Ethical Trading Initiative - ETI Impact Assessment

Call for Proposals - ETI Impact Assessment

TERMS OF REFERENCE
17 January 2003

Purpose of this document

This document presents the aims and scope of the Ethical Trading Initiative's (ETI's) Impact Assessment.

It will be circulated to potential research partners as part of the Call for Proposals, and will be used by applicants as a basis for preparing their proposals. Once the project is under way, these Terms of Reference (TOR) will be used as the key reference document for project management purposes.

This document has been developed by ETI's tripartite Impact Assessment Steering Group in close consultation with the wider membership, and with input from specialist external organisations and individuals. The TOR were officially approved by the ETI Board on 7th November 2002.

1. Background & rationale

What do we mean by "impact assessment"?

By "impact assessment", ETI is referring to:

"… the systematic analysis of the lasting or significant changes - positive or negative, intended or unintended - in people's lives brought about by a given action or series of actions" (C. Roche, Oxfam 1999)

This "systematic analysis" can be used to produce different types of information. For ETI, the analysis will be used to produce information that will allow us to:

Find out whether or not the adoption of the ETI Base Code is having the impact it was intended to have, and if not how the actual impact differs from the intended impact;
Report to target audiences on the actual impact of implementing the Code;
Improve our intended, beneficial impact, by learning what has gone right or wrong in the past and why this has happened, and putting lessons learnt into practice.

Why is impact assessment important to ETI?

Corporate codes of labour practice came about as a means of getting companies to take responsibility for labour conditions in their supply chains, and as a way of reassuring consumers that the workers producing goods they buy are not being exploited in the process. Yet a code can do both these things without necessarily making much of a difference to the lives of the workers. Making real improvements to workers' lives will only come about if good policies and intentions are followed through with well-informed and appropriate actions.

In 1998, trade union, non-governmental (NGO) and corporate members of ETI agreed and adopted the ETI Base Code, which is based on International Labour Organisation (ILO) standards (follow this link for a full version of the Base Code). When companies decide to join ETI, they make a commitment to implementing the ETI Base Code in their supply chains and to reporting annually on progress in doing so. Over the years, therefore, our member companies have committed staff and funds to implement the Base Code with their suppliers. Corporate, NGO and trade union members alike have all contributed time and resources to identifying and developing good practice in code implementation and promoting this amongst our corporate members. But has this made any difference in terms of improving the lives of workers on the ground? Four years on, we feel it is time to take stock and find out whether and how the implementation of the ETI Base Code by our member companies is making a difference to workers.

Key stakeholders, including the UK Department for International Development (DFID) and development NGOs within our membership, are involved with ETI because they believe that improvements in labour standards can generate wider benefits in terms of poverty reduction. Thus, it is also important to ETI to assess what impact the implementation of the Base Code is having on individuals and groups other than workers, e.g. workers' families and local communities.

There are substantial differences in the management approaches used by our various corporate members to implement the Code, and differences in the way that their suppliers have managed the Code. Experience indicates that some approaches are more effective than others. A systematic assessment of these management systems and practices and how they influence the effectiveness of codes will produce useful lessons for members and others involved in ethical sourcing, and help us all to improve the impact of codes.

For ETI, therefore, the timing is right for embarking on an impact assessment. But we also believe that this will be happening at a time that will provide us with the opportunity to make a real contribution to the wider ethical trade "community". There is growing demand from a range of actors involved in ethical sourcing for a rigorous assessment of the impact of codes of labour practice on the lives of workers. Anecdotal evidence exists, both of positive and negative impacts of code implementation, and a small number of case studies have been initiated to look at the impact of code application in specific countries and sectors. But there is a need for a more systematic evaluation of impact that looks across different retailing and sourcing companies and the impact they are having. ETI now has 29 companies within its membership, with a collective turnover of over £100 billion. We are in an excellent position to make a real contribution to the debate.

It is for these reasons that ETI, with support from the UK Department for International Development (DFID), has committed £200,000 to carry out an impact assessment between now and March 2005. We are now seeking an independent research team to work in partnership with us on carrying out this piece of work. These Terms of Reference set out the aims, scope and proposed methodology for the impact assessment as agreed by the ETI membership.

What information does ETI already have?

