Our friends at WethicA have released their recent newsletter What Constituents a “Responsible Purchase”?.

It is an important topic for many in China, and it is a topic that has evolved from making sure no children are in the labor pool, to ensuring your painted items are not lead paint based, to develop sustainable practices when designing, manufacturing, and selling products.

If you like the article below,and would like to learn more about their services, you can go to their website here

Most of our customers are western buying companies wanting to improve labor conditions in their supply chain worldwide. Most purchase from other countries besides China extending our work with our clients to countries of some of the following: India, Bangladesh, Mexico, Turkey, Morocco, Romania, Vietnam, Indonesia, Cambodia. Different country conditions often prompts the question “is it a responsible purchase”. Another way to ask the same question is if we should stop working with this country because of its general lack of social awareness.

I have mulled over this question even before becoming formally involved with social accountability and corporate social responsibility. The first time I asked myself this was in Morocco ten years ago. Every week, the prevalent garment industry there dispatched thousands of trucks crossing the Straits of Gibraltar with finished goods to more affluent Europe. It was common to witness Moroccan children climb onto the back of the trucks or trapped themselves amongst the goods to enter Europe despite the fatal risks of lack of water and food during the journey, dangers associated with jumping on moving trucks, and getting caught by law enforcement officers. At this time I felt the responsible approach was to buy things in countries like Morocco where in spite of conditions, it brought jobs to people that needed it. Jobs, however low-end, meant opportunities and could reduce the desperation of these youths risking their lives on those trucks. In the years since, my outlook has shifted dramatically after being exposed to absolutely horrendous working conditions that can not be considered as any type of opportunity except only for owners to exploit their laborforce.I have seen how such harsh and dangerous working conditions have slowly and surely destroyed the physical and mental state of employees leaving a demoralized and hopeless workforce. I am confronted again with the same question if it responsible to work with such factories.

Sure, I can argue the creation of jobs.

But at what cost?

Our experience in many developing countries gives WethicA the tools to analyze this issue extensively. Naturally, some countries have better general working conditions than others. But this by no means automatically assures every factory in “good working conditions” countries are up to those standards or even close, and vice versa with “bad working conditions” countries. More importantly, crucial differences in living costs, government policies and social organization prevents the application of any feasible global benchmark of absolute best or worst. Very often, a good situation in one country is considered a poor one in another. Taking in the overall situation of a country on to its own scale is key to identifying the good factories to use as the benchmark. Returning to the original question: should companies stop buying goods from one country because the general working conditions are worst than other countries? If that is the case, this will halt the potential of any progress, in particular with the good factories, throwing out all hope in achieving real improvement in that country. This can not be a responsible solution either.

Once again, we need to select the best factories with real potential for sustainable improvement based on the individual country’s benchmark, not a global standard. This I feel is the only responsible solution.

Another behind the scenes video detailing the accounts of labor practices in China’s factories has been released on youtube, and this time the target of the film is Disney.  An ongoing battle for Disney, they have had some high profile issues in China and have begun working to address the issues in a public manner.

The film itself is compelling, and highlights some of the issues that Perig’s note highlighted a couple weeks back.

Part 1:

Part II:

The Devil finds work for idle hands is a quote that I (and others) talk about when discussing China’s labor market.  It is not so much a matter of if there will be problems from large scale layoffs, just a matter of how big the problems would be.

So, when reading the recent AFP article Laid-off workers in China say prospects grim I took interest in the paragraph:

Laid-off migrant workers said job prospects elsewhere in southern China looked grim as soaring prices for raw materials and shrinking demand from the crisis-hit US and European economies squeeze manufacturers in the region.

“We thought about going to Shenzhen or even Shanghai. But then factories are also closing down in those places,” Song Xiaoguan, 25

Surely an issue the central party is going to be keenly aware of, for many in China who have left their families to work in the city, a lot is at stake.

A Step closer to Microfinance in China Microcredit lenders ermerging in China By Wang Lan, is an article that looks to shed some light about the stage and interpretation of microfinance in China.

By definition, microfinance is the service of giving very small loans (as little as $20) to very poor people without assets or collateral. These types of loans are typically given to a group of people, who commit to help each other when someone in the group is not able to make a payment. As I read the article I quickly noticed that the term microfinance was used in a very loose way, which included giving loans and credit to small to medium business owners.

“Microcredit lenders, once the quaint peripheral players in China’s mammoth financial system, are emerging from the shadows of the State-owned banks as white knights to thousands of small, cash-strapped manufacturers around the nation.

The spate of bankruptcies in the manufacturing sector, particularly in the Pearl River Delta region, has prompted the government to act by selectively relaxing credit controls three times in the past two months.”

This is could be good news to local and international microfinance/poverty alleviation organizations with projects in China, if it means these laws will provide microfinance financial institutions (MFIs) with more access to capital. Since local microfinance MFIs often do not have the accountability and transparency needed for access to capital from big banks and lending institutions, they rely on microfinance banks, such as the Grameen Bank to help them with capacity building and financing.

The article continues to explain how in 2005 the People’s Bank of China, initiated the first government-lead pilot project to promote and support rural poor and agriculture, which was later modified to provide loans to small business owners who had been affected by tighter monetary policies.

