Business ethics in the textile, clothing and footware (TCF) industries - 4

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SAP 2.60/WP.110

Business ethics in the textile, clothing and footwear (TCF) industries

By Jean-Paul Sajhau

Part 4

Monitoring of the application of a code of conduct

It is not enough to have a code of conduct to ensure respect of working conditions. It must also be properly applied in the enterprise itself or in the workshops of its subcontractors. The monitoring or supervision of the application of a code of conduct ensures its credibility and the creation of a favourable climate of opinion amongst consumers. There are two kinds of monitoring: active monitoring and contractual monitoring. The latter consists of relying on a guarantee by suppliers in the form of documents certifying that they apply the code of conduct of the enterprise. Active monitoring consists of having visits, inspections and control procedures carried out on the spot by different persons. Active monitoring may be carried out either by the staff of the enterprise, i.e. internal monitoring, or by external monitoring. The most credible method of monitoring the application of a code of conduct is by an independent body: local or international non-governmental organizations, religious associations, consumer associations or specialized consultancy enterprises.

Various non-governmental organizations offer enterprises a monitoring and supervisory service. This is the case with the BSR and the ICCR. However, although this monitoring may seem to have greater credibility in the eyes of the public, very few enterprises make use of it. The Gap is one of the rare enterprises which makes use of external monitoring. Since it is a special and innovative case in this respect, box 3 contains a detailed description of the independent monitoring system set up by The Gap (a system which it will be recalled applies only to one major supplier of the firm).

A number of services are offered to enterprises to help them draw up or improve their code of conduct. However, no real pressure has been brought to bear on enterprises, with the exception of that from the ecumenical associations due to their financial clout. Nevertheless, box 3 shows that The Gap was confronted with considerable pressure from organizations and consumers. The latter have indeed a major role to play in making enterprises responsible and encouraging them to improve working conditions and respect human rights.

Box 1

Principles for Global Corporate Responsibility: Benchmarks for Measuring Business Performance. Proposed by the Ecumenical Committee for Corporate Responsibility (ECCR), the Interfaith Center on Corporate Responsibility (ICCR) and the Task Force on the Churches and Corporate Responsibility (TCCR)
This document, prepared by three ecumenical associations, begins by recalling that the churches, through their own investments, are often shareholders, and thus partially owners of companies. This obligation as owners requires that greater care be given not only to the financial situation but to the impact of the activities of companies on general well-being. The document successively examines the wider community in the broad sense, the national communities and the enterprise. In each of these parts, it establishes principles of action, criteria to be adopted and references to be used in assessing the performance of enterprises in the light of the previously defined criteria. This box refers to the part dealing with the action of enterprises vis-à-vis shareholders, employees and clients, suppliers and subcontractors.
3. The enterprise

