality
control/quality assurance staff is in different countries, etc. Under pressure
from suppliers and consumers, every human rights programme must justify its
expenditure, whether that be in reference to how human rights initiatives are
showing up in practical terms (for example, is the company targeted by consumer
campaigns?), if important problems are still being uncovered, if the
expectation of stakeholders are being met, etc.
- Since this is an investment in quality relationships, every
issue should be justifiable in terms of expenditure.
- There is a belief that costs are usually passed on to
consumers. In this NGO's experience, it is often the supplier who pays.
- Professional social auditors are finding that, in general,
the costs of human rights monitoring are not so different from those associated
with environmental auditing and quality management, and that they can be
reduced through integration.
On collaboration within a sector:
- Intense media scrutiny over human rights offences tarnishes
not just the company singled out, but the whole industry. The issue is
therefore not one of competition. Collaboration within a given sector is much
more powerful, especially in cases where minority buyers experience difficulty
in demanding code compliance from suppliers.
- Competition is the key challenge. Pilot projects are
therefore needed to demonstrate both the safety and effectiveness of
co-operative strategies.
On collaboration with external bodies and independent
monitoring:
- If there is an issue not addressed by a company, an NGO has
a right - even a responsibility - to do something about it. However, a strategy
to embarrass and expose the company does not always take full advantage of the
opportunities for remedial action.
- All parties must come to the table and agree on ground
rules to prevent future loss of trust through divergent expectations about the
meaning of partnership. As yet there is no economically sustainable model of
independent monitoring. The well-known example of The Gap in El Salvador was
far too time- and energy-consuming given the size and output of the factory.
The only way around this is through cost-sharing and collaboration.
- Receiving payment for services can undermine NGOs'
legitimacy to monitor and expose. Perhaps the role of NGOs lies not in
monitoring, but rather in oversight and supervision.
On the wider picture:
- Governments often hide behind the argument that ILO
standards are Western. However, this is disingenuous since the self-same
governments sit at the negotiating table.
- Last time the issue of codes of conduct was raised at the
ILO, on the whole workers were very pro, governments were ambivalent and
employer organisation spokespeople were hostile. It is important that
supportive international business makes its views known to representatives and
therefore to the ILO.
- Is it really the case that trade unions are
external? In Europe this has not traditionally been the case. Trade
unions can be key to surmounting difficult monitoring issues such as effective
worker consultation and the danger of reprisal. Freedom of association is not
simply an issue of industrial relations, but one of democracy and
accountability of more general concern to a globally responsible company.
Companies operate better in stable democracies and therefore have a huge
interest in building social partnerships.
[Note: The views expressed in
this seminar are those
of the individuals concerned, and do not
necessarily
represent the positions of their organisations, or
of the
Ethical Trading Initiative.]
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