Perhaps because of China’s size nothing is “micro” here. If the goal is to help cash-strapped small business owners and to stimulate the economy, it may take some time until the very poor gain access to microfinance services, at least from the major national banks.

Located within its 2007 CSR Report, OKI has a 2 page section on their China based CSR activities.  Concise, within the 2 pages we can see that the firm is investing in its people, looking to meet environmental standards, and has a small (but growing) community program where they are building schools, playing baseball, and donating blood.

Not overloaded with data, but a nice way to make sure to cover China as part of the overall report when many others have yet to take that step.

To read more about their CSR practices you can click here, or read their special section on meeting their CSR commitments

A few days ago, I received the below from friend Pierig Vezin of WethicA.  The founder of this company, Pierig is someone I have come to refer friends to who are in needed of ethical supplier audits, and his letter below shows why.  It is an excellent piece that I encourage everyone to read.

During the past month, we broke our yearly “record” of weekly working hours in one factory. The record number was 106 hours in a single week for these workers. Breaking it down, these workers labored more than 15 hours a day for a straight 7 days a week. But placed in the context of an average week consisting more than 80 or 85 hours a week (12 hours a day, 7 days a week), the severity of their working hours become all the more clear. Even worse, these workers have not been given a day off in more than 2 months.

Fortunately, if only marginally better, not every factory keep workers laboring those hours, but the majority of factories work more than 70-75 hours a week with one to two days off a month. When owners are asked for explanation for these labor-intensive hours, the common one is still: “They are migrant workers, they want to work. If we don’t let them make enough overtime, they will quit.”

This statement seems reasonable enough to most people because it is partly true. The legal cap on working hours is at 40 hours a week. But as the workers are far from their home, they are often willing to work those intensive hours in hopes of earning as much as possible in the shortest period. There is however a very important difference to note. Workers prioritize wages over working time, but believing workers want to work more than 40 hours a week of their own volition is hardy true at all. Looking carefully at factory policies, we often find hefty penalties for workers for not working each hour expected, or even those asking for a day of leave. As most of the workers are paid on a piece rate, not working already means losing the potential wages of that day, but with the factory polices, it serves to double penalize the workers ensuring they lose twice the wages they would have earned working that day.

From a different angle, if workers would have been happy with the working hours, factory penalties to limit absenteeism and leave request would not be necessary. Often complaints from workers in interviews confirmed about being forced to work long, excruciating hours.

Whenever you hear that common justification for imposing long working hours on workers, know that the incentive to earn more is not the sole motivator for overtime; often times, the penalties keep these workers glued to their stations.

When writing the post The Difficulty of Evaluating CSR Reports, I had not begun reading Sinopec’s 2007 Sustainability Report.

Had I, I would have had another example of just how wide the spectrum can be.

Using the image below as a start, for Sinopec, sustainability for them is about 3 things :improving the financial value of the firm, improving human capital,and improving the environment.  There are none of the pictures of executives helping children read or plant trees, and what “kids and babies” angles they did through into this went into the back

What they did cover, often, was corruption and how they had programs to deal with that, and they had programs that supported the development of their employees and their families.  It was like reading a state owned enterprise guidebook at time as I began to see that Sinopec’s angle on this document was not only honest.. it was holistic in many regards.

As an assessment under traditional means  Sinopec’s report as a pure environmental report was not complete.  they failed to mention many of the key programs I would have hope to see from an oil firm, and what programs they have are pretty thin at best.  I thought that there would have been more mention on R&D related to clean technologies - like a BP - or that there would be some discussion around their process to clean up their supply chain.  However, neither happened

However, by taking their view of sustainability out to a position of where a traditional CSR report is positioned it did force me to think about how different parties view sustainability in different ways. Surely everyone can admit that the system is not a perfect one, but what I found almost amusing in my second read was that Sinopec had some of the best statistics (and presentation of their statistics), unlike many firms that bury or hide numbers with in reports.

Where I would recommend this report for readers is to spend some time thinking about how China and the West see sustainability from a cultural perspective and how this highlights that gap.  It is not necessarily a bad thing that Sinopec took this route in their report, and I do appreciate seeing their view, but if they need to really work on their supporting information for next year so that we can see just what it is they are doing.

CD News has posted a very interesting interview of Dr. Simon Zadek, Chief Executive of AccountAbility discussing the role of corporate responsibility in today’s world.

For me the most interesting part of the interview comes in the first three questions as Dr Zadek really hammers away at the idea that the Western CSR model is “the” model and puts forward that it is actually lesser developed and developing nations like China, Cambodia, South Africa, and Brazil that will really start to define how companies develop CSR practices.

over the past 10 or 15 years at the international level come primarily from a western liberal mind set. I think that there is an assumption on the part of many businesses or CR activists that it’s just a question of other cultures and countries catching up. That seems to me the furthest possible place from the truth.

for myself, I would agree with this statement in at about the 75-85% level as I think that given the size of “CSR” there is going to be a large chunk of this business philisophy that will be driven by the ideals of Western firms moreso that the conditions on the ground in the afor mentioned countries.  Corporate HQ will set the strategic directions for global programs, HQ based staff will manage country Foundations will still hire and develop teams, and while programs will localize (something we are seeing in China already in the largest programs) we are not seeing where local policies are breaking through in many of the CSR strongholds.

