FAIR LABOR ASSOCIATION 2008 ANNUAL REPORT · Caitlin Morris Nike, Inc. Gregg Nebel adidas Group...

January 1, 2007–December 31, 2008

September 2009

F A I R L A B O R A S S O C I A T I O N

2 0 0 8 A N N U A L R E P O R T

www.FairLabor.org

The Fair Labor Association brings together colleges and universities, civil societyorganizations and socially responsible companies in a multi-stakeholder initiativeto improve the working conditions for thousands of workers around the world.

Our board of directors includes six representatives of universities, six representatives of non-governmental organizations, six

company representatives and an independent chair.

Independent Chair

Adele Simmons, Chicago Metropolis 2020, served from October 22, 2003 until July 31, 2007

Carol Bellamy, World Learning, served from August 1, 2007

Board of Directors 2007–2008

Industry Caucus

Nicole Bassett (2008)Patagonia

Daryl BrownLiz Claiborne, Inc.

Tim FreerNew Era Cap Company

Art HeffnerPhillips-Van Heusen Corp.

Reiner Hengstmann (2007)PUMA AG

Caitlin MorrisNike, Inc.

Gregg Nebeladidas Group

NGO Caucus*

Marsha DicksonEducators for SociallyResponsible Apparel Business

Linda GolodnerNational Consumers League

Pharis HarveyFormerly of InternationalLabor Rights Fund

Michael PosnerHuman Rights First

James SilkOrville H. Schell, Jr. Center forInternational Human Rights

* One NGO seat vacant.

University Caucus

Bob DurkeePrinceton University

Carol KaesebierNotre Dame University

Until May 2007

Rick Van BrimmerThe Ohio State University

Elizabeth KennedyUniversity of SouthernCalifornia

Derek LochbaumUniversity of North Carolina

Beginning June 2007

Karen DaubertWashington University

Maureen RiedelPennsylvania State University

Craig WestemeierUniversity of Texas

Beginning June 2008

Joe EbaughUniversity of Maryland

Contents

President’s Message 2

A Decade of Protecting Workers’ Rights 6

FLA Affiliates: Partners in Labor Compliance 9

Toward Sustainable Compliance 12

Innovations 15

Monitoring and Verification 20Independent External Monitoring

Code Compliance and Remediation

Noncompliances by Region

Independent External Verification

Third Party Complaints 28

Special Report: FLA Soccer Project 32

Guest Article: Worker Participation and Engagement 43

MESSAGE FROM THE PRESIDENT

Thelast couple of years havebeen a period of transitionfor the FLA, in more waysthan one. The global

economic system has been shaken to itscore and the impact on workers hasbeen palpable around the world. Thework of the FLA has been dominated bycontroversial factory closures andmitigating the impacts of the crisis.Falling orders have meant that factorieshave had even fewer resources toensure that they respect workers rights,especially in cases where factories havehad to lay off workers or worse, closetheir doors. The decision to retrenchworkers as a means of cuttingexpenses—no matter how valid it maybe—heightens the risk that workersrights could be violated.

Predicting how long economic recoverywill take is a difficult task; however,a few implications are already clear.The crisis has highlighted the criticalimportance of labor compliancemethodologies that are focused onprevention and sustainability. I firmlybelieve that there is potential to preventlabor rights violations through capacitybuilding initiatives, which helpcompanies to develop the policies,procedures and trained staff required tomanage highly controversial issues, andthat progress and impact can bemeasured through key performanceindicators.

The economic and social turmoil we arewitnessing has also tested the FLAmethodology and placed a tremendousresponsibility on all constituents tonavigate the crisis in a way that isconsistent with our commitment to

social responsibility. Worker rightsshould not be the first victim ofrecession, and it is essential thatcompanies and factory owners plan forsuch events in the future by makingprovisions for retrenchments andclosure. One could argue that our dutyto behave in a socially responsiblemanner increases in a period of crisis.

Some industry leaders have stepped upto address the impact that thedownturn is having on developingcountries, millennium challenge goalsand the most vulnerable populations,such as women, children and migrant

workers. Many countries have no orvery frail safety nets or social insuranceto assist workers who have been laid offor labor market policies to ensurerecovery. Women are returning tosubsistence farming and migrantworkers are finding themselvesstranded without a means to returnhome. China, with over 20 millionmigrant workers displaced followingthe Chinese New Year 2009, was one ofthe few countries that reacted quicklyto develop a labor market strategy tosave jobs and protect wages, and tomaintain social stability.

FAIR LABOR ASSOCIATION � 2007/2008 ANNUAL REPORT 2

The global economic crisis hashighlighted the importance ofmethodologies that focus onprevention and sustainability.

The FLA and the labor rightscommunity have been grappling forsome years with the fundamentalchallenge of ensuring decent workingconditions in jurisdictions where thereis no enforcement or respect for laborrights. The FLA started out as acompliance program applied to the firsttier of the global supply chain of brandsand licensees. The program hasexpanded to include retailers andsuppliers and has added a proactive,preventive system to achievesustainable compliance throughcapacity building. The test ofsustainability necessarily assesses howcompanies treat their workers andconsumers, in addition to how theymanage the natural resources they use.Sustainable compliance will have beenachieved when workers and managersin a factory are able to collaborate toensure that the entire employment lifecycle is managed in a code-consistentmanner.

We realize that the traditional auditalone cannot bring about sustainablecompliance and reduce the overall levelof labor rights violations in globalsupply chains. The audit, when properlyconducted, tells us what a factory lacksin order to be in compliance withnational and international laborstandards and the FLA code. It is at thispoint that the buyer and the supplierneed to start addressing the deficits, bethey at the level of policy, procedure,training, or communication. The FLAhas been at the forefront of efforts todevelop initiatives beyond monitoringto address these issues. Our sustainablecompliance system (FLA 3.0) is themost defined and advanced program inthat regard. You’ll see a great deal aboutthis program throughout the pages ofthis report; many of the concepts andtools are being infused into newprograms where the responsibility for

compliance is shared among manystakeholders from the customer, such asthe college and university affiliates, andbuyer level to the local factory andcommunity level. Local stakeholderengagement is essential to the processof determining the priority areas forcorporate social responsibility.

Traditional labor compliance auditscontinue to be a very important duediligence tool for checking andmeasuring compliance at key points. Inthis report, we present two years of FLAmonitoring data (for 2007 and 2008).The natural tendency would be tocompare the data to assess progress, orthe lack of it, quantitatively. I cautionagainst that because audits are largelyqualitative in nature and representcompliance only within the supplychains tested. I think that they correctlyreflect the challenges the laborcommunity continues to face in makinga difference in the overall level of laborrights globally, but this belies the impactthe FLA and its affiliates have had onthe daily lives of over 4 million workersin factories subject to the FLA systemover the past two years. In follow-upverifications, we have found a 70percent plus success rate in remediatingtough problems in factories.

Still, even when well done, audits andremediation intervene late in theproduction process. One can draw a

direct parallel between traditional laborcompliance auditing and the qualitymovement which realized that end-of-line quality controls were ineffectiveand expensive. The pursuit of quality inthe apparel industry, for example,therefore became a question of in-linequality control—sewing the quality intothe garment, rather than detecting themistakes after the fact. Better to make agarment right the first time than torework it again. The same logic appliesto the compliance process. We need toembed compliance in the product, andthat process needs to begin well beforethe cloth is cut.

There are two dimensions tosustainable compliance that are fastcoming into focus. The first is that thecompliance imperative begins with thebuyer. The way the product is designed,developed and sourced all influence theprospects for compliance. Everybusiness unit involved in the process ofgetting a product made has someinfluence on the compliance status ofthe product, although most of thosebusiness units are probably not aware ofthe role they could play or trained toensure that their influence is not anegative one. Building compliance intothe process would therefore involve theeducation of all the decision makersalong the production chain. Further,they need to be equipped with theinformation and tools to avoid making


Local stakeholder engagement isessential to setting priorities ofcorporate social responsibilityand creating sustainable solutionsto labor compliance challenges.

decisions which have a high risk ofcompromising labor compliance. This isthe sort of integrated supply chainmanagement that FLA-affiliatedcompanies should strive to implementand may very well be the next level ofcompetitiveness.

The second dimension to buildingsustainable compliance into the productis to make sure that the materials useddo not already embody violations ofhuman, labor or environmental rights.The issue of Uzbek cotton demonstratesthis very clearly. If the cotton used in agarment was picked by forced child laborin Uzbekistan, all the efforts to ensurethat the cloth was cut and sewn in alabor compliant manner may onlyaddress part of the problem. Withenhanced technology and mobility, thereis greater transparency all along thesupply chain. The more that is knownabout issues along the supply chain, themore likely we’ll be called to engage onthese issues. In the near future, it islikely that companies will have toconduct a life-cycle analysis of theirproducts and the material supply chainsin order to identify all the risks involved.I hasten to add that this does not meanthat brands should take responsibility forall risks, but there is a duty to know anda duty to avoid those risks.

The FLA has a project in progress that istracing clothing back to the cotton fieldsand we are also adapting ourmethodologies for labor compliance tothe agricultural sector. This will allowall stakeholders to identify the issues ina supply chain, from child laborconcerns in the field to health andsafety issues related to pesticide use.The FLA is not expanding its mandatefrom the factory all the way to the farm.We are testing the capabilities of ourtools at different levels of the supplychain and in the process trying to raisethe consciousness of companies to bemore proactive in their efforts toprevent labor violations, and to expandtheir engagement with stakeholders andother partners in and around the supplychain to create sustainable solutions. Inparticular, it’s important to get suppliersto assume ownership and responsibilityfor their compliance programs, whichwill mean fewer audits by buyers andmore collective or coordinated capacitybuilding programs.

Moving to a full life-cycle analysis willobviously take time and additionalresources, but the increasingtransparency of the supply chain willplace an onus on socially responsiblecompanies to take proactive steps tomanage the risks present in the life

cycle. There are many examples of life-cycle risks that are likely to demandattention in the short-to-medium term.The prevention strategy also requiresthe integration of social, labor andenvironmental criteria into the businessmodel in order to avoid or foreseepotential problems along the supplychain. More and more companies arestarting to report the carbon footprint oftheir products, but many commentatorsargue that water will present us witheven bigger challenges than energy.Management of this preciouscommodity is set to become a verycontentious issue as the competitionbetween food production and industryincreases, and major exportingcountries such as India and China startto deplete their water supplies. Societywill have to make some difficult choices.When consumers learn that it takesbetween 7,000–20,000 liters of water toproduce one kilogram of cotton fiber,we may see consumer reactions thatmay be even more decisive than in thecase of labor and human rights. Childlabor pricks the conscience of theconsumer, whereas the environmentalconsequences of irresponsible companybehavior may interfere with theconsumer’s quality of life and personalwell-being. These labor andenvironmental issues will almostcertainly be combined in the collectiveconscience and be more powerful thanever.

If sustainable compliance meansfactories that are self-sufficient in theirmanagement of code issues, then theFLA needs to continue to develop therange of tools and materials needed toincrease the capacity of the supplychain to meet and maintain ourstandards. In the course of testing oursustainable compliance methodologiesin the Soccer Project over the last threeyears, we developed a new set of


The increasing transparencyall along the supply chain willplace the onus on companiesto integrate social, labor andenvironmental criteria intotheir business model to preventviolations.

assessment tools that now providesolutions to a number of the challengeswith which we have been grappling.They are a series of web-based toolsthat allow us to profile a company,group of companies or even an entiresupply chain at different levels. Theyallow us to scale our services, which isvital to the limited compliance capacityof the licensee community and smallcompanies. The FLA’s core program,with its internal and externalmonitoring components, continues tobe demanding for many companies,particularly smaller brands anduniversity licensees but is essential forlabor compliance. The FLAcontinuously seeks ways of making theprogram more affordable and effectiveto companies of all sizes and

capabilities, including licensees. To datewe have produced web-based tools thatallow universities to profile theirlicensees, licensees to assess theirsuppliers, Participating Companies toassess their suppliers and suppliers toassess themselves. The FLA onlineassessment and training portals, withtheir diagnostic and capacity buildingtools, are a key resource on the road tosustainable compliance.

We must also not forget that workershave a critical role to play in sustainablecompliance and their views should beintegrated into the decisions that affecttheir lives. If workers are aware of theirrights and are able to exercise themthrough organizations of their ownchoosing and have trusted channels to

communicate grievances, the role of theFLA and its constituents becomes thatof enablers rather than enforcers.

AURET VAN HEERDEN

PRESIDENT AND CEO


Increasingly studies show thatconsumers are thinking abouthow the products they buyimpact the world, and that they

are willing to change their buyinghabits for social good. Consumers arelooking for information that helps themto make purchasing decisions thatsupport social and environmentalsustainability. Even in a recession,consumers feel it’s important forcompanies to be dedicated to a socialpurpose.

While eco-friendly, organic and fairtrade products have demonstrated theyhave appeal, consumers also place high

priority on a company’s commitment totreat its workers decently and beresponsible in the communities inwhich it operates. Consumers wantassurances that the brands they buy arenot produced in sweatshop conditions.

Ten years ago the Fair LaborAssociation (FLA) evolved out of amulti-stakeholder partnership whichcame together to end the use of childlabor and other sweatshop practices inapparel and footwear factories. The FLApromotes and enforces a broadWorkplace Code of Conduct, based onInternational Labour Organization(ILO) standards, aimed at protecting

key worker rights. Complementing theFLA code are specific benchmarks thatdefine the level of conformity requiredto meet the FLA standards. Companiesthat join the FLA and demonstratesubstantial compliance with the codethroughout their supply chain areeligible to have their labor complianceprograms accredited by the FLA.

As a leader in global monitoring for thepast decade, the FLA has made somegains. Today we seldom find childrenbelow legal age working in factoriesthat produce for FLA-affiliatedcompanies. These global apparelcompanies are taking responsibility for

A DECADE OF PROTECTING WORKERS’ RIGHTS


working conditions in productionfactories, strengthening theirmonitoring and working with supplierson better ways to run their plants andmanage workers.

The FLA enters its second decadewith an even greater commitmentto enhance the capabilities of brands,suppliers and workers so that togetherthey can ensure labor standards areconsistently upheld. The FLA’s multi-stakeholder process is its greateststrength, creating a sharedcommitment by socially responsiblecompanies, colleges and universities,and civil society organizations toimprove working conditions formillions of workers all around theworld. The FLA does that throughseveral key program areas:

Monitoring and Verification

Upholding the Workplace Code ofConduct requires due diligence.Companies that join the FLA committo establishing internal systems formonitoring workplace conditions andmaintaining Code standards throughouttheir supply chains. A core componentof the FLA’s program is conductingindependent and unannounced auditsof factories used by FLA affiliates andevaluating compliance with all codeelements. The FLA conductsunannounced external inspections allover the world, including: the Americas;Europe, Middle East, and Africa (EMEA);South Asia; South East Asia; and EastAsia. In 2007–2008, FLA accreditedmonitors conducted 239 factory visitsin 27 countries across the globe.


FLA companiesare takingresponsibilityfor workingconditionsin productionfactories,strengtheningtheir monitoringand workingwith suppliers onbetter ways torun their plantsand manageworkers.

FLA Factory Audits and Workers Impacted 2007–2008

2007 2008

Factories Audited 119 120

Audits (including shared facilities) 132 136

Number of FLA Factories 4,179 4,532

Estimated Number of Workers in FLA Factories 3.7 million 4.2 million

Estimated Workers in Audited Factories 106,766 126,136

The FLA external monitoring system isfully transparent and the only one thatholds companies publicly accountable.The FLA posts the results of all auditson our website, as well as the actionplans that FLA-affiliated companiesdevelop with their supplier factories tocorrect any issues that are found.Aggregate findings from auditsconducted in 2007 and 2008 can befound starting on page 20.

Preventing Labor Violations

The FLA approach isn’t simply to policefactories, but also to encouragepartnership and collaboration amongfactory owners, buyers, workers andother community stakeholders, such astrade unions and NGOs, to preventlabor violations in factories fromhappening. The FLA proactively workswith local stakeholders, including civilsociety groups, to uncover the rootcauses of the most serious andpersistent labor problems and todevelop sustainable solutions thatensure greater compliance in the future.

