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SAP 2.60/WP.110
Business ethics in the textile, clothing and footwear (TCF) industries
By Jean-Paul Sajhau
Part 2
Codes of conduct: A general overview
Characteristics
The codes of conduct or codes of practice adopted by a number of mainly multinational enterprises include a variable number of principles which define the ethical standards of the enterprise. These may be general principles such as, for example, the concept of non-discrimination while, in a number of cases, there is a detailed description of the social practices which the enterprise wishes to see respected in the production and sale of the goods and services which it markets. Some enterprises make a distinction between the basic principles which regulate its internal activity and those which it wants to apply in the selection and monitoring of activities of its subcontractors. A number of codes make explicit reference to ILO Conventions, in particular those concerning the respect of human rights at work. In other cases, the reference is more indirect, even if the principles established are often based on fundamental ILO Conventions.
The agrofood, forestry, chemicals and consumer products sectors are amongst those which have progressively introduced a number of codes of practice. However, while the concept of ethical practice has made a remarkable comeback in recent years in the strategic policy of industrial and commercial enterprises, it is above all in the textile sector, and in particular in clothing and footwear, that the trend is the most evident. United States enterprises have played a pioneering role in this respect. Since Levi Strauss adopted in 1992 a code entitled "Business partner terms of engagement and guidelines for country selection", many other enterprises producing apparel and footwear as well as major retail groups have followed suit. In Europe, the trend has been longer in coming, although increasing attention is now being given at the headquarters of the major European enterprises in the TCF sectors to the specific application of codes of "good practice" and codes of conduct. In the developing countries, practically no initiatives of this kind have been taken; on the other hand, a growing number of production enterprises working under subcontracting arrangements for the multinational enterprises of the industrialized countries must respect the codes established by the latter, which significantly affects their activities.
Origin and rationale of the phenomenon
In the 1970s, considerable criticism was levelled against multinational enterprises concerning their activities in the developing countries. National and international trade unions as well as a number of host countries accused them of carrying out their activities without consideration of the harmonious social and economic development of the countries in which they operated. It was such criticism which led to the establishment, by a number of government international organizations, of draft codes of conduct some of which, such as that of the United Nations, have remained a dead letter. In the social sphere, the International Labour Organization adopted in 1977 a Tripartite Declaration of Principles on Multinational Enterprises and Social Policy which is still in force and to which trade unions in the TCF sector attach considerable importance, as can be seen from a draft resolution tabled by the Workers' group at the recent ILO Tripartite Meeting on the Globalization of the Footwear, Textiles and Clothing Industries: Effects on Employment and Working Conditions, held in Geneva between 28 October and 1 November 1996.
To some extent the codes drawn up by intergovernmental international organizations, and in particular that of the ILO in this sphere of social policy, which were of a voluntary kind can be seen as the forerunners of subsequent initiatives taken unilaterally by individual enterprises.
Other external factors have contributed to the recent publication of codes of conduct. The pressure brought to bear by the international trade union movement has without doubt played an important role in this process. In the TCF sectors the International Textile, Garment and Leather Workers' Federation has for many years been calling for a greater sense of social responsibility by enterprises in the sectors and has provided support to national federations in their campaign for the respect of human rights at work. Of the progress made in this sphere, mention may be made, for example, of the United States where in May 1995 the Clothing Manufacturers' Association of the United States of America (employers) and the Amalgamated Clothing Textiles Workers' Union (workers) signed for the first time a national branch collective agreement which included, amongst other aspects, a code of conduct applicable to enterprises and their subcontractors which established minimum standards regarding wages, hours of work, forced labour, child labour, freedom of association, non-discrimination as well as occupational safety and health.
Consumers' associations as well as a number of non-governmental organizations have also endeavoured to draw the attention of consumers, the public authorities and the enterprises concerned to the need to respect a number of minimum rules regarding human rights.
Although in a large number of cases attention has been focused on the specific problem of child labour, associations and organizations have taken their campaign further either by trying to promote social labels for one or more categories of TCF products, or by organizing campaigns to sensitize the public to the general problems of basic workers' rights or by trying to draw up standard codes which enterprises could adopt and tailor to their particular needs. The following chapter contains a summary of some of these initiatives which clearly show the increasing awareness of the international community about the social problems raised by globalization in the TCF sectors.
