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SAP 2.60/WP.110
By Jean-Paul Sajhau
The Phillips-van Heusen group, with headquarters in New York, is made up of several enterprises in the apparel and footwear sectors. Phillips-van Heusen (PVH) attaches considerable importance to its code of ethics adopted in 1992, which, as in the previous case, is divided into general principles applicable to all the firm's activities and guidelines for suppliers and subcontractors.
The following table, which summarizes these principles, has been divided into three columns. The first summarizes the general philosophy of the enterprise; the third column contains the specific guidelines for business partners; and the second refers to environment practices applicable to both the enterprise and its partners.
Table III. Phillips-van Heusen: Synoptic table of the code of conduct
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Keywords |
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The Phillips-van Heusen commitment |
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Employment practices at Phillips-van Heusen |
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Guidelines for Vendors |
| Goal |
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To achieve the highest moral, ethical and legal standards. Commitment to the following principles is total and irrevocable |
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Non-violation of legal rights and the moral integrity of employees |
| Prison or forced labour |
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Prohibited |
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| Non-discrimination |
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Non-discrimination with regard to race, sex and religion. No toleration of fanaticism, racism and sexual harassment |
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Non-discrimination with regard to race, sex and religion |
| Coercion |
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Prohibition of any form of physical or mental coercion |
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| Working hours |
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-- local standards or
-- P-VH standard: -- maximum of 60 hrs a week -- one free day -- overtime correctly remunerated (enterprises which conform to this standard will be given preference by PVH) |
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| Wages and remuneration |
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Minimum: The standards prevailing in local industry |
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| Safety and health |
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The working environment must not be detrimental to the health and safety of employees. The enterprise must contribute to the medical needs of its employees |
| Communication |
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Encouragement of open and direct communication at the workplace |
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| Employee welfare |
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-- Right of access to appropriate education and training
-- Right to medical benefits -- Right to the exercise of religious practices -- Right to the exercise of family obligations |
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| Responsibility of a global enterprise |
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Contribute to the betterment of the communities |
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| Legal requirements |
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Activities in accordance with local regulations |
| Environment |
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Awareness of the protection and improvement of the environment |
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Awareness of the protection and improvement of the environment |
| Sanctions in the event of violation |
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Termination of trade relations with enterprises which violate these principles |
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In the past ten years, The Gap has undergone a process of dynamic expansion through its different trademarks (Gap, Banana Republic, Gap Kids, Gap Shoe Stores, Baby Gap Store) which it markets and directly controls throughout the world. Thanks to this success, The Gap has from 1991 become the second largest apparel retailer in the United States. The enterprise, which subcontracts all its production, has established a code of conduct which establishes enterprise selection criteria and the respective methods of application. It should be noted that The Gap is the only United States enterprise in the TCF sector which has accepted, for the time being, in a single case (that of a major supplier in El Salvador: the Mandarin International Apparel factory) an external monitoring of the application of its code. This unusual example of independent monitoring was examined earlier.
The following table is divided into two parts. The first part outlines the principles of The Gap's code and the second part outlines the methods of its application.