The FLA sustainable compliancemethodology (FLA 3.0) is designed to

strengthen the capacity of suppliers andworkers to, along with buyers, takegreater responsibility for codecompliance and continuousimprovement programs in theirfactories. In contrast to traditionalaudits that use “yes or no” check-offformats for determining compliance,the sustainable compliancemethodology starts with a stakeholderforum to define priority issues and thenconducts assessments that can measurea factory’s degree of compliance andincremental progress with laborstandards. After testing this approach inChina and Thailand (see page 32), theFLA has been rolling this process out inseveral countries.

Creating Space for Dialogue and

Cooperation

A key objective of many projects andundertakings by the FLA is to involve awider and more diverse set ofstakeholders in our efforts to addressglobal issues in labor compliance. TheFLA frequently hosts multi-stakeholderforums to provide a respectfulenvironment for different groups toprovide their perspectives on the issuesand to collaborate on projects andsolutions. The FLA forums drawrepresentatives from non-governmentalorganizations, trade unions,government agencies, suppliers,companies, and universities toexchange experiences, ideas, andpossible initiatives to improve workingconditions in the supply chain.

The FLA Board held its summermeetings abroad in 2007 and 2008, forexample, to facilitate greaterparticipation by internationalstakeholders and to explore laborcompliance challenges in leadingexport regions. The FLA hosted aStakeholder Forum in conjunction withthe June 2007 Board Meeting in

Santiago, Dominican Republic, toaddress the challenges of promotingand protecting worker rights followingthe expiration of the country-specificquota system embodied in the Multi-Fibre Arrangement (MFA).

China’s global significance as a tradepower and its importance as a sourcingdestination for FLA-affiliated companiesprompted the FLA to select China as thevenue for its June 2008 Board Meetingand the FLA Stakeholder Forum. TheFLA also was involved in severalinitiatives in China, including a projectwith the Chinese Chamber ofCommerce for Import and Export ofTextiles (CCCT), to pilot the FLA’ssustainable compliance methodology.The Stakeholder Forum, held inKunshan city (near Shanghai), focusedon the opportunities and challenges thatChina’s new Labor Contract Lawpresented for improving workers’ lives.

Expanding Our Reach

The FLA constantly strives to havegreater impact and reach with ourprograms. The FLA engages in specialprojects to test new strategies foraddressing labor standards issues thathave proven difficult to solve, tacklinglabor issues down the supply chain inthe cotton fields, or adapting ourmethodologies to other industries thathave yet to confront labor issues in asystematic way, to mention just a few.The FLA collaborates with other multi-stakeholder initiatives to buildsynergies and maximize the impact ofthe work we all do.


FLA AFFILIATES: PARTNERS IN LABOR COMPLIANCE


Thecompanies, suppliers,colleges and universities,and collegiate licensees thatjoin the FLA share a

commitment to promoting internationallabor standards. The obligations ofcompany affiliation are demanding.Those who agree to the terms of joiningthe FLA demonstrate leadership byworking in a serious and systematic wayto improve the lives of thousands ofworkers in their supply chains. Activecolleges, universities, and NGOsparticipate in many facets of the FLA’swork, including development andpromotion of the Workplace Code ofConduct and advising the organizationon how to improve its work.

The FLA supports members’ efforts byproviding innovative, value-added tools,advisory services and training that helpthem strengthen compliance programsto ensure that international standardsare being met throughout their supplychains. The FLA brings credibility to theprocess of assessing, monitoring, andverifying the implementation of ourWorkplace Code of Conduct with ourindependent and transparent processes.

Buyers and Suppliers

FLA-affiliated companies represent alarge spectrum of industry. Theoverwhelming majority of factories inthe FLA program are in the apparelsector (approximately 75%), followedby footwear, equipment, andaccessories. Other industriesrepresented in the FLA supplierdatabase include collectibles, jewelry,hosiery, paper products, home goods,electronic products, and bags.

The numbers of companies affiliatedwith the FLA, including collegiatelicensees, continued to grow in 2007and 2008. FLA-affiliated companies fallunder different categories: ParticipatingCompany, Participating Supplier,Category B Collegiate Licensee,Category C Collegiate Licensee, orCategory D Collegiate Licensee.Collegiate licensees produce productsfor the 208 colleges and universitiesthat were affiliated with the FLA in

2008. Currently, 28 leading companiesare Participating Companies and thereare 11 Participating Suppliers. Inaddition, there are 30 Category BLicensees. As of March 2009, 324Category C Licensees and 530 CategoryD Licensees are affiliated with theorganization. (An online re-registrationprocess has been underway and theFLA expects these numbers to increasebased on historical information.)Together, these FLA affiliates have

become partners with the FLA’s otherstakeholders in implementing the FLAWorkplace Code of Conduct anddeveloping and sharing best practices inlabor compliance.

Accreditation

Accreditation by the Fair LaborAssociation is the most advancedrecognition of a company’s laborcompliance program. ParticipatingCompanies whose labor complianceprograms have been accredited havedemonstrated the greatest commitmentto implementing the Workplace Code ofConduct. They have undergone over atwo- to three-year implementation periodextensive performance reviews, includingindependent factory monitoring,verification of remediation initiatives,and a thorough evaluation of theirinternal protocols and auditing, as well ascomprehensive training through the FLA.

The Board of Directors must vote toaccredit the labor compliance programsof Participating Companies. In 2007, theFLA Board voted to accredit the laborcompliance programs of Gildan, NewEra Cap and PUMA AG. In 2008, H&Mand Patagonia joined this prestigiousgroup, which also includes Adidas,Eddie Bauer, Liz Claiborne, Nike,Nordstrom and Phillips-Van Heusen.

Supplier Base

Participating Companies, ParticipatingSuppliers, and Category B Licensees arerequired to submit to IndependentExternal Monitoring by FLA-accreditedmonitors. One of the requirements onthese affiliates is that they provide theFLA annually with an accurate list of allfactories producing applicable brandsand update such list quarterly.Additionally, they must also provide theFLA with access letters to facilitate


Top-Ten Countries Regarding Employment in FactoriesSupplying FLA Companies

2007

Country Estimated Number of Workers* Percent of Total(in thousands)

China 1,587 42.7

Vietnam 507 13.6

Indonesia 291 7.8

Thailand 217 5.8

Bangladesh 145 3.9

India 135 3.6

Cambodia 106 2.9

Honduras 68 1.8

Sri Lanka 58 1.6

Mexico 52 1.4

Top-Ten 3,166 85.2

Rest of the World 551 14.8

TOTAL 3,717

2008

Country Estimated Number of Workers* Percent of Total(in thousands)

China 1,713 37.6

Vietnam 563 12.4

Indonesia 348 7.6

Thailand 243 5.3

Bangladesh 207 4.5

India 158 3.5

Cambodia 145 3.2

Sri Lanka 81 1.8

Honduras 76 1.7

Mexico 46 1.0

TOP-TEN 3,580 84.0

Rest of the World 665 16.0

TOTAL 4,245 100.0

* In some instances, employment levels are estimated since employment informationwas not available for each factory. In such cases, missing data were extrapolated fromfactories in that country for which data were reported.

unannounced admission to factories byaccredited monitors and otherdocumentation. From each company’sfactory list, the FLA randomly selectsindividual factories that will be subjectto surprise audits, proportional to acompany’s number of factories and withconsideration to country andproduction risks.

In 2007, FLA-affiliated companiesreported that they sourced from 4,234factories, located in 81 countries.Approximately 17% of the factoriessupplied collegiate licensees. The largestconcentration of factories supplyingFLA companies in 2007 was in China,where 1,679 factories or 39.7% of thetotal number of factories were located.

In 2008, FLA-affiliated companiesreported that they sourced from 4,532factories, located in 83 countries.Approximately 15% of the factoriessupplied collegiate licensees. Thelargest concentration of factoriessupplying FLA companies was again inChina, with 1,718 factories or 37.9% ofthe total number of factories located inthat country.

The FLA estimates that the facilitiesreported to the FLA as supplying FLAcompanies employed over 3.7 millionworkers in 2007 and 4.2 millionworkers in 2008. As a group, the top-ten locations accounted for over 80% oftotal employment in factories supplyingFLA companies. By far the largestnumber of workers in factoriessupplying FLA affiliates was in China:1.5 million workers in 2007 and 1.7million workers in 2008.

In managing its due diligence activities,the FLA divides the world into fiveregions: (1) the Americas, consisting ofthe United States, Canada, theCaribbean, and Central and SouthAmerica; (2) Europe, the Middle Eastand Africa; (3) South Asia, consisting

among others of India, Pakistan,Bangladesh, and Sri Lanka; (4) EastAsia, consisting primarily of China,Hong Kong, Taiwan, and Japan; and (5)South East Asia, consisting amongothers of Thailand, Indonesia,Cambodia, Malaysia, and Vietnam.

As has been discussed in earlier reports,the expiry of the Multi-FibreArrangement (MFA) at the end of 2004has resulted in geographic shifts ininternational trade in apparel andtextiles that favor China, India,Pakistan, and other countries thatformerly were subject to quantitativerestrictions from the United States, theEuropean Union, and other largeimport markets. The shift in sourcing infavor of China is evident from thesupplier base of FLA companies.

The table above shows the distribution ofthe FLA supplier base by FLA region. Theshare of FLA suppliers located in East

Asia (primarily China) rose from 35.5%in 2005 to 48.0% in 2007, and droppedback to 2006 levels with just over 45% ofsuppliers in 2008. Over a similar period,EMEA’s share fell from 17.4% to 9.3%.South East Asia’s share experienced adrop from 20.5% in 2005 to 17.2%, butbegan to pick up more suppliers in 2007and 2008. Interestingly, the Americas’share remained relatively stable; thisstability masked substantial supplierreductions in Central America and theCaribbean and a steady increase in thenumber of U.S. suppliers that are FLACategory B Licensees and specialize inproduction in categories other thantextiles and apparel.


Distribution of Suppliers by FLA Region(percent of suppliers)

Region 2005 2006 2007 2008

Americas 18.2 19.1 16.0 16.7

Europe, Middle East and Africa (EMEA) 17.4 11.2 9.9 8.3

South Asia 8.4 7.2 8.3 9.9

East Asia 35.5 45.3 48.0 45.8

South East Asia 20.5 17.2 17.8 19.4

Those who agree to the termsof joining the FLA demonstrateleadership by working in a seriousand systematic way to improvethe lives of thousands of workersin their supply chains.

TOWARD SUSTAINABLE COMPLIANCE

Each year, the FLA establishesnew goals for innovations toexpand our reach andimprove our programs to

have a greater and more lasting impacton the lives of workers. Some bigtransitions are underway in the way weare providing services, increasingownership and accountability for codecompliance at the supplier level, andexpanding our programs to involve agreater number of local stakeholders, aswell as a greater engagement of workersthemselves. The FLA engages in specialprojects to test new strategies and seeksolutions to systemic noncomplianceissues that have proven particularlydifficult to remediate. In these projects,we seek to involve a wide range ofinterested parties in the process ofdeveloping new ways to improve codecompliance.

As set out in Paul Bailey’s paperincluded in this report (see page 32),the Soccer Project allowed us to developinnovations in sustainable complianceto methodically address the root causesof noncompliance. These innovationsinformed a new methodology andprogram, FLA 3.0, which the FLAofficially launched in 11 factories inChina and Thailand during the secondhalf of 2007. In the first phase of rollingout our sustainable compliancemethodology, we held multi-stakeholderforums in China and Thailand todetermine priority issues. Grievanceprocedures and hours of work wereidentified as core concerns in factoriesinvolved with the Soccer Project and abig opportunity for learning.

FLA-affiliated companies are required tohave a secure internal communicationschannel for grievances as part of their

obligations of being in the FLA. Wecame to recognize the importance ofhaving such a grievance procedure atthe factory level so that conflicts couldbe settled locally more quickly. CarolineRees’s paper “Worker Participation andEngagement,” also part of this report(see page 43), highlights the fact thatwhen workers are integrated into acompany’s grievance procedure, they aremore likely to use that procedure toseek resolutions to differences.

Over the years, the FLA has found thatexcessive overtime also has been awidespread issue in many factories thatwe have audited, resulting in high levelsof noncompliance. Understanding theroot cause of this issue is importantbecause noncompliance in this areafrequently correlates with adverseimpacts on worker health and safety andwages, thus increasing noncompliance


in other code elements. Through ournew sustainable compliance methods,the FLA was able to evaluate the issuesthat have surfaced in our core auditing.

We piloted several new instruments aspart of the Soccer Project that are criticalto the implementation of a sustainablecompliance program. The toolbox forsustainable compliance monitoringdiffers substantially from the typicalaudit instrument and general workerinterviews that accompany complianceaudits. These tools represent a big shift inhow we deliver services. The web-based,factory self-assessment tool, which theFLA calls the Sustainable ComplianceAssessment Tool or SCAT, allows us toplace greater accountability at the factorylevel and to reach a larger number ofsuppliers. The worker surveys, orSustainable Compliance Perceptions tool(SCOPE), is administered confidentiallyto a statistically representative sample ofemployees to understand the perceptionsof workers at the factory on the sameissues. The FLA is thus able to get a 360degree picture of what’s happening in afactory with regard to key code elements.

At the close of 2008, the first partici-pating factories had completed thefactory self-assessments (SCAT) and theFLA had administered the workersurveys (SCOPE) regarding grievanceprocedures and hours of work.Participating factories were providedwith access to online capacity buildingservices and instructional materialsdeveloped by the FLA to address theissues raised by the SCAT and theSCOPE. Based on the results of theirassessments, the factories and buyersworked together on developing theroot-cause analysis and capacitybuilding plan.

Analysis: The FLA released reports onour aggregate findings from the SCATand SCOPE surveys exploring grievance

procedures and hours of work. Throughour traditional auditing process, the FLAfound that many suppliers did not haveeffective or systematic grievanceprocedures. The SCAT and SCOPEidentified gaps in perception about theseissues between workers and factorymanagers. Workers had not receivedquality training of the different grievancechannels available. The FLA wasencouraged that workers werecomfortable bringing forth complaints,whether formally or informally. However,these were largely undocumentedcomplaints and it was unclear whetherthey all had been addressed. In factorieswith better training and implementation,there was a lower turnover rate andhigher percentage of productiondelivered on time.

The SCAT and SCOPE on hours ofwork affirmed many assumptions theFLA carried from our traditional audits.The FLA found that the use of excessiveovertime was widespread inparticipating factories. The problem islikely even greater than we coulddocument since evidence has shownthat workers underreport their hours.Migrant workers seemed to experiencegreater adverse impacts. The SCOPEand SCAT surveys providedconsiderable evidence that extensiveovertime is not an efficient means ofretaining workers or improving thequality of production and delivery time.

Capacity Building: The shift from asystem that relies only on traditionalmonitoring to a sustainable compliancemodel requires changes in operatingprinciples and procedures on the partof brands and their compliance officersas well as of suppliers. The FLA tackledthese two challenges in 2007 and 2008through trainings for brand compliancestaff and training of service providerswho could ultimately provide capacitybuilding services to suppliers.


The FLAengages inspecial projectsto test newstrategies andseek solutionsto systemicnoncomplianceissues thathave provenparticularlydifficult toremediate.

The FLA developed a FoundationCourse on FLA 3.0 that was offered tobrand headquarter officials in the U.S.and to field compliance officers inChina and Thailand. Part of theFoundation Course included root causeanalysis and development and use ofthe balanced score card (BSC) as amanagement tool.

One of the unexpected challenges thatthe FLA faced in rolling out FLA 3.0 inChina and Thailand was the sparsenessof qualified service providers who couldprovide capacity building services tofactories. To fill this gap, the FLAorganized Training-of-Trainers (TOT)sessions for local organizations in thetwo countries that had demonstratedinterest in being accredited as serviceproviders for FLA 3.0 on specificcompliance topics, such as GrievanceProcedures and Dispute Settlement,Hiring, and Discipline.

