Volnei
Cipriano, an adidas-Salomon representative, and Richard Wokutch (right)
at an adidas-Salomon subcontractor shoe factory in Brazil discuss
health and safety conditions and adidas’s factory inspection
program. Photo by Larry French.
The adidas-Salomon plant. Photos by Richard Wokutch.
Another view at adidas-Salomon
Studies since the installation have shown that the needle guards enable sewers to work faster and more efficiently because they are no longer worried about needle wounds.
“Looking
at the costs of an environmental catastrophe, one can see the financial
advantage of avoiding accidents.”
Gap Inc. raised some eyebrows in 2003 when it released for the first
time a social responsibility report critical of working conditions at
many of its clothing factories in developing countries. Detailing a range
of workplace violations related to minimum wage, safety, environmental,
and other standards, including underage labor, the report "marks
a dramatic change in strategy for a retailer that has long been on the
defensive" about conditions at its overseas facilities, noted a Wall
Street Journal news story.
Gap, which has developed over the past three years a factory rating system
and monitoring plan that focuses attention on the plants that most need
it, was lauded for its openness by labor-rights advocates who have been
among its harshest critics.
Labor-rights groups "have done a good job exposing the many exploitative
labor practices in multinational or contractor factories in developing
countries," says management Professor Richard Wokutch. What is less
well known, he says, are the exemplary approaches that some companies
have taken to address the concerns. Long before Gap publicized its problem
plants, he says, other companies, galvanized by public criticism, had
acknowledged the problems at their facilities and put in place corrective
measures.
Wokutch, who specializes in business ethics and corporate social responsibility,
is the R.B. Pamplin Professor of Management at Virginia Tech's Pamplin
College of Business and head of the management department. He and other
researchers discuss some of these model programs in a recent book he co-edited,
Rising Above Sweatshops: Innovative Approaches to Global Labor Challenges
(Praeger, 2003). "We provide details on their implementation so that
others facing similar challenges can learn from the strengths and weaknesses
of these programs."
Wokutch authored or co-authored four chapters that discuss Nike's various
initiatives in Asia; Dow Chemical's implementation in Thailand of Responsible
Care, an industry initiative for the proper handling of chemicals during
their lifecycle; adidas-Salomon's Standards of Engagement governing working
conditions in subcontractor plants; and the Brazilian Pro-Child Institute,
an industry group seeking to eliminate child labor in shoe manufacturing
(co-authored with Virginia Tech management Associate Professor Larry French).
Wokutch's research included visits to company-owned manufacturing plants
as well as subcontractor facilities and interviews with company and industry
representatives, government officials, and labor advocates. "I also
applied knowledge and drew upon contacts I had gained while leading study-abroad
programs to Asia that examined the sweatshop labor controversy,"
he says. Over the years, he and his study-abroad students have visited
a number of companies with operations in Southeast Asia, including Nike,
Mattel, Disney, and Levi's.
The case studies, he says, are not intended to be overall evaluations
of the labor practices of the companies, but rather "descriptions
of particular labor-oriented programs that merit attention as potential
models for other firms."
Nike, Wokutch says, has developed a comprehensive system of monitoring
and remediation. Spurred by criticisms over working conditions in its
contractor factories in Indonesia that began in the late 1980s, the company
issued its Code of Conduct to its suppliers around the world, binding
them to core standards related to labor, wages, benefits, work environment,
safety, and health, and requiring them to submit to regular inspections.
For instance, the section on compensation in Nike's Code of Conduct states:
"The contractor provides each employee at least the minimum wage
or the prevailing industry wage, whichever is higher; provides each employee
a clear, written accounting for every pay period; and does not deduct
from employee pay for disciplinary infractions."
Adopting
codes of conduct is an important beginning; monitoring and enforcement
are necessary subsequent steps. Wokutch (who co-authored the chapter on
Nike with DePaul University business ethics Professor Laura Hartman) says
Nike's system features an audit program with external as well as internal
auditors, including labor-rights groups, and a "labor practices"
team that visits factories and conducts training and awareness initiatives.
The audit quantitatively measures a contractor's compliance with Nike's
code. Factories are evaluated based on four areas of risk assessment:
country location, factory size, type of operation, and compliance record.
All factories judged to be high risk are audited every year, compared
to 50 percent of the medium-risk plants and 10 percent of the low-risk
facilities.
"This new instrument is applied in-depth," Wokutch says. "Nike
is focusing on global consistency, striving to find ways to link performance
on this audit with decisions on suppliers and incentive schemes."
He notes that one of the company's sternest critics, Medea Benjamin of
the human rights and social justice group Global Exchange, observed several
years ago that "things are changing for the better" and that
the company has made "an astounding turnaround" in the way workers
are treated.
Wokutch adds that in Vietnam, where Nike has been manufacturing through
factory partners since 1995 and is the largest employer, the company has
greater leverage toward compliance in the footwear industry than in apparel
or other industries, as it is the sole source of orders for most footwear
subcontractors.
