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Who's Who in Codes-of-Conduct?Enforced 'linkage' of trading privileges to respect for workers' rights has been a goal of the international labor movement for almost a century, but all of labor's efforts to achieve this through international organizations of governments, primarily the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), have been rebuffed. In the last half-decade, however, corporate codes of conduct dealing with workers' rights have proliferated, as have groups dedicated to monitoring firms and inspecting factories to determine whether they are actually observing the codes to which they have agreed. A significant number of well-known firms--including Levi Strauss, Nike, L.L. Bean, Reebok, Safeway, Jockey, Sara Lee, and Gerber-- have now accepted both the labor standards set out in the codes and the monitoring processes. If more and more firms adopt the codes, if compliance is objectively monitored, and if consumers tilt their purchasing towards firms certified as being in compliance, then respect for workers' rights may come to be in practice a condition for full access to international markets. 'Linkage' could become a reality -- not through international action by governments, but by the growth a kind of private 'common law' created by business firms and NGOs. Conditioning a firm's participation in international trade to its respect for the rights of its workers may possibly become a reality in an unexpected way -- that is the tantalizing possibility held out by the burgeoning of corporate codes of conduct and of systems to monitor firms' compliance with these codes. Enforced "linkage" of trading privileges to respect for workers' rights has been a goal of the international labor movement for almost a century, but all of labor's efforts to achieve this through international organizations of governments, primarily the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), have been rebuffed. Even efforts merely to create a WTO working group just to study the idea of linkage, led usually by the United States and France, were roundly rejected at WTO ministerial meetings in Marrakech in 1994, Singapore in 1996, and Seattle in 1999. In the last half-decade, however, corporate codes of conduct dealing with workers' rights have proliferated, as have groups dedicated to monitoring firms and inspecting factories to determine whether they are actually observing the codes to which they have agreed. A significant number of well-known firms have now accepted both the labor standards set out in the codes and the monitoring processes. These firms include such well-known brand names as Levi Strauss, Nike, L.L. Bean, Reebok, Safeway, Jockey, Sara Lee, and Gerber. If more and more firms adopt the codes, if compliance is objectively monitored, and if consumers tilt their purchasing towards firms certified as being in compliance, then respect for workers' rights may come to be in practice a condition for full access to international markets. "Linkage" could become a reality -- not through international action by governments, but by the growth a kind of private "common law" created by business firms and NGOs. (1) The above three big "ifs" illustrate the three necessary steps in creating effective linkage: setting standards, monitoring compliance, and enforcing the standards. Setting Standards International labor standards have been set for many years, but they have been almost totally ignored as trade has burgeoned in the globalized economy. Standard-setting alone is clearly insufficient to change practice. (2) The International Labor Organization (ILO) has since 1919 adopted over 180 conventions, many of them relating to workers' rights. In 1998 the delegates to the ILO's annual conference in Geneva designated seven of these conventions as "core labor standards" and initiated a campaign to get universal ratification of these core conventions by all countries. The seven conventions relate to four issues: workers' rights to freedom of association and collective bargaining (Conventions 87 and 98), child labor (Convention 138), non-discrimination in employment policies (Conventions 111 and 100), and forced labor (Conventions 29 and 105). Although the ILO is a tripartite international organization, composed of delegates from the business and labor sectors as well as from governments, and business thus had a full role in the writing of the conventions, the adoption of these international labor standards has had little discernible effect on business practices around the world. An egregious example of this is the extreme rarity of trade unions in the world's many export processing zones (EPZs). The ILO's experts do monitor the degree of compliance by countries' governments with the conventions and publish very objective reports that often criticize violations of the standards in many countries. However, the ILO does not monitor individual firms or factories, and does not have any enforcement powers. This lack of "teeth" explains the ineffectiveness of the ILO conventions. In the late 1970s, both the ILO and the Organization for Economic Cooperation and Development (OECD) adopted codes of conduct for multinational corporations (MNCs). Both codes covered such labor issues as non-discrimination in employment policies, and respect for workers' rights to organize trade unions and bargain collectively. The OECD in 1999 began a process to up-date its code of conduct, holding consultations with business and trade union representatives and posting an initial draft on its web-site for comment in January, 2000, and a second draft in March. Despite the involvement of the business sector in the adoption of both the ILO and OECD codes, the existence of these international standards over the past two decades has had no significant impact on the behavior of the MNCs. This stems from the lack of either monitoring procedures or sanctions of violators in connection with the codes. In the early 1990s some well-known MNCs, primarily in the footwear and