Wednesday, September 29, 2010

Moving Beyond Social Compliance

Most companies, even if they do not have a "CSR department" have a program in place to monitor social compliance in their global supply chains. For these companies, it is important to protect their brands' reputations by ensuring that the factories manufacturing their goods, often in developing countries, respect workers' rights, pay legal wages and abide by environmental legislation. It's also often from these departments that companies develop a more holistic CSR strategy.

I've spent the past two days in Ho Chi Minh City at the Better Work Vietnam International Buyers' Forum.  The Better Work program is described as:
"... a unique partnership between the International Labour Organization (ILO) and the International Finance Corporation (IFC).  It unites the expertise of the ILO in labor standards with that of the IFC in private sector development."
That's not a very telling description, but basically it's an effort to develop a sustainable, industry-wide mechanism to promote stronger industrial relations and good working conditions for garment factories in targeted countries (Vietnam, Cambodia, Jordan, Haiti).

Today, apparel retailers have different codes of conduct that they expect their contract factories to adhere to as a condition for doing business. To ensure that these factories are upholding the expectations expressed in these different codes of conduct, retailers employ auditors (either company employees or third-party audit firms) to visit factories and check conditions against their respective codes. With many retailers sharing the same factories, you can imagine that factories are visited dozens of times each year by auditors and out of each visit comes a list of "corrective action plans" for the factory to implement in order to remain in good compliance with retailers' codes.

This approach creates an environment where factories seek to solve specific problems in preparation for the next audit, but they may not take the time to understand root causes of non-compliance. Instead of understanding why they're unable to control overtime hours, factories may look for short-term solutions in order to "pass" the next audit.

The Better Work program seeks to shift the dialogue away from "auditing" and "monitoring" to truly finding long-term, sustainable solutions to poor factory working conditions.  In addition to conducting factory assessments (similar to a typical audit, but much more detailed and thorough), Better Work provides factories with consulting services and training (both for management and workers) in order to build factories' capabilities to manage working conditions and industrial relations.

Furthermore, retailers that subscribe to the Better Work program, agree to stop auditing factories and rely instead upon the Better Work assessments for insight into factory working conditions. This alleviates the factories from repetitive auditing and the International Labor Organization provides a credible approach that provides companies with the confidence that factories are being held to internationally accepted labor standards.

To me, it's a win-win situation, but these past two days have highlighted some challenges to broader adoption of this approach. Companies have had social compliance audit programs in place for decades and some are unwilling to let go of their own programs. People who represent companies and auditors have a vested interest in seeing the current environment prevail (They may fear for their jobs.), so they're not necessarily interested in promoting an industry-wide practice. Companies insist that their standards are stricter than the ILO standards and are unwilling to compromise on some points in order to support the Better Work framework.

The Better Work program has its work cut out for them, but I'm hopeful that retailers will embrace this approach more fully and the industry can move beyond the never-ending cycle of social compliance audits toward an internationally accepted, industry-wide system that focuses on the most important goal: improving the lives of garment workers.

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