Governments have also played a significant role in the promotion of standards concerning the respect of human rights and codes of conduct. In Europe some governments, such as that of France, are calling for greater respect of human rights in the sphere of international trade and are actively participating in national studies as well as research carried out by the European Commission on the social aspect of international subcontracting in the TCF sectors. In the United States, the so-called "No Sweat" campaign introduced by the Clinton Administration in the fight against sweatshops has led to the establishment of a Trendsetter List of enterprises in the TCF sectors which respect labour legislation and human rights in general in their production and marketing activities and ensure that these rights are respected by their subcontractors. The Department of Labor, which had identified a number of deficiencies concerning the respect of human rights and labour legislation in the TCF sectors, in particular in subcontracting of apparel production, and which has been faced with a number of cases involving the exploitation of immigrant workers in sweatshops set up on the United States territory, has taken steps to clean up the sector. At the same time as it stepped up its inspections, it adopted a positive approach by drawing up and distributing to the media a list of socially responsible enterprises in the sectors producing and marketing TCF articles.
In 1996, this list, reproduced below, included a large number of enterprises which had adopted a code of conduct.
Enterprises participating in the "No Sweat" campaign
| Abercrombie & Fitch | Galyans Trading | Mast Industries |
| Baby Superstore | GapKids | NFL Properties |
| Banana Republic | Gerber Childrenswear | Nicole Miller |
| Bath & Body Works | Guess Inc. | Nordstrom |
| Bergners | Henri Bendel | Old Navy Clothing Store |
| Bryland | Lands End | Penhaligon's |
| Boston Stores | Jessica McClintock | Patagonia |
| Cacique | Lane Bryant | Structure |
| Carson Pirie Scott | Lerner New York | Superior Surgical Mfg. |
| Dana Buchman | Levi Strauss | The Limited |
| Elisabeth | Limited Too | The Gap |
| Express | Liz Claiborne | Victoria's Secret |
| Source: Department of Labor, 25 Mar. 1996. |
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It is undeniable that this campaign, with the help of the media, has given enterprises an added impetus to adopt codes of conduct.
In the specific sphere of child labour, the United States Government has been particularly active. Between 1994 and 1996, the Bureau of International Labor Affairs of the Department of Labor organized three public hearings on international child labour issues which outlined the conditions of child exploitation in the world in all industries which export products to the United States. Its 1996 session offered the opportunity to a number of enterprises and employers' associations in the TCF sectors (Levi Strauss, Sporting Goods Manufacturers' Association, International Mass Retail Association) to show what progress had been achieved in this sphere, in particular through codes of conduct. A number of representatives of non-governmental organizations and trade unions also described their activities in this sphere, including in the promotion of codes. The presence of members of Congress, and in particular Senator Harkin who is responsible for a number of Bills to prohibit the import of products made by children, reflected the growing concern of political circles in the United States about this delicate problem. In 1996, the Department of Labor also published, at the request of Congress, a study on the influence of codes of conduct adopted by United States apparel enterprises on child labour.1 The study, which examined a representative sample of some 48 enterprises selected from the major firms in the production and marketing of clothing in the United States, clearly confirmed that the adoption and application of codes of conduct which contained a reference to the prohibition of child labour (in 42 out of 48 enterprises) had reduced child labour in the subcontracting enterprises established in the developing countries. The drop was particularly significant in Central America. The report believes that although it is likely that a number of other factors also contributed to this improvement (greater awareness of consumers of the problems of child labour; concern by exporters about possible legislative measures to boycott products made with child labour, etc.), there is no doubt that the most significant impact is due to the increasing number of codes of conduct established over the last five years.
By strengthening the role played by the developing countries in international trade, the globalization of the economy has also encouraged greater awareness of the commercial importance of the respect or non-respect of basic standards relating to human rights. It is no longer possible for the developing countries which want to increase or maintain their penetration of the markets of industrialized countries to ignore the existence of various kinds of pressure which exist in this sphere. As a result, in recent years, a number of governments have endeavoured, often with assistance from the ILO, to reduce the obstacles to the ratification of these fundamental standards and their effective application. The most dramatic progress has been made in this sphere of child labour, which benefits from broad media coverage and against which pressure is greatest in the context of the liberalization of trade. Here once again the ILO has played an important role as catalyst, in particular through its International Programme for the Elimination of Child Labour (IPEC). In the TCF sectors, it is for example within the framework of this programme and in collaboration with UNICEF that the Bangladesh Garment Manufacturers' and Exporters' Association signed, with the support of governments and local non-governmental organizations, an agreement to discontinue the employment of children of school age in apparel enterprises and to provide for their participation in special education programmes. Social progress of this kind is without doubt the first step towards the establishment of more elaborate codes of conduct which take account of the new social requirements of international trade.
In the industrial countries, the motivations of enterprises which have adopted codes of conduct are often more complex. It is true that pressure brought to bear by trade unions and consumer' associations or non-governmental organizations play an important role. Furthermore, as noted above, some government campaigns may have a significant influence on industrialists and encourage them to give greater attention to social matters. However, the decisive factor for the adoption of such codes is probably the public image which the enterprise wants to project to its clients, employees, suppliers and shareholders. The construction of a positive public image, in which the concept of the socially responsible employer has acquired a new importance, is a long-term and increasingly more complex task in which management teams are much more involved in the past. An enterprise's public image is now an asset which must be protected and developed to the maximum. In the textile and footwear sectors, a company's public image is particularly important and often determines a decision whether the public will buy its goods. On these highly competitive markets, it is therefore important for a company to project a positive image and to retain a good reputation over the long term.