apparel industries, adopted their own codes of conduct regarding workers' rights and labor conditions in their production facilities. One of the first was the Levi Strauss Co, makers of blue jeans. Its company code covered such issues as working conditions, minimum wages, environmental standards, and child labor. It broke new ground by covering the firm's 600 contractors in developing countries, not just Levi's own plants. By 1995, with four years of experience with its code, Levi had ceased business with about five percent of its contractors and had required improvements in a quarter of them. Levi's initiative was soon followed by other MNCs, such as Nike and Reebok in footwear, the Body Shop, the Gap, and Phillips-Van Heusen in apparel, and Mattel in toys. Many of these companies used personnel from their own staffs to make inspections of contractors' plants, sometimes on a surprise basis. (3) By the year 2000 the Business Roundtable listed more than twenty major U.S. companies which had adopted their own codes applying to all of their operations, worldwide. (4) Under these individual company codes, the firms choose the inspectors to monitor facilities producing the firm's goods. In the mid-1990s, two major exposes of sweatshop conditions in the apparel trade, one concerning Thai immigrants in Los Angeles, and the other the employment of child labor in Honduras, sparked the creation of several codes of conduct that various firms could adopt, with monitoring to be done "externally," by independent inspectors, rather than only "internally," by each firm itself. The intent was to provide codes reflecting a broad consensus on labor standards, and to give the code of conduct process more credibility by supplementing internal with external monitoring. These multi-firm codes proliferated to the point that the World Trade Organization (WTO) felt it necessary to adopt a code of conduct on the adoption of codes of conduct. The WTO code calls on those creating codes to ensure that the standards adopted are non-discriminatory and that the codes do not create "unnecessary obstacles to international trade," and to base the codes primarily on existing international standards so as to promote the "harmonization" of the proliferating codes. (5) Among the more prominent multi-firm codes that have been developed are the following: The Fair Labor Association (FLA) www.fairlabor.org This organization grew out of the White House Apparel Industry Partnership (AIP), an ad hoc group of apparel firms, unions, and NGOs convened in August, 1996 by the Clinton administration in response to the scandals in Los Angeles and Honduras. In November, 1998 the White House released a report on the AIP's work that included a proposed code of conduct on workplace standards and a set of monitoring guidelines. A process was then begun to create the FLA as a permanent organization to implement the code. This led to a split among the organizations involved in the AIP/FLA process. Two apparel firms withdrew, feeling that the inspection provisions were too strict. The unions involved in the AIP, including UNITE (the major U.S. garment and textile labor federation) also withdrew, charging that those provisions were too lenient, and could allow firms to use the code as a cover of respectability while continuing unfair labor practices. The NGOs in the AIP effort also split. The Interfaith Center on Corporate Responsibility, feeling that the monitoring glass was half empty, withdrew. Four other NGOs, including the International Labor Rights Fund and the Lawyers Committee for Human Rights, viewing the glass as half full, decided to stay with the effort, and became founding members of the FLA. (6) In January, 2000 the FLA named its Executive Director: Sam Brown, former anti-Vietnam War activist, director of ACTION, and U.S. Ambassador to the OSCE. Mr. Brown reports to a fourteen-member board composed of six industry representatives, six NGO representatives, one university representative, and a neutral chairperson. The FLA also has an NGO Advisory Council, composed of a number of NGOs in the U.S., Asia, and Latin America that are concerned with workers' rights, and a University Advisory Council comprised of representatives of approximately 150 universities and colleges that have affiliated with the FLA, seeking to assure that firms licensed by the schools to produce products bearing the schools' names and logos are observing fair labor standards in their production facilities worldwide. The FLA is funded with dues paid by the participating firms and universities. (The latter pay one per cent of their annual licensing revenues, with a minimum of $100 and a maximum of $50,000). During the latter part of 2000, the FLA was in the process of accrediting groups to act as FLA external monitors. The first accreditations are expected to be made in early 20001. The FLA's member firms were simultaneously setting up their own internal monitoring systems. (See section below on "Monitoring Procedures.") The first certifications by the FLA that member firms, and their overseas contractors and suppliers, are in compliance with the FLA code of conduct thus await the launching of the monitoring process. The Worker Rights Consortium (WRC) www.workersrights.org This group was created through the activity of the United Students Against Sweatshops (USAS), formed during a wave of student activism in1998 to assure that colleges and universities limit the use of their names and logos to sweatshop-free apparel. The collegiate licensing industry has a total annual sales volume of about $2.5 billion, much of it involving major corporate names such as Nike, Gear, and Champion. Commencing with a sit-in at Duke University, the movement involved teach-ins, demonstrations, and occupations of university buildings, and eventually coalesced into the formation of the USAS. Just as the AIP led to the founding of the FLA as an implementing body, the USAS created the WRC in April, 2000 as an organization to adopt a formal code of conduct for university licensing and