Workplace measures aside, Nike has also expanded support for social programs
that provide education for workers and small business loans for local
women. The company, Wokutch says, believes that such initiatives serve
not only as a gesture of its commitment to the work force, but also as
a foundation for long-term relationships with the community.
Covering the same issues as Nike's Code of Conduct, adidas-Salomon's Standards
of Engagement aim to ensure that its supplier factories are safe and fair
workplaces. The company provides training on its standards to its suppliers,
who are encouraged to participate in audits and provide feedback. Like
Nike, adidas-Salomon uses external as well as internal auditors and is
a member of the Fair Labor Association, which contracts with independent
auditors. Where suppliers fall short of full compliance, adidas-Salomon's
auditors will help them develop a plan toward this goal.
The
company, which published its inaugural social and environmental report
in 2001 (a first for the sporting goods industry), has attracted favorable
notice for its activities related to its Standards of Engagement. Wokutch
notes that the company was ranked first in its industry on the Dow Jones
Sustainability Index in 2001, up from fourth a year earlier. "Much
of this improvement is attributed to the compliance work the company is
doing with its international suppliers."
The Standards of Engagement are patterned after the UN's International
Labor Organization (ILO) conventions and the model code of conduct of
the World Federation of Sporting Goods Industries and sets standards related
to forced labor, child labor, discrimination, wages and benefits, hours
of work, freedom of association and collective bargaining, disciplinary
practices, health and safety, environmental requirements, and community
involvement.
Implementing the standards, however, has not been without challenges
for the company. In Thailand, Wokutch says, common violations in the subcontractor
plants were exploitation of migrant workers, payment of less than the
minimum wage, nonpayment of benefits, ignoring maximum working hours,
and discrimination against older workers. With a low rate of unionization
in the country generally, workers are less knowledgeable about their rights
and may be reluctant to air grievances to inspectors, he says.
Thai labor advocates have argued that managers will make note of workers
who talk to inspectors or who even spend too much time looking at posted
standards. Still, an adidas-Salomon manager responsible for standards
compliance told Wokutch that he can often tell which workers are willing
to discuss their concerns because "they are the ones who will make
eye contact with him." The manager would then meet with these workers
privately, Wokutch says, sometimes off-site, before or after work.
A particular challenge for the company worldwide is determining when
to sever ties with a supplier for noncompliance with its standards. In
2001, adidas-Salomon ended relationships with 32 non-complying suppliers
worldwide. Termination isn't ideal, Wokutch says, as it eliminates any
leverage that adidas-Salomon would have to bring about change in that
factory. At the same time, the company also must avoid allowing such contractors
to remain as suppliers "as this would undercut the credibility of
its enforcement both with that supplier and with others."
The Pro-Child Institute was set up in 1995 by the local shoe employers'
association in Franca (a city in southern Brazil that is a major shoe
manufacturing and export center) to eliminate child labor in the footwear
industry and improve the welfare of children through education programs.
In the book, Wokutch and French examine the reasons for and extent of
child labor (defined by the ILO as work done by children under the age
of 15 - or 14 in developing countries). Wokutch and French discuss the
institute's primary program of inspection and labeling and assess the
program's overall impact. Members who pass inspection may use a PCI label
on their shoeboxes that declares that child labor was not used in the
production of the shoes.
The
results have been mixed. By all accounts, both researchers say, child
labor "has been virtually eliminated" in PCI principal manufacturing
plants. But the institute's effectiveness with respect to the manufacturers'
suppliers, which employ the vast majority of child laborers, is harder
to determine due to the home-based nature of many of these subcontracting
operations. Many of these subcontractors - as well as many of the smaller
shoe manufacturers - have not joined PCI.
Even if it is assumed that the program has also eradicated child labor
in subcontractors' workshops, the researchers say, "It is likely
that an underdetermined number of children have found other work. In some
cases, their new work may be even more dangerous than their shoe work,
especially when it involves evening jobs, working alone, or illegal activities,
such as prostitution, the drug trade, or theft.
"PCI's experiences, say Wokutch and French, suggest that industry
collaboration can be effective in combating child labor in regular workplaces.
But the difficulty of monitoring child labor in the informal economy and
the displacement of child laborers to other sectors are reasons why it
is also important to provide children with opportunities for apprenticeships,
education, and recreation. "There are many underlying reasons for
child labor and problems associated with the practice that will not be
resolved simply by preventing children from working." Child labor,
the researchers say, remains a serious issue in Franca.
Responsible Care is an international, voluntary program in the chemical
industry for the safe handling of chemicals. It serves as an industry
forum where chemical companies can share best practice information and
also provides an institutional vehicle for other forms of cooperation
among member firms to address common environmental challenges.
Responsible Care uses six codes of management practices related to community
awareness and emergency response; pollution prevention; prevention of
fires, explosions, and chemical releases; procedures for safe transportation,
storage, and other handling of chemicals; employee health and safety;
and product stewardship - integrating safety, health, and environment
considerations into the design, production, distribution, and disposal
of the product.
