Is investing in poor women good business?

A health educator at her work station in Bangladesh

One lesson of the Apple in China scandal is that factory monitoring is a necessary but insufficient way to improve the lives of workers in poor countries. Apple inspected its suppliers’ factories, but conditions remain harsh. While strengthening inspections and sanctions, smart brands and retailers are finding ways to help workers in their supply chains gain more control over their work and lives.

A program run by BSR (Business for Social Responsibility) called the HERproject, which gives women working in export factories access to health information, is an example of what could–and should–be done. Teaching young women about health, including reproductive health and family planning, is, by itself, a good thing. It also delivers a not-so-subtle message to factory owners that it might be good for their business to take better care of workers, instead of exploiting them until they are used up.

Many factory owners “see their workers as cogs in a machine” and act accordingly, says Racheal Yeager, who leads the HERproject for BSR. “That’s why there are high rates of turnover and high rates of absenteeism.”

“What we’re trying to do is change the mindset of the factory management,” she says. [click to continue...]

Timberland’s Jeff Swartz: “This is hard.”

It’s the end of an era at Timberland, one of the most socially-responsible companies in America.

Family-owned since it was started in 1953 by Nathan Swartz, the grandfather of the current ceo, Jeffrey Swartz, Timberland  is being sold for $2 billion to VF Corp. VF is one of the world’s largest clothing and shoe companies; its brands include The North Face, Vans, Wrangler and JanSport.

What this means for the New England company’s well-known commitment to environmental responsibility and social justice remains to be seen.

Uncertain, too, is the future of  Jeff Swartz, perhaps the most passionate advocate in corporate America for the idea that companies have a moral obligation not only to generate wealth for shareholders but to do good for the world.

“This is hard,” says Jeff told me when we spoke yesterday. [click to continue...]

Mark Hurd got off easy

Some notable and quotable items from the news:

Mark Hurd got off easy: Yes, by all accounts, he was a great CEO of Hewlett Packard and no, he may not have engaged in sexual harassment, but let’s focus for a moment on what he did.

The WSJ reported today that “the woman [HP contractor Jodie Fisher] was paid at times when there was no legitimate purpose.” In plain English, this means that he sent money to her that belongs to HP shareholders for work that she did not do. If true, this is clearly a firing offense. If it’s not fraud, then what is it?

The HP board, it seems to me, should have fired Hurd for cause and taken away his severance, which is being valued at about $35 million by The Journal.

As my friend Nell Minow, the corporate-governance expert and founder of The Corporate Library, tweeted the other day, linking to a column by Henry Blodget:

Wait A Minute — Why Does Mark Hurd Get $50 Million Severance When He Lied In His Expense Reports? http://bit.ly/aUSYA6 10:58 PM Aug 6th via TweetMeme

See Nell’s blog here.

As for those who say Hurd will be hard to replace, well, if that’s indeed the case, that’s his fault. A key job of any CEO is to groom potential successors, and assemble a team that can keep a company running smoothly in his or her absence. It’s never a one-man show, and shouldn’t be. One measure of just how well Hurd led HP will be the company’s performance in the next couple of years.

A climate “Pearl Harbor”: Congress’s reluctance or inability to act to curb global warming has led some people, notably Joe Romm, to speculate about what it might take to spur action. Back in 2008, Romm listed a number of “climatic mini-catastrophes” that might move public and policymaker opinion, among them the Arctic going ice-free, a mega-drought hitting the American southwest, more super storms like Katrina and “a heatwave as bad as Europe’s 2003.” I don’t know how the current Russian heat wave compares to the 2003 heat. But shouldn’t it be a wake-up call, if not a Pearl Harbor, when it comes to global warming?

For a detailed meteorological analysis, see Dr. Rob Carver’s blog at Weather Underground. Russian officials now say the heatwave has cost 5,000 lives as fires range out of control, says the Telegraph. Russia banned grain exports last week, with uncertain effects on world food prices. “Russian grain exports totaled 21.4 million metric tons last year, about 17 percent of the global grain trade,” The Times reported. What’s more, according to The Times’ Green blog, Russia’s president, Dmitri A. Medvedev, blamed the crisis on climate change and called for action:

What’s happening with the planet’s climate right now needs to be a wake-up call to all of us, meaning all heads of state, all heads of social organizations, in order to take a more energetic approach to countering the global changes to the climate.