to create a monitoring system to verify compliance with the code. Unlike the FLA, the WRC is governed only by representatives of student groups, labor unions, and NGOs, without participation by the apparel and footwear firms themselves that produce the universities' caps, jackets, and sweatshirts. This greater independence has led the UNITE union, the AFL-CIO, and several NGOs concerned with workers' rights to participate in the WRC, either on its Governing Board or in its Advisory Council. The WRC is funded by dues paid by participating colleges and universities. Schools that receive royalties from a licensing program are asked to pay one per cent of their previous year's licensing revenues (with a minimum of $1,000 and a maximum of $50,000). Rather than create a comprehensive monitoring process, the WRC plans to use a system of spot-checks, carried out by local trade unions and NGOs in the countries concerned, responding to workers' complaints, and also pro-actively targeting firms in regions in which there has been a pattern of violations of workers' rights. The WRC will not certify that a firm is in compliance with the WRC code -- rather, it will cite companies for specific violations. (The WRC feels that, given the multiplicity of small production shops in many countries producing for the universities' licensees, it is not possible to certify with any certainty that all of a given firm's suppliers and contractors are in compliance.) The WRC plans to help the indigenous worker-allied groups develop their capacities to participate effectively in the monitoring system of spot checks. At the end of 2000, the WRC's inspection program was still in the process of formation. Worldwide Responsible Apparel Production (WRAP) www.wrapapparel.org Given that only a few major U.S. apparel firms were involved in the White House's AIP initiative, the American Apparel Manufacturers Association (AAMA) moved to create its own code of conduct and an organization to monitor apparel firms' compliance with that code. The AAMA's member firms produce over 80% of the apparel sold at wholesale in the U.S. Among the well-known firms affiliated with the AAMA are Phillips-Van Heusen, Jockey International, and the Sara Lee Corporation. In 1998 the AAMA approved a WRAP code of conduct, and in July, 2000 the WRAP Certification Program was created as an independent entity with its own Board of Directors, chaired by Joaquin Otero, former Deputy Undersecretary of Labor during President Clinton's first term. The ten-member board consists of six independent members with no ties to the apparel industry and four executives of leading apparel firms. Lawrence Doherty, a former trade-union activist, was named WRAP's Executive Director. The Certification Program will operate the monitoring process to verify whether factories producing for AAMA member firms are abiding by the WRAP code of conduct. By mid-July, 2000 an initial 120 garment factories in sixteen countries had applied to be monitored under the Program, which trains and accredits outside organizations to conduct factory inspections. The WRAP program is funded by fees paid by factories registering with the program and by monitoring firms applying for accreditation as WRAP inspectors. By late 2000 WRAP had provisionally accredited seven monitoring groups, most of them for-profit auditing and testing firms, and was seeking to build a network of local NGOs abroad to participate in the monitoring process. The provisionally accredited monitors had certified five factories to be in compliance with the WRAP code, and WRAP was expecting the total to reach 100 in early 2001. Social Accountability International (SAI) www.cepaa.org In the mid-1990s the Council on Economic Priorities (CEP), a 30-year-old research institute studying issues of corporate social responsibility, became concerned that the growing number of company-specific codes of conduct were inconsistent, unclear, and expensive to monitor, given that monitors had to be trained to apply each code separately. The Council therefore created the CEP Accreditation Agency (CEPAA) in 1997 to develop a standard for workplace conditions that could "apply universally with regard to geographic location, industry sector, and company size." The development of the code was overseen by the CEPAA Advisory Board, a group of about twenty representatives, about half from business firms and the rest from trade unions and NGOs. This process resulted in 1998 in a code of conduct entitled "SA8000," modeled in its approach on the established ISO 9000 system for ensuring quality control in production. A process to revise the code on the basis of comments from those using it was begun in 2000, with the Advisory Board expected to issue the revised version in the spring of 2001. In mid-2000 the CEPAA changed its name to "Social Accountability International"(SAI). By spring, 2000 the SAI had accredited five auditing and testing firms to conduct inspections. These firms are required to consult with local trade unions and NGOs. SAI certifications are made on a plant-by-plant basis. By late 2000, the SAI had certified 61 plants as being in compliance with the SA8000 code, of which 34 were in China and one in Vietnam. The Ethical Trading Initiative (ETI) www.ethicaltrade.org The ETI is a coalition of business firms (about 18, mostly based in Britain, but also including Safeway, Levi Strauss & Co., and The Body Shop), NGOs (about 17, including Oxfam Great Britain, the Save the Children Fund, and the Amnesty Business Group), trade union federations (including the International Confederation of Free Trade Unions, the British Trades Union Congress, the International Union of Woodworkers, and the International Textile, Garment, and Leather Workers' Federation), and the British government's aid agency, the Department for International Development. The British government is providing half the ETI's funding for its first three years of operation, with the rest to be derived from organizational membership fees. The ETI was created in 1997 and became