3.1. Shareholders

Principles
3.1.P.1. The company's corporate governance policies balance the interests of managers, employees, shareholders and other company stakeholders.
Criteria
3.1.C.1. Ensuring shareholders' participation and rights to information while protecting the interests of other stakeholders.
3.1.C.2. The company respects the right of shareholders to submit proposals for vote and to ask questions at the annual meeting.
References
3.1.B.1. The company observes a code or codes of best practice or has drawn up its own comprehensive corporate code such as General Motors' 28-point guidelines for corporate governance. The code that the company observes must be at least as rigorous as the Cadbury Code of Best Practice (UK).
3.1.B.2. Shareholders are informed about significant and material violations of corporate policies (including codes of conduct), adverse decisions by tribunals or courts, and results of internal audits or analyses of corporate activity.
3.2. Employees
3.2.P.1. The company has a universal standard governing its employment practices and industrial relations. The standard includes genuine respect for employees' rights to freedom of association, labour organization and free collective bargaining and is non-discriminatory in employment.
3.2.P.2. The company values its employees and their contributions in every sector of its operations.
3.2.P.3. The company pays adequate wages to enable employees, especially women, to meet the basic needs of themselves and their families and to provide discretionary income.
3.2.P.4. The company recognizes the need for supporting and/or providing the essential social infrastructure of child care, elder care and community services which allows workers, especially women who have traditionally done this work as unpaid labour, to participate as employees (text proposed by ICCR only).
Criteria
3.2.C.1. No discrimination in its policies of employment and remuneration, whether by race, age, sexual orientation, disability or religion.
3.2.C.2. Training, development, promotion and advancement opportunities within the company are available to all employees.
3.2.C.3. All those who work within and on the company's premises, whether permanent, temporary or contractual, shall receive equal protection especially in provision of equipment and information concerning their health and safety at work.
3.2.C.4. Employees are free to establish and join workers' organizations without discrimination or interference and to engage freely in collective negotiations to regulate the terms and conditions of their employment. 3.2.C.5. Paying a sustainable wage to all employees.
3.2.C.6. The company provides equal pay for work of equal value, with goals and time lines to implement this policy.
3.2.C.7. The company provides social support to enhance women's economic empowerment. This includes centres for child care, elder care and the care of persons with disabilities.
Benchmarks
3.2.B.1. International Labour Organization (ILO) standards.
3.2.B.2. The Convention on the Rights of the Child as it relates to labour practices.
3.2.B.3. The ECCR Wood/Sheppard Principles on equal opportunity of employment for people from ethnic minorities or an equally rigorous code.
3.2.B.4. An appropriate and rigorous code with regard to equal opportunity of employment for women based around "Opportunity 2000" and the UN Declaration on Gender Equity.
3.2.B.5. A code for the employment of disabled persons at least as rigorous as the Code for the Employment of Disabled People produced in the United Kingdom.
3.2.B.6. The company respects the rights of its employees to organize in trade unions or other appropriate worker representative bodies to monitor working conditions and does not engage replacement workers during a dispute.
3.2.B.7. International Labour Organization (ILO) Conventions are complied with: No. 29 (forced labour); No. 87 (freedom of association); No. 98 (right to engage in collective bargaining); No. 100 (equal remuneration); No. 105 (abolition of forced labour); No. 111 (prohibition of discrimination); No. 122 (employment policy); and No. 138 (minimum age).
3.2.B.8. The company shall have a process to establish a sustainable wage, such as a market basket survey or some other appropriate method.
3.2.B.9. Developing concrete goals to provide women with true and equal participation in decision-making.
3.2.B.10. Providing adequate technical training which contributes to advancement of all employees, particularly women.
3.2.B.11. The company encourages or participates in the creation of child-care centres and centres for the elderly or disabled where appropriate.
3.3. Customers, suppliers and contractors

Principles
3.3.P.1. The company ensures that its products and services meet customer requirements and product specification.
3.3.P.2. The company is committed to marketing practices which protect consumers and which ensure the safety of all products.
3.3.P.3. The company will not market its products to consumers for whom they are not appropriate.
3.3.P.4. There is a commitment to fair trading practices.
3.3.P.5. The company accepts its responsibility to use its purchasing power to encourage good corporate citizenship among its suppliers.
Criteria
3.3.C.1. All advertisement and labelling of products is complete, fair and honest. Only claims which can be substantiated and fulfilled are made by the company, its employees and its agent.
3.3.C.2. Care is taken by the company not to denigrate or supplant alternative natural products.
3.3.C.3. No engagement by the company in cartels, spheres of influence or patent protection to the exclusion of others' rights.
3.3.C.4. The company is scrupulous in its negotiations and contractual arrangements with other companies. This includes fair dealing, prompt payment and the avoidance of corrupt practices, bribes and questionable payment.
3.3.C.5. The company seeks out supplies who meet the same standards on environmental and social grounds as the company sets for its own products.
3.3.C.6. The company will not enter into contracts with suppliers who use any form of forced or compulsory labour.
Benchmarks
3.3.B.1. The company receives positive evaluations from independent consumer organizations.
3.3.B.2. Appropriate consumer codes are followed (cf. Infant Formula marketing codes).
3.3.B.3. Where either advertising standards legislation or codes exist, they are complied with and this compliance is regularly disclosed (see British Codes of Advertising and Sales Promotion).