Local Stakeholder Engagement: Oneof the most significant aspects of FLA3.0 is that it combines and integrates

the resources of local stakeholders,suppliers, buyers, and serviceproviders. The initial step in theimplementation of FLA 3.0 is theconvening of these stakeholders in aforum to identify the priority issues,root causes of noncompliance, andcapacity-building needs. Conductingthese forums involves a huge amountof work on the part of the FLA to getlocal stakeholders to meet and shareinformation on compliance issues, toenlist the cooperation of suppliers andto identify and mobilize local andinternational service providers. In thelonger term, these actors will be able totake more ownership and initiative forsustainable compliance. In the shortterm, the FLA will have to do a lot ofcapacity building to empower them toplay that role.

The incorporation of local stakeholders,in particular, requires a significanteffort on the part of the FLA to consultwith them, to provide training and toharness their potential as service

providers in remedial programs. Thiswork can only be done at field level. Weare working to mobilize new resourcesfor FLA-affiliated companies to assistthem in meeting their Charterobligation to consult with civil societyorganizations. Most importantly, wewill integrate local, and particularlyworker, voices into our program,thereby enhancing its legitimacy andsustainability.

Expansion: The FLA staff are preparingfor expansion of the FLA 3.0methodology to other geographicregions in 2009 and beyond.Additionally, many service deliverytechniques developed for FLA 3.0,namely internet based assessments andcapacity building, are being leveraged tohelp us scale up our services for a largenumber of companies with limitedresources. We kicked off a pilot in 2007for an Enhanced Licensee Program (seepage 15), for example, that targetssmaller university licensees that areregistered as Category C affiliates.


CASE STUDIES IN INNOVATION

Enhanced LicenseeProgram Pilot

Engagement with collegiate licensors,licensing agents, and licensees over theyears have revealed some significantgaps in code awareness and complianceamong university licensees, particularlymid- and small-size companies. TheFLA developed an approach to dealingwith the labor compliance issues ofthese licensees while also taking intoaccount the limited resources of thesecompanies and their varying sizes,industries, and business models. Asmentioned previously, the FLA hasbeen able to leverage web-based toolsdeveloped for FLA 3.0 to help small andmid-size licensees assess their ownperformance in upholding laborstandards and to develop internal laborcompliance programs.

The Enhanced Licensee Program (ELP),launched as a pilot project in 2007, istargeted toward smaller, Category CCollegiate Licensees. Category CLicensees are those with total annualrevenues under $50 million, with manyof them under $5 million in annualrevenues. Category C Licenseesmanufacture or source in a largenumber of product categories, fromapparel and footwear to paper products,jewelry, and gifts.

Licensees who enrolled in the ELP wererequired to commit to five “BuildingBlock” obligations, which includeadopting and communicating a code totheir suppliers; training internal staffon compliance matters; conductinginternal monitoring of suppliers;collecting and managing complianceinformation; and remediating


noncompliances. Additionally,participants were asked to complete theonline Licensee Profile and Self-Assessment (LPSA), develop acompliance improvement orimplementation plan to address areasneeding improvement, begin internalmonitoring of an appropriate sample offactories involved in collegiateproduction, and attend at least onetraining session on compliancedeveloped by the FLA for universitylicensees.

ELP Pilot Objectives and

Participants: The Enhanced LicenseeProgram (ELP) pilot was designed totest the program with a limited numberof Category C Licensees. The objectiveof the pilot was to:

• Learn more about the characteristicsof this diverse group of companies

• Test the tools that had beendeveloped and develop new guidancematerial as required

• Adapt tools to meet the needs of thispopulation before launching to awider group of licensees

• Elicit feedback from constituents(licensees, licensors and licensingagents) about the operation of thepilot and use the feedback to modifythe program for a broader set ofcompanies.

The ELP was piloted beginning in 2007with approximately 100 licensees andthe following ten licensing universities:Princeton University; The Ohio StateUniversity; The Pennsylvania StateUniversity; The University of Maryland(College Park); The University of NorthCarolina at Chapel Hill; The Universityof Texas at Austin; University ofCalifornia, Los Angeles (UCLA);University of Michigan; University ofNotre Dame; and Washington University

in St. Louis. Both the CollegiateLicensing Company (CLC) and theLicensing Resource Group (LRG) werealso involved in the pilot group.

The list of pilot licensees was developedin collaboration with the licensingagents and pilot schools. The goal wasto enlist a cross-section of licensees ofdifferent sizes, industries, and businessmodels, as well as to include bothlicensees whose main line of businesswas collegiate licensing and others whosupplied mainly other markets. Over100 Category C Licensees participatedin the pilot.

Licensee training, the first step in theELP, was conducted at University ofNotre Dame, University of Maryland,University of California-Los Angeles,and The Ohio State University. Thetraining sessions provided an overviewof the principles of labor compliance,requirements of the ELP, and tools andguidance material available tocompanies participating in the pilot.

Licensee Profile and Self-Assessment

(LPSA): The Licensee Profile and Self-Assessment (LPSA) is a web-based tooldesigned to measure a licensee’s state ofcompliance with respect to the fivebuilding block obligations of the ELP.Taking the LPSA is the second step inthe ELP. The FLA launched theassessment tool in February 2008 and91 licensees completed the LPSA byOctober 2008.

Results of the LPSA are sent by emailupon the licensee’s completion of theself-assessment online. Results includea numerical and color-coded scoreranging from 1 (or red, signifying a lowscore) to 5 (or green, signifying a highscore) for each of the five obligationareas. In addition to the scores, theresults identify areas where the licenseehas performed well, areas forimprovement, and next steps for the


The FLA isscaling itsservices tomeet theunique needsof hundreds ofsmall and mid-size licenseesby leveragingthe web-basedtools developedfor FLA 3.0.

licensee, which may include submittingdocumentation to the FLA andreviewing online guidance material andother licensee resources housed on theFLA’s Training Portal.

ELP Findings: Through the ELP pilot,the FLA learned a significant amountabout the licensees, such as their codeawareness levels and capacity forimplementing compliance programs.The FLA also learned about theeffectiveness of the ELP program and itstools and materials, as well as gained abetter understanding of theinfrastructure and systems that areneeded to provide greater support tolicensees. The FLA is continuing thepilot with goals to expand the coverageto all Category C Licensees in the future.

Agriculture Project

The concern about unfair labor practicesprevailing in the agriculture sector hasbeen well documented in a range ofstudies by the International LabourOrganization (ILO), independentresearchers, international and nationallabor rights organizations and NGOs,and media campaigns. There are several

reports that highlight the poor workingconditions in cotton production inUzbekistan, Pakistan and India, cocoafarms in Africa and coffee estates inCentral America. Some studies have alsoreported on child labor issues in thehybrid seed production sector in India.

One such media campaign in 2003regarding the presence of child labor inthe Indian cotton seed farms ofSyngenta Seeds Inc. led them to the FairLabor Association (FLA). The FLA andSyngenta began a pilot project in theagriculture sector in 2004 to help themmonitor working conditions in theirIndian hybrid cotton seed supply chain.

Syngenta Seeds Pilot: Syngenta SeedsInc. is a Swiss agro-businessmultinational headquartered in Basel,which ranks third in high-valuecommercial seeds market in the worldand employs over 21,000 people inmore than 90 countries. Until 2004,Syngenta was the largest producer ofhybrid cotton seeds in the world withbusiness valued at about USD 3 million.It was this line of business that broughtSyngenta under fire by the media withallegations of child labor.

The FLA and Syngenta developed aproject to map, assess, analyze, monitorand remediate labor rights issues inSyngenta’s hybrid seed supply chain.Though the project was initiated in thecotton seed sector, Syngenta sold itsglobal cotton seed business in 2005,and the FLA and Syngenta continuedthe project in the hybrid vegetable seedsector beginning in 2006.

Over the past two years, the FLA andSyngenta have made significantprogress adapting the FLA’sindependent external monitoringmethodology to the hybrid vegetableseed sector. The FLA built an in-depthunderstanding of the tasks and risksinvolved in the hybrid seed production.Through this process, the FLAdeveloped and field tested a set ofbenchmarks and a monitoring systemwith relevant tools for the agriculturesector, based on ILO conventions andthe FLA’s Principles of Monitoring.

Following the FLA’s 3.0 approach ofengaging multiple stakeholders indeveloping sustainable processes, fivestakeholder consultations were held bythe FLA and Syngenta at differentstages of the process to solicitstakeholders’ advice and update themon the progress of the project.Stakeholders prioritized the leadingconcerns that they hoped to addressthrough the FLA’s monitoring andremediation process: child labor, healthand safety, and wages and benefits.

Monitoring Syngenta’s Supply Chain:

Syngenta began conducting internalmonitoring of their farms in 2007 andby 2008, they had monitored a total of1727 farms. Child labor was identified asa problem during peak season, whenmore workers were needed for cross-pollination activities. Health, safety andenvironment (HSE) also emerged as apriority issue. Syngenta discovered that


workers were not aware of theimportance of personal protectionequipment (PPE) and the importance ofusing it during chemical application.

In 2008, FLA conducted threeunannounced independent externalmonitoring (IEM) visits of Syngenta’sfarms. Each IEM was conducted on acluster of approximately 25 small(0.25–1 acre) farms selected at randomfrom Syngenta’s farm lists. Health andsafety, code awareness and hours of workemerged as the top three non-complianceissues in external monitoring.

Remediating Issues in the Supply

Chain: Syngenta submitted correctiveaction plans to address the issuesuncovered in both internal and externalmonitoring. To tackle the child laborissue, the FLA and Syngenta invited aselected group of experts to discuss thechild labor issue in Syngenta’s okra andpepper farms at a consultation held inHyderabad in November 2007. Based onexpert recommendations, Syngentadeveloped an additional child labormonitoring tool for the farms. They alsointroduced an incentive scheme andpiloted it with their okra growers inApril 2008. Syngenta monitored theirfarms three times in one productionseason as prescribed by the task and riskmapping. Growers who are found to bein compliance with Syngenta’s code atall three monitoring events were given abonus of up to 5 percent of the totalprocurement price. The maximumbonus in this incentive program wasgiven if there was an absence of childlabor. Additionally, a progressivedisciplinary policy was introduced,wherein Syngenta would stop using agrower who, after repeated remindersand remediation, was found delinquenton child labor for two consecutiveproduction seasons. Several awareness-building programs were mounted in thefield. Pre-season meetings with the

growers were organized to make themaware of the codes of conduct andSyngenta’s relationship with the FLA.Syngenta developed comprehensivehealth and safety remediation plans.Written contracts with fair workingconditions clauses were drawn withgrowers. A labor monitoring tool wasintegrated with the existing field cropcard (for quality check of the seedsduring the production season) andsupervisors were trained to look forlabor compliance issues whileconducting field visits.

As with all FLAmonitoring, the progressreports, research studies, monitoringreports and remediation plans for theSyngenta pilot project are published onthe FLA website to provide greatertransparency to the project. Althoughthere are areas for improvement, the

project has demonstrated that with theappropriate commitment andcollaboration, working conditions can beimproved in agricultural supply chains.The experience and learning from theSyngenta project suggests ways that theFLA systemmay be able to go deeper intothe supply chain of the apparel sector,such as home-based work, cotton seedproduction, and more. As themethodology emerging from the Syngentaproject is further refined, it also may proveto be adaptable to other supply chainsinvolving small rural land holdings.

Joint Initiative on CorporateAccountability and WorkersRights (JO-IN) Project

Six leading international multi-stakeholder initiatives (Clean ClothesCampaign, Ethical Trading Initiative,


Fair Labor Association, Fair WearFoundation, Social AccountabilityInternational, and Workers RightsConsortium) established the JointInitiative for Corporate Accountabilityand Workers Rights (JO-IN) in 2004.The aims of JO-IN are to maximize theeffectiveness and impact of multi-stakeholder approaches to theimplementation and enforcement ofcodes of conduct by ensuring thatresources are directed as efficiently aspossible to improving the lives ofworkers and their families; to explorepossibilities for closer cooperationbetween the organizations; and to sharelearning on the manner in whichvoluntary codes of labor practicecontribute to better workplaceconditions in global supply chains.

Some significant outcomes of theproject include a draft common codeof conduct and agreed-uponremediation methodologies to addressnoncompliances regarding wages,hours of work, and freedom ofassociation, as well as new assessmenttools to address complex complianceissues. There has also been significantlearning for each the six participatingorganizations, including considerablygreater understanding of each others’approaches and increasedcollaboration beyond the JO-INproject, such as the creation of a JO-INForum that extended collaborationinto 2008 and beyond.

Central America Project

The FLA’s Central America Project is anexample of a project in which the FLAsought to address noncompliance issuesspecific to a region or country throughinnovative approaches with broaderapplicability to the FLA program. TheCentral America project (CAmP I)began in 2004 with a grant from theDepartment of State as a means to

develop mechanisms and tools thatwould produce measurableimprovement of workplace conditionsin El Salvador, Guatemala, andHonduras. The objective of the projectwas to enhance workers’ rights,particularly the right to equality andnon-discrimination, and to promote aculture of compliance in CentralAmerica through the application ofgood practices on equality and diversity,which ultimately would result in bettermanagement systems. CAmP I wascompleted in 2005. One of theoutcomes of the project was thedevelopment of guidelines of goodpractice (GGP) regarding hiring,termination, grievance procedures, anddisciplinary practices focused on non-discrimination.

In 2006, the U.S. Department of Stateawarded a second grant to the FLA tocontinue the program (CAmP II) inHonduras and expand it to theDominican Republic. A key element inCAmP II was to train other trainers toenable the teachings of the project tocontinue beyond its conclusion. DuringCAmP II, representatives of 56 factories(38 in Honduras and 18 in theDominican Republic) were trained inthe GGP, as were 25 representatives of3 Dominican trade unions and 30inspectors from the DominicanSecretariat of Labor. Eighteen brandrepresentatives and 15 private serviceproviders attended Training-of-Trainerssessions held by the FLA in Honduras.CAmP II ended in 2007.

To evaluate the impact of GGP trainingson factories that participated in CAmPII capacity building, the FLA conductedindependent external assessment eventsin five factories that volunteered to beevaluated. In general, the results of theassessment showed that the fivefactories recorded noticeableimprovements around their hiring

policies and procedures. Though moretime is necessary to gauge the fullimpact of the trainings, the assessmentshowed that the training enabledfactory management to recognize thepolicy and capacity gaps that existed intheir factories and the processnecessary to make progress towardshigher levels of compliance.


TITLE


TheFair Labor Association(FLA) is committed toensuring theimplementation of our

Workplace Code of Conduct. Upholdingthat commitment requires duediligence. A core component of theFLA’s program is conductingunannounced Independent ExternalMonitoring (IEM) of factories used byFLA affiliates and evaluatingcompliance of all code elements.Submitting to the FLA’s monitoringprogram is one of the ten obligationsaffiliated companies are required tofulfill. Transparency is important to theprocess and thus, the findings for allinspections are posted to our website asTracking Charts, which can be found atwww.FairLabor.org under PublicReporting.

INDEPENDENT EXTERNAL MONITORING

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In 2007, FLA-accredited monitors conducted 119 factory visits in 27 countries across all fiveFLA regions. The shift in business to China has led to an increasing number of IEMs in EastAsia. The FLA has seen this shift year over year since expiration of the Multi-FibreArrangement (MFA).

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2008 IEMs per Country

CODE COMPLIANCE AND REMEDIATION


TThe FLA’s Workplace Codeof Conduct is based onInternational LabourOrganization (ILO)

standards. Each code element issupported by specific benchmarks thathelp us measure a factory’s compliancewith that code element. The charts onthis page show the distribution ofnoncompliances by code element. Atleast one benchmark in the Health andSafety code element was breached in 90percent or more of the factories auditedin 2007 and 2008. Noncompliances infactories were also high for Hours ofWork, Wages and Benefits, andFreedom of Association.

FLA affiliates are responsible forworking with the factory following aninspection to develop a correctiveaction plan (CAP) to address thenoncompliances, to conduct follow-upvisits to ensure the plan isimplemented, and to provide statusreports to the FLA.

Different forms of noncompliance leadto different approaches and timingregarding remediation plans. Somenoncompliances may be relatively easyto fix, such as adding fire extinguishersor recharging them. In these cases,remediation can be carried out quicklyand documented through certificates,photographs, and other simpledocumentation.

Other noncompliances, however, aremore complex and take much longer toremediate, such as violations offreedom of association, discrimination,or excessive hours of work. In the caseof excessive hours of work, for example,a corrective action plan might involvebetter production planning, the

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There were 501 instances in which at least one benchmark of the FLA Workplace Code ofConduct was breached.