Wokutch says that Dow's Thai unit, reflecting its parent company's approach,
has a behavioral orientation to environmental, health, and safety issues.
"The fundamental thesis of this approach is that engineering-oriented
measures can only be just so effective in improving workplace safety and
health. Further improvements require eliminating human error and ensuring
that workers follow appropriate operating procedures." Dow's biggest
health, safety, and environmental challenges, he says, are eliminating
such errors, and it does so by rewarding desired behavior rather than
simply criticizing or punishing infractions. "The behavioral approach
is particularly well suited for tackling such problems as leaks, breaks,
and spills, and transportation safety issues.
"The program has won Dow's Thai operations recognition from its
parent company and the Thai government and ISO 14001 certification for
environmental management systems from the International Standards Organization.
"Responsible Care appears to be a novel and effective way for chemical
industry firms to address problems that they have in common in a collaborative
way."
Asked by Wokutch what her company does particularly well in environmental,
health, and safety issues, Dow's Asia-Pacific area director Judy Castledine,
who periodically inspects plants, listed four strengths. Dow has integrated
environmental, health, and safety concerns into every employee's work
processes, she said, and avoided a situation where such issues end up
being minded by only the safety specialists. Dow has also been effective
in reducing waste at the source and implementing hazard management practices.
Finally, Castledine noted, her company has been effective in "globalizing"
its environmental, health, and safety practices - in ensuring that their
operations, wherever located, meet or exceed applicable local government
standards or Dow corporate standards, whichever are higher.
The program's success in Thailand, Wokutch says, also shows that multinational
corporations and their industry associations can be important sources
of expertise for developing countries in environmental, health, and safety
issues. "In many cases, the multinational firms have valuable technical
knowledge and equipment that may not be otherwise available to these countries."
Dow's Thai unit, for example, helped local government authorities and
other employers in one industrial site to develop an emergency response
plan for the site in the wake of several environmental incidents, including
an oil refinery fire, that underscored the weakness of existing government
and industry emergency response plans and capabilities.
While beneficial for workers and the community, how do programs aimed
at safeguarding worker rights, safety, and health affect a company's profitability?
That's a difficult question, Wokutch says. "The relationship between
corporate social responsibility and business ethics on the one hand and
profitability on the other is, in fact, one of the key questions in the
'business ethics/social issues in management' field." The research
results, he says, are ambiguous, but many people would like to believe
that "good ethics are good business.
"The issue, he says, is not just a philosophical one. "There
are hundreds of billions of dollars invested in socially screened investment
funds based on the assumption that, in the long run, socially responsible
firms will be more profitable and thus better investments.
"It may not be "proof" in a definitive sense, he concedes,
but there is plenty of anecdotal evidence that the programs discussed
in his book contribute to the corporate bottom line. adidas-Salomon's
Standards of Engagement, for example, help ensure that subcontractors
abide by safety, health, and other standards. "The adidas-Salomon
folks believe that a safer workplace is a more productive workplace, and
I agree. Accidents are very costly in terms of physical damage to individuals
and property, medical expenses, retraining costs, workers compensation,
bad publicity, and so on."
Wokutch recalls that while visiting an adidas-Salomon supplier's plant
in Thailand, he was told that needle guards had been installed on sewing
machines to protect workers from injuries caused by broken needles. "Studies
since the installation have shown that this safety measure also enables
sewers to work faster and more efficiently because they are no longer
worried about needle wounds.
"Dow Chemical's participation in Responsible Care in Thailand has
benefits both for the company and for the community, he says. "Looking
at the costs of an environmental catastrophe - think Union Carbide and
Bhopal or Exxon and the Exxon Valdez - one can see he financial advantage
of avoiding accidents.
"There is also the downside, Wokutch says, of being perceived as
operating irresponsibly in developing countries, as the struggles of Nike
and Gap over their reputations as employers of sweatshop labor have shown.
"To the extent that companies can avoid that kind of negative publicity
and possible boycotts associated with it, they are ahead of the game financially."
Brazil's Pro-Child Institute, he says, was clearly motivated principally
by the shoe manufacturers' desire to avoid a possible boycott of their
shoes by consumers concerned about the use of child labor. "The fact
that they were able to avoid this has to count as a success.
"Still, the financial benefits of these programs are difficult to
measure, Wokutch says. "We don't know with certainty what accidents,
boycotts, or other negative events would have occurred if these programs
had not been in place. We also don't know with certainty how much worker
morale is increased and turnover decreased as a result of programs that
treat people more humanely.
"I would like to think that individuals involved with these programs
considered first what the right thing to do was, from a moral perspective,
and then used a little bit of moral imagination to figure out how to make
this also contribute to the bottom line. But, to the extent that a company
can promote its interests as well as those of the community in which it
operates, everyone benefits. I think the programs we document in the book
do that."