The impact assessment can build on a body of knowledge and monitoring data that already exists within the ETI. In particular, this project can build on data collected through ETI's corporate annual reporting process, which has produced:

Annual reports from around 25 corporate members, 17 of whom will have reported over 3 or more years;
These reports include significant qualitative information on the supply chains of each member company, responsibility for ethical trade within the company, communication and training activities carried out within the company and the supply chain, their ethical trade monitoring programme, any suppliers delisted due to persistent non-compliance with the code, and use of verification systems and independent complaints mechanisms;
They also include extensive quantitative data on number and type of evaluations (audits) carried out, in which countries these audits took place, number and nature of unresolved non-compliances (i.e. breaches of the Code which have not been rectified) and number of nature of corrective actions (i.e. actions taken to rectify any non-compliances found).

The full reporting template against which corporate members are required to report is given in a separate document, "ETI Corporate Annual Reporting Guidelines 2002", included with the Call for Proposals.

The study can also build on learning gained from ETI's tripartite activities and projects, such as our experimental projects, working groups, roundtables and southern code initiatives. This is documented in ETI's Workbook and other publications.

2. Aims of the Impact Assessment

Aims of the Impact Assessment in the context of ETI's goal and purpose

The ultimate goal of the ETI as a tripartite organisation is to improve the lives of workers and their families through the application of internationally recognised labour standards in global supply chains (From Good Intentions to Good Practice: ETI Proposal to DFID March 2002). While ETI works toward this goal, it is recognised that there are many factors outside the control of ETI that will affect whether or not we are successful in contributing towards it.

As its specific contribution to this goal, ETI's purpose is to identify and promote good practice in the implementation of corporate codes of practice based on international labour standards (From Good Intentions to Good Practice: ETI Proposal to DFID March 2002). One critical way in which we promote good practice is through the requirement we place on member companies to adopt and implement the ETI Base Code in their supply chains, and to demonstrate continuous improvement in implementation and impact.

Through their membership of ETI, therefore, each member company is committed to the effective implementation of international labour standards (as expressed through the ETI Base Code) and to improving the lives of workers in their supply chains. Part of the purpose of the impact assessment will therefore be to assess and identify how to improve the impact of member companies' activities in relation to these commitments.

ETI as a tri-partite organisation also wishes to review broader impacts of implementation of the ETI Base Code, including the impact on workers' families (which relates to ETI's organisational goal, above), local communities, small-scale/marginal producers and wider society. ETI would in particular like to consider these broader impacts in terms of their poverty implications.

Purpose of Impact Assessment

The impact assessment therefore has two related purposes:

Primary purpose: to find out what impact implementation of the ETI Base Code is having on the lives of workers in the supply chains of member companies, and to identify how the impact on these workers can be improved. The primary purpose relates to the commitment made by individual member companies in joining ETI and adopting the Base Code.

Secondary purpose: to find out whether implementation of the ETI Base Code is having positive or negative impacts on other individuals or groups e.g. workers' families, local communities, and wider society, and to identify how any negative impacts can be minimised and positive impacts improved. The secondary purpose relates to the interests of ETI as an organisation in understanding and improving the broader social impacts of code implementation.

Under the primary purpose, improvement of the lives of workers should be considered particularly in terms of:

Poverty status: do changes for workers brought about by code implementation contribute (or not) to making these workers less poor? (The research partner will be asked to propose an appropriate definition of poverty);
Worker empowerment and recognition of workers' rights: impact of code implementation on workers' ability to air concerns and negotiate improvements to conditions with management, and on employers' recognition of workers' rights to organise and bargain collectively;
Impact on recognition of women's rights and gender relations in the workplace;
Meeting workers' own priorities: as expressed individually and collectively. That is, has code implementation addressed those problems that are most important in the eyes of workers?

Under the secondary purpose, consideration should be given to:

Impact on poor and marginalised groups: e.g. small-scale producers, poor local communities;
When considering impact on workers' families, it is particularly important to assess whether and how code adoption has benefited female workers. Development experience shows that increasing women's income is more likely to yield benefits for other members of the family, as compared to increasing men's income by the same amount.

