April 30, 2000

HEADLINE: Who's watching the shop floor

BYLINE: Tim Vickery Special to The Christian Science Monitor

A host of private auditors rise to monitor fair-labor practices - and help expose the bad behind some of our goods.

BODY: Everyone loves a bargain. And globalization brings more cheap goods to stores across the United States each year.

Well over half of all US imports last year - valued at more than $ 750 billion - came from developing countries in Asia, Latin America, and the former Soviet Union. Apparel, footwear, toys, and sporting equipment account for a large portion of imports.

But does a "Made in Cambodia" label mean a 12-year old sewed that shirt, or a mother of five worked a 14-hour shift for 20 cents an hour to make that $ 120 pair of sneakers?

"At this moment, there is no way for the American consumer to know 100 percent that a particular garment is 'sweat free,' " explains Sam Brown, executive director of the Washington-based Fair Labor Association, one group working to improve overseas labor conditions.

A boom in private "social compliance" auditing may change that.

Surveys indicate US consumers are willing to pay more if retailers guarantee their products are not made by children, and that most would change brands to avoid goods made in "sweatshops," generally defined as work situations in which workers are subject to exploitation.

But only 16 percent of US consumers in one recent survey indicated they would make a "sweat free" guarantee their highest priority in purchasing decisions. The rest said price or quality was king. "The bottom line is, a lot of people would like to do the right thing, but a lot of things get in the way," remarks Marsha Dickson, professor at Kansas State University and author of a forthcoming study on labeling and consumer preferences.

One of the greatest obstacles is the lack of labeling. Currently, companies are not required to label their goods "sweat free," but momentum is building for change.

A veritable cottage industry of social compliance auditors has sprung up to help socially responsible companies verify conditions at supplier factories and to help consumers know if the goods they buy are free of labor abuses.

"The Holy Grail is proof of compliance, like a 'certified organic' label," notes Matt Shapiro, spokesman for New York-based Social Accountability International, one of the groups recently formed to help police overseas factories.

The monitoring industry's prospects are so rosy that PricewaterhouseCoopers (PwC), which audited 6,000 factories last year for clients like Nike and Wal-Mart, plans to spin off its entire Global Compliance practice to capitalize on market growth.

Other groups are ramping up as well. They will collectively face a monumental beat. Consumers don't realize how many retailers are supplied by goods made under questionable worker conditions, many experts say.

"We only hear about the big ones," notes Leslie Burns, professor of apparel merchandising at Oregon State University and a founding member of the Consortium of Educators for Social Responsibility. "The majority of companies are flying below the radar screen."

Worldwide, some 80,000 factories employing millions of workers feed the US appetite for consumer goods. Wal-Mart alone buys from more than 20,000 factories around the world.

While some companies identify violations at their overseas factories on their own, no single organization is capable of monitoring such a massive effort.

For now, consumers cannot expect foreign governments to police firms. Garment and footwear manufacturing is an economic lifeline for many developing countries.

In Cambodia, for example, clothing accounts for 70 percent of exports. Textile workers there sometimes make triple the nation's average wage, which is about $ 280 a year.

Governments may readily adopt international labor standards to get access to export markets, but neglect to enforce those laws for fear of losing revenue.

Look for a 'code of conduct'

A consumer's first clue that a product might be sweat-free is whether the company has a code of conduct. "A code acts like a lightning conductor.... It means the company has to be responsive to criticism," explains Neil Kearney, president of the International Garment, Leather, and Textile Workers Union, in a recent speech.

But a code of conduct alone is no guarantee that a company's products weren't made in a sweatshop.

"They are really good standards," says Leila Salazar, director of corporate accountability at Global Exchange, a San Francisco-based watchdog group, "but we want to see a system that holds companies accountable."

That's the rub. Companies that enforce their codes risk losing suppliers. "Some factories think our standards are just too big of a hassle," explains Vada Manager, director of global issue management at Nike. "They would rather do business with less scrutiny." Since all buyers do not insist that their suppliers adhere to company codes, abusive, "bottom feeding" factories continue to operate.

Many companies have taken accountability into their own hands. Like other industry leaders, Nike's team of compliance officers conducts quarterly inspections to identify violations of its code. To add external financial expertise and "reputation assurance" to its own efforts, Nike hired PwC to inspect each of Nike's 780 suppliers last year.