There were 619 instances in which at least one benchmark of the FLA Workplace Code ofConduct was breached.

creation of a new work shift, or eventhe expansion of a facility orconstruction of a new one so thatadditional workers can be recruited.Multi-year remediation plans arecommon with regard to complexnoncompliance issues.

Each code element is evaluated basedon a combination of compliancebenchmarks:

Substantive benchmarks areconsidered a direct violation of therights and duties embodied in the FLAWorkplace Code of Conduct.

Procedural benchmarks refer tosystems or administrative processeswhose absence in a factory could leadto the violation of a code provision.

Miscellaneous benchmarks refer toissues that do not fall squarely underexisting FLA benchmarks.

This distinction is important because,as you will note, the vast majority ofnoncompliances with respect to theChild Labor code element were of aprocedural or other nature (93% in2007 and 94% in 2008) rather than adirect violation involving theemployment of children. Proceduralviolations in these two audit cyclesincluded, for example, not having anage verification system that meets FLAstandards or ignoring certain legalprocedures, such as employing juvenileworkers of an eligible age but who havenot registered with the local laborbureau or who have not had thephysical examination required by law.More details on the FLA benchmarkscan be found at www.FairLabor.org.

The charts on this page show thedistribution of noncompliances by codeelement for 2007 and 2008.


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2008 Procedural vs. Substantive Non-Compliances

There were 2,294 instances of noncompliance based on benchmarks reported by accreditedmonitors in 2008, which translates into an average of 19.1 instances of noncompliance perfactory inspection.

There were 2,040 instances of noncompliance based on benchmarks reported by accreditedmonitors in 2007, which translates into an average of 17.1 instances of noncompliance perfactory inspection.


* Each of the IEMs conducted in China in2007 has the following text included on thecorresponding tracking chart to reflect thesystemic noncompliance with the FLAbenchmark on Freedom of Association:“The Chinese constitution guaranteesFreedom of Associations (FOA); however,the Trade Union Act prevents theestablishment of trade unions independentof the sole official trade union—the All-China Federation of Trade Unions (ACFTU).According to the ILO, many provisions ofthe Trade Union Act are contrary to thefundamental principles of FOA, includingthe non-recognition of the right to strike.As a consequence, all factories in China fallshort of the ILO standards on the right toorganize and bargain collectively. However,the government has introduced newregulations that could improve thefunctioning of the labor relationsmechanisms. The Amended Trade UnionAct of October 2001 stipulates that unioncommittees have to be democraticallyelected at members’ assemblies and tradeunions must be accountable to theirmembers. The trade union has theresponsibility to consult with managementon key issues of importance to theirmembers and to sign collectiveagreements. Trade unions also have anenhanced role in dispute resolution.”

2007 Regional Non-Compliances in Comparison

The Americas: The 22 audits conducted in the Americasresulted in 272 findings of noncompliance, or roughly 12.4findings of noncompliance per audit. The code element mostfrequently breached in the Americas was Health and Safety, withat least one breach of the compliance benchmarks associatedwith this code element identified in 19 out of 22 IEMs.

EMEA: The 13 audits conducted in the EMEA region resultedin 265 findings of noncompliance, or roughly 20.4 findings ofnoncompliance per inspection. At least one benchmarkregarding the Health and Safety code element was breached ineach of the 13 audits conducted in the region. Noncomplianceswere also high for Hours of Work, Freedom of Association andCollective Bargaining and Wages, Benefits, and Overtime, withat least one benchmark in each element breached in at least 10of 13 inspections.

East Asia: The 47 audits conducted in East Asia resulted in 842findings of noncompliance, or roughly 17.9 findings ofnoncompliance per audit. For all 43 IEMs conducted in China,FLA-accredited monitors recorded a violation of the benchmarkregarding the right to freedom of association;* as a result, 43out of the 47 audits conducted in this region (91%) had at leastone noncompliance with respect to the Freedom of Associationand Collective Bargaining code element.

South Asia: The 18 audits conducted in South Asia resulted in345 findings of noncompliance, or roughly 19.2 findings ofnoncompliance per audit. In 89% of the audits conducted inSouth Asia (16 out of 18), FLA-accredited monitors recorded atleast one violation of the benchmark regarding Health andSafety.

South East Asia: The 19 audits conducted in South East Asiaresulted in 316 findings of noncompliance, or roughly 16.6findings of noncompliance per audit. One or more of thebenchmarks associated with the Health and Safety and Hours ofWork code elements were recorded by FLA-accreditedmonitors as being breached in 17 out of 19 audits (90%),followed by one or more in 15 of the audits for Wages, Benefits,and Overtime (79%).

* Each of the IEMs conducted in China in 2007 and 2008 has thefollowing text included on the corresponding tracking chart toreflect the systemic noncompliance with the FLA benchmark onFreedom of Association: “The Chinese constitution guaranteesFreedom of Associations (FOA); however, the Trade Union Actprevents the establishment of trade unions independent of the soleofficial trade union—the All-China Federation of Trade Unions(ACFTU). According to the ILO, many provisions of the Trade UnionAct are contrary to the fundamental principles of FOA, includingthe non-recognition of the right to strike. As a consequence, allfactories in China fall short of the ILO standards on the right toorganize and bargain collectively. However, the government hasintroduced new regulations that could improve the functioningof the labor relations mechanisms. The Amended Trade Union Actof October 2001 stipulates that union committees have to bedemocratically elected at members’ assemblies and trade unionsmust be accountable to their members. The trade union has theresponsibility to consult with management on key issues ofimportance to their members and to sign collective agreements.Trade unions also have an enhanced role in dispute resolution.”

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2008 Regional Non-Compliances in Comparison

Americas: The 27 audits conducted in the Americas resulted in450 findings of noncompliance, or roughly 16.7 findings ofnoncompliance per audit. The code element most frequentlybreached in the Americas was Health and Safety, with at leastone breach of the compliance benchmarks associated with thiscode element identified in 21 out of 27 (78%) IEMs.

EMEA: The 6 audits conducted in the EMEA region resulted in60 findings of noncompliance, or roughly 10 findings ofnoncompliance per audit. At least one or more benchmarksregarding the Health and Safety; Wages, Benefits andOvertime; and Hours of Work code elements was breached ineach of the 6 audits (100%) conducted in the EMEA region.

East Asia: The 52 audits conducted in East Asia resulted in 881findings of noncompliance, or roughly 16.9 findings ofnoncompliance per audit. For all 51 IEMs conducted in China,FLA-accredited monitors recorded a violation of the benchmarkregarding the right to freedom of association; as a result, 51 outof the 52 audits conducted in this region (98%) had at least onenoncompliance with respect to the Freedom of Association andCollective Bargaining code element. One or more benchmarksregarding Wages, Benefits and Overtime was also breeched in51 out of 52 audits (98%) in this region. Noncompliances werealso high for Health and Safety and Hours of Work, with at leastone benchmark in each element breached in at least 46 of 52inspections.

South Asia: The 10 audits conducted in South Asia resulted in342 findings of noncompliance, or roughly 34.2 findings ofnoncompliance per audit. At least one or more benchmarksregarding the Health and Safety code element was breached ineach of the 10 audits (100%) conducted in the region.

South East Asia: The 25 audits conducted in South East Asiaresulted in 561 findings of noncompliance, or roughly 22.4findings of noncompliance per audit. At least one or morebenchmarks regarding the Health and Safety code element wasbreached in each of the 25 audits (100%) conducted in theregion. Noncompliances were also high for Freedom ofAssociation and Collective Bargaining, with at least onebenchmark breached in 24 of 25 inspections (96%).*Noncompliances were also high for Wages, Benefits andOvertime and Hours of Work, with at least one benchmark ineach element breached in more than 80% of the inspections.

* Each of the IEMs conducted in Vietnam in 2008 has the followingtext included on the corresponding tracking chart to reflectsystemic noncompliance with the FLA benchmark on Freedom ofAssociation. “Vietnam has not ratified ILO Conventions 87 or 98.Under Vietnamese law, all unions are required to affiliate with thesingle trade union, the Vietnam General Confederation of Labor(VGCL), which is affiliated with the Communist Party. With respect tosuch union monopolies, the ILO Committee on Freedom ofAssociation has stated that ‘the rights of workers to establishorganizations of their own choosing implies… the effectivepossibility of forming… [trade unions] independent both of thosewhich exist already and of any political party.’ Vietnam’s legalframework is therefore not compatible with the ILO Principles onFreedom of Association and, as such, all factories in Vietnam fail tocomply with the FLA Code standard on Freedom of Association.”

INDEPENDENT EXTERNAL VERIFICATION

The FLA selects a sample ofthe audits conducted inprevious years and arrangesfor an accredited inde-

pendent external monitor to revisit thefactories to verify that corrective actionswere taken to remedy noncompliances.In 2007 and 2008, the FLA conducted37 Independent External Verifications ofcorrective action plans for inspectionsconducted in 2004, 2005 and 2006. Inour experience, a two- to three-yearperiod should lapse between the devel-opment of a corrective action plan andverification in order to be able to

measure the impact of the morecomplex remediation plans. Verificationreports are posted on the FLA website.

Two important points should be takeninto consideration in reviewing theresults of the verifications. First, unlikeinspections that are selected at random,the verification visits target somefactories facing critical and challengingnoncompliance issues, such asnonpayment of wages, egregious safetyand health violations, freedom ofassociation, and harassment or abuseissues. The FLA targets cases forverification based on the severity of the

issues that emerged from the inspections.

In returning to these factories, FLA-accredited monitors were asked to focuson the original noncompliances or risksof noncompliance identified in theaudits and to evaluate progress towardremediation. The monitors were alsoasked to cite any new noncomplianceissues they observed that were notincluded in the original audit report.

Not surprisingly, the largest number ofnoncompliances monitors reviewed wasin the health and safety area, reflectiveof the distribution of noncompliances


2007 Verification Audits by Region

Region Number of Verifications Percent

Americas 5 26%

EMEA 2 11%

South Asia 8 42%

East Asia 2 11%

South East Asia 2 11%

Total 19 100%

2007 Verification Audit Results by Code Element

Code Element Complete / Improved / No Risks Risks Not No. % Success NewVerified Pending Change Addressed Addressed Original Rate Findings*

Code Awareness 16 6 7 5 1 35 63% 4

Forced Labor 7 5 4 0 1 17 71% 3

Child Labor 6 1 1 0 0 8 88% 0

Harassment or Abuse 66 29 26 3 1 125 76% 6

Discrimination 2 0 0 1 1 4 50% 3

Health & Safety 109 34 36 3 2 184 77% 43

Freedom of Association 0 1 5 1 4 11 10% 1

Wages & Benefits 36 13 19 5 1 74 66% 6

Hours of Work 13 13 24 2 0 52 50% 9

Overtime Compensation 8 6 1 0 1 16 88% 5

Miscellaneous 3 3 0 1 0 7 86% 2

Total Verifications 266 111 123 21 12 533 n/a 82

% By Status 50% 21% 23% 4% 2% 100% n/a n/a

In 2007, 50% of noncompliances werefound to be fully remediated by the FLAaffiliate and its suppliers, and in 71% of theissues identified previously, monitors wereable to verify full or partial remediation.Within the 19 factories, 82 new findings ofnoncompliances surfaced during theverification audits, requiring additionalremediation steps. The vast majority of thenewly-identified noncompliances were alsoin health and safety.


In 2008, 48% of noncompliances werefound to be fully remediated by the FLAaffiliate and its suppliers, and in 74% of theissues identified previously, monitors wereable to verify full or partial remediation.Within the 18 factories, 107 new findings ofnoncompliances surfaced during theverification audits, requiring additionalremediation steps. The vast majority of thenewly-identified noncompliances were alsoin health and safety.

2008 Verification Audit Results by Code Element

Code Element Complete / Improved / No Risks Risks Not No. % Success NewVerified Pending Change Addressed Addressed Original Rate Findings*

Code Awareness 11 6 11 4 0 28 61% 0

Forced Labor 4 2 1 4 0 7 86% 6

Child Labor 8 2 1 1 2 11 91% 8

Harassment or Abuse 8 4 0 3 1 12 76% 7

Discrimination 1 1 0 5 1 2 50% 3

Health & Safety 86 39 42 9 5 167 77% 59

Freedom of Association 8 4 7 5 1 19 10% 1

Wages & Benefits 12 12 6 4 1 30 66% 9

Hours of Work 14 9 9 4 1 32 50% 4

Overtime Compensation 2 5 8 2 0 15 88% 9

Miscellaneous 1 0 1 0 2 2 86% 1

Total Verifications 155 84 86 41 14 325 n/a 107

% By Status 48% 26% 26% 13% 4% n/a n/a n/a

Completed: The corrective action plan (CAP) for non-compliances was fully implemented in a verifiable manner.Improved: Progress was made on noncompliances but not all steps had been completed.No Change: No progress was made on the CAP.Risks Addressed: Steps had been taken to address procedural issues that could lead to noncompliance.Risks Not Addressed: Steps were not taken to address procedural issues that could lead to noncompliance.% Success Rate: Based on full and partial remediation.

In revisiting factories to verify remediation of issuesfound in past audits, FLA-accredited monitors wereable to verify full or partial remediation of over 70%of the noncompliances.

2008 Verification Audits by Region

Region Number of Verifications Percent

Americas 2 11%

EMEA 5 28%

South Asia 3 17%

East Asia 7 39%

South East Asia 1 5%

Total 18 100%

for all inspections in general. Since theverification audits were weightedtoward reevaluating situations wherecomplex and critical issues hademerged in the inspections, there werea higher number of cases involvingharassment or abuse than one findsoverall in general inspections.

Verifications illustrate a challengewith using a monitoring system alonefor due diligence. An unannounced,external audit of a factory provides asnapshot of issues within the factory ata point in time. In revisiting factoriesto verify remediation of pastnoncompliances, monitors often

identified additional or newnoncompliances. As we have cometo understand the limitations ofmonitoring, the FLA has been at theforefront in developing a sustainablecompliance methodology (FLA 3.0)that we believe will have significantimpact for change at the factory level.

THIRD PARTY COMPLAINTS

TheFLA provides agrievance channel for thirdparties in cases where thereis persistent or serious

noncompliance with the FLA WorkplaceCode of Conduct in a production facilityused by any FLA-affiliated company.Any person, organization, or companymay file a complaint with the FLA as allstakeholders have a role in improvingcorporate accountability for labor rights.

When the FLA receives a third partycomplaint that meets the criteria forFLA involvement, it asks the FLA-affiliated company involved to reviewthe complaint and inform the FLAabout its findings. When needed, theFLA commissions independentmonitors to investigate the allegationsand make recommendations forremediation of any noncompliances.The FLA facilitates the remediationprocess with a focus on correctingnoncompliances, addressing conditionsthat led to the violations, and makingsure working conditions are fair anddecent. The FLA-affiliated companyagrees to develop a corrective actionplan in cooperation with the supplierand other stakeholders, to overseeimplementation of the plan and toconduct the first level of verification.All findings, corrective action plans andcase updates are posted to the FLAwebsite to uphold transparency andaccountability.

Factory closures, and the complex set ofissues associated with such actions,dominated Third Party Complaintsreceived by the FLA in 2007 and 2008.Plant closures were, to a significantextent, related to the expiration of theMulti-Fibre Arrangement, a country-

specific quota system that governedpatterns of trade and investment in thetextile and clothing industry for threedecades, and the onset of the currenteconomic downturn. Third PartyComplaints and other complex casesbrought to the attention of the FLAwere disproportionately in theAmericas. All investigative reports,corrective action plans, and casesummaries are available on the FLAwebsite. Among the Third PartyComplaints processed by the FLA in2007–2008 were:

Cimatextiles, S.A., Guatemala

Guatemalan trade unions filed a ThirdParty Complaint in May 2007 allegingthat local factory managementthreatened to close the Cimatextiles,S.A. factory in violation of workers’freedom of association rights, and thatmanagement also had used intimidationand violence against workers atCimatextiles and at the neighboring

plant Choishin.