To the extent that the media highlight certain conditions of work which are particularly deplorable both in the sweatshops of the industrialized countries as well as in the developing countries, the adoption by a global enterprise of a code of conduct is an attempt to provide a kind of guarantee for the final consumer that the products made or marketed by the company have not involved any kind of exploitation of workers concerned. It is therefore up to the enterprise to implement the principles established in the code, at the risk of using its credibility. Given the importance of subcontracting practices in the TCF sectors, it is clear that an enterprise which adopts a code of conduct takes a number of risks because any failure to respect the code which is noted by trade unions or the media will have greater impact and a correspondingly negative effect. This explains the importance of application conditions and helps explain why some enterprises prefer to keep a low profile and refrain from giving too much publicity to their codes of conduct. The press, and in particular the Anglo-Saxon press which is more sensitive to the subject, includes many examples of enterprises which have been singled out for their non-respect of their code of conduct. The most frequent examples in the apparel and footwear sectors concern the non-respect of human rights in factories working under subcontracting arrangements for large international brands, most often in the developing countries. However, celebrities who use their fame to promote a given brand of clothing or shoes are also subject to criticism in the media if the products bearing their name have been manufactured in conditions which do not respect the fundamental rights of workers. The recent scandal in the United States caused by the Kathie Lee Gifford case is symptomatic of the influence of the media on the social image of an enterprise. This leading television presenter had to explain why she had agreed to let the Wal-Mart enterprise use her name and her fame to promote a line of clothing some of which had apparently been produced in sweatshops in Honduras and even New York. The combination of factors concerning the person in question and the fact that the Wal-Mart enterprise had its own code of conduct considerably tarnished the image of both parties, and it is by no means sure that the numerous statements of good intentions on both sides have managed fully to re-establish consumer confidence. In the same way, the many articles which have appeared in the press on the cost of manufacturing sport shoes in the developing countries compared with their selling price in the industrialized countries morally penalize leading enterprises in the sector which are furthermore trying to promote good social practice through their codes of conduct.
In their search for a balance between the lowest possible production costs, to protect their competitiveness, and the maintenance of a good social image likely to satisfy consumers and pressure groups, multinational enterprises in the TCF sectors have little room for manoeuvre. Hence the extreme sensitivity to the subject in the context of globalization. It should however be pointed out that although theoretically the importance of the ethical aspect in the management of enterprises has been widely recognized (since the beginning the 1980s, chairs in business ethics have been established in a large number of universities and business schools) it is only recently that a number of financial analysts have noted that enterprises which applied codes of conduct performed better than average on the stock exchange.2 Of course, conclusions cannot be drawn about the existence of a direct link of cause and effect between these two factors since it is generally the most productive enterprises in a given sector which have the human and financial resources enabling them to develop an ethical approach. It can however be noted that the existence of a responsible social attitude is not detrimental to the image which financial markets have of a given enterprise. Some investment consultancy firms now take account of ethical elements in their criteria for the composition of stock exchange portfolios.3
The large majority of trade unions favour the generalization of codes of conduct, provided that their application is not subject to restrictions. In their view, the main weakness of the codes lies in the fact that they are applied and monitored by the enterprise itself which is thus both judge and jury. Furthermore, they believe that even when the enterprise tries to apply, at all levels, its ethical principles, it rarely has the necessary human resources to do so. It is in fact often the employees responsible for product quality and the commercial agents of the firm who control the application of the codes by subcontractors. This twofold responsibility restricts their effectiveness. Trade unions therefore favour a new approach in which the control of the application of codes would be entrusted to independent and trustworthy persons or associations. This would involve developing a kind of "social audit" function comparable to that of a financial audit. Of course, the generalization of such a system raises a number of problems which go beyond the purely financial aspect of the cost of an additional audit and is still a long way off. However, it is worth noting that the case of The Gap enterprise, which accepted the external monitoring of its application of its code (this case will be examined below), is a major precedent which could become standard practice in the future.
Notes:
1 US Department of Labor, Bureau of International Labor Affairs: "The apparel industry and codes of conduct: A solution to the international child labor problem?", Washington, DC, 1996, 242 pp.
2 A conclusion reached, for example, in a study published in 1996 by Peter Prowse Associatives on the annual reports of the 100 main companies quoted on the stock exchanges in Europe.
3 In Switzerland the branch of a Scandinavian bank (Edouard Constant bank) has had an ethical portfolio since 1 January 1997. It is therefore the first Swiss private bank to propose ethical criteria.