fully operational in 1998. It has issued a Base Code of labor practice, based on the seven ILO core conventions, and covers such issues as freedom of association, working conditions, wage levels, and child labor. The ETI's initial activities have focused on pilot studies to test monitoring and verification systems. Four such pilot studies were under way in late 2000, concerning clothing in China, wine in South Africa, horticulture in Zimbabwe and Zambia, and bananas in Costa Rica. The ETI's eventual system of monitoring will be based on the experience gained in these pilot studies. The Global Compact www.unglobalcompact.org At the January, 1999 meeting of the World Economic Forum, in Davos, Switzerland, U.N. Secretary-General Kofi Annan challenged the world's largest MNCs to adopt standards on human rights, labor, and the environment, and observe them in their production facilities world-wide. After consultations with business firms, the International Chamber of Commerce, the International Employers Organization, the International Confederation of Trade Unions, and NGOs in the human rights and environmental fields, a nine-principle "Global Agenda" code of conduct was issued at a July, 1999 Geneva meeting chaired by Mr. Annan and Adnan Kassar, president of the International Chamber of Commerce. The U.N. program also issued detailed explanations of the four principles that relate to labor issues: freedom of association and collective bargaining, forced labor, child labor, and discrimination in employment. Over 300 large corporations have subscribed to the Global Compact's code, and the U.N. has asked that each firm apply the nine principles in its operations, and provide the U.N. program with one case study annually of how the company resolved a particular problem that arose during such application. The Global Sullivan Principles Twenty-two years ago the Rev. Leon Sullivan initiated a code of conduct for MNCs operating in South Africa, which was then under the apartheid regime. In 1996 Rev. Sullivan began consultations with a number of major corporations on a code of conduct for MNCs in the globalized economy. In November, 1999 he and U.N. Secretary-General Kofi Annan present the resulting eight-point Global Sullivan Principles at a ceremony at U.N. headquarters. Each company ascribing to the Principles is obliged to submit an annual report to Rev. Sullivan that provides examples of activities demonstrating progress in the application of the principles, lays out the firm's plans for further such activities in the coming year, and appends other pertinent company reports on its activities in the areas of the environment, social responsibility, and labor policies. By late 2000 over fifty firms had already subscribed to the Principles, including Coca-Cola, Ford Motors, General Motors, Hughes Electronics, Occidental Petroleum, Phillips-Van Heusen, Shell International, and Texaco. In addition to the above programs for codes of conduct and monitoring processes intended to apply either universally, or at least across an entire industrial sector such as apparel, there are several more specialized efforts. Among them are: The Fair Trade Federation (FTF) www.fairtradefederation.com The FTF is an association of producers and merchandising firms to assist craft artisans and poor farmers in developing countries. Its Board of Directors is composed of individuals active in development NGOs and in small retail outlets for products made by poor people in developing countries. It focuses on assuring that producers work in safe and healthy conditions and earn a living wage. Fair Trade www.globalexchange.org This is a project of Global Exchange, a U.S. NGO concerned with social justice in the globalized economy. Like the larger Fair Trade Federation, of which Fair Trade is an affiliate, the latter group focuses on craft artisans in developing countries, seeking to assure that they receive at least 15-to-30 percent of the retail price of their products. It operates two Fair Trade Craft Stores in the California bay area. It applies a nine-point set of Fair Trade Criteria that includes fair wages, environmentally sustainable practices, safe and healthy working conditions, and no use of child labor. TransFair USA www.transfairusa.org Created in 1996, TransFair is a non-profit monitoring organization, focusing to date on small coffee growers. It certifies that coffee roasting and retail firms are in compliance with four principles: purchasing from small farmers, paying them at least $1.26 per pound of coffee, providing the small producers with credit at non-usurious rates of interest, and developing direct purchasing arrangements with the producers, to cut out middlemen. TransFair received initial funding from the Ford Foundation. Its Board of Directors is composed of development and environmental activists, coffee experts, and small entrepreneurs. It is affiliated to an international group, Fair Trade Labeling Organizations (FLO), based in Europe. Rugmark International www.rugmark.org This organization, and its U.S. affiliate, the Rugmark Foundation - USA, seeks to abolish child labor in the hand-knotted rug industry in India, Pakistan, and Nepal. Rugmark certifies producers in those nations if they comply with the requirements that they register all their looms and factories with Rugmark, use no child labor, allow unannounced inspections of their facilities, and make contributions to the cost of educating former child carpet weavers. The inspectors are trained and supervised employees of the Rugmark Foundation. Carpets made by certified producers are individually numbered and supplied with the Rugmark label. By late 2000 over 190 carpet stores in all fifty U.S. states carried Rugmark-certified rugs. Comparison of the Codes Given the plentitude of codes of conduct, it is fortunate that they are very similar in many of their provisions. The five multi-firm systems of codes and inspection discussed above (the FLA, WRC, WRAP, SAI, and ETI) all address the following ten topics:
These ten topics include the four issues covered by the ILO's "core labor standards," and several of the groups explicitly state that their codes were derived in great part from ILO conventions. The wording of the codes is also very similar on many of the ten topics. Thus the business firms, NGOs, and trade unions involved in the development of the various codes seem to have arrived at a consensus on labor standards with which firms should comply if their products are to be traded internationally. It is important to note that in all seven of these major codes the business firms involved have explicitly accepted the principle that they are responsible for assuring fair labor practices by their numerous contractors and suppliers in the developing countries. Few of the well-known brand-name merchandisers actually produce many goods in factories that they own, using workers directly hired by the merchandising firm. Most of the brand-name goods in shoes and apparel are made in the facilities of smaller firms that actually employ the production workers. This acceptance of responsibility for conditions in contractors' plants is a complete turnabout from the position taken by many brand-name merchandisers prior to the 1990s. They had previously taken the stance that they could not control the actions of their contractors, and therefore bore no responsibility for labor conditions in their suppliers' plants. (This contention had exasperated the world's trade unions, which pointed out that the same firms seemed to have no difficulty exercising detailed control over the design and quality of the products those same plants produced). Now, by pledging to abide by the new codes of conduct, the brand-name merchandisers are putting their international relationships with their contractors on the same basis that has applied to their U.S. contractors and suppliers since the adoption in the 1930s of U.S. legislation making parent firms responsible for working conditions in their contractors' shops. (This principle was later confirmed in the post-war Taft-Hartley and Landrum-Griffith acts.) (7) The major topic on which there is as yet no consensus as to how it should be treated in the various codes is the issue of the "living wage." While all of the codes oblige firms and their contractors to pay at least the legal minimum wage in the countries where production takes place, many NGOs and trade unions contend that minimum wages are often set unreasonably and unnecessarily low. In some instances (notably in the United States) the incomes of workers receiving the legal minimum wage are below the legal poverty line. A "living wage" would be higher than the legal minimum wage. Three of the five codes adopted by the multi-firm groups with inspection systems have included provisions for a living wage. The SAI's SA 8000 code requires that wages "shall always be sufficient to meet basic needs of personnel and to provide some discretionary income." To implement this provision, the SAI uses a formula that estimates the cost of food per person in a household, assumes two wage earners per household, and sets a target for family savings. The British ETI code also requires that "wages should always be enough to meet basic needs and to provide some discretionary income." In an ETI paper on implementing this clause, the ETI compares the merits of using a formula or using a "living wage" figure resulting from local research and negotiation in each area. The ETI will test both approaches in pilot projects, and then choose which one to use. (8). The WRC code requires wages which "provide for essential needs and establish a dignified living wage for workers and their families." The code sets out a living wage formula involving the cost of basic needs such as housing, food, and clothing; average family size; and average number of adult wage earners per family. The FLA code has not initially required payment of a living wage, but the FLA, noting that the issue requires further attention, requested a Department of Labor study on wages in the apparel and footware industries in selected countries, and plans to use this data in a review of the FLA code's wage provisions. (The DOL study was released in March, 2000). The Global Sullivan Principles call for companies to "compensate their employees to enable them to meet at least their basic needs," rather than merely requiring payment of at least the legal minimum wage. With seven major codes of conduct, similar in their provisions, having been added in the late 1990s to the already-existing ILO conventions and the OECD and ILO guidelines for MNCs, there is no shortage of labor standards today. What is new is the burgeoning movement for credible monitoring of firms' compliance with those standards. Monitoring Compliance None of the five multi-firm systems of codes and inspections plan to hire inspectors directly, on their own staff payrolls. Instead, at the end of 2000, four of them (FLA, WRAP, SA8000, and ETI) were in various stages of "accrediting" and training other organizations to do the inspections on a contract basis. Three categories of groups will be involved in the monitoring process: long-established commercial auditing and testing firms, organizations that provide socially-conscious investors with information on the labor and/or environmental practices of companies, and local NGOs in developing countries that are active on issues of labor standards and human rights. Among the commercial auditing and testing firms involved are such well-known names as Underwriters Laboratories, Intertek Testing Services, the Swiss-based SGS Group, and PricewatershouseCoopers. The social-investment monitoring organizations include: The Investor Responsibility Research Center (IRRC) www. irrc.org The IRRC was founded as a non-profit organization in 1972 by a number of institutional investors, such as foundations and universities, to investigate whether firms were complying with social and environmental principles. When the Sullivan Principles were developed for U.S. firms operating in South Africa during the apartheid