Objectives of Impact Assessment

The specific objectives of the impact assessment are as follows:

To find out the impact of implementation of the ETI Base Code on the lives of workers, and indirectly on workers' families, communities and wider society (measuring impact): What impact does implementation of the Base Code have on the lives of workers? How are different types of workers affected by implementation of the Code? Do codes have indirect or unintended impacts on workers, their families or other individuals, groups or wider society, in particular on other vulnerable groups such as small-scale producers? If so, in what ways? What are the impacts in the short and long term?
To identify how the impact of implementation of the ETI Base Code can be improved (improving impact): What approaches and practices can be adopted to help improve the impact of the ETI Base Code?
To develop a strategy & tools for on-going monitoring and assessment of impact (developing tools): Develop a realistic strategy and tools for building appropriate impact monitoring and assessment into the future work programmes of companies, ETI (e.g. through development of the annual reporting process) and appropriate partners, after the end of the project.
To share learning gained from the impact assessment with those involved in implementing ethical sourcing (sharing learning) - to ensure that findings from the study are shared within the ETI membership and with other organisations and individuals who are well-placed to put the learning into practice.

The project will focus on assessing the impact of the ETI Base Code and will not compare the impact of the ETI Code with other codes. However, it is expected that findings will be relevant to other company-led, voluntary codes of labour practice.

The following section explains in more detail the specific issues that ETI wishes to be addressed under each of the four project objectives. Please note that the list of issues provided is not intended to be exhaustive.

3. Scope

Objective 1: Measuring Impact

Below is a list of issues that ETI members would like to see addressed under Objective 1 of the impact assessment. It is recognised that the range of issues is broad and that it may not be possible to cover all the issues within the scope of the budget for this project. It is proposed that the research partner will review this with ETI after completion of Phase 1, with a view to prioritising these issues as necessary. See Section 4 (Proposed Approach & Methodology), below.

Scale of impact:

To find out the scale of impact in terms of the following:

How many workers are being impacted by ETI member companies' adoption of the Base Code? What proportion of total workers in members' supply chains does this represent? This should be assessed by considering:
- What proportion of members' supply chains is being targeted for code implementation?
- What proportion of the targeted supply base has been informed about the Code and its aims and principles?
- In what proportion of the targeted supply base has significant monitoring activity taken place?
- In what proportion have significant corrective actions (i.e. improvements in labour standards) been recorded?
What proportion of workers in the local industry/workforce are impacted by the Code? Are workers who are impacted amongst the poorest or the more well-off by local standards?

Sustainability of impact:

What evidence is there that the Code and its impact on workers will be sustained over time? This will require investigation in particular into the following:

The extent to which Code implementation has included/led to worker education: Have workers been made aware of the principles and purpose of the Code, and the rights they have as a result of the Code?
How suppliers (producers and manufacturers) have responded to the Code: Have suppliers changed attitudes, management systems and/or practices in response to pressure from customers to implement the ETI Base Code? Are corrective actions sustained? How have suppliers responded to the concept of continuous improvement?
Whether and how local labour organisations, relevant NGOs and/or trade associations have been involved in implementation of the Code: Have local organisations with an interest in workers' rights been involved in code implementation e.g. in designing/conducting workplace audits, in implementing improvements, and/or in building local code implementation bodies?
How retailers and sourcing companies have responded to the Code: To what extent have the principles of ethical sourcing been incorporated into policies and practices at different levels of the company, and across relevant departments (buying, quality, technical, design etc.)? What concrete impact has this had on sourcing practices (e.g. duration of supplier relationships, relaxing lead times for orders so as to relieve pressure on suppliers to ask for excessive overtime)?

Different levels of impact:

Codes can have impacts at different levels. Objective 1 should include an assessment of impact at the following levels:

Effectiveness of implementation of the 9 principles of the Base Code. What changes have been made to working practices as a result of enforcement of each of the nine principles of the Base Code? What impact have these changes had in terms of the principles concerned (e.g. what has been the impact on take-home pay, overall hours of work, health of employees, recognition of trade union rights?)
Broader impacts of code implementation on workers. This should include an assessment of the impact on:
- Poverty - has code implementation made workers less or more poor?
- Worker empowerment and recognition of workers' rights (see Purpose of Impact Assessment, above)
- Gender relations and recognition of women's rights in the workplace
- Meeting workers' own priorities - to what extent has code implementation met workers' own priorities? What impact do workers themselves perceive code implementation to have had? Priorities and perceptions of workers will vary considerably from situation to situation.
Impacts of code implementation on workers' families and local communities. e.g. family members may benefit directly from health or educational services provided by employers as part of meeting code requirements. Conversely, there may be negative impacts on the incomes and livelihoods of the families of children who lose their jobs as a result of insensitive strategies for dealing with child labour.
Has there been any impact on workers in other local factories, farms or facilities where the Code hasn't been implemented? If yes, what impact? (e.g. implementation of the Code in selected workplaces may have knock-on effects on labour conditions in neighbouring workplaces due to competition for labour between employers)
Are there any wider impacts at the local/national level that may lead to longer-term changes for workers? If yes, what impacts? (e.g. changes to national labour legislation and/or its enforcement, changes in awareness, attitudes, policies or capacity of other influential players such as trade associations, other public authorities, local NGOs, local labour organisations, and media organisations).

Factors affecting impact:

The impact of the Code is likely to be uneven, with some workers being impacted more than others. The experience of ETI and others indicates that a number of different factors may influence the impact of codes. These include:

Type of worker: In particular, what is the impact on particularly vulnerable groups of workers such as homeworkers, children, migrant workers and ethnic minorities (where relevant)? Are there different impacts on female as opposed to male workers, skilled as opposed to unskilled workers, and permanent as opposed to casual/contract workers?
Industry or sector: does impact differ depending on the nature of the supply chain (e.g. length, complexity of supply chain, stability of supply relationships)?
Country: how and to what extent code implementation impacts on workers is likely to depend significantly on factors such as the political and regulatory environment, local labour legislation, the interest and capacity of local NGOs and trade unions, and the level of support for codes from local industry bodies/trade associations. These factors vary significantly from country to country.
Attitudes, management systems and size (scale of operation) of producer/manufacturer
Code management approach taken by retailer and/or sourcing company
Whether or not worker education has taken place about the Code

Unintended impacts:

The project should include an assessment of the nature and scale of any unintended impacts, negative or positive, of applying the ETI Base Code. Experience indicates that the following issues need to be considered:

Relationship between labour standards and employment opportunities: Implementation of the ETI Base Code is intended to lead to improvements in labour standards, which may in turn lead to higher labour costs per employee for the employer. If and where labour standards and costs per employee have risen, what has been the impact on employment opportunities, including on the number of jobs available and on security of employment?
Impact on employment opportunities as a result of:
- Policies adopted by some corporate members where potential suppliers are "screened" for compliance with the Base Code before they are contracted;
- Suppliers being "de-listed" by corporate members if they are persistently failing to meet code requirements
Impact on producers and workers in the informal economy: To date, attempts to extend coverage of the ETI Base Code to small-scale, informal workplaces (such as agricultural smallholdings, and homeworkers in the manufacturing sector) have been limited. However, where this is being attempted, what has been the impact on these producers and workers of implementation of the Base Code?

Objective 2: Improving Impact

Under Objective 2, ETI would be interested in particular to identify improvements that can be made in the following areas:

Management approaches and practices for retailers and sourcing companies: Within the ETI membership, there is considerable variation in the way different companies are managing ethical sourcing. For example, different companies allocate responsibility for ethical sourcing within different departments, they use different monitoring techniques and auditors, and they have different ways of assessing risk and focusing their monitoring activities. From ETI's point of view, it would be very useful to know if certain management approaches are more likely to benefit workers, and if so how and under what conditions.
Management approaches and practices for suppliers (employers): many corporate members believe that the nature of suppliers' management systems has an important bearing on potential impact on workers. ETI would be interested to know what types of management systems at the factory/farm level are most likely to generate benefits for workers, and under what circumstances.
Management of partnerships with NGOs, trade unions, governmental and other organisations
Approaches to the development of company codes and their local interpretation - does this influence code content and impact on workers?

Objective 3: Developing tools

For Objective 3, a balance needs to be found between methodological rigour, and the need to develop tools that are realistic and simple enough that companies and others will actually use them. This will be a major challenge for the project.