Box 2

Guidelines for corporate action on child labour of the Council on Economic Priorities (CEP)These guidelines have been drafted by the Council on Economic Priorities (CEP) to assist companies in developing, adopting and implementing their own corporate action plans with special focus on the problem of child labour. The guidelines outline a general course of action and provide a common point of departure for all companies. They present a series of steps that could be carried; however, not every company need take every step or follow the order presented.
Different steps for action

I. Adopt a code of conduct
A code of conduct can help a company carry out its mission in a socially responsible manner.
If your company has a code of conduct
1. Be sure it includes a provision on child labour.
2. Be sure it defines who your company considers to be a "child".
If your company does not have a code of conduct
1. Consult with other companies, both within and outside of your industry, that have adopted codes of conduct (CEP will gladly send you a packet of sample codes).
2. Study these codes and identify key issues your code should address.
3. Draft a code of conduct. Be sure it includes a provision on child labour.
4. Invoke key company staff in the creation of your code. Circulate and discuss it internally.
II. Disseminate and implement your code
Once your company has a code of conduct, it is essential to communicate to all staff and business partners the content and meaning of your code.
Explain and enlist support for your code
1. Meet with company employees in your company headquarters.
2. Create and maintain a list of all your contractors and suppliers in the developing world.
3. Meet with business partners, including contractors and suppliers.
4. Educate your business partners on the value of the code and the advantages of compliance.
5. Refer to your code directly in the terms of your contracts with contractors and suppliers.
6. Ensure that workers employed by your business partners are aware of and understand the code.
7. Translate the code into local languages.
8. Use graphics to enable illiterate workers to understand the code.
9. Post the code in full view in all your factories.
10. Seek means for workers to register complaints (i.e. a toll-free telephone number, address, or suggestion box).
Work with contractors to implement your code
1. Offer to all contractors your company's substantive help for achieving compliance.
2. Set a schedule for achieving compliance in collaboration with your contractors.
3. Set your own internal dates for follow-up spot audits.
4. Notify all business partners of the implications of violating your code, from warnings to termination of contract in case of continued non-compliance.
III. Monitor your code effectively
A code of conduct is only as effective as its monitoring system. Whether your production is sourced from formal or informal producers, site visits are necessary. Visits establish dialogue, and are an invaluable tool for implementing and monitoring codes.
Plan your site visits
1. Focus first on suppliers operating in countries where child labour is endemic.
2. Focus next on factories and regions which source a high percentage of your imports.
3. Schedule both planned and surprise visits, and observe the site in the evening to be sure employees are permitted to leave. If dorm facilities are available, go and see them.
4. Prepare a checklist of danger signals that indicate the use of child labour or abusive conditions: dangerous machinery, overly heavy machinery; toxic substances; locked fire doors; uninsulated wires; excessive long weekly working hours; physical, mental or sexual abuse; and harassment of workers.
Engage in first, second and third-party monitoring
1. Send corporate representatives, including officials from headquarters and local offices, buyers, or quality control inspectors (first-party monitoring).
2. Hire an auditing firm (second-party monitoring).
3. Invite independent monitoring organizations to assess the situation, including: local and internal non-governmental organizations, religious groups or consumer groups (third-party monitoring).
4. Continue sourcing on a regular basis from factories which will uphold your code and conduct.
5. If children are found working, collaborate with contractors and suppliers to protect children; hire adults instead, and work to promote the development of the children.
IV. Protect children and promote their development
Companies and contractors together can work with industry and development partners to protect children and fulfil their basic needs.
Take steps to protect children
1. Guard children against health and safety hazards immediately.
2. Avoid preemptory firing of children, as this places many in a worse position (i.e. hard labour, child prostitution).
3. Establish company procedures and guidelines to halt new hiring of children for work in exploitative conditions.
Take steps to promote child development
1. Determine whether or not education is available, either public or private.
2. If available, encourage children to attend school and arrange a stipend to compensate for loss of family income.
3. If not available, enable the child to participate in full or part-time schooling combined with vocational training or an apprenticeship programme at the factory.
4. Offer the child's job to an adult member of the family on the condition that the child remain in school.
5. Work with a range of partners -- non-governmental organizations (Save the Children or Care), multilateral institutions (UNICEF or ILO), national ministries, local non-governmental organizations, unions and industry associations -- to address child labour in the context of community development efforts.
V. Promote industry-wide action on child labour
The problem of child labour should be addressed both by individual companies and through coordinated efforts among industry peers and business partners, working within and across industry lines.
Work with counterparts to
1. Develop industry-wide sourcing guidelines and partner selection guidelines.
2. Establish an industry-wide monitoring system.
3. Support a database or registry on factory records for compliance with child labour laws and international standards.

