Corporate social responsibility in the IT sector: Is it responsible enough?

Multinational companies played a key role in attracting foreign direct investment, generating employment, providing training and raising wages in the IT sector worldwide. But there are also considerable social and labour challenges arising from their operations.

Article | 13 April 2007

Multinational companies played a key role in attracting foreign direct investment, generating employment, providing training and raising wages in the IT sector worldwide. But there are also considerable social and labour challenges arising from their operations. A new ILO report (Note 1) prepared for a forthcoming tripartite meeting examines recent developments in the electronic components industry which employs some 18 million people worldwide.

GENEVA (ILO Online) – Personal computers (PCs) are built from an international array of components produced and assembled in 10 countries or more. Up to half of their retail cost is made up of the cost of all the components and services that brand-name firms buy in.

In this break-up of a truly global production system, subcontractors are found at the lower end of the PC value chain. They are involved in standardized activities such as the manufacture of motherboards, printed circuit boards and other labour-intensive activities, which give them the appellation of "board stuffers".

This means that, because of cost advantages, commodity suppliers are often found in export processing zones in low-wage developing countries. "The lower end of the value chain is therefore of particular importance when we consider the labour and social challenges arising from participation in global production systems, and especially from the operations of multinational enterprises", explains the ILO's IT expert Paul Bailey.

Getting the "board stuffers" on board

In response to concerns regarding labour and social issues in the IT electronics manufacturing industry, many multinational companies adopted programmes of corporate responsibility and some now also participate in voluntary industry initiatives.

The Global e-Sustainability Initiative (GeSI) has established a supply chain working group. Its members, including most of the industry's computer and telecom giants, explore ways in which ICT sector companies can collaborate so as to manage social and environmental issues in their supply chains more effectively. By subscribing to the sustainable development principles, GeSI members contribute to the United Nations Global Compact (Note 2).

GeSI has established a close working relationship with other voluntary industry initiatives, including the Electronics Industry Code of Conduct (EICC) group. The group consists of 26 companies that have come together to ensure that working conditions in the electronics industry supply chain are safe, that workers are treated with respect and dignity and that manufacturing processes are environmentally responsible.

"When we started the EICC, in 2004 the founding companies realized that even though we all were coming from slightly different positions, we could achieve meaningful improvements efficiently by working together", says Brad Bennett, Intel's sustainable development manager and Chairman of the EICC. "If you add up the revenue of these companies, it's in excess of US$500 billion", he adds.

EICC has developed a common questionnaire and audit process to assess conformance to the Code. Ultimately, participants hope the EICC will cascade down the electronics supply chain until the entire industry lives up to the Code.

In its labour section, the Code covers some of the ILO's fundamental principles and rights at work, including freely chosen employment, the elimination of child labour, non-discrimination and freedom of association. Working hours should not be more than 60 per week and workers should be paid in compliance with minimum wage and overtime regulations as provided by national law.

"Trade unions and civil society have criticized the EICC for not being consistent with international labour standards, particularly in respect of ILO core labour standards. No mention is made of promoting the effective recognition of the right to collective bargaining…", says Robert Steiert from the International Metalworkers' Federation (IMF).

The IMF is a member of Goodelectronics, a broad alliance of civil society organizations and trade unions, which was formalized in August 2006. The international network aims to improve human rights and environmental conditions in the electronics industry bridging local activities with global initiatives.

The hardware that drives the IT revolution

But the new ILO report not only looks at corporate social responsibility issues. It also examines recent economic and employment trends in the manufacture of electronic components and products.

According to the report, the electronic components industry is the engine that drives the IT revolution. "World exports of these products grew at an average rate of 2.7 per cent per year between 1995 and 2004 reaching record levels in the latter year. The industry is the hardware that drives the IT revolution and employed some 18 million people in 2004, but numbers are probably much higher today", says Bailey.

Since 1996, exports of ICT goods have doubled and have grown at a faster pace than merchandise exports. Between 1996 and 2003 merchandise exports increased by 60 per cent, while ICT goods exports increased by 100 per cent. In 2003, exports of ICT goods exceeded $1.1 trillion, accounting for 15 per cent of world merchandise exports.

"The value of international trade in ICT goods thus exceeded the combined value of international trade in agriculture, textiles and clothing", concludes Bailey.

While the USA and Japan were still major exporters in 2003, China is now the head of the class in terms both of employment – reaching over 6 million in 2005 – and exports, which were worth US$62.5 billion in 2003. Nevertheless, this growth was due mainly to investment by foreign multinationals, the report says.

The major developing country exporters include: China, Hong Kong (China), Singapore, Republic of Korea, Taiwan (China), Malaysia, Mexico, the Philippines, Thailand and Indonesia. European players include: Germany, Netherlands, United Kingdom, France, Ireland, Italy, Belgium, Hungary, Finland, Sweden, Spain and Austria, which altogether account for a quarter of world exports.

Besides reviewing recent developments in the industry, the three-day meeting on 16-18 April 2007 will also discuss the role of social dialogue when companies divest, restructure or outsource design, production and manufacturing; adherence to recognized standards throughout supply chains; and, best practice for lifelong learning activities in the industry.


Note 1 - The production of electronic components for the IT industries: Changing labour force requirements in a global economy. Report for discussion at the Tripartite Meeting on the Production of Electronic Components for the IT Industries: Changing Labour Force Requirements in a Global Economy, International Labour Office, Geneva, 2007.

Note 2 - The United Nations Global Compact was launched in 2000 as a network of UN agencies dealing with social and environmental issues, forming an ideal corporate social responsibility network. The Global Compact asks companies to embrace, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment, and anti-corruption.

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