Working with FLA-affiliated companyLiz Claiborne, Inc., a buyer at bothfactories, the FLA requested accreditedmonitor COVERCO (Comisión para laVerificación de Códigos de Conducta)to investigate the allegations.COVERCO found that factorymanagement had not respected thetrade union’s legitimacy and its right tonegotiate a new collective bargainingagreement. Factory management hadalso failed to consult with the union asthe collective bargaining agreementrequired and had not paid the correctseverance payment to workers. At thetime of the investigation, Cimatextileswas temporarily closed.

Liz Claiborne developed andimplemented a remediation plan basedon the recommendations in theCOVERCO report. However, since thefactory failed to restart operations asscheduled in September 2007,


remediation activities were focused onthe neighboring Choishin factory.Choishin management signed anagreement with the union indicatingthat they would offer former workers ofCimatextiles first right of refusal on anyemployment opportunities that becameavailable at Choishin. The agreementwas signed by both parties in thepresence of the local Labor Ministry.Choishin negotiated severancepayments with the union and signed anagreement to this effect on November6, 2007. Choishin provided benefitpayments to all workers with specialneeds, including workers on maternityleave and breastfeeding.

Liz Claiborne engaged a consultant toreview hiring and termination practicesand grievance procedures at all of itssuppliers in Guatemala. The consultantalso conducted training at each factory,as well as follow-up visits in May 2008,to verify that corrective actions hadbeen implemented at each of thefactories. The FLA verified that thecorrective action plan was implementedand closed the Third Party Complaint.

Hermosa Manufacturing,El Salvador

The FLA continued its efforts to addressthe issues that arose from the 2006closure of Hermosa Manufacturing,which were first reported in the FLA’s2007 Annual Public Report. The FLAhad created an emergency fund, withfinancial contributions provided by FLAaffiliates and non-affiliates, for thepurpose of providing assistance toretrenched workers while effortscontinued to hold the government of ElSalvador and the factory ownerresponsible for carrying out their legalobligations. The Fundación de Estudiospara la Aplicación del Derecho(FESPAD), a non-governmentalorganization (NGO) based in El

Salvador, completed distribution of thefunds to former Hermosa workers inJanuary 2007.

Upon the request of the FLA theMaquila Solidarity Network (MSN)conducted an independent review ofthe emergency fund and issuessurrounding the closure of HermosaManufacturing. MSN released its reportin June 2007, which includedrecommendations for continuedsupport of the Hermosa workers andsuggestions of preventative measuresthat could guard against a similarsituation in the future.

The MSN report documents extensiveoutreach by FLA-affiliated companiesthat sourced from Hermosa to thegovernment of El Salvador to ensurethat the rights of workers embodied indomestic law were realized. FLAaffiliates have continued efforts in thisarea, including encouraging U.S.government officials to usegovernment-to-government channels toapply additional pressure on thegovernment of El Salvador to fulfill itslegal obligations to the workers. FLA-affiliated company adidas Group wrotean open letter to the Government of ElSalvador, which was published in twoleading newspapers in the country,

calling on the government to fulfill itspromises made in earlier dialogues withthe company. As a result, some progresshas been made in the provision ofhealth services to chronically illworkers and a job fair was scheduledfor former Hermosa workers.

In September 2007, the FLA engaged alabor attorney in El Salvador to serve asOmbudsman to establish effectivedialogue with the various stakeholdersinvolved in the case. The Ombudsmanengaged with Salvadoran governmentand civil society organizations to seekredress for the violations of workersrights affecting Hermosa workers,particularly those who remainunemployed. He also established adialogue with garment factories thatcould be the source of employment forformer Hermosa workers and hasobserved the hiring process at one ofthe factories.

The Ombudsman also worked with theInstituto Salvadoreño de FormaciónProfesional (Salvadoran ProfessionalTraining Institute, INSAFORP) andAlbert Einstein University to create anopportunity for former Hermosaworkers to refresh their skills,particularly with respect to operatingsewing machinery, gain familiarity withEnglish as a second language anddevelop computer proficiency. Theprogram began on March 30, 2008,with FLA companies providingfinancial contributions to cover costs oftransportation, meals and basic fooditems for the 40 displaced workersattending the sessions.

The FLA has worked with affiliated andnon-affiliated companies in El Salvadorto put into place non-discriminatoryhiring policies and procedures in localsupplier factories, including conductingtraining for factory owners andmanagement on nondiscriminatory


hiring practices. The FLA also reviewedits audit instrument and mademodifications to ensure that localfactories that produce for FLA-affiliatedcompanies not only deduct and recordin their books social security and otherlegally-mandated contributions, butthat such payments are actuallyreceived by the relevant agencies.

Jerzees de Choloma, Honduras

In September 2007, the FLA received athird-party complaint from workers atthe Jerzees de Choloma (JDC) factory inHonduras, a plant operated by FLA-affiliated company Russell Corporation.Among the allegations were charges ofmandatory overtime, abusive behaviorby managers and supervisors,discrimination and dismissal of workerstrying to form a union, and closure ofthe plant as a reaction to efforts byworkers to form a union. The FLAcontracted with an FLA-accreditedmonitor to conduct an independentaudit. While the independent monitor

did not find evidence to support theallegation that the plant closure wasconducted in order to avoid formationof a union, the October 2007 reportfound that the factory was not incompliance with the FLA WorkplaceCode of Conduct in the areas of freedomof association, harassment or abuse, andhealth and safety, and recommendedsteps to remediate such issues.

Russell Corporation adopted acomprehensive corrective action plan(CAP) to address the compliancefailures and extended the scope ofcoverage of the CAP to all of itssuppliers. In February 2008, anindependent external audit verified theimplementation of the CAP. The reportindicated that Russell management hadbeen “proactive” in the correction offreedom of association issues (FOA).Among the numerous steps, they hadissued a statement that the companyrecognized and respected the right ofemployees to FOA and collectivebargaining, had incorporated FOA

training in the hiring process of allemployees, eliminated questionsregarding prior participation inassociations from hiring forms,reinstated 63 union members at theJerzees de Honduras factory at the samelevel of seniority and provided back pay,recognized the union and started adialogue and collaboration with theunion. Russell also implemented anti-harassment or abuse and discriminationpolicies and procedures at Jerzees deCholoma and Jerzees de Honduras andtook disciplinary measures againstsupervisors who had been found toengage in harassment and abusivetreatment of workers.

In addition, Russell Corporationdeveloped a written retrenchmentpolicy based on objective,nondiscriminatory criteria to ensurecompliance with domestic law withregard to notice, severance, benefits forcertain workers that receive specialtreatment, and other requirements.Managers were trained on the newpolicies. Russell gave hiring priority toJerzees de Choloma workers at otherRussell facilities in the Choloma area*and facilitated reemployment ofretrenched workers in non-Russellfactories in the Choloma region.

BJ&B, Dominican Republic

The BJ&B sports hat factory in VillaAltagracia, Dominican Republic, wasthe subject of one of the first ThirdParty Complaints handled by the FLA in2002. The complaint centered onviolations of freedom of association ofworkers attempting to form of union.After prolonged engagement, the unionwas formed and a collective bargainingagreement concluded, but over time the

* It’s important to note that at the time the FLA drafted the 2008 Annual Report, the Russell Corporation had closed in 2009 the Jerzees deHonduras factory, where many of the Jerzees de Choloma workers had been rehired. Russell Corporation attributed their decision to a down-turn in business, however, new allegations of violations with regard to freedom of association surfaced. The results of the FLA’s investigationinto these allegations will be reported in the FLA’s 2009 Annual Report.


situation at the factory deteriorated asorders declined. In February 2007,management of BJ&B announced theclosure of the factory because ofeconomic considerations. There was agreat deal of controversy over whetherthe company had met the spirit and theletter of its collective bargainingagreement obligations with regard tothe closure. Although no new ThirdParty Complaint was filed, the FLAengaged in efforts to achieve a justresolution for workers throughFLA affiliated company Nike, whichhad contracted with the BJ&B facility,and to promote dialogue betweenworkers and management. The FLAparticipated in a meeting convened bythe International Textile, Garment andLeather Workers’ Federation in SantoDomingo, Dominican Republic, thatincluded the factory’s owners, unions,brands and the Worker RightsConsortium (WRC). Following themeeting, the FLA released a jointstatement with the WRC that included aseries of recommendations concerningseverance for the workers. Ultimately,the union and management reached anagreement that resulted in additionalseverance payments for workers.

Estofel S.A., Guatemala

Eight former workers at Estofel S.A.factory in Guatemala City, Guatemalasubmitted a Third Party Complaint tothe FLA in May 2008 alleging a rangeof labor violations at the factory,including failure to pay the fullseverance benefits owed workers whenthe factory closed in November 2007.The FLA first learned of the closurefrom a labor rights organization andfrom FLA-affiliate Phillips-Van Heusen(PVH), which had been sourcing fromEstofel up until a few months before

the closure. PVH had been contacted byworkers at the plant and by Guatemalanlabor rights organization COVERCO toassist with collecting full severancepayments. PVH pressed Estofel and itsbusiness partner, Singaporean companyGhim Li, for full payment.

University of Washington (UW)students, who were conducting fieldstudy in Guatemala in February 2008,became concerned about possibleviolation of workers rights at the plantas well. An affiliate of the FLA and theWorker Rights Consortium (WRC), UWasked the two organizations to worktogether to seek compensation forapproximately 1,000 workers owedbenefits as a result of the closure. TheFLA and the WRC organized an ad-hocmulti-stakeholder group to manage theresolution of the case. The groupincluded affiliates Hanesbrand, whichlicensed Champion to GFSI, Inc., GFSI,Inc.; PVH and the University ofWashington.

COVERCO, an FLA-accreditedindependent monitor, was engaged bythe group to determine the amount ofthe severance due each dismissedworker consistent with Guatemalanlaw. COVERCO verified the payrollrecords of 974 employees; examinedsettlement records, payment vouchersand bank deposit records; andestablished the benefits entitled to allemployees, as well as indirect laborbenefits that apply only to the workerswho were pregnant or breastfeeding.

COVERCO verified that the factory hadsignificantly underpaid the benefits toworkers. Through negotiations, Estofelagreed to pay all benefits, exceptindirect labor benefits, within aspecified time frame. COVERCO wasengaged to coordinate the workeroutreach, which was challenging given

the time that had lapsed since theclosure of the factory. COVERCO wasable to reach nearly 95 percent of theworkers and distribution of paymentsbegan in December 2008, with 871workers receiving additional severancetotaling approximately $526,000(accounting for the fluctuation inexchange rate). This was an extremelysuccessful and unprecedented outcomefor this type of collaborative effort.

Details about the Third Party Process and related reports can be found on the FLA website.


SPECIAL REPORT

The Soccer Project, launched in 2005,was designed to test the sustainablecompliance methodology of the FairLabor Association (FLA). The projectcapitalized on the interest generated bythe 2006 World Cup in Germany tofocus attention on labor conditions inthe production of a range of products—balls, boots, clothing, accessories—formajor brand-name companies affiliatedwith the FLA.

The FLA’s sustainable compliancemethodology, also known as FLA 3.0,1

has as its immediate objective tostrengthen the capacity of suppliers toimprove and eventually achieve self-sustainable compliance with respect tothe FLA Workplace Code of Conduct. Itaims at identifying the root cause(s) ofpersistent and serious non-compliancesand devising the means to overcomethese problems. It involves theenhancement of monitoring throughthe addition of a developmentalapproach and consists of threeelements: (1) needs assessment; (2)capacity building; and (3) measurementof progress with respect to identifiedsystemic noncompliance issues. Anumber of different tools and trainingmodules that have been developed forFLA 3.0 have been extensively tested inthe Soccer Project: they include web-based self-assessments, workey surveytools, training courses, instructionalmaterials, and indicators.

The FLA Soccer Project is beingconducted in 17 factories, 9 in Thailandand 8 in China, that supply products(balls, apparel, equipment) associatedwith the soccer industry to FLA-affiliated companies. On the basis ofFLA’s previous monitoring experienceover the past five years and a series ofstakeholder consultations, twocompliance issues were selected whichhad proven difficult for participatingfactories to address in the past, namely,hours of work (HoW) and grievanceprocedures (GP).

This report takes an objective look atwhat the FLA Soccer Project set out todo, how it proceeded, what itaccomplished (or did not), the lessonslearnt, and what still remains to bedone. As such it represents more theviews of an “outsider” or externalviewer, but stops short of being a fullevaluation. It is based on the abundantrecord-keeping and report-writing byFLA staff that chronicles thetransparency and progress of theproject to date. It does not repeatextensively material that is readilyavailable elsewhere, such as in theinterim report on the project publishedby the FLA in August 2006.2

The report is structured as follows. Thefirst part provides some necessarybackground on the soccer project,including the soccer products supplychain, labor standards in China and

Thailand, and factories where theproject has been implemented. Thesecond part describes the set of projectactivities with brands, owners,suppliers, and other stakeholders whilethe third part discusses achievements ofthe project regarding two priority areasidentified by stakeholders, hours ofwork (HoW) and grievance procedures(GP). The fourth part sketches areas forfurther work and next steps while thefifth draws some lessons from theproject. The sixth part presents somegeneral conclusions.

I. Background on the SoccerProject

Diagram 1 depicts the functioning ofthe supply chain for soccer products.Local suppliers and subcontractorslocated in developing/producingcountries are responsible for theproduction of soccer products. Designand marketing of products typicallyoccur in final markets. Product flows todistribution centers and retail stores infinal markets, most often developedcountries.

The conditions under which soccerproducts are manufactured have beenthe subject of considerable attention bylabor rights organizations for a numberof years. For example, some ten yearsago, in response to the criticism aboutthe use of child labor in Pakistan, aMemorandum of Understanding was


Sustainable Compliance in the Soccer Products Industry:Report on the FLA Soccer ProjectPAUL J. BAILEY

signed between the industry in Sialkot(Pakistan), ILO and UNICEF at a timewhen children at home in this regionproduced the majority of the world’ssoccer balls, drawing attention for thefirst time to this industry.3 The industryhas since expanded to other productionsites such as in China, Indonesia,Taiwan and Thailand.

Concerns persist about conditions ofwork, low pay and long hours in theindustry, not to mention the absence oftrade unions and collective bargainingand a host of other industrial relationsissues. Since the FLA Workplace Codeof Conduct mirrors to a large extent theprinciples embodied in in the ILO’score labor Conventions, Table 1 canserve as a proxy indicator of whereChina and Thailand—the two countriesthat host factories in the SoccerProject—stand, in terms of their

commitment by having ratifiedinternational standards, on theprinciples of freedom of association,non-discrimination, forced labor andchild labor.4

Non-ratification of Conventions 87 and98 helps explain the weak position oftrade unions in these countries andperhaps the absence of a culture thatwould support the submission ofgrievances by workers. Likewise,non-ratification by China of theConventions on the elimination offorced and compulsory labor might alsohelp explain the propensity to resort toexcessively long hours and virtuallymandatory overtime without a cleardifferential for additional hoursworked.

The Soccer Project was conducted ineight factories in China, of which six

supply Nike and two adidas. All of theNike factories produce footballs andthree of them also make accessories.One adidas supplier makes onlyfootballs and the other only apparel.They range considerably in size andemploy between 500 and 6,800workers (average 1,800, with mostunder 1,300 employees) for a total ofabout 15,000 workers (almost two-thirds of whom are women). Thenumber of down stream sub-contractors varies greatly from factoryto factory: the larger the number ofsuppliers, the greater the dependencyon them for components, and thehigher the chances of a break down inthe supply chain. The two adidasfactories are the largest. One Nikefactory producing footballs andaccessories has declined to participatein the HoW segment of the projectbecause of pressures of peak productioncoinciding with important activities ofthe project.