In developing a strategy and tools for on-going monitoring and assessment, the following questions need to be addressed:

What should be measured, and for what purpose? What information needs to be collected?
Who should collect what data? Who should be responsible for evaluating the data collected? What is the role for companies, for ETI, for workers, trade unions, NGOs and other organisations?
How often does information need to be collected, how often should it be reviewed/evaluated?
How do you make sure that what is measured gets used?
What other mechanisms/tools can be used to support continuous improvement in code implementation and its impact on workers? Not everything needs to be measured in order to be solved e.g. are there mechanisms that can be introduced which would link positive rewards to implementation of corrective actions?

Objective 4: Sharing learning

Achievement of Objective 4 will be a shared responsibility between ETI and the research partner. ETI wishes to share findings from the impact assessment with the following target audiences:

All ETI members (companies, trade unions, NGOs). Within companies, target audiences include those individuals with day-to-day responsibility for code implementation, relevant buyers, and senior representatives responsible for making resource and strategic decisions about ethical sourcing. Within the larger NGOs, target audiences should include those departments responsible for trade policy, country programmes for sourcing countries, and campaigns and public education on ethical trade issues.
Workers in member companies' supply chains, through appropriate intermediaries e.g. local trades unions and relevant NGOs
Corporate members' suppliers who are being asked to apply the Base Code (both direct and indirect suppliers)
Other ethical sourcing initiatives e.g. Social Accountability International, Clean Clothes Campaign, Fair Labor Association, Workers' Rights Consortium, Euro-Retailer Produce Working Group (EUREP), Worldwide Responsible Apparel Production (WRAP)
Other retailers and sourcing companies
DFID and other donors with an interest in ethical sourcing
The United Nations International Labour Organisation (ILO)
Bodies responsible for or interested in legislating on corporate responsibility for labour standards in supply chains e.g. UK government, EU
Ministries of Labour and labour inspectorates in supplying countries

See Section 5, below, for suggested methods for sharing learning

4. Proposed approach and methodology

It will be the responsibility of the research partner to further develop the research approach and to develop detailed methodologies. However, ETI proposes the following broad approach, divided into three phases:

Phase 1: UK-based research

The aims of Phase 1 will be for the research partner to:

Familiarise themselves with the various perspectives of ETI members on the impact assessment, and with the existing body of knowledge and information within ETI;
Assess the various management approaches used by corporate members to implement the Code, and get their perspectives on what impact adoption of the Code has had to date, why this is the case, and how its impact could be improved;
Further develop the research approach and methodology for the in-country studies.

Phase 1 activities to include:

Briefing by ETI Secretariat
Review of ETI corporate members' annual reports
Interviews with a wide cross-section of corporate members, and selected individuals from the trade union and NGO memberships
Consultation with other organisations and researchers who have relevant expertise on ethical trade and impact assessment
Developing a typology of management approaches/systems currently being used by ETI corporate members to implement the Code;
Drawing up a framework for selecting locations and focus of in-country studies, and making the selection in consultation with ETI
Developing working definitions of "poverty" and "impact" for the purposes of this study, and establishment of clear rules for deciding on what does/does not count as an "impact of code implementation".
Develop terms of reference for the in-country studies, in consultation with ETI
Preparation of initial report and presentation of Phase 1 findings to ETI members and other target audiences (see Section 5, below).

Phase 2: In-country studies

It is anticipated that the majority of the research partner's time and focus will be spent on the activities in this phase. The aims of Phase 2 will be to:

Gain an in-depth understanding of the impact of adopting the Base Code in a range of situations, addressing the key issues set out in Section 3 (Scope) - Objective 1: Measuring Impact
Where appropriate, collate a set of baseline data against which future change as a result of code implementation can be assessed;
Identify existing monitoring activities carried out by stakeholders in supplier countries, and assess if/how these could be developed to monitor and evaluate impact
Get perspectives of workers, suppliers and other relevant local stakeholders on how the impact of implementation of the Base Code could be improved
Share learning from the study with local stakeholders

Methodology:

It is expected that the in-country studies will:

Be conducted in collaboration with appropriate local researchers with a good knowledge of relevant local issues (the industry, labour legislation etc.) and appropriate research skills
Involve interviews with all key stakeholder groups, including managers, supervisors, workers, children and other family members, local labour organisations and relevant NGOs
Pay particular attention to differences in perspectives and priorities of, and impact on, different types of worker, including differences between men and women, casual and permanent workers, and migrant and local workers. Data collected should be dis-aggregated as far as possible
Ensure that information collected is "triangulated" or cross-checked
Involve the collection of both qualitative and quantitative data, as appropriate

Phase 3: Analysis of findings and sharing learning

Phase 3 activities to include:

Analysis of findings from Phase 2 and preparation of draft final report
Review draft report with ETI
Prepare final report and presentation of findings to ETI
Delivery of presentations and other outputs to other target audiences (to be agreed - see Section 5, below).