Table IV. The Gap: Synoptic table of the code of conduct
| A. The code |
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| Keywords | Sourcing Guidelines for Vendor Selection |
| Human rights | The Gap will not conduct business with suppliers or subcontractors who violate basic human rights |
| Child labour | Subject to all applicable laws, rules and regulations |
| Forced labour | Prohibited |
| Working conditions | Prevailing industry standards in the surrounding community |
| Physical sanctions | Prohibited |
| -- Work schedules
-- Overtime -- Minimum wage |
All applicable laws, rules and regulations |
| Health and safety | Employees must not be exposed to conditions which are dangerous to their health |
| Legal requirements | Subcontractors must comply with the laws and regulations of the country in which they exercise their activity |
| Political stability | The Gap will not conduct business in a politically unstable country |
| Environment | At least in accordance with local regulations |
| Sanctions in the event of violations | Termination of trade relations with trade partners who do not respect the code |
| B. Methods of application |
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| Keywords | Corporate Sourcing Policies |
| Basic principles | -- Obligation for trade partners to respect the Sourcing Guidelines for Vendor Selection
-- Obligatory signature of a vendor-compliance agreement |
| Application | -- Approval of the subcontracting plant by a representative of The Gap
-- Periodical inspection: An inspection certificate is issued by a Gap-authorized buying agent. This certificate is a condition of payment for the subcontracting enterprise -- The choice of the subcontracting country must be approved by a sourcing committee which meets four times a year. The Gap purchases its products only in countries approved by this committee |
| Intermediaries | Unless expressly authorized by corporate sourcing, The Gap will not purchase goods produced in a foreign country through US or foreign-based importers |
With a turnover of more than $5,000 million and net profits of $450 million, Nike, which was established in 1968 by a Stanford student (Phil Knight) who already believed in the virtue of delocation, has become the undeniable world leader in sports footwear. In 1988, Nike outdistanced its main competitor, Reebok, another United States company developed by Paul Fireman who, in 1988, bought a small United Kingdom footwear company called Reebok.
In order to establish their position on the world market, these two enterprises adopted comparable strategies consisting of a massive use of international subcontracting and the promotion of their products by major names in sport.
Because of their systematic use of subcontracting, but also perhaps because of their success, Nike and Reebok have been subject to many attacks in the media. Their leaders are accused of having amassed a considerable fortune through the payment of paltry wages to those who manufacture their shoes in the developing countries. A comparison between the manufacturing cost of a pair of sports shoes (in particular the labour component) and the retail selling price reveals an enormous profit margin; the sports personalities who sponsor these two trademarks are paid extremely high contracts and, something which is even more damaging to the firms' public image, surveys carried out by journalists and trade unionists have revealed that some subcontractors do not respect the most elementary rights of their workers. This offensive has led the two enterprises to emphasize their ethical approach to business and the respect of codes of conduct which they have established. Reebok has therefore set up model factories which must respect very strict conditions, in particular as regards child labour. The firm has also established a Reebok prize which is awarded each year to individuals or associations working for the promotion of human rights.
The basic principles defining the ethical strategy of these two enterprises are set forth below. The Reebok code can be divided into three different parts which are presented in the form of three sub-tables. The first part (A) concerns the basic commitment of Reebok to the respect of human rights and its determination to work with business partners who share this commitment. The second part (B) is the central component of the Reebok human rights production standards, which include all Reebok's requirements of its trade partners. Reebok refers to four fundamental human rights at work which are covered by ILO core Conventions. The third part (C) concerns the implementation of the standards. Mention is made at the end of this table of the Reebok Human Rights Award, even though it is not directly mentioned in the code and forms a separate document. The Reebok Award can be considered as part of the implementation of Reebok's social commitment. Despite the criticisms made of the practices of some of Reebok's suppliers, it is interesting and paradoxical to note that the Reebok Award enjoys an undeniable prestige and has contributed to the attempts by the enterprise to improve its social image.