There were initially ten factories inthe Soccer Project in Thailand, sevenproducing for Nike and three for adidas.The Nike supplier factories onlyproduce apparel, while one adidassupplier produces footballs and twoapparel. They employ between 460 and3,600 workers (average 1,900) for atotal of about 17,000 workers, 80% ofwhom are women. The largest factory


Table 1. Ratification of ILO Core Conventions by China and Thailand

China Thailand

Freedom of Association and Collective Bargaining C.87

C.98

Elimination of Forced and Compulsory Labor C.29 26.02.1969

C.105 02.12.1969

Elimination of Discrimination in Respect of Employment and Occupation C.100 02.11.1990 08.02.1999

C.111 12.01.2006

Abolition of Child Labor C.138 28.04.1999 11.05.2004

C.182 0.8.08.2002 16.02.2001

Diagram 1: Soccer industry supply chain

Developing/producing country

Local supplier Suppliers/factory Distribution center Retail store

Brands/Marketing

Designer

Subcontractor(s)

Flow of goods

Final market(s)

Flow of order, information, design

Table 2. Principal Soccer Project Activities, 2005–2008

Year Activity/Country T-o-T Brands Factory Owners Suppliers CSO/NGO Workers

2005 Initial consultations (C, T) √ √

Training on BSC Pilot 1( C) √

Master training on BSC(for FLA staff) (C) √

BSC self-assessment andin-depth review (C,T) √

2006 Training on BSC Pilot 2 (C) √

Analysis of training (C) √

NGO Forum (C, T) √

Initial meeting with key stakeholders √ √

Gap analysis and identificationof training needs (C, T) √

Feedback on training needs (C, T) √

Training on Guidelines ofGood Practice (C, T) √

Training on BSC (C, T) √

Foundation Course (C) √

Training on Guidelinesof Good Practice (C) √

Worker interviews (focus groupdiscussions) (C,T) √

Training on Improving Working TimeManagemen (C) √

2007 Training on Guidelinesof Good Practice (C) √

Training Workshop on Guidelinesof Good Practice (C) √

Training on grievance proceduresand Guidelines of Good Practice (T) √

Training on grievance procedures (C),(two sessions) √

Training on dispute settlement (C, T) √

Training on grievance proceduresand Guidelines of Good Practice (T,C) √ √

Training on SCAT √

Meeting with CSOs (T) √

Training on Guidelinesof Good Practice (C, T) √

2008 Application of SCAT (C, T) √

Training on hours of work (C, T) √

Root cause analysis (C, T) √ √

Application of SCOPE (C, T) √ √

C- ChinaT- Thailand


producing apparel for adidas is nolonger participating due to its closurein mid-2007. Two Nike apparel-producing suppliers are notparticipating in the HoW component ofthe project.

II. Project Activities

Project activities with brands, owners,suppliers, and other stakeholders wereconducted in a highly transparent fash-ion. This “process” included: communi-cation with brands, factory owners andsuppliers, focus group discussions withworkers, meetings, factory visits, con-sultations with NGOs and trade unions,buyers and suppliers, workshops, train-ing sessions, evaluations and newslet-ters. Principal Soccer Project activities,by stakeholder involved, for the period2005–2008 are shown in Table 2.

The project initially held consultationswith suppliers in Bangkok on October17, 2005, and in Shanghai on October19, 2005. The Bangkok consultationswere attended by 12 suppliers andrepresentative buyers (FLA-affiliatedcompanies), while the Shanghaiconsultations were attended by 7suppliers. The agenda and format ofboth consultations were similar: (1)presentations on issues related tocorporate social responsibility and laborcompliance by invited academics andlocal and international experts andpractitioners; (2) description of theFLA Sustainable Compliance Programand of the Soccer Project methodologyand implementation procedures andtimelines by FLA staff; and (3) opendiscussion on any aspect of the FLASoccer Project.5

The FLA also held a series ofstakeholder forums to engage its otherconstituents on the project’s goals andobjectives and implementation process.The first two civil society consultationswere held in March and April 2006 in

Hong Kong and Bangkok, respectively.The top five problems identified by theNGO Forums held in Hong Kong andBangkok were:

• Excessive and forced OT.

• Delays/defaults in wage payment,wage deduction without prior notice,minimum wage not guaranteed,wages far below living wage in someareas.

• Occupational disease, poor workingconditions, accidents and injuries atwork.

• Absence of trade unions, or workers’self-governing organizations.

• OT payments not guaranteed, OTpremiums not paid.

These well-documented activities of theproject—meetings of brands, owners,suppliers, stakeholders; assessments,trainings, measurement of progress—demonstrated a very transparentprocess in which all had the possibilityto be involved. In 2007, the emphasis ofactivities was on capacity building; withthe FLA making capacity buildingservices available to suppliers directlyand also training (through Training-of-Trainers) private sector organizationsand inviduals who would be able toprovide quality training services tofactories. In 2008, the FLA began toapply measurement tools to developbaselines against which to measure theimpact of its capacity buildingactivities.

The Soccer Project has been thelaboratory in which the FLA tested andrefined a number of tools in itssustainable compliance toolbox. Thesetools are:

• SCAT—Sustainable Compliance

Assessment Tool: A SCAT is an on-line questionnaire with multiple-choice questions. It is a

self-assessment filled out by thesupplier on the Assessment Portal.The results of the SCAT will show thesupplier the strengths and weaknessesin their organization on the chosenissue. A different SCAT is developedfor each Priority Issue (see below forPriority Issues).

• SCAT+: The SCAT+ is the tool usedby an assessor during externalverification of results after a capacitybuilding period has taken place. Itcovers the same areas as the SCAT,but the SCAT+ also includesadditional check lists and verificationof documents.

• SCI—Sustainable Compliance

Indicator: SCIs are indicatorsdeveloped to measure and record theprogress made during CapacityBuilding phase of a Priority Issue.SCIs can be downloaded from anduploaded to the Assessment Portal.SCIs are filled out by the supplier. ASCI is basically a key performanceindicator (KPI).

• SCIM—Sustainable Compliance

Instructional Material: A SCIM canbe a face-to-face training, writtendocumentation, or an interactive on-line course with examples and videos.SCIMs are developed for each PriorityIssue either by the FLA or incollaboration with local serviceproviders. Local SCIM trainings existon issues such as: Dispute Settlement(Grievance Procedures), Hiring andDiscipline. More SCIMs will be addedover time.

• SCOPE—Sustainable COmpliance

PErceptions: SCOPEs are workerinterviews done by a local serviceprovider. The SCOPE and the SCAT(or SCAT+) results together give amore complete picture of a supplier’ssituation. A different SCOPE isdeveloped for each Priority Issue. The


questions are multiple-choice ones,and the result is given as a degree ofcompliance.

III. Soccer Project Priority Areas

The consultations with buyers, suppliers,and civil society representatives led tothe identification of two priority issuesfor the Soccer Project: grievanceprocedures (GP) and hours of work(HoW). These were not only two majoritems where non-compliance had beenconsistently detected in past monitoring,they were also regarded as key toimproving code compliance in otherareas. Good grievance procedures arevital to the implementation andeffectiveness of the code of conductsince they provide a channel for workersto resolve issues of noncompliance andgive management feedback on how thecode is being implemented andexperienced. Excessive hours of workoften lead to numerous other codeviolations, including underpayment ofwages and overtime premiums, denial ofrest days and holiday periods and canlead to occupational safety and healthproblems. They also have seriousconsequences for workers in terms offatigue and work/life balance.

All factories taking part in the trainingneeds assessment for China indicatedthat they were interested inparticipating in trainings offered by theFLA on the topics of “BalancedScorecard Strategy Development” and“Grievance Procedures.” Four factorieswere interested in training on“Productivity Improvement.” A numberof other training needs were brought upby the factories, includingcommunication/leadership skills atdifferent management levels, HRM,supply-chain management, and lifeskills for workers.

Before getting into the specifics of the

two different areas treated, it isimportant to note that—as with all pilotprojects—one of the goals is to evaluatethe process and tools and ensure thatthey work in the desired way, and ifnecessary make changes.

This is also true for the Soccer Projectand some of the tools and processeshave changed during the course of theproject. To give a concrete example ofthe first priority issue treated,Grievance Procedures, worker inputwas handled by focus group discussions

carried out by a local organization.For the second priority issue, Hoursof Work, this part of the process hadevolved into a standardized workersurvey (SCOPE) that mirrors the self-assessment the factory managementtakes and that is filled out by astatistically viable sample of the entireworkforce. Hence—the issues treatedin the project have not been handled instrictly the same fashion.


Box 1: Excerpt from FLA Principles of Monitoring

Reporting and remediation of noncompliance

F. Provide Employees With Opportunity to Report Noncompliance

Develop a secure communications channel, in a manner appropriate to the cul-

ture and situation, to enable Company employees and employees of contractors

and suppliers to report to the Company on noncompliance with the with the

workplace standards, with security that they shall not be punished or prejudiced

for doing so.

G. Establish Relationships with Labor, Human Rights, Religious or Other Local

Institutions

Consult regularly with human rights, labor, religious or other leading local institu-

tions that are likely to have the trust of workers and knowledge of local conditions

and utilize, where companies deem necessary, such local institutions to facilitate

communication with Company employees and employees of contractors and sup-

pliers in the reporting of noncompliance with the workplace standards

Consult periodically with legally constituted unions representing employees at the

worksite regarding the monitoring process and utilize, where companies deem

appropriate, the input of such unions

Assure that implementation of monitoring is consistent with applicable collective

bargaining agreements e workplace standards, with security that they shall not be

punished or prejudiced for doing so.

H. Establish Means of Remediation

Work with Company factories and contractors and suppliers to correct instances

of noncompliance with the workplace standards promptly as they are discovered

and to take steps to ensure that such instances do not recur

Condition future business with contractors and suppliers upon compliance with

the standards

Grievance Procedures (GP)

Unlike HoW, which is anchored on theFLA Workplace Code of Conduct andregarding which outcomes are readilyquantifiable (i.e., maximum 48 hours +12 hours OT per week, with one day offin seven), GP relate to Obligations ofFLA Companies and to the Principles ofMonitoring (see above) and there is noquantifiable blueprint on what a GPshould look like and how to achieve it.The greater involvement of humanrights, labor, religious or other leadinglocal institutions, as recommended bythe FLA, might help in developing bestpractices models, but additional train-ing and information may be required.

The overall importance attached to GPvaries and workers’ needs differconsiderably depending on whether ornot the workforce is largely composedof migrants. In factories with mostlymigrant workers, the demand for afunctioning grievance system is moreexplicit and workers made varioussuggestions during the focus groupdiscussions held early on in the project.

Workers’ involvement in the design andimplementation of a GP is generallyvery low. Even in factories withemployee representatives, opportunitiesfor participation are rare. A vastmajority of workers expressed theirpreference for a grievance systemformed jointly by labor andmanagement. They also expressedinterest to have greater workerinvolvement in the grievance resolutionprocess.

Even in factories where workersstressed the importance of GP, themajority had rarely used the existingsystem, for varying reasons.Interviewees stressed the followingpoints as areas for improvement: afaster and more transparent process ofresolution; a “better attitude” amongmanagers towards workers lodging

grievances; and more workerparticipation in the process of resolvinggrievances.

Although most factories had establishedmore than one grievance channel,many of them were used onlynominally by workers, for varyingreasons. Nearly all depended almostentirely on their line managers toresolve grievances, although none ofthe factories provided training tomanagers on conflict or grievanceresolution or had any explicit protocolfor dealing with such cases.

After the initial results, trainingsessions on Guidelines of GoodPractice, Grievance Procedures andDispute Settlement, as well as BalancedScore Card, have been held in bothcountries, and a period of capacitybuilding has taken place in thefactories. In order to measure theimpact of the project so far, the FLAdecided to meet with the factories inlate 2007 to discuss how the projectwas perceived and what changes hadtaken place.

Two workshops were held in China andThailand the first week of December2007 where representatives of thebrands and factories could discuss theirexperiences, what they had learned,what had changed and what had beenchallenging. A few items stand outbecause they were mentioned in mostgroups in both countries:

• Their way of thinking in regards toGP had changed. While earlier theysaw “no grievances” as good, theynow understood that this is notnecessarily the case. The phrase“change in mentality” came up severaltimes.

• GP in factories changed and werenow more detailed although quite afew informal channels were still inplace (and not always documented),

• They still had difficulties in“motivating” workers to submitgrievances.

• Difficulties were also encountered intraining personnel who receive andhandle grievances.

Hours of Work (HoW)

The selection of HoW as one of the pri-ority issues served to demonstrate howthe FLA 3.0 methodology could be usednot to accuse companies of workingexcessive hours but to get at thepossible root cause(s) of the phenom-enon, and eventually devise remedialsolutions. This root cause analysis wasinitially conducted through a self-assessment completed by managementfollowed by an in-depth review withFLA staff. Workers attitudes were gath-ered through focus group discussions,at the beginning of the project, andagain early 2008 involving a secondgeneration of the self-assessment tooland the standardized worker survey.


Box 2 : FLA Workplace Code of Conduct

Hours of Work

Except in extraordinary business circumstances, employees shall (i) not be

required to work more than the lesser of (a) 48 hours per week and 12 hours over-

time or (b) the limits on regular and overtime hours allowed by the law of the

country of manufacture or, where the laws of such country do not limit the hours

of work, the regular work week in such country plus 12 hours overtime and (ii) be

entitled to at least one day off in every seven day period.

In many countries, laboring 60 hoursper week is legal. Shift work is largelyunknown. Therefore workers commonlyarrive at 06:00–07:00 in the morningand go home at 18:00 or 19:00 in theevening—or later—when the job isdone. Under such a system, it is unclearto the worker when his or her regularhours end and when OT begins and atwhat (increased) rate of pay this OT iscompensated. As a starting point, aclearly printed pay slip indicating whennormal hours have been reached andwhen OT begins would be a major stepin helping workers understand whatthey are getting from their extra efforts.

If higher wages or productivityincentives could be established, workerscould reach their income targets in ashorter period of time and would nothave to seek more OT in a factory ormove to another that offers more OT.This would reduce labor turnover andthe knock-on effects of that mentionedabove. If the wage is too low in the firstplace, OT in and of itself will not solvethe problem, but rather productivityincreases, based on incentives.

Employers in China and Thailand havegenerally been slow to link excessiveHoW to work organization andproductivity/quality issues. Greater useof LEAN production methods, TQM,and team work could significantlyreduce working hours withoutnecessarily reducing wages. Studieshave shown (in China) that productivitycan be increased by 40% to 50%, if anyof the above methods are used.

While productivity increases are ofinterest to employers as a means toreduce excessive OT, workers are onlyinterested if decreases in HoW result inthe same or higher income. The mainproblem here is converting the lowlevels of production efficiency intohigher quality, better paid work. A

solution might be (1) to carry out casestudies on where improvements havetaken place (i.e., to highlight bestpractice); (2) for FLA to providesupport in the short term for specificmeasures; and (3) to establish an actionplan for each participating factory.

1. One of the issues that surfaced

was that workers at factories

supplying FLA participating

companies wanted to work more

hours and were leaving these

factories to get more overtime (OT)

hours elsewhere, or in some cases noteven accepting offers of employmentfrom factories supplying FLAparticipating companies when theylearned about the 60 hour work weeklimit provided for in the FLAWorkplace Code of Conduct.

The resulting high turnover of workerscreates a vicious circle that underminesproduction efficiency and hencerequires the remaining workers to worklonger. It also adds to costs andincreases the likelihood of wages andbenefits not being paid in full or ontime. Since workers are often drawnfrom rural areas far from the factory,replacing them is a cumbersome andcostly process and if a factory is not

certain about future order levels,management may prefer to simply workthe existing workforce longer andharder rather than hire additionalworkers who may be surplus torequirements in a few months time.

According to the information availablefrom the initial workshops, an FLAsuggestion to provide productivityincentives as a means of both reducingOT and retaining workers was notimmediately accepted. The argumentthat excessive OT contributed to lowproductivity, absenteeism, highturnover and safety and healthproblems did not seem convincing tothe factory owners. It should be notedthat in other countries, OT is frequentlybuilt into a contract to allow workers toearn more, or workers can delay (orslow down) work to necessitate OT.Where most workers are migrants andare far away from home without theirfamilies, OT is often the preferredalternative of workers to sleeping in acompany dormitory, or engaging indrinking, gambling, and so on. In manyindustrialized countries a higher rate oftaxation on OT earnings acts as adisincentive on excessive hours, butthis is obviously not the case regardingChina and Thailand.