5. Expected outputs/deliverables

The ETI Impact Assessment is intended not as an academic exercise but as a practical project yielding concrete outputs that will help members and other interested players to improve the implementation of codes and the impact on workers. As such the sharing of learning is a specific and central objective of the project (Objective 4) and the production and delivery of appropriate outputs is an important role for the research partner.

The target audiences for project outputs are listed under Section 3 (Objective 4) , above. The specific outputs or "deliverables" that the research partner will be expected to deliver are as follows:

Phase 1

Draft framework for selecting locations of in-country studies
Draft TORs for in-country studies
Report of Phase 1 with executive summary, to include:
- Objective 1: findings regarding scale of impact, how member companies are responding to the Code, company perspective on which countries, sectors, types of supplier etc. it is easy/difficult to apply the Code;
- Objective 2: a typology of existing ethical sourcing management systems within member companies;
- Objective 3: What monitoring information companies are already collecting, what other information they think it will be useful to collect;
- Objective 4: A list of target audiences in the UK and North, a preliminary list of audiences in locations of in-country studies, and suggestions on how best to share findings with these audiences.

Phase 2

Sharing of learning in-country (specific outputs to be decided)
Progress reports to ETI (details to be decided)
Presentation to an ETI members' roundtable (seminar)
Report on findings from each in-country study

Phase 3

Final report to ETI with executive summary, answering clearly the issues set out in these Terms of Reference. This report should include:
- Objective 1: a summary of findings on what impact adoption of the ETI Base Code has had on workers;
- Objective 2: what management systems/approaches seem to work best (i.e. are most likely to generate benefits for workers), and how they can be improved
- Objective 3: recommended impact monitoring and evaluation strategies for (a) ETI, (b) member companies, (c) suppliers and (d) other groups/organisations as appropriate
- Objective 4: description of what has been done to share learning from the project, and recommendations to ETI on what else can be done to further promote uptake of learning from the impact assessment.
Presentation of above to ETI membership

6. Confidentiality of information

The success of this project will depend critically on trust being generated between the researchers, ETI, and workers and managers within member companies and their supplying companies. Many potential informants will not be willing to release information unless they feel confident that the risk of that information subsequently being used against them is minimised. Workers' jobs or even lives may be at risk. At the same time, if this project is to achieve its stated objectives, key findings from the impact assessment need to be shared widely. Finding an appropriate balance between these two concerns will be a major and ongoing challenge for the project.

For these reasons, the research partner will be required to adhere to the following policy on confidentiality of information:

In all cases, the safety, integrity and interests of individuals, and the commercial interests of companies, shall be protected. To ensure this, no information which is attributable to a particular individual or company shall be made available beyond the immediate research team and the ETI Secretariat. All individual members of the research team will be required to sign a confidentiality agreement to that effect as part of their research contract.

All information made available beyond the research team and the ETI Secretariat - including to ETI members - shall therefore be either in an aggregate form, or by use of code names or pseudonyms if a specific company or individual needs to be referred to, in such a way that the identity of the company or individual is protected. Failure to do so will be considered as a breach of contract on the part of the research partner.

7. Working relationship between ETI & research partner

The research partner will be expected to work closely with the ETI Research & Information Manager, providing feedback on progress on a regular basis. The ETI Impact Assessment Steering Group will also periodically review progress of the project.

The research partner will be expected to consult the Research & Information Manager if they wish to carry out any activities that deviate from this Terms of Reference.

ETI on its part will ensure that the research team has access to necessary information from ETI and its members to complete the Terms of Reference. ETI will also take responsibility for ensuring that the generic, anonymised findings from the impact assessment will be shared as widely as possible within ETI and with other target audiences outside of ETI.

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