Supplying international brands? ILO and ETI aid SMEs in China's Guangdong Province

On 15 March 2017, we and the ILO Office for China and Mongolia launched a project to improve the productivity, competitiveness and sustainability of Small and Medium Enterprises in Guangzhou City, Guangdong Province, under the ILO’s Sustaining Competitive and Responsible Enterprises or SCORE programme.

SCORE helps SMEs sustain their participation in global supply chains by encouraging them to develop their own solutions to meeting the increasingly high standards demanded by international companies. Offering practical training and in-factory consulting services it has a proven track record in other parts of China and seven other countries.

So far, 16 factories have registered for the programme in Guangzhou. They will receive training, coaching and consultation services specifically tailored to help SMEs improve their social performance while maintaining business competitiveness. 

“The SCORE Programme suits the needs of SMEs in improving their productivity, quality and management systems. It is first and foremost about capacity-building,” said Gao Yun, Representative of the ETI Office for South East Asia and East Asia.

“It provides constructive expertise to factories and addresses those issues that cannot be resolved through an auditing-only approach. It helps establish bipartite cooperation, which includes worker participation when seeking improvement solutions. And it places emphasis on establishing sustainable management systems which will continue even after SCORE ends.”

Gao Yun said: “ETI members believe in taking responsibility for enhancing the working conditions of the people who make their products, and member companies are committed to ethical trade and expect their suppliers to work towards this goal too.”

SME’s in international supply chains

In China, SMEs have a growing presence in international supply chains.

SMEs make up 60% of China’s national industrial output and create nearly 80% of jobs. Improved SME competitiveness could therefore contribute to both economic and social development as well as poverty reduction.

However, SMEs tend to have much lower levels of compliance with national labour laws. There is also a greater likelihood of strained industrial relations and inadequate safety and health protection for workers.

These problems are common and reflected in worker-management communication, compliance with labour standards, and in particular, issues around excessive working hours and in meeting legal wage rates and benefits.

China has ratified a significant number International Labour Conventions and translated them into law. However, the government struggles to effectively enforce these laws, leaving workers dependent on employers to provide decent working conditions.

SMEs are expected to successfully conduct business in a highly competitive global marketplace. Yet with lower productivity, they struggle to stay in business as they face difficult price competition and high expectations from their customers to offer better working conditions.

Additionally, since SMEs discount the benefit of training to their business outcomes, they are reluctant to send their employees for training or to pay for factory consultation services.

In turn, this creates a very weak demand for business training and makes it challenging for service providers to offer training and consultation to this target market. 

Improving productivity and working conditions

Michael Elkin, the Chief Technical Advisor of the ILO Global SCORE Project said: “The project will develop a viable and dynamic market place for business development training services that are designed to improve the productivity and working conditions for SMEs in the long run.

“It will enable a market-based system to provide sustainable support to SMEs who participate in global supply chains to improve their productivity and working conditions.”

Over the next two years, the ILO-ETI project will support business development service providers to carry out a variety of training workshops and provide factory consulting services for participating SMEs.

This will improve dialogue and collaboration between workers and management, and improve overall performance in participating factories, including but not limited to a reduction in defects, material usage and waste, a reduction in worker turnover rates and absenteeism and a reduction in accidents as well as an increase in wages.

By the end of January 2019, the project will have generated at least five case studies outlining the experience of and lessons from SCORE’s performance in participating factories.   

If companies wish to find out more about the programme contact Gao Yun.

This blog also appeared on the ILO's China website on 20 March 2017.