One question that arises, but cannot befully answered, is whether the originalwage (based on 48 hours + 12 hoursOT) allows workers to meet their basicneeds, without having to resort toadditional excessive OT, or, whetherthey are merely working for the shortterm to amass as large a nest egg aspossible quickly and then to returnhome. It is also distressing to note that60 hours per week (i.e., 48 hours + 12hours) increasingly appears to beregarded as the norm, and only workbeyond 60 hours per week as OT.Responses to the self-assessmentindicating “80+” hours per weeksuggest a 16-hour work day in a five-dayweek, 13 hours a day in a six-day week,and 11.5 hours a day in a seven-dayweek. Furthermore, one factory citedthe practice of informing workers ofpending overtime—beyond thatallowed by the FLA Code or the law—and then obtaining a governmentpermit to legalise the extra hours

Some issues with respect to HoW thatarose from the experiences of Chineseworkers include:

• None of the eight factories in Chinahad a functioning system forinvolving workers in the developmentof a company policy on HoW.

• All eight factories relied on some OTbeyond 60 hours/week during peakseasons or for rush orders.

• The worker interviews highlightedthe relationships between pay systemsand extent of OT: workers in factoriesand units receiving hourly wagesexpressed a stronger demand formore OT than workers in factorieswith a piece-rate pay system.

• A clear link between more OT andthe level of motivation of workerscould not be established during theinterviews.

• Interview questions related to therelationship between the method ofproduction and extent of OT revealedthat workers in factories that adopteda LEAN management systemexpressed a stronger demand for OTthan workers in factories with othermethods of production.

• The collective piece-rate pay systemtends to only consider the existingwage level and not an actual OTpremium payment.

• All eight factories used localminimum wage levels as thereference when calculating OT, ratherthan the actual or average wage.

2. A second issue mentioned

regarding the need for OT was

problems with the supply chain.

There were often delays in placing orconfirming orders, or last minutechanges in specifications. This delayedthe start of production and led tobacklogs that needed to be made upthrough extra-hours of work in order tomeet shipment deadlines. In addition,components often arrived late or werenot up to standard. Finally, power cutsfrequently disrupted production.

If orders or components had arrived ontime, presumably OT would not havebeen required. However, there are anumber of actors involved in the supplychain who would all have to makechanges to their systems for placing orfilling orders. At this point in timethere is no forum or process forresolving conflicts between the systemsof the buyer, the supplier and the sub-suppliers, so the only option is toincrease the capacity of each actor toplan and execute orders and to makethem aware of the impact theirdecisions have on the other actors. TheFLA may provide a platform for thiscapacity building and awareness raising.

Finally, dealing with delays resultingfrom power cuts is a more complexissue and beyond the scope of the FLACode of Conduct—but it is a realproblem. A quick fix might be theinstallation of solar panels or otheralternative forms of electricitygeneration to keep essential operationsmoving, but there is a question of size,capacity, availability of fuel, cost andthe resulting pollution.

Ideally, improving supply chainmanagement would help productivity allthe way around, but there are limitsregarding how far the FLA canrealistically go to change the situation inthe short run. If delays in delivery aredue to mismanagement, this could becorrected, or at least improved, throughcapacity-building. If however, they aredue to the supplier not deliveringcomponents on time or goods of poorquality for whatever reason,remediation is much more complex.

IV. Next Steps

At the December 2007 workshops toevaluate progress, training modules werereviewed. Most participants opined thatthe module on the Balanced Score Card(BSC) was the most complicated andthat just training compliance personnelwas not enough. BSC is a strategic tooland top management needs to becommitted to it and trained before itcould be put in place.

On HoW, it has been noted that thereis less OT in factories with piece ratesystems, although additional piecesover the norm are not compensated ata higher rate. This suggests that thepiece rate system deserves a closer lookbecause of its potential to affectovertime.

With regard to GP, more thought shouldbe given to what exactly various modelsmight look like. It was mentioned on


many occasions that most complaintswere to the immediate supervisor, whowas ill-prepared or trained to deal withthem. This suggests the need for moreand better training. One point that isunclear is the level and degree ofconflict resolution and the number offiled grievances that get solved. Moreemphasis should be placed on the actualsolution of complaints.

A possible way forward might be, indiscussion with the various actors, toestablish measurable targets (actionprograms) for each participating factorywith respect to HoW and GP, along thelines of:

• What can be implementedimmediately, or at least in the short-term (e.g., six months) by thefactories on their own, withoutassistance;

• What could be implemented within ayear (or other reasonable medium-term time frame) with some externalassistance, training, etc.; and

• What could be aimed at over the long-term assuming sufficient resourcesand assistance were available?

For example, with respect to HoW, thefollowing steps might be taken: (1)provide each worker with an easy to

understand pay slip, indicating regularhours worked and OT (plus rates ifpossible); (2) if OT rates are not beingpaid, do so; and (3) introduce a shiftsystem, or piece-rate system to complyfully with FLA requirements.

With respect to GP, one might ask for:(1) examples of successfully resolvedconflicts; (2) what worked and why,and if this is replicable, and (3) whatdidn’t work and why not.

Since the workshops in 2007, thesuppliers all agreed to start over withHoW; factory management filled outthe web-based self-assessment in early2008. This was followed by the workersurveys and each factory received theresults for analysis.

Since then the FLA has also held twotraining sessions on its developed Hoursof Work training module—one each inChina and Thailand in May. After thetraining session the factories havedeveloped capacity building plans withconcrete measures and are in the processof implementing those plans while usingindicators to record the progress.

Still to be carried out late in 2008 is theindependent external assessment thatwill complete the cycle of bothGrievance Procedures and, at a laterstage, HoW. The first independentexternal assessments are planned forthe second half of 2008.

V. Lessons Learned

Overall the project has shown that itis possible to go beyond mere auditingto engage stakeholders, buyers, andsuppliers, using qualitatively differenttools in a sustainable fashion. Theparticipative approach—involvementwith suppliers and brands as well aslocal stakeholders—proved to beworkable. Moreover, the applicationof the methodology through the

soccer project provided theopportunity to develop an array ofmethods and tools (self-assessments/worker interviews;capacity building materials, training oftrainers (TOTs), tools such asSCAT/SCIM/SCOPEs and web-basedportals) that can serve as thebackbone for the broaderimplementation of FLA 3.0.

Participants were particularly positiveabout the quality of the training andtrainers, their ability to learn moreabout the FLA and the new cooperativerelationship among factories andbetween factories and the FLA. GPtraining received the most comments,and this module was rated between“very useful” and “OK.” For othermodules, the responses on theirusefulness differed. Nevertheless, onthe whole, more training was desired.In response to the question of whetherthe training on GP made a difference,the comments on the whole werepositive and included the following:great improvement, deeperunderstanding of contents and handlingof grievances and complaints; moreharmony, improved confidence level ofworkers in relation to submitting agrievance, reduction of complaints; forother respondents, the training on GPmade no difference. On how FLAmanaged the project, the responseswere quite varied, ranging from a few“well,” many “OK,” some “don’t know”or blank, and a few “not so well.”Others commented that the project isstill ongoing and that they looked forcontinuous improvement. In addition,there were requests for follow-up aftertraining, that activities be conducted asplanned in order not to avoid confusingthe participants, and for morecommunication.

Training continued to be the mostdesired follow-up item, with more


wanted rather than specific changes inhow it was provided (with theexception that more time was requestedduring the training to digest what wasbeing provided). Additional itemsrequested included: training on HRManagement/Workplace standards,more local issues, e.g,, new ChineseLabor Contract Law, and hours of work.

Other lessons learned from the SoccerProject include:

• The need for confidence building wasidentified as a crucial factor. Itappears to have taken some time toconvince companies that they werenot being monitored for non-compliance using the policing model,with all the negative implications thiswould have.

• It also took some time and effort toget the idea across to factories thatthis was not just another activity withpunitive implications, but rather oneaimed at identifying the root cause(s)of a problem, so as to devise remedialaction to eliminate or reduce it andprevent re-occurrence in the future.

More emphasis needs to be placed inclarifying objectives and expectations atthe outset. At numerous points in theproject, staff and trainers realized thatnot all participants were clear on theobjectives and this detracted from thebenefits of the training.

• There was a lack of clarity in thetrainings regarding terms like “policy”and “procedures.” There may havebeen difficulties with translation orthere may be a lack of equivalentconcepts in local languages. Otherterms that were difficult to get acrosswere “efficient communication” and“properly supervised.”

• Although FLA Soccer Project staffconsistently tried to convince suppliersand owners that reducing HoW to the

legal limits will have a positive impacton performance, productivity,occupational safety and health, andwell-being of workers, the message hasbeen slow in getting through. Oncefactories become convinced thatproductivity gains can be achieved,despite a reduction in working time,and workers (through incentives/bonuses) see that there will be no lossof income if targets are met, it maywell be possible to remain within theupper working time limits set by theFLA Code. Nevertheless, additionaltraining material will need to bedeveloped, utilized and monitored.

• Eventually, the high cost of recruitingand training new workers may wakeemployers up to the benefits ofretaining their existing workforce, butthis would have to be done withoutmeeting the workers‘ desire forincreased OT.

• The ultimate problem with the issueof long hours may well be thatdeveloping countries are not yetattuned to the 8-hour day, 40-hour,5-day week, plus limited O/T asrequired. Changing this perceptionmay require/necessitate societalchanges. In addition, long hours seemto be as much of if not more of apush-pull factor than anything else.Workers want longer hours as muchas, if not more than, employers.

• On the whole, there was probably nosingle root cause for lack ofcompliance with the OT and GPprovisions of the FLA Code or otherbenchmarks, but rather a number ofroot causes, each of varying weightand some more amenable to remedythan others.

• The lack of worker involvement in theestablishment of HoW and GPsystems may well explain theinadequate functioning of such

systems. Realistically however,ordinary workers, and especiallymigrants, should not be expected tohave sufficient knowledge of suchcomplex industrial relations issues. Itis probably fair to say that the absenceof strong trade unions or other formsof worker representation contributesto this state of affairs.

• The factories involved in theTraining Needs Assessment (TNA)for China provided extensivefeedback on the first generationsustainable compliance assessmenttool (SCAT), which they found partlytoo general or unclear and partly toosimilar to an audit tool. As a result,the FLA has revised the tool. As theSoccer Project served as a pilot forFLA 3.0, the evaluation and revsionof tools has been an important partof the process.

VI. Conclusion

This report on the FLA soccer projecttakes an objective look at what thissustainable compliance project set outto do, how it proceeded, what itaccomplished (or did not), the lessonslearned, and what still remains to bedone. As such it represents more theviews of an “outsider” or externalviewer, but stops short of being a fullevaluation.

As with any work in progress, it isdifficult to step in at any given pointand take a single snap shot of where aproject is at, knowing full well that thecamera is still rolling and events areunfolding. In addition, an analysis ofwritten documentation can only go sofar and would need to be supplementedby additional insider comments fromactual participants in events, to theextent possible.

On the whole, targeting on a singleeconomic sector—the soccer industry—


serves to focus attention on theproblem at hand. Once correctlyunderstood, the new FLA 3.0methodology will contribute tofostering a sustainable complianceculture rather than one based onmonitoring only for violations to exposenon-compliance (the so-called “nameand shame” mentality) which didnot identify the root cause behindthe non-compliance, nor provide anyguidance on how to correct it. Theprevious approach also encouragedcompanies to devise strategies to avoiddetection (the proverbial “cat andmouse” game) rather than to change ormodify behavior. On the whole FLA ischanging from an auditor to be anactive partner; sustaining themomentum for change will be asignificant challenge.

Calls for additional training, theexpansion to other items in the FLAWorkplace Code of Conduct, inclusionof more than just soccer industry-producing factories, increasedinvolvement and dialogue between allparties in the supply chain (sub-contractors, suppliers, factories, brands,consumers) and improvement ofcommunications, etc., must be viewedpositively. The challenge will be torespond to these requests.

Overall, the root-cause-analysisapproach succeeded, but with theconsequence of usually pointing tomultiple causes not just one, all ofwhich would need to be dealt with, butfor which additional detailed individualtraining modules would need to bedeveloped. The problem here will bedelineating what falls within FLA‘sexisting mandate, and because of thesize and number of the problems, andpresumably limited resources, toprioritize what can be done and whereto start on a step-by-step basis.

Endnotes

1.For more information on FLA 3.0 see,http://www.fairlabor.org/about/fla_30_-_toward_sustainable_compliance

2.FLA Soccer Project Interim Report(August 2006).

3.The agreement is generally known as theAtlanta Agreement. Seehttp://www.imacpak.org/atlanta.htm.

4.The information on ratification of ILOconventions originates fromhttp://www.ilo.org/ilolex/english/docs/declworld.htm

5.Seehttp://www.fairlabor.org/docs/Soccer_Supplier_Consultation_2005.pdf

About the Author

Paul J. Bailey is a consultant andresearcher with 28 years of experienceworking for the International LabourOrganisation. He was a researchcoordinator for twelve years focusingon multinational enterprises, served asILO Director for two years in Dhakaand two years in Manila. He hasa wide range of expertise and writtenextensively on corporate socialresponsibility, and has conductedon-site inspections in the ship breaking,automotive and garment industries. Hehas undertaken projects in Bangladesh,China, India, Pakistan, Philippines,Thailand, Turkey and the USA.


GUEST ARTICLE

InJune 2008, Professor JohnRuggie, the UN Secretary-General’s Special Representativefor Business and Human Rights,

presented his third report to the UNHuman Rights Council. It sets out athree-part framework through which totake forward the business and humanrights agenda. The framework—whichhas received the broad support ofbusiness, government and civil societyorganisations and was welcomed by theCouncil—comprises three principles:the State duty to protect against humanrights abuses by business; the corporateresponsibility to respect human rights;and the need for more effective accessto remedies.1

For leading companies in all sectors,the idea that they have a responsibilityto respect human rights—to ‘do noharm’—is neither novel norconceptually challenging. Many alreadyreflect a commitment to respect humanrights through a company policystatement or adherence to an externalset of standards, such as the GlobalCompact’s2 human rights principlesor an existing Code of Conduct.

Yet moving from the idea of aresponsibility to respect human rightsto delivering this in practice across acompany’s operations is much lessstraightforward. It is not simply a

negative obligation of refraining fromcertain actions. It frequently requiresproactive policies and procedures to bein place. But what exactly are they? Or,as Ruggie asks: “how do companiesknow they respect human rights? Dothey have systems in place enablingthem to support the claim with anydegree of confidence?” “Most,” heconcludes, “do not.”3

That is not to say that companies havebeen idle in the face of the challenge.Indeed, there has been muchexperimentation. One sector leadingthe way has been the apparel industry,which was the target from the early1990s of a series of high-profilecampaigns alleging human rights-related abuses in their supply chains.As a result, individual brand companiesdeveloped their own in-house codesand practices. Subsequently, codes ofconduct covering labor rights sprangup through multi-stakeholderinitiatives, such as those of theFair Labor Association, SocialAccountability International, theEthical Trading Initiative and theWorkers Rights Consortium.4

Traditional approachesto ensuring compliance

In most of these initiatives, the primaryfocus was on ensuring compliance with

standards through monitoring andauditing systems, sometimesaccompanied by verification and/orsocial performance reporting. Yet thelimitations of auditing and monitoringhave become increasingly clear overtime.5 Major brand companies havefound that they lead to only limitedimprovements in suppliers’ compliancewith their codes of conduct.6 Theconclusion increasingly being drawn isthat such systems are important butinsufficient to the task of improvinglabor rights implementation. What,then, is needed to make the difference?

One of the obvious features of anymonitoring or auditing system is that itis a top-down process, typically definedand controlled by the management ofa company, even if external providersmay implement parts of it on theirbehalf. These systems are designed toaccount to company management,shareholders and/or interested thirdparties (often western consumers,NGOs and investors) regarding thecompany’s impacts on the labor rightsof workers in its supply chains. Thoseimpacted—the workers themselves—remain largely passive objects in theprocess, with at most a few of themthe occasional subject of an auditor’sinterview.

This is a huge missed opportunity. For


Worker Participation and Engagement:The Key to Long-Term Improvements in Labor RightsImplementation

CAROLINE REES

the management of a factory and thecompanies that source from it, having ameans to receive on-going, self-initiatedfeedback from workers on theirconcerns is equivalent to having afinger on the pulse of a factory’sperformance with regard to laborrights. Without this feedback loop,problems are missed that may escalateand impact operations through reducedproductivity and staff retention,increased errors, accidents, strikes orworse. This is true whether or not everyconcern is well-founded. For example,complaints that result from workershaving misunderstood information ontheir paychecks can be easily resolved;left unaddressed, the continuing senseof grievance is no less a potentialproblem for the factory than if thepaychecks were in fact wrong.

