INDEPENDENT monitoring
using local
resources
ETI Seminar Report 2
August 1998
This report presents highlights of the Ethical Trading
Initiative's second 'Learning From Doing' seminar. Held in London on 13th July
1998, the seminar addressed the pressing issue of local community involvement
in the monitoring and verification of codes of conduct.
Additional web version material (not in printed copy):
[ETI Library]
Main conclusions from the seminar
- Serious human rights and labour rights abuses may go
undetected if monitors do not consult in-depth with local experts/organisations
- Local resources can be useful not only in monitoring
suppliers, but in securing the success of corrective actions
- Community partners must be independent and must be seen to
be independent (i.e. they should not be directly engaged with the particular
union or company concerned)
- When networking in the community, monitors may face serious
safety risks, and those responsible for this monitoring need to understand the
risks involved
- Community-based monitoring is not cost-prohibitive since
local consultants are paid local rates
- The key challenge is to create regional monitoring capacity
worldwide by growing the capacity of local partners.
Heather White, Verité
Seminar outline
Heather White explained how Verité's links with local
partners are key to monitoring supplier compliance (with codes of conduct,
local labour laws and ILO conventions). She went on to describe the logistics
of information gathering and Verité's experiences in India, China, and
elsewhere.
Linking with local organisations
Local knowledge
- community partners supply valuable expertise on issues such
as local labour practices, and fulfil interpreter and interviewer roles.
However, locally-based professional auditors can be problematic since their
relationships with workers or employers may compromise the objectivity of
monitoring.
Process issues
- Local organisations can help auditors understand the
context in which factories operate and the issues likely to be encountered
(e.g. knowing the gender of workers in advance enables auditors to select the
appropriate interviewers).
Adjustable audit schedule
- By being flexible and fitting in further consultation with
local partners, monitors are more likely to resolve difficult or unexpected
issues (e.g. gender or caste make-up of workers).
Follow-up
- After consultation with local organisations,
recommendations are made regarding corrective actions to take with
suppliers.
Inspector qualifications
In Verité's experience, an effective auditing team should
include personnel with:
- Production/sourcing background
- Occupational health and safety expertise
- Research and investigation ability
- Survey/interview experience.
Worker interview information
Information gathering from management interviews and physical
inspections alone will often not reveal the full story of factory conditions.
Worker interviews show:
- Wages/overtime/benefits
- Fines/deposits/deductions
- Fire safety
- Physical abuse/harassment
- Child labour.
Monitoring in China - challenges
Within China independent trade unions are forbidden, and
complicity among business, local authorities and police can lead to questions
over the safety of auditing work. Other challenges include:
- Absence of non-governmental organisations (NGOs)
- Foreign-owned factories
- Special export-processing zones
- Auditor security
- Risks to Chinese nationals.
Monitoring in China - tips
- Approach suppliers in a non-confrontational way which does
not put management on the defensive
- Encourage most-favoured working conditions as a business
strategy
- Deal with subcontracting issues.
[ China: see also Seminar 4
and Seminar 5 ]
Additional Material
General Discussion Points
(Focused discussion included in published briefing
above)
On generating influence within the supply chain:
- Buyers' power is key to effective code of conduct
implementation. Some companies are reducing the number of suppliers they deal
with, thereby increasing their influence among the remaining 'best practice'
factories.
- Minority buyers can increase leverage with suppliers by
working together. More and more businesses are joining fora, but issues such as
trade secrets and confidentiality remain hurdles to sector collaboration.
On promoting supplier co-operation:
- A policing approach to monitoring suppliers can drive
malpractice underground and the 'comply-or-die' approach to certification can
take several years to work through extensive subcontracting chains. Rather than
embracing a mode of interaction in which "…there is every incentive for
suppliers not to be honest", companies should devise strategies to encourage
factory 'buy-in'.
- Companies need to consider how their own deadlines and
price demands affect the treatment of workers down the supply chain.
- Some companies have offered assistance and incentives to
factory management for meeting code standards. In one case a company agreed to
pay higher prices to help its suppliers meet monthly compensation expectations.
In such cases it is important to have someone on the ground to ensure benefits
reach the intended recipients.
- With a growing number of buyers interested in suppliers who
meet certain ethical standards, high-performing, socially responsible factories
may be able to compete on issues other than price.
- Reward for co-operation could also operate along a
compliance certification approach, although this is a much longer process.