Were I to model it out:

Community investment (philanthropy and volunteerism) - global directed programs will begin to localize as local staff continues to develop, and business units on the ground will take on much of this role.  however, large global partnerships will continue to receive the largest grants.

Environment - this is certainly an area where western based managers need to begin listening to their BRIC/ developing nation partners as it is their partners who are exposed to the problems of environmental degredation on a very intimate level.

Labor relations (incl. health & safety). - This is an area that will have an interesting dynamic long term.  The in-house lawyers (and PR firms) of the west will look to drive strong policies to address issues on the ground as a matter of defense.  No one wants to be Nike in ‘97 again, and with consumer activisim in the west growing, the issues of child labor and exploiting labor are sensitive issues,  Some of the most proactive firms (Nike) are working with governments and NGOs around the world to develop systems, policies, and capacity to reduce these issues, and so in that manner the loop will close.

Governance and Codes of Conduct - These will become global.  firms like Philips, Wal-Mart, and others are all working feverishly to abondon the local + concept and more to a global standard that is really driven by the western home office.  Partly a defensive mechanism, partly arising from a need to work with a single code of conduct, there are entire industry clusters (particularly textile and footwear) that have worked to take it a step further and coordinate as an industry at a global level.

To read more of his interview, and it is a very interesting interview, I highly suggest it.  for those looking to learn how to break into the CSR field, you will get some excellent advice in is last response as well:

The key decision that someone coming into this field has to make is, “Am I comfortable becoming another manager in the field, responsible for reporting or responsible for compliance, or responsible for philanthropy?”;

A new report from Labour Behind the Label, a pressure group, has come out in the UK, ranking retailers for their ’sweatshop’ performance. Since the web-site seems to be inaccessible in China, have a read of this comment from the Independent on the report. Apparently:

Some very large retailers admit, in the words of the report, they “have no plans to do anything about garment employees’ poverty wages.” Step forward Clarks, Debenhams, French Connection, House of Fraser, John Lewis, Laura Ashley, Matalan, River Island and Levi Strauss.

If you are not British, you might know who some of those companies are, but they do represent a very sizable portion of the retail market in the UK.

For the report to include Levi Strauss in that list seems to be ludicrous, as Levi Strauss have definitely be doing a lot in this area for several years. Apparently a number of other companies did not did not ‘respond to the survey or make any information public’, including Burberry (who I know for a fact are leading the way as luxury retailers go) -the website I looked at for Burberry has plenty of information. I am thus very dubious as to the quality of the data in this report.

update:

click here to download the report if you are inside China.

Having read the report, I can reveal the report focuses on ‘Living Wages’ and thus deems paying minimum wage as not being good enough. The entire report is around trying to get companies to pay a ‘living wage’ to the employees of their contract factories, which should be decided by workers themselves (this is not how the UK minimum wage is decided though!). The minimum wages the workers get in China are living wages. In fact most of those workers are able to save money to send home. Other countries might be different; in which case the report should compare minimum wages with ‘living wages’.

Instead of lambasting companies for not paying a ‘living wage’, the report should focus on lambasting companies for not meeting other, more important, requirements, such as Minimum wage, having labour contracts, health and safety practices, environmental pollution and all the other laws these contract factories are breaking. Meeting the minimum law is, yes, only the minimum, but that is still what is needed. Beyond that, it is up to the market and laws to change; not necessarily the role of the buyers (unless they chose to, to distinguish their brand).

Read the rest of this entry »

Factory and labor conditions have been a hot topic in China for a while. It peaked last summer when product safety recalls focused the spotlight on China, and the recent implementation of the labor law has looked to push reforms into the system that protect industry.

Labor conditions and code of conduct have traditionally been a black hole for CSR reporting. Companies rarely highlight the fact that they have problems proactively, and if these issues are reported on it is because someone was caught doing something wrong.

So, when I was passed a link to the Project Kaleidescope report, I was intrigued as it was a chance to learn about these issues as the ongoing process they are, rather than as a moment in crisis. A partnership between McDonald’s, Disney, and Domini Social Investments, it follows a topic that has received a lot of attention over the last year in China:

Project Kaleidoscope was a collaborative effort initiated and guided by a multi-stakeholder Working Group consisting of representatives of the McDonald’s Corporation and The Walt Disney Company and other organizations that work on international labor issues. We, the Working Group, sought to improve working conditions in facilities that produce products for corporate supply chains. We believe this is not only a worthwhile objective in and of itself, but also a way to help protect against reputational risk and to enhance long-term shareholder value.

At 56 pages, this report offers a very comprehensive look into a process where real collaboration can occur. It is the best document I have seen to date on the issues, and how to proactively address them through a collaborative process.

So, if you are CSR manager, a purchasing manager, a risk analyst, HR specialist, etc I suggest you read this. These problems are not the problems or the responsibilities of a single department, so make sure that oyu read this and review it together.

full report can be downloaded here