Worker Participation: The roleof effective, rights-compatiblegrievance mechanisms

It is only by developing effective day-to-day communications betweenmanagement and workers that thisobvious gap can be filled. And a corecomponent of this must be an effectivemechanism through which workers canvoice concerns and complaints, withoutfear of retaliation and with confidence inbeing heard. It is this bottom-upapproach, empowering the voice ofthe workers themselves, that mustcomplement more traditional top-downsystems such as auditing and monitoring.

It is not the proposition here thateffective grievance mechanisms infactories are the panacea for thechallenges a company faces in ensuringcompliance with labor standards.Indeed, where these mechanisms areseen to work best, the evidence suggeststhey are typically part and parcel ofwider practices of open and trustedcommunications between workers and

factory management. Other systems arealso essential to ensure the company isrespecting rights, such as the wider duediligence process set out in ProfessorRuggie’s report to the UN. However,such is the potential importance ofeffective grievance mechanisms that—as the Ruggie report also reflects—theymerit attention in their own right.

This has been the intent behind aproject at the Corporate SocialResponsibility Initiative (CSRI) ofHarvard Kennedy School entitled“Corporations and Human Rights:Accountability Mechanisms forResolving Complaints and Disputes.”Launched by the CSRI in January 2007in collaboration with Professor Ruggie’s

mandate, and based on an extensiverange of multi-stakeholderconsultations, the project has exploredwhat models of grievance mechanismexist at the company, industry, multi-stakeholder, national, regional andinternational levels. The CSRI projecthas engaged stakeholders in identifyingwhat makes grievance mechanismseffective or ineffective in practice, inwhat circumstances and why.7

The first phase of the project culminatedin the publication of a Guidance Tool forcompanies and their externalstakeholders on developing rights-compatible grievance mechanisms at theoperational level.8 The Guidance Toolsets out seven principles, supported by a


Harvard Kennedy School’s Corporate Social Responsibility Initiative

The CSRI project has now begun a second phase of work, aimed at facilitating

access to information about the kinds of grievance and dispute resolution mecha-

nisms that exist in different countries and sectors. The lack of such information has

been identified by all stakeholder groups as a barrier both to accessing these mech-

anisms and learning from them. In its first year, the project undertook an initial map-

ping of some existing mechanisms, yet this represents the tip of an iceberg.

Questions remain about the wider array of grievance mechanism around the world,

how they work, how to access them, what processes and outcomes they can provide,

and what expert resources (advisory services, mediators, etc.) can assist their use.

Equally, progress in improving and learning from such mechanisms is hindered by

the lack of information about different models, what has worked where, when and

why; what outcomes they are producing and what they might mean for corporate

policies and procedures that can avoid repeat disputes.

The project will seek to address this gap by developing an open-source, web-based

resource and learning network in the form of a ‘wiki’. This will be a virtual resource

where individuals and organisations around the world can find, post, edit and dis-

cuss information about grievance mechanisms and the resources that support them.

It will focus on building high quality information about grievance mechanisms, but

will not itself be a place to lodge grievances. The project is being developed in sup-

port of the mandate of the UN Secretary-General’s Special Representative on

Business and Human rights, Prof. John Ruggie, and in collaboration with a variety of

interested organisations and networks of mediators, companies, NGOs, academics

and others. A beta version will be launched in fall 2008.

For further information, contact Caroline Rees at [email protected]

number of guidance points and moredetailed explanatory text. It deliberatelyleaves scope for companies and theirstakeholders to develop processes in linewith their size, sector, local culture,needs and challenges, within theframework of the principles. Forexample, in small and medium-sizedcompanies they can be implementedwith a relatively light touch and low cost.

The seven principles, read in thecontext of workers’ rights, require thata grievance mechanism be:

1. Legitimate and trusted: Thegrievance mechanism should beperceived as legitimate by theworkers who may need to access it,and should be jointly designed andoverseen by the management andworkers concerned.

2. Publicised and accessible: Thegrievance mechanism should bepublicised to, and readily accessibleby, all workers who may need toaccess it.

3. Transparent: The grievancemechanism should operate on apresumption of transparency ofprocess and outcomes, whileallowing for dialogue to remainconfidential and, where requested,for complainant confidentiality.

4. Based on engagement and

dialogue: The grievance mechanismshould focus on engagement anddialogue between the parties, withthe aim of identifying sustainable,rights-compatible solutions that areacceptable to all.

5. Predictable in terms of process:

The grievance mechanism shouldprovide predictability in terms of thekey steps and options within theprocess, should be time-bound whereappropriate and provide for agreedoutcomes to be monitored.

6. Fair and empowering: Thegrievance mechanism should seek toredress imbalances in power,knowledge and influence betweenthe management and workers toenable informed dialogue, a sharedresponsibility for outcomes and aprocess based on respect.

7. A source of continuous learning:

The effectiveness of the mechanismshould be measured and cumulativelessons from complaints shouldbe reviewed to identify systemicchanges needed to eithermanagement practices or theworkings of the grievancemechanism.

Evidence gathered in the course of theCSRI project shows that in manyinstances companies—whether majorbrand companies or supplier factories–do have some form of ‘complaints’ or‘grievance’ mechanism in place forsupply chain workers. Indeed manycodes of conduct require that they doso, as does that of the FLA. However,in practice these mechanisms oftenprovide only the ‘front end’ of aneffective grievance mechanism—namely access (a complaints box,hotline, or worker or managementcontact point) and internal assessmentor investigation of a complaint.

Both these steps are important, providedthey protect the complainant fromretaliation. Yet that is typically where theprocess ends: the management decideson some action to be taken and may—though does not always—inform thecomplainant of that response. If thosebringing the complaint support theoutcome, that may be fine. If they don’t,this centrally-controlled process, withmanagement as the sole arbiter of theoutcome, makes the company bothdefendant and judge in the eyes of thecomplainant. The process can quickly

lose legitimacy and the complaint maycompound into an on-going sense ofgrievance. Furthermore, since there israrely any systematic recording ofcomplaints—starting with the mostminor concerns raised with supervisorson the factory floor—there is also nocapacity to spot trends and patterns thatpoint to systemic problems and enableimprovements that can prevent the samegrievances from recurring. Such ‘front-end’ grievance mechanisms canironically exacerbate rather than resolvegrievances, counter to the interests of allconcerned.

Engaging workers directly inraising and resolving grievances

Little surprise, then, that emergingresearch appears to confirm thatgrievance processes are mosteffective—for workers andmanagement alike—where they providefor dialogue and are embedded inmanagement systems that encourageworker-management interaction.

Project Kaleidoscope was acollaboration between 2002 and 2007involving McDonald’s, Walt Disney andseven organisations concerned withlabor rights issues, including investorgroups. It sought to improve workingconditions in facilities in corporatesupply chains through a system dubbed‘Dynamic Social Compliance’.9 Thisconsists of two components: “two-waycommunications—bottom-up, as well astop-down—that seek to engage keystakeholders, including workers andsupervisors, as well as managers, incollaborative efforts to identify issues,develop solutions and monitorprogress…[and] an internal compliancemanagement system that registers andresponds to the many internal andexternal factors that can affectcompliance at the facility level.”10


The project—focused on 10 factories inChina—showed that “[b]etween 78%and nearly 100% of workers surveyedat the participating factories saidconditions had improved since thesystems-based approach wasimplemented.” It equally found that“[t]he factories see value in activelymanaging the compliance process.They perceive its advantages for theirbusiness interests.”11 While this projectwas not focused on grievancemechanisms, procedures to addressworkers’ concerns through two-waycommunications and a collaborativesearch for solutions were central to thesystemic changes it introduced.

Meanwhile, the FLA, which has led theway among multi-stakeholder initiativesin recognizing the importance of thequality of grievance mechanisms, hasconducted preliminary researchspecifically on this issue.

In the course of 2007, the FLA conducteda review in five Thai and six Chinesefactories supplying either Adidas or Nike,using the SCOPE and SCAT toolsdeveloped under FLA 3.0.12 Theysurveyed workers and management ontheir perceptions and experience ofgrievance mechanisms in the factory. Theresults showed a fairly strong correlationbetween the integration of workers in agrievance procedure and the successfulimplementation of that procedure. “Inother words, workers who feel integratedin the factory’s operations and thegrievance procedures are much morelikely to actually use the differentchannels and voice their concerns.”13

The business case for effectivegrievance mechanisms

But why is this good news for factorymanagement? An increased rate ofcomplaints is not, at first blush, anappealing prospect for most managers.

However, the evidence from the FLASCOPE survey also bore out the viewthat effective grievance mechanismscontribute to improved economicperformance. Those factories that hadbetter grievance mechanisms, whichintegrated workers into the managementof grievances and saw high uptake of themechanisms, had lower turnover ratesand rarely lost workers to other or betterpaid factory jobs. In turn, factories witha low worker turnover rate reported thatthey delivered almost 98% of theirproduction on time, while factories witha high turnover rate (above 8%) saidthey delivered only around 80% of theirproduction on time.14 Furthermore,although complaints initially increasedwith worker integration into grievanceprocedures, once there was a high levelof integration, it flattened and evendeclined. The report ascribes this to thefact that in factories with high workerintegration, there were also otherchannels for workers to voice theiropinion, problems and discontent.15

This is a preliminary set of findings fromthe early months of important work bythe FLA, and it will need furthercorroboration over time. There are othervariables in play that no doubtcontribute to the positive correlationsfound. But it begins to build a solidbusiness case, as well as the rights-basedcase, for effective grievance mechanismsthat meet the Principles described above.

Indeed, the conclusions of the FLAreview chime with the findings ofBusiness for Social Responsibility, anon-profit membership organisation,which has developed the concept of‘Beyond Monitoring,’ comprising fourpillars for advancing sustainable supplychains. The four pillars—developed inconsultation and collaboration withcompanies and other stakeholders—consist of ‘buyer internal alignment’,‘supplier ownership’, ‘empowerment of

workers’ and ‘public policy frameworks’.The third of these pillars is described as:

“Empowerment of Workers who take astronger role in asserting and protectingtheir own rights. This will develop throughan increasingly informed and participatoryworkplace, with access to securecommunications channels, effective meansof raising and resolving disputes, andopportunities for skills development.” 16

While the report notes that buyerscannot impose worker empowermentstrategies on their suppliers, it underlinesthat they have a role in providing supportfor the ability of suppliers to manage anempowered workforce and helping themto see it as promoting profitability. TheGuidance Tool on Rights-Compatible


The resultsshowed afairly strongcorrelationbetween theintegrationof workers ina grievanceprocedure andthe successfulimplementationof thatprocedure.

Grievance Mechanisms likewiseunderlines the important role as well asresponsibilities of sourcing companies innot just requiring their suppliers to puteffective grievance mechanisms in place,but supporting their efforts to do so andensuring backup processes are in placewhere serious grievances are not resolvedlocally. Companies such as Nike and GapInc are increasingly adopting this kind ofsupportive, capacity-building approachwith suppliers in pursuit of their owncorporate responsibility goals.17

Conclusion

A grievance mechanism is only one toolfor measuring and ensuring compliancewith standards and thereby advancingthe implementation of workers’ rights.Yet it is a crucial one that has to datereceived inadequate attention. Theemerging evidence supports the viewthat effective mechanisms that helpidentify grievances early and engageworkers in finding sustainable solutionscan contribute positively to productivityand staff retention. Most significantly,as Professor Ruggie notes in his reportto the UN,18 “An effective grievancemechanism is part of the corporateresponsibility to respect.” It is anessential tool, not an optional extra,for any responsible company.

Endnotes

1. “Protect, Respect and Remedy: aFramework for Business and HumanRights—Report of the SpecialRepresentative of the Secretary-Generalon the issue of human rights andtransnational corporations and otherbusiness enterprises, John Ruggie”. UNdocument A/HRC/8/5, p.5

2. Seehttp://www.unglobalcompact.org/AbouttheGC

3. “Protect, Respect and Remedy,” p.9,emphasis added.

4. While the apparel industry was one ofthe first to be singled out for criticism,other industries with complexinternational supply chains have facedsimilar challenges, and a number of theinitiatives created in response cover avariety of industries seeking to addressthe labor rights of supply chain workers.

5. See, for example, Locke, Richard, FeiQui, and Alberto Brause. 2006. “DoesMonitoring Improve Labor Standards?Lessons from Nike.” Corporate SocialResponsibility Initiative, Working PaperNo. 24. Cambridge, MA: John FKennedy School of Government,Harvard University; Ascoly, Nina andIneke Zeldenrust. 2003. ”ConsideringComplaint Mechanisms: An ImportantTool for Code Monitoring andVerification.” Center for Research onMultinational Corporations, Amsterdam;Bendell, Jem. 2004. “Barricades andBoardrooms: A Contemporary History ofthe Corporate AccountabilityMovement”. Geneva: UN ResearchInstitute for Social Development; Utting,Peter. 2005. “Corporate Responsibilityand the Movement of Business” inDevelopment in Practice Volume 15,Numbers 3 & 4. Routledge, June 2005

6. See, for example, Nike. “Innovate for aBetter World: Nike FY05–06 CorporateResponsibility Report”, p.6; Gap Inc.“What is a Company’s Role in Society?Gap Inc. 2005–2006 Social ResponsibilityReport,” p.26; Reebok. “OurCommitment to Human Rights: ReebokHuman Rights Report 2005,” p.42. NikeFY05–06 Corporate ResponsibilityReport

7. For more on this project and thepublications it has produced, seehttp://www.hks.harvard.edu/m-rcbg/CSRI/pub_workpapers.html orhttp://www.business-humanrights.org/Documents/HarvardAccountabilityMechanismsproject

8. Corporate Social ResponsibilityInitiative. 2008. “Rights-CompatibleGrievance Mechanisms: A GuidanceTool for Companies and TheirStakeholders.” Corporate SocialResponsibility Initiative Working PaperNo. 41. Cambridge, MA: John F.Kennedy School of Government,Harvard University.

9. Project Kaleidoscope Working Group.2008. “Project Kaleidoscope: ACollaborative and Dynamic Approach toCode of Conduct Compliance,” p.1

10. Ibid., p.211. Ibid., p.3

12. SCOPE (Sustainable CompliancePerceptions) is a tool developed by FLAto evaluate sustainable compliance issuesfrom the workers’ perspective usingstandardised quantitative questionnaires.SCAT (Sustainable ComplianceAssessment Tool) is a parallel FLA tool toelicit views from factory managers on aself-assessment basis.

13. Fair Labor Association. 2008. “SCOPEReport: How a Functioning GrievanceProcedure May Positively Impact aFactory’s Performance”at:http://www.fairlabor.org/3results.

14. Ibid.15. Ibid.16. Business for Social Responsibility. 2007.

“Beyond Monitoring: A New Vision forSustainable Supply Chains,” p.5

17. Nike. 2006. “Innovate for a BetterWorld: Nike FY05–06 CorporateResponsibility Report,” p.13; see alsodescription of Gap Inc.’s engagementwith grievance mechanisms related totheir supply factories in Lesotho in:Rees, Caroline and David Vermijs. 2008.“Mapping Grievance Mechanisms in theBusiness and Human Rights Arena.”Corporate Social Responsibility InitiativeReport No. 28. Cambridge, MA: HarvardKennedy School, pp.13–17

18. “Protect, Respect and Remedy,” p. 24.

About the Author

Caroline Rees is Director of theGovernance and AccountabilityProgram, Corporate Social ResponsibilityInitiative, at Harvard University’sKennedy School of Government. Sheis an advisor to Professor John Ruggie,the UN Secretary-General’s SpecialRepresentative for Business and HumanRights. She also serves as a trustee andmember of the Board of the Institute forHuman Rights and Business. Previously,Rees was with the British Foreign andCommonwealth Office and was postedwith the U.K.’s Mission to the UnitedNations in Geneva, where she led theU.K.’s human rights negotiating team. In2005, she chaired the negotiations thatcreated the mandate of the SpecialRepresentative of the Secretary-Generalfor Business and Human Rights.


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