Supply Chain Innovation

Creating the Future of Codes of Conduct

Monday, March 17, 2008

It has become very fashionable to criticize Codes of Conduct and monitoring, and to hold them responsible for all sorts of unpleasant realities in workplace conditions – from sub-minimum wages to excessive overtime. At one level, such criticisms fail to recognize that wage and hour issues predate the wave of codes and monitoring that arose in the mid-1990s. In fact, codes were a reaction to such basic labor law violations. At a deeper level, however, the criticism fundamentally represents a misunderstanding of the nature of the Corporate Social Responsibility (CSR) movement and the limits and possibilities of code implementation. Let us remind ourselves of how we got here.

Government agencies in many, many jurisdictions around the world – from Manhattan to Mumbai – were failing to enforce their labor laws. Labor-management relations were breaking down and the coverage of collective agreements was shrinking. This breakdown in labor market regulation meant that enterprises could do pretty much as they pleased, and left with the choice, too many did the wrong thing and cut costs at the expense of workers. Civil society organizations responded to these regulatory failures and consequent abuses with the only weapon they had – information. Using the Internet, they mobilized public opinion nationally and internationally in order to pressure companies into doing the right thing. Multinational brand names were obviously the most sensitive to such public exposure, and so a new form of regulation emerged in which civil society organizations use information to oblige brands to enforce labor standards at their supplier facilities. Thus, private actors stepped in to replace public agencies. These ad hoc responses obviously needed to be more consistent and global, and consequently codes of conduct were adopted and implemented worldwide and enforced through audits.

The phenomenon of private actors (like companies or NGOs) delivering public goods throws up a number of anomalies. For starters, they are not mandated or elected or accountable in the same way that public agencies are. Private actors therefore lack legitimacy when they step in to replace public actors. In order to compensate for this, the best initiatives were convened by governments and included other stakeholders. This led to the so-called Multi-Stakeholder Initiatives (MSIs), which grouped multinationals, civil society organizations and sometimes even government agencies together to drive labor standards down the supply chain. In addition, the Fair Labor Association (FLA) has universities at the table and has included suppliers in order to get as many stakeholders involved as possible. Corporations cannot achieve full social responsibility without accountability, and so the FLA went even further and made audit results public, transparency being the best form of accountability.

This effort grew in scale and scope throughout the 1990s and by the end of the decade, social audits had become a standard feature in apparel and footwear factories exporting to the US and the EU. They shone a light into tens of thousands of factories that had not been inspected for a long time. Did they always do a good job? Categorically not. There are thousands of cookie-cutter audits that cannot be considered real audits. Many buyers do not follow-up to make sure that noncompliance issues get resolved. Some buyers simply cut and run when auditors report major problems with a supplier facility. Still, there are a good number of solid audits conducted by serious companies who want to ensure that labor standards are maintained, even if only to reduce the risk of scandal.

What then is the future of codes? If we return to the point made earlier that codes are required to compensate for the regulatory breakdown in global supply chains, then they will be around for a long time. Many of the main exporting countries will remain badly regulated, and some will get worse. Multinational companies and buyers will therefore need to take extra steps to ensure that their product is manufactured under ethical conditions. The apparel and footwear sector has been a pioneer in this regard, but there are other sectors which are way behind the curve in terms of the due diligence they should be conducting.

More companies in more industries will adopt codes and monitor their implementation in order to control for the sorts of risks we have seen well-publicized in the last 12 months, risks such as serious health and safety violations and child labor. Hopefully, these other sectors will learn the lessons of the apparel and footwear sector, and will adopt the latest techniques of root cause analysis and capacity building. Code monitoring will not only have to get a lot better, it will also have to avoid duplicate auditing and achieve greater harmony in terms of standards and benchmarks.

Finally, it will be vital that we achieve synergies and consistency in terms of remedial strategies. Too many remedies are superficial and short-lived, and too many buyers are reaching the same compliance findings in the same factories and requiring those factories to make changes. If the factory is lucky, the companies will prescribe the same remedies, but often they don’t, and this results in the factory looking for the simplest way to give them what they want, regardless of the integrity or the sustainability of that change.

Greater coordination between buyers will be necessary if we are to break out of this vicious circle. Therefore, the future of codes is many futures. Some will be seriously implemented and seriously received and will achieve real gains for workers’ rights and working conditions. Others will be mere charades and treated as such by suppliers. Consumers, investors and civil society will need to make some judgment calls and start rewarding those companies sincerely trying to defend rights by buying their products and shunning the products of the pretenders.

Auret van Heerden


Add new comment

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.