Box 3
Example of the involvement of NGOs in the implementation of codes of conduct: The independent monitoring of The GapSince 1990 The Gap had had trade relations with the Mandarin International Apparel Factory, an independent plant situated in the San Marcos free trade zone of El Salvador. In 1995, after a number of workers were dismissed within a period of three weeks for trying to set up a trade union, the international community became aware of the poor working conditions at Mandarin International: more than 12 hours of work a day, overcrowded and overheated premises, coercive measures, very low wages (56 cents an hour), etc. It became clear that Mandarin International was not respecting The Gap's code of conduct.
The National Labor Committee (NLC) sounded the alarm and organized campaigns to sensitize consumers. Although The Gap was not the only enterprise working with Mandarin International, the NLC focused pressure on The Gap which became an important target. The Gap is well known for living up to its public image; furthermore, it had been one of the first enterprises to develop a code of conduct. A targeted campaign is, moreover, much more effective than a general campaign. The strategy was successful and The Gap showed itself willing to discuss the matter.
Initially, it reacted by canceling its contract with Mandarin International. However, this was not what the NLC wanted since this would not have changed in any way the working conditions of the workers. The Gap and the NLC thus signed an agreement whereby The Gap would renew its contract only if working conditions were improved and the leaders of the trade union movement were reinstated. It also promised to give specific assistance in improving working conditions in the workshops and to have the application of codes of conduct monitored independently -- until then monitoring had been carried out by employees of The Gap, which the NLC believed was not sufficient.
Representatives of The Gap and the NLC met on 15 December 1995 to discuss working conditions at Mandarin International. This resulted in a resolution and an agreement. The Gap agreed to work with the Interfaith Centre on Corporate Responsibility (ICCR) and the Business for Social Responsibility (BSR) to study ways of developing an independent monitoring system for Mandarin International. The agreement resulted in the establishment of the Independent Monitoring Working Group (IMWG).
On 22 and 23 February 1996 a meeting was held in San Francisco to prepare an independent monitoring process. Questionnaires were sent out by the IMWG to the main pressure groups which were asked to give their impressions and opinions on the development of the independent monitoring and the measures to be used to make it effective. This meeting resulted in the definition of the independent monitoring process and the establishment of the following main goals:
-- detect violation of The Gap's code of conduct and applicable local law;
-- promote practices leading to compliance with The Gap's code of conduct and applicable local law;
-- encourage training programmes for workers on the basis of their knowledge about their own rights;
-- deter abuses against workers;
-- provide a safe, fair, credible mechanism for dispute resolution;
-- foster a productive, humane working environment;
-- promote utilization of existing processes within the plant to resolve problems as rapidly as possible.
On 22 March, a resolution on worker-management relations at Mandarin International was signed. IMWG members agreed on the immediate establishment of a team of independent monitors to ensure that all operations at Mandarin International would be in compliance with the laws of El Salvador and with The Gap's own code of conduct. This team was called the Independent Monitoring Group of El Salvador (IMGES).
The resolution also focused on the problem of the trade unionists who had still not been reinstated. The participants agreed that they should be reinstated no later than 1 May. The agreement also stipulated that if Mandarin International failed to respect it, The Gap would immediately cease all relations with it. In June 1996, the independent monitors had access to the Mandarin International plant to verify whether the codes of conduct were being respected there.
With these resolutions and the establishment of the IMWG, The Gap has gone further than other United States enterprises which have developed codes of conduct, without however authorizing an independent monitoring of their application. The independent monitoring of The Gap at Mandarin International must be seen as a pilot project, the success of which could serve as an example for the introduction of similar programmes in other plants in Latin America and Asia. However, for the time being, the application is limited and only the future will tell whether the principle will be subsequently extended to all suppliers.

Updated by BR. Approved by OdVR. Last update: 28 September 2000.