Unhappily, a crisis in Russia is highly unlikely to rouse the U.S. Senate to action. But imagine if this heat and drought were affecting wheat farmers in, say, Kansas and North Dakota?

Actually, even that might not have an impact. A poll released last week by the Shelton Group found that most people who doubt that climate change is occurring, and caused by man-made activity, would not change their mind even if reality of man-made global warming consumers would not change even if the polar ice cap melted, kids couldn’t go outside to play or shifting weather patterns turned Nebraska into a desert. My goodness.

But the good news is…that while Congress is stalled on the energy and climate front, and while consumers seem less engaged, companies are increasingly finding that sustainability is good for business. As my friend and colleague Joel Makower reports at GreenBiz.com:

The footwear and apparel industry has joined forces to create an Eco Index tool to better understand materials’ and products’ impacts….Meanwhile, appliance makers agreed last week to new energy and water efficiency standards for major appliances that will reduce the nation’s utility bills by billions of dollars. A new bartering exchange was launched to help small businesses with excess supply of goods or services barter for things they need. And John Finisdore writes of an effort by more than 200 companies to understand and manage their dependence and impact on ecosystem services.

I wrote about the outdoors industry initiative (See How ‘green’ are those hiking boots?) last week. You can read more about Timberland’s effort to develop standards for its products here.

Speaking of Greenbiz, later this month I will be leading an online conversation with John D. Gagel, Sustainability Manager at Lexmark International, and Daniel Schmid, Head of Sustainability Operations at SAP, about how sustainability initiatives can drive profitability.  We’ll hear stories from Lexmark and SAP about tools and techniques for monitoring, measuring and reporting on corporate sustainability performance with an aim to driving financial returns. Greenbiz will host the free webcast on Tuesday, August 24, and it is likely to fill up fast, so register soon.

How “green” are those hiking boots?

In a world where it’s so hot or dry that no one wants to hike, bike, run or climb, outdoorsy companies like Nike, Patagonia, REI and Timberland will be in deep trouble.

So it makes sense—and it’s certainly about time—for the companies that sell outdoor apparel and equipment to come up with common standards to measure the environmental impact of their products.

This week, an industry group called the Outdoor Industry Alliance announced that its members have spent several years doing just that. The companies unveiled “a ground breaking environmental assessment tool” that they call an Eco Index, saying:

It provides companies throughout the supply chain a way to benchmark and measure their environmental footprint, allowing them to identify areas for improvement and make informed sourcing and product life cycle decisions.

It sounds good, doesn’t it? The trouble is, the group says it will take a long time for the industry to develop and agree on standards that are simple, reliable and meaningful enough to present them to consumers. In fact, there’s no commitment to turn the index into a shopper-friendly tool, the industry says:

The current focus of the index is to be an internal/supply chain facing tool and not a consumer-facing label. This focus could be revisited in future years.

That’s disappointing. It’s particularly disappointing because one company—Timberland—has demonstrated that it’s possible to measure and report on the impact of its products. As it happens, Timberland today (Aug. 3) convened a conference call to talk about its own Green Index and how it fits into the new industry-wide initiative.

Jeffrey SwartzJeff Swartz, the CEO of Timberland and a leader of the corporate-responsibility movement, said he wants to play nicely with competitors and other retailers, as the industry tries to settle on common metrics. “We can’t afford a Betamax-VHS debate,” he said. “Harmonization is an imperative.”

At the same time, Swartz made clear that he’s frustrated by the slow pace of the industry initiative.

[click to continue...]

Helping companies fight sweatshops

On a 15-hour flight from Chicago to Hong Kong (in coach), it helps to have some distractions. The movie Get Smart? Nah. Instead, I spent time talking with Dan Viederman, the leader of an NGO called Verite, who I’ve gotten to know in recent years because he works with U.S. companies that want to improve conditions in factories in poor countries where their products are made.

Dan, who is 45, happens to be an old China hand. He first traveled to China in 1985, after college, to spend a couple of years teaching English. “I was one of 50 foreigners in a city of 9 million people and 30 of them were Korean,” he tells me. He also lived in China during the 1990s, first as a development worker with Catholic Relief Services and then as the director of World Wildlife Fund’s offices in Beijing. He’s been back many times since.