PwC's standard one-day audit includes an observation tour of the factory, examination of payroll, tax records, and employee files, and 10 to 15 minute on-site interviews with approximately 25 workers and managers.

Verite, a nonprofit organization that has done 500 audits, spends from one to six days at each factory. They spend an hour interviewing 20 to 25 workers strictly off-site and with no managers present. Verite consults the company's code, but requires its clients to adhere to Verite's stricter standards. "We're motivated by remediation. We don't audit for auditing's sake, but for the welfare of the workers," says Mil Niepold, director of programs.

Some 10 other organizations conduct social compliance audits worldwide.

Nike insists that it has a zero-tolerance policy regarding labor violations. "Our monitoring is the most rigorous you'll find in the industry. We place no orders without vetting the supplier first," assures Mr. Manager.

But activists criticize Nike and others for failing to enforce protections promised by their codes. "Most efforts around so-called social-accountability monitoring are pretty serious scams," asserts Tom Wheatley of the National Labor Committee, a worker-advocacy group in New York.

Justine Nolan of the Lawyers Committee on Human Rights is more sympathetic. "I think companies like Nike have their hearts in the right place. But the more you stick your neck out, the more you get criticized," she says.

Many companies find themselves in a Catch-22 position. Refusing to publicly disclose audit findings calls into question a firm's commitment to fix what's wrong.

"Until we are able to see what they're doing, it's hard to know what is really going on. We have to open the lid and look inside," says Massachusetts Institute of Technology Professor Dara O'Rourke, who has observed inspections at more than 100 factories as part of his academic research. "Independent monitoring can play a positive role in improving factory conditions, but only if it is much more transparent and can be verified by workers and local [nongovernmental organizations]."

A move by US Congress?

Congress may soon consider a "right to know" proposal that would require US companies to report labor conditions to the American public and to overseas workers.

Meanwhile, one of the first groups to standardize industry-wide codes of conduct and hold companies accountable by monitoring auditors is the Fair Labor Association (FLA). Members' fees fund FLA, and compliance is voluntary. FLA has accredited two audit groups since 1998 (Verite and a small Bangladeshi women's organization).

Officially, only FLA member companies and its governing board receive audit reports. Critics claim such reporting allows companies to bury damaging information. FLA Director Mr. Brown cites Nike's voluntary publication of critical audit reports on its Indonesian and Mexican factories as evidence of FLA members' commitment to transparency. "For them to say 'we screwed up' is rare for politicians, business people, kids, anybody," he says.

While experts praise disclosure as a positive step, remediation is all-important. "Almost everyone has a code of conduct," Brown says. "The question is, what do they do to fulfill their promise all the way down to the factory floor?"

Another leader in the fair-trade movement is Social Accountability International (SAI). Created by the Council on Economic Priorities, SAI draws on established international workplace-quality standards to measure social accountability.

Unlike FLA, SAI includes nonapparel manufacturers and also requires that factories pay a "living wage" - enough for basic needs and some discretionary spending.

SAI standardizes factory certification and focuses accountability closer to production. Six SAI-accredited certification organizations have approved 60 factories in 10 industries.

The newest entrant, Worldwide Responsible Apparel Production (WRAP) is a brainchild of the American Apparel Manufacturers' Association. Also focused on suppliers, WRAP does not require "living wage" payments.

According to its website, WRAP conducted pilot audits of 2,000 factories in the US, Mexico, and Central America. Three social auditing firms hold WRAP accreditation.

The need to stick around

Another newcomer, part activist, part monitor, the Workers Rights Coalition does no accreditation. Focusing on university licensees, WRC conducts fact-finding investigations, training, and public education to raise workers' awareness of their rights. A defining feature of WRC is its policy of publicly disclosing results of all investigations. WRC maintains independence by refusing funding from corporations.

But noting that Nike helped the WRC's first factory investigation, Scott Nova, a spokesman for WRC, says "corporations are a crucial lever for change. We have to work with them."

Boycotting a company's products is not the only way consumers can press companies to be accountable.

The Interfaith Center for Corporate Responsibility and the Investment Responsibility Research Center works with shareholders to influence companies to improve labor conditions at overseas factories.

Each monitoring organization may focus on different links in the supply chain, but all agree that an ongoing presence is critical.

"Monitoring is not just parachuting in and documenting problems. It has got to be done on the ground," says Mr. O'Rourke of MIT.