Table V. Reebok: Synoptic table of the code of conduct
| A | |
| Keywords | A commitment to human rights |
| Basic principles | Reebok attaches considerable importance to the standards of its business partners as regards human rights. The respect of these rights is one of Reebok's characteristics |
| Desired result | Improvement of the morale and performance of its employees and, by extension, increased productivity |
| Moral/ethical goal | Implementation of the principles concerning human rights which are just, adapted to different cultures and encourage employees to be proud of their work |
| B | |
| Keywords | Human Rights Production Standards |
| Freedom of association and bargaining | Reebok will seek business partners that share its commitment to the right of employees to establish and join organizations of their own choosing. Reebok will seek to ensure that no employee is penalized because of his or her non-violent exercise of this right. Reebok recognizes and respects the right of all employees to organize and bargain collectively |
| Child labour | Prohibited. Definition of the term "child":
-- less than 14 years of age; -- younger than the age of compulsory education fixed at the national level; -- in accordance with national legislation defining the term "child" for persons over the age of 14 |
| Forced labour | Prohibited. The term "forced labour" includes work which is required as a means of political coercion or as punishment for holding or for peacefully expressing political views |
| Non-discrimination | Reebok will seek business partners that do not discriminate in hiring and employment practices on grounds of race, colour, national origin, gender, religion or political or other opinion |
| Working hours | -- Maximum: 60 hrs a week on a regular basis
-- Preference will be given to business partners who use 48-hour work weeks -- Overtime: Remuneration according to national legislation and local practice |
| Wages/remuneration | -- In accordance with local regulations
-- Local standards (if higher) Reebok will seek business partners who share its commitment to the betterment of wage and benefit levels that address the basic needs of workers and their families |
| Occupational safety and health | Reebok will seek business partners that strive to assure employees a safe and healthy workplace and that do not expose workers to hazardous conditions |
| C | |
| Keywords | Application of Standards |
| Selection of trade partners | Reebok will apply this code in the selection of its trade partners |
| Pressure on trade partners | Reebok will seek compliance with these standards by its trade partners |
| Coercion | Reebok opposes the use of force to suppress any of these standards and will take account of such action in evaluating subcontractors |
| Information | Reebok seeks business partners providing full information on the means of production used |
| Control | Reebok will take measures to monitor the correct application of the standards, for example through the use of on-site inspection of production facilities |
| The Reebok Award | The Reebok Human Rights Award for initiatives which have made a major contribution to the human rights cause |
Nike's code of conduct is, like an increasing number of others, subdivided into two sections: one, made up of ethical guidelines, applies to the enterprise as a whole; the other regulates the obligations of its trade partners. Nike has also published an information document entitled Nike and sourcing: A primer which describes in general terms the origin of the enterprise, its strategy based on delocation and its relations, through a number of specific examples with its subcontractors and suppliers.
Table VI. Nike: Synoptic table of the code of conduct
| Keywords |
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The Nike Code of Conduct |
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Memorandum of Understanding. Obligations of subcontractors/suppliers |
| Basic principles |
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Principles governing the conduct of business:
-- trust -- teamwork -- honesty -- mutual respect |
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Nike expects compliance with the same principles by its trading partners |
| Human rights |
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Respect of human rights |
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| Forced labour |
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Forced labour -- prison or otherwise -- must not be used at any stage of production |
| Non-discrimination |
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Nike is a company made up of persons of all origins, which appreciates individual diversity and is dedicated to equal opportunity for each individual |
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No discrimination in hiring, salary, benefits, advancement, termination or retirement on the basis of gender, race, religion, age, sexual preference or ethnic origin |
| Safety and health |
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In accordance with local regulations |
| Health insurance, life insurance and workers' compensation |
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In accordance with local regulations |
| Responsibility of a global enterprise |
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To do what is expected of a leader by participating in the betterment of people's lives through sport and fitness |
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| Legal requirements |
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In accordance with local trade legislation as regards:
-- minimum wages -- overtime -- child labour -- leave, public holidays -- mandatory retirement benefits Compliance with: -- local regulations -- practices established by Nike A Nike representative is responsible for the day-to-day application of the Memorandum in each subcontracted factory. Nike production managers update the Memorandum every two years. Nike may request an independent monitoring of plants at any time. In the event of non-compliance with the Memorandum, Nike may require that the situation be corrected or it may terminate its trade relations. All subcontractors must: -- keep any documentation which may be necessary to prove the correct application of the recommendations contained in the Memorandum; and -- agree to provide these documents to Nike for any inspections required by the company |
| Environment |
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To minimize impact on the environment. Implementation of the three "Rs" of environmental action: Reduce, re-use and re-cycle |
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| Application |
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