Who’s responsible for factory conditions in poor countries? Has CSR gone too far?

garment-factoryJust who is responsible for the fire in a garment factory in Bangladesh that killed more than 100 workers in November?

The factory owner? The government of Bangladesh? US and European brands and retailers who bought the clothes made there? Shoppers who demand the latest styles at low prices?

And who deserves credit for the improvements in working conditions at Foxconn, China’s largest employer and Apple’s biggest supplier?

Apple? The Chinese labor market? Journalists at The New York Times?

Similar questions could be asked about paint factories that discharge pollution into rivers, toy factories that use dangerous chemicals or factories everywhere that run inefficient equipment or burn dirty fuels.

For nearly two decades, a core belief of the social-responsibility movement  has been that western brands and retailers must take responsibility for the social and environmental performance of the factories in their supply chain. This has created an immense infrastructure–an industry, really, of consultants who write codes of conduct for those factories, inspect the factories, report on them and deploy a combination of carrots and sticks that, at least in theory, bring about improved performance.

In essence, US and European brands have become quasi-governmental, undemocratic standards setters and enforcers of social and environmental norms.

So how’s it working? The year just past put a spotlight on a glaring failure of that system–the fire in Bangladesh, where factory conditions in the garment industry are widely deemed to remain unsafe–and on what has been cited as one of its successes–the new transparency of Apple’s supply chain, and the improved conditions at Foxconn, which supplies HP, Sony, Dell and other electronics companies, as well as Apple. [click to continue…]

Apple’s China problem–and ours

More than a decade after the Nike scandals of the late 1990s exposed terrible working conditions in the Asian factories where most of our stuff is made, has anything changed? To be sure, in the years since, most US brands — not just footwear and apparel companies like Nike, Timberland and Gap, but corporate giants like GE and Walmart — have assumed responsibility for human rights and environmental problems throughout their supply chains. But are conditions any better for the workers?

Those questions are front-page news these days, literally, in The New York Times, which has published two long and extraordinary stories about Apple and its supply chain in China. [See How the US Lost Out on iPhone Work and especially In China, Human Costs are built into an IPad.] The Apple-in-China story is also brought to life by Mr. Daisey and the Apple Factory, a lively, provocative episode of public radio’s This American Life, in which an actor-turned-reporter  named Mike Daisey investigates conditions at a Foxconn factory in Shenzhen. Together this reporting paints a shameful picture of harsh and unsafe working conditions at Apple suppliers: sometimes deadly safety issues, chemicals that scar people’s hands, 60-hour weeks, long stretches of work with no breaks, a rash of worker suicides, etc. To get some perspective, I spoke with Dan Viederman, the executive director of Verite, a nonprofit that helps companies build more humane and sustainable supply chains, and I’ve been reading my friend Adam Lashinsky’s excellent new book, Inside Apple.

Foxconn offers medical care on its campuses

For starters, let’s be clear: This is not an Apple problem. The focus of both The Times’ reporting and Mike Daisey’s story is Foxconn, which is said to be China’s biggest private employer and may be the world’s largest manufacturing company. It employs 1.2 million people (!) and assembles an estimated 40 percent of the world’s consumer electronics, for customers including Amazon, Dell, Hewlett-Packard, Nintendo, Nokia and Samsung, according to The Times. Part of a company called Hon Hai that is headquartered in Taiwan, Foxconn operates not just in Asia, but in the Czech Republic, Mexico and Brazil. It publishes a corporate social responsibility report and has US-based employees in Houston and Austin, TX.  Most Americans, of course, have never heard of Foxconn although they probably own something that was made by the company. [click to continue…]

Stephen Viederman: Foundations don’t practice what they preach

Today’s guest post comes from Stephen Viederman, the former president of the Jessie Smith Noyes Foundation and an expert on sustainable investing. Steve, who has worked in the foundation world for more than 25 years, defines sustainable investing is “future-oriented, risk-adjusted and opportunity-directed.”  This is also called socially-responsible or green investing.

Here’s the problem: Even foundations that aim to promote sustainability or social justice with their grants don’t see their investments as another tool to achieve that end. They don’t, in other words, put their money where their mouth is, or where their values are. Steve, by the way, is also the father of Dan Viederman, executive director of Verite, a human-rights nonprofit; evidently, working for the public good runs in the family. This essay was originally published by Inflection Point Capital Management, a new sustainability-driven asset management boutique led by the estimable Matthew Kiernan with offices in Toronto, London, New York and Melbourne.

Philanthropic foundations are like old-fashioned slot machines. They have one arm and are known for their occasional payout.

Although the term “mission-related investing” found its way into the lexicon of philanthropy decades ago, the finance committees of most foundations continue to manage their endowments like investment bankers. Their portfolios give no hint that they are institutions whose purpose is the public benefit. There is a chasm between mission – grantmaking – and investment. The logic of a synergy between the two has yet to take hold. [click to continue…]

Modern-day slavery: Here, there and everywhere

57470512SH007_migrantsModern-day slavery is not just about sex workers or poor people in faraway places.

Some farmworkers in the U.S., for all practical purposes, work as slaves.  Laborers  with few or no rights, working under inhumane conditions, typically far home, have produced such products as  blueberries, organic milk, personal computers or cell phones and garments imported from India, a new report says.

Consider:

An estimated 12 to 27 million people are victims of slavery, and other forms of forced labor around the world. In the United States alone, 10,000 or more people are being forced to work at any given time.

The report, called Help Wanted: Hiring, Human Trafficking and Modern-Day Slavery in the Global Economy (PDF for download, here),  was published by Verite, a non-profit based in Amherst, Mass., that monitors and reports on  labor rights abuses around the world. (It was funded by Humanity United, a nonprofit focused on peace and human rights started and chaired by Pam Omidyar.) Over the years, Verite has helped identify and clean up the supply chains of such global brands as Timberland, Gap, Levi Strauss, Apple, Disney and HP. I met with Verite’s executive director, Dan Viederman, last week in Washington to talk about the report, and what can be done to deal with slavery. [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.”