period, the IRRC studied the compliance of over fifty U.S. firms with the Principles. More recently, the IRRC has done similar investigations of whether firms comply with the McBride Principles in Northern Ireland. In 1997 the IRRC published the book Sweatshop Quandry on conditions in apparel production in developing countries, including Central America, and in late 2000 the IRRC completed a report commissioned by a group of U.S. universities on the conditions under which the apparel carrying the universities' names is produced. The IRRC provides reports on companies' compliance with various standards, especially in the environmental field, that are requested by over 500 clients such as institutional investors and law firms. The Ethical Investment Research Service (EIRIS) www.eiris.org In 1983 a group of mostly British churches and charities with investments set up the EIRIS to do research on corporate ethical behavior. Today it covers over forty research topics for more than 100 charities, pension funds, and other institutional investors. It maintains a database on 1,000 British and 500 European companies. Verite www.verite.org Organized in 1995, Verite provides investor research, factory inspections, worker interviews, and factory monitoring systems to ensure that goods sold under a company's trademark are produced in accordance with international human rights standards. The organization has conducted over 500 comprehensive factory evaluations in forty-six countries. Rather than merely report violations, Verite puts emphasis on helping firms to correct them. Verite has been particularly interested in the conditions in the plants of U.S. firms producing goods in China. Business for Social Responsibility (BSR) www. bsr.org The BSR, founded in 1992, is an association of over 1,400 companies, financed in part by the firms' dues. The BSR also receives funding from foundations, the U.S. government, and fees for services. It provides these services to its member firms to help them assure that their activities "demonstrate respect for ethical values, people, communities, and the environment." The BSR's activities are concentrated on conferences and training workshops on social responsibility for firms in the U.S. and abroad, including issues of auditing and accountability. The Global Reporting Initiative (GRI) www.globalreporting.org The GRI was created in 1997 to develop technical guidelines for the monitoring of companies' economic, environmental, and social performance. This initiative sprang from concern about a "proliferation of inconsistent reporting approaches developed by business, government, and civil society." The GRI's goal is to eventually develop a set of "generally accepted sustainability accounting principles" in the such areas as the environment, labor rights, workplace health and safety, and wages and working conditions. These principles would be the counterpart to the existing "GAAP" (Generally Accepted Accounting Principles") that are used by auditors world-wide. The GRI has a Steering Committee composed of a wide spectrum of organizations including the U.N. Environment Program, business corporations, NGOs, accounting bodies, and research centers. In March, 1999 the GRI issued its draft Sustainability Reporting Guidelines, which were then pilot-tested by twenty-one companies. In June, 2000 it released a revised version of the Guidelines, which are available for use by groups doing inspections in connection with the various codes of conduct concerning workers' rights. All five of the multi-firm systems of codes and monitoring require the participation of local NGOs in the monitoring process, either directly, or as "resource organizations" for the commercial auditing firms and the social-investment monitoring groups. This will require training of the NGOs' staffs and volunteers regarding both the content of the codes and the procedures for making inspections. Such procedures can be quite technical in nature, and the training process will thus be crucial for the effective use of the NGOs. Some of the multi-firm groups anticipate that local NGOs and trade unions will be able to use the fees they will be paid by such groups for doing the inspections as a source of organizational income. The Monitoring Systems The WRC The student-spawned, university-focused WRC plans to use a network of local worker-allied NGOs and trade unions in the countries where the goods are produced to investigate workers' complaints, through on-site inspections and off-site interviews with workers. In addition, the local NGOs and unions will conduct unannounced spot checks of plants in regions where there has been a pattern of violations of workers' rights. The WRC will use this monitoring by local groups to put "teeth" into the WRC's verification system by supplementing both the WRC's requirement that the universities' brand-name licensees provide affidavits that all of their production facilities comply with the code of conduct, and also the internal monitoring procedures companies may develop to ensure that their factories are in compliance. The local NGOs and unions are thus the core of the WRC monitoring process. The network of local NGO and union monitors was still in the process of formation in late 2000. The FLA The apparel-and shoe-industry- focused FLA has received numerous applications from monitoring groups, and expects to make its first accreditations in early 2001. The FLA hopes to see vigorous competition for its monitoring business among all three categories of monitors: commercial auditing firms, social-responsibility consulting organizations, and local NGOs. In 2000 some pilot monitoring was done, partly by Verite, in four Asian and Latin American countries, and some NGOs in India, Taiwan, and Central America were trained in monitoring techniques to prepare them for eventual FLA accreditation. The FLA's verification system will have two parts. First, the participating companies must set up systems to monitor all of their factories, and these internal company plans must be