On retaining high-performing suppliers while pursuing an agenda
for further improvement:
- Sourcing agents have sometimes been reluctant to raise new
issues with already high-performing suppliers. They are concerned that
additional demands may lead the factory to conclude that a particular company
is 'too much trouble to do business with', that it is much easier to turn to
other retailers who have 'reasonable' demands.
- One way to overcome this obstacle to further improvement is
to engage in what ETI stands for: collaboration and communication within and
across sectors.
- Another approach is to call their bluff politely but
persistently: push them to the limit. In this economic climate, it would be
unusual for a supplier to turn its back on a reliable buyer, especially when
most measures for meeting compliance requirements do not actually entail high
costs.
- Training and orientation are also important. Companies
should explain the logic of their concerns and convey the message that
suppliers can add to their competitive advantage by 'leading the way' in
progressive labour practice.
On managing the company-supplier monitoring relationship:
- If abuses are detected during the monitoring process, how
does a company confront its supplier with the information?
- Approaches vary from company to company depending on their
different feedback loops. While one company may contact the supplier through
its own legal department, or an outside attorney, another might have a closer
relationship with suppliers which makes a face-to-face meeting with factory
management more effective (and probably better for its promotion of supplier
'buy-in'). In both cases, the company is likely to stipulate that continuation
of the relationship is contingent upon the correction of abuses within a given
timeframe - the latter being determined by the seriousness of the offences and
the company's priorities.
- How receptive are companies when external monitors expose
shortcomings in their own 'in-house' monitoring of suppliers?
- Relationships with suppliers are based on trust, but, in
many cases, not true sincerity or honesty. This is where external monitors can
come in as a third party. While companies may be upset to find suppliers have
withheld information, they are generally receptive to the findings of these
external monitors who they themselves have selected (often in preference to big
accountancy firms) and directed towards 'problem' factories.
On reversing the 'downward spiral' of price competition:
- Best labour practice is often correlated with union
presence. The downside is that buyers frequently insist that the resulting
prices are too high.
- Price pressures can clearly dictate labour conditions. If
the bottom-line is that companies ultimately suppress human rights by seeking
the lowest prices, how can we convert this downward spiral into an upward
spiral?
- Legislation is a powerful tool. It can compel companies to
invest in feedback loops, dedicated staff and ensuring transparency in supply
chains. Legal precedents against high profile companies whose suppliers used
bonded labour have encouraged companies to minimise their exposure. Proposed US
legislation on child labour will carry penalties of fines and impounded goods,
again providing incentive for companies to act.
- Codes of conduct are a good start since buyer leverage is
arguably a much faster way to effect change than advocacy and policy processes.
However, codes must have teeth and represent more than a public relations
exercise.
On the role of trade unions and the right to freedom of
association:
- To what extent is freedom of association a priority for
companies? What kinds of strategies are there to create space for development
of freedom of association?
- Freedom of association is usually at the bottom of the
priority list for companies, unless there is a CEO etc. who takes a personal
interest. Entrenched relations in the USA have fed anti-union attitudes, making
it unlikely for many companies to require suppliers to protect the right of
freedom of association. Similarly, companies often have knee-jerk reactions
against co-operating with local labour groups.
- What is the role of trade unions in an approach such as
Verité's? How do you ensure that NGOs are not being presented as an
alternative mode of worker expression at the expense of trade unions?
- While freedom of association is perhaps the most
controversial area for labour rights monitoring, monitors often find that, if
this right is violated, other violations such as harassment are more likely to
be found.
- What is the situation in Chinese export processing zones?
Some say companies are subordinate to government legislation forbidding freedom
of association. Others maintain that there is room for companies to manoeuvre.
The question then is, are they motivated to do something about it?
- In Chinese export processing zones - notorious for their
high risk of workplace abuses - companies are unlikely to go beyond insisting
on compliance with national law. This obstacle is complicated by a lack of
understanding among Chinese workers of union issues. However, it may be
possible to encourage multinationals to act to create environments where
independent unions can operate.
On assessing the viability of a 'living wage' approach to
equitable compensation:
- Monitors can report on the poverty line and workers'
positions in relation to it, and link with local researchers to explore what
constitutes a 'living wage'.
- To establish the value of the 'living wage' one needs data,
benchmarks and examples of where it is being awarded. Arguments put to
companies must be substantiated with in-depth research into issues such as the
adequacy of the prevailing minimum wage.
- NGOs and others must avoid developing multiple and
competing ways of calculating a 'living wage' if they want to maximise pressure
on companies.
[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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