We ran into each other by chance, but we were both headed for the Pearl River Delta area of southern China, the world’s biggest manufacturing hub, where many millions of mostly young workers make the clothes, shoes, furniture and electronics we use every day. (I’m typing this blogpost on a MacBook Air; odds are some or all of it was made here. Same with the Gap jeans and shirt I’m wearing.) These huge facilities—with dormitories for the production workers, apartments or homes for middle managers, cafeterias and restaurants, stores and athletic facilities—are more like company towns than mere workplaces.

Consider: Shenzhen, which is just north of Hong Kong, was a fishing town of about 30,000 people when “paramount leader Deng Xiao-ping” (as he’s called in this morning’s South China Morning Post) designated the area as a “Special Economic Zone” to promote foreign trade in 1980. Today, Shenzhen is bigger than New York or Paris, with about 14 million people, and it’s one of China’s wealthiest cities.

This has been a boon to U.S. companies and consumers. But it has also led to scandals around sweatshop labor that embarrassed Nike and Kathie Lee Gifford and Disney and Wal-Mart, most in the 1990s, some more recent. Since then, U.S. companies have been looking for ways to stay out of that particular spotlight. Many have written labor standards and codes of conduct that they impose on their suppliers, after which they hire inspectors to monitor factory conditions. These U.S. and European brands function, informally and imperfectly, as the Department of Labor in China, which has pretty good labor laws on the books but enforces them erratically at best.

As executive director of Verite since 2004, Dan has tried to improve that system. He has worked with a host of companies – Timberland, Disney, Gap, Apple, a coalition of firms called the Electronics Industry Citizenship Coalition and others—around labor practices in the developing world. Verite does auditing, training, worker empowerment programs, research and investigations. Verite also has contracts with the U.S. government (labor and state) to look at issues like migrant labor and slave labor, and it’s part of a chocolate industry effort to do something about child labor in the cocoa industry in West Africa. The NGO is headquartered in Amherst, MA, with offices in China and Manila.

No one who knows anything about this system of factory monitoring, inspection and compliance will tell you that it is ideal but in China, at least, it’s about all we’ve got. Dan’s job is to make it better, and he says the obstacles are many—suppliers keep two sets of books to fool auditors, they monkey around with workers’ pay stubs by deducting funds for housing or uniforms, they track hours poorly or don’t pay overtime, etc. “There’s built-in underpayment of wages,” Dan says. Besides that, some auditors who work for U.S. brands may not be fully committed to the task—they are paid, after all, by the companies, and they may not know or care how to do inspections right. Think of how Arthur Anderson “audited” Enron.

As a nonprofit, Verite’s loyalty is to the workers, and its credibility is key. That’s one reason why Dan is refreshingly honest about the flaws of the system. “We don’t really believe you can certify a factory as complaint,” he says, because conditions change all the time as new orders come in. A more sustainable approach would be to educate workers to look out for their own rights—Timberland hired Verite to try that at some factories a few years ago, and Reebok has taken similar steps. But the Chinese government permits only one trade union, and Dan tells me that the government-controlled All China Federation of Trade Unions has never, as far as he can recall, organized a strike or fought hard for its members.

Despite all the problems, there’s little doubt that the massive industrialization of China has been good for its people. Hundreds of millions have lifted themselves out of poverty through factory work—more than in any other place at any other time. This is the upside of globalization.

“By almost any measure, except maybe environmental quality, China’s a better country for most people than it was in 1985,” Dan says. “I think that has a lot to do with its openness to the world and its role in the global economy.”

What’s more, before we smugly assume a position of moral superiority when it comes to cheap labor in China, we should remembering that it wasn’t all that long ago that rapid industrialization and unfettered capitalism created terrible factory conditions in American cities. (The Triangle Shirtwaist factory fire caused the death of 146 garment workers in 1911.) It took a robust union movement, aided by progressive politicians, to protect American workers from exploitation.

Something similar will have to happen in China before we can feel entirely comfortable when we pay “bargain” prices for laptops or jeans. Interestingly, the Chinese government has been more willing to allow dissent and permit the growth of vibrant NGOs in the environmental arena—where the problems are dire—than it has been to promote independent labor unions.

“In the long run, things will change because the society demands change,” Dan says. “This can’t be the responsibility of business alone.”