approved by the FLA. In the first year, each FLA member firm must internally monitor at least half of its plants, and subsequently will be required to annually inspect all of its factories. Second, the FLA 's own accredited monitors will inspect at least 30% of each firm's production facilities during the firm's first 2-3 year period of participation, and 5-to-15% thereafter. The plants to be inspected will be selected by the FLA's staff, with priority on those facilities "with the greatest risk of noncompliance." The FLA requires that local NGOs be involved in the companies' internal monitoring, and that NGOs must either directly conduct the FLA's external monitoring or be involved in it by other FLA-accredited monitoring organizations. WRAP This apparel-industry group will monitor on a factory-by-factory basis, giving a certification of compliance to factories that meet all of the points in the WRAP code of conduct, as verified by accredited WRAP monitors. Certifications are valid for two years, with unscheduled inspections occurring during that period when deemed necessary by WRAP on the basis of its risk criteria. By late 2000 WRAP had provisionally accredited seven monitoring organizations to do inspections, and had more applications pending. All of the provisionally accredited monitoring groups will be required to send their inspectors through WRAP monitoring training programs, to obtain permanent accreditation. The first such courses will begin in early 2000. WRAP will use a network of local NGOs in each country to participate in the WRAP monitoring process, either as accredited WRAP monitors themselves, or as "resource organizations" to assist WRAP monitoring groups through the NGOs' knowledge of the local scene and their permanent presence. The WRAP monitoring training process will help prepare local NGOs to compete with commercial firms, and with social-responsibility consulting groups, for WRAP's monitoring business. WRAP will emphasize the importance of the NGOs maintaining objectivity and professionalism when doing inspections. By the end of 2000, using the provisionally accredited monitors, WRAP had certified five factories as being in compliance with all of the WRAP code's principles, and expected to have about 100 facilities certified by early 2001. Each factory can then decide whether to use the certification report in its own advertising and business negotiations. SAI To monitor companies' compliance with its SA8000 code of conduct, the SAI is accrediting auditors to conduct factory inspections. By late 2000 the SAI had accredited five commercial auditing and testing firms: SGS, Underwriters Laboratories, Intertek Testing, Det Norske Veritas (DNV), and the Bureau Veritas Quality International (BVQI). SAI requires that its accredited monitors consult with local trade unions and NGOs prior to each audit, and collaborate with them during the auditing process, so as to take advantage of "their unique knowledge of the communities in which they work." The SAI hopes eventually to accredit some NGOs themselves as SA8000 auditing bodies. To guide its auditors, SAI has developed a detailed Guidance Document, and conducts professional auditor training courses. By late 2000 SAI had certified 61 factories as being in compliance with the SA8000code, 35 of them in China. (The SA8000 code requires that where the workers' right to freedom of association is restricted by law, "the company shall facilitate parallel means of independent and free association and bargaining for all such personnel." Some observers of labor conditions in China have expressed doubt that many such "parallel means" have come into existence, even if firms have tried to facilitate their creation.) The ETI Companies joining the ETI are required to carry out audits to monitor their local suppliers and contractors as to compliance with the ETI Base Code. Where violations are found, the ETI member firms must monitor progress on correcting the problems. Of the ETI's four pilot programs under way in 1999 to test monitoring systems, the project in Costa Rica's banana industry is testing two approaches. One is using the SGS auditing company as a monitor, to see whether such use of commercial auditing firms can obtain credibility. The other approach involves local companies, unions, and NGOs designing an inspection process and carrying out inspections on a multi-stakeholder basis. ETI's eventual approach to monitoring will be based on the lessons learned in these pilot studies. With the monitoring processes for verification of the various codes still in their early stages, and only a few factories or firms having yet been certified as being in compliance, it is too early to tell how effective the verification processes will be. It will be a year or two before the accuracy, objectivity, completeness, and credibility of the monitoring can be judged. However, with so many independent verification initiatives being launched, using detailed technical inspection systems, involving local unions and NGOs, and offering training courses for inspectors, one can hope that the existence of international labor standards, which alone has done little for workers in developing countries, will finally be supplemented by a serious system of verification. If so, then two of the three steps necessary for linkage of workers' rights to trading privileges will be in place. Enforcing the Standards The third requirement will be a system to reward firms that comply with the codes, and punish those that do not. Given that the nascent system of codes of conduct is a voluntary one, outside of international treaty law, and unable to call on governments to impose sanctions on violators, enforcement will have to depend on two non-governmental forces: consumer purchasing decisions, and publicity in the media. The most powerful force to back up the codes would be decisions by significant numbers of consumers to skew their purchases in favor of firms and factories certified to be in compliance with a code, and against those that lack such a "Good