As more global corporations turn to overseas suppliers for the manufacture of products or components, the question of disparities in workplace conditions and employee pay has become a front-page issue.
Soccer balls stitched by Pakistani children as well as the discovery of Honduran sweatshops that manufacture Kathie Lee Gifford's line of Wal-Mart Stores Inc.'s [WMT] clothing are just two examples of the media getting wind of foreign workplace practices that are not up to the standards of the developed world.
While some companies seem to have been caught by surprise on this issue, there has been a growing trend over the last 10 years by companies who manufacture products overseas to codify the expectations of their foreign suppliers, and communicate this internally and externally.
According to Aron Cramer, director of business and human rights programming for San Francisco-based Business for Social Responsibility, there are two main reasons why companies are beginning to formulate international codes of conduct. "As the global economy expands, businesses want to extend a sense of ethics in an international context," said Cramer, whose employer is a training and information clearinghouse with approximately 800 member companies. Second, he said that "there has been a shift in the expectations of the media, consumers, governments, and advocacy groups [about] the way business is done around the world."
As the American public becomes exposed to the realities of overseas manufacturing, their expectations have risen.
But companies addressing this issue claim that concerns about their image is not the driver. Said Cramer: "I honestly don't believe that most companies go into this because their primary goal is to get good PR."
According to Jonathan Mudd, director of public affairs for clothing manufacturer and retailer The Gap, Inc. [GPS], "it is not a PR issue." Though he admits the San Francisco-based company has received some good press about its "Vendor Code of Conduct", he says "we have a code of conduct because it helps operations and it's the right thing to do."
Mudd explained that The Gap's need for a comprehensive document stemmed from "different cultural standards, laws, and expectations." For example, legal ages for child labor can be as early as 11 or 12 in some countries, although The Gap sets a limit of 14 years. In addition to being a reflection of the company's socially conscious employees, Mudd said the code was "essentially about running a good business." Without a code, Mudd speculated their international manufacturing would be a "ball of chaos."
Athletic footwear and apparel manufacturer Reebok International Ltd.'s [RBK] "Human Rights Production Standards" evolved out of its Human Rights program, which was developed in 1988. Kate Burnham, director of corporate communications for the Stoughton, Mass., based company, said that its production standard "is not a major issue from a marketing standpoint". She explained that Reebok has not spent time formulating or promoting a formal advertising strategy using their production standards.
An important first step for companies is to have a clear set of guidelines. The Gap's "Vendor Code of Conduct", Reebok's "Human Rights Production Standard", and the Minneapolis-based, general merchandise retailer Dayton-Hudson Corp.'s [DH] "Standards of Vendor Engagement" deal very specifically with a variety of issues. These include the safety of the workplace, forced labor, childlabor, discrimination, disciplinary practice, hours per week and fair wages.
Communicating Guidelines
Once there are guidelines on paper, communication becomes crucial. "Employees need to know that these guidelines are an essential part of normal business practices", explained BSR's Cramer. Susan Eick, director of corporate public relations for Dayton-Hudson, explained that its standards are included in all employee training manuals and that all retailers are made aware of Dayton-Hudson's policies.
Communication with foreign business partners also is crucial. The Gap, which deals with over 500 suppliers in 50 countries, makes sure each vendor has The Gap's code posted in factories. Reebok employees monitor suppliers' factories; hired consultants make unannounced visits.
In concert with communication, the training of internal personnel is important, said Cramer. Quality Assurance personnel need to know exactly how an acceptable factory is run according to health, safety and environmental standards.
Lastly, Cramer pointed out the need to view any code of conduct as a "work in progress". Mudd commented that The Gap's code was a "living document" and was "updated as they learned things". (BSR, 415/865-2510; Gap, 415/291-2271; Reebok 617/341-7298; Dayton-Hudson 612/304-0700)