Housekeeping seal of approval." If customers begin asking stores whether their apparel is "WRAP certified," or whether their running shoes have won an "FLA service mark," or whether their hand-knotted carpets carry Rugmark labels, or whether their items with university logos are from WRC-inspected plants, and those consumers then refuse to buy products lacking certification, then uncertified firms will lose sales, and firms in compliance will increase sales. The customer's money would be the most effective enforcement mechanism. Will the consumers make such distinctions? It is too early to tell, and there are both optimists and pessimists on this issue. The pessimists note that some large firms have refused to participate in voluntary codes-of-conduct processes because those firms don't think the certifications will make any significant differences in consumer behavior. (9) The optimists cite various public-opinion polls that indicate consumers will be selective in their shopping., For example, a poll by a University of Maryland institute showed the 75 percent of American consumers would be willing to pay $5 more for a shirt if they were sure it was not made in a sweatshop. (10) Another poll conducted by U.S. News and World Report showed that over 90% of Americans said they were concerned about the working conditions under which products are made in Asia and Latin America. (11) The optimists also note that some firms, such as the Body Shop, have based their marketing strategies on identifying their brand name with responsible social and environmental policies, with considerable success to date. In South Africa, some forest products exporters reacted to pressure from British home improvement buyers by obtaining Forest Stewardship Council certification for their operations. (12) Thus there are some indications that the general consuming public may support codes of conduct at the cash register, but no overall trend can yet be determined. Observers of the code of conduct phenomenon note that European consumers seem already to be more environmentally and socially conscious than are North Americans. Within the U.S., college students seem to be more concerned with the "sweatshop" issue than is the general public, judging by the emotional force behind the campus anti-sweatshop movement that produced the WRC. If the views of these segments of the world's consumers become generalized, then the consumers could provide the "muscle" to enforce the standards. Time will tell. Even if it turns out that consumers are indifferent to the issue of workers' rights, and just buy whatever product looks best and/or cheapest to them, firms might be moved to comply with the codes out of fear of bad publicity or the hope of good "P.R.," even if they doubt that such publicity will actually affect their sales. Companies are very sensitive to what is said about them in the media. The code of conduct movement itself is viewed by many observers as stemming from the exposes in the U.S. in the mid-1990s. In the business world, publicity, favorable or critical, can constitute pressure in itself. Firms are "image-conscious." Thus another factor determining whether standards can be enforced will be the degree to which the media publicizes the certification of some companies or the failure of others to obtain it. Here, the enthusiasm and energy of college students can help generate publicity for the code of conduct process. On a longer-term basis, labor-friendly NGOs can also mobilize public opinion on the sweatshop issue, so that it remains "news," and continues to obtain media coverage. We are still far from making "linkage" of workers' rights with trade an effective reality, but at least there are now two initiatives in that direction: the traditional effort "from above" to get linkage into international trade agreements, especially through the WTO, and now the initiative "from below" to hold producers' feet to the fire through codes of conduct, with objective monitoring, and enforcement by consumers and the media. If one or the other of these efforts succeeds, the workers in developing countries may finally win higher wages, better working conditions, and -- most important of all -- greater human dignity. Notes 1. See Daphne Eviatar, "Just Don't Do It," The American Lawyer, November, 2000, pp. 107-108. 2. Thomas Donaldson, a professor at the Wharton School of Business, states that "codes by themselves are worthless." See Thomas Donaldson, "The Promise of Corporate Codes of Conduct," Carnegie Council on Ethics and International Affairs, Human Rights Dialogue, Fall, 2000, pp. 16-17. See also Evitar, op. cit., p. 108 for a judgement that international labor standards are "notoriously ineffective and unenforceable." 3. Robin D. Givhan, "A Stain on Fashion," The Washington Post, September 12, 1995, p. B-4. 4. The Business Roundtable, Corporate Social Responsibility in China: Practices By U.S. Companies, February, 2000. 5. World Trade Organization, Code of Good Practice for the Preparation, Adoption, and Application of Standards. 6. On the splits, see Daphne Eviatar, "Just Don't Do It," The American Lawyer, November, 2000, p. 109, and Richard Applebaum and Peter Dreier, "The Campus Anti-Sweatshop Movement," The American Prospect, September-October, 1999. 7. See the testimony of Jay Mazur, President of the International Ladies' Garment Workers' Union, before the Commission on the Future of Worker-Management Relations, July 25, 1994, p.3. 8. David Steele, "The 'Living Wage' Clause in the ETI Base Code -- How to Implement It?," www.ethicaltrade.org/resources/ETI Reports. 9. For example, Daphne Evitar quotes an executive of a major retailer as making such a calculation. See Evitar, op. cit., p. 110. 10. See Jenny Bates, "International Trade and Labor Standards," The Progressive Policy Institute, April, 2000, www.dlcppi.org/texts/trade/standards, p. 7. 11. U.S. News and World Report, December 16, 1996. 12. See "The Role of Voluntary Initiatives," PIU Trade Report, p. 156, available at www. cabinet-office.gov.UK/innovation. |