Improving working conditions in your clothing supply chain

Case 3: We have found labour problems in one of our factories. What should we do?

If your brand is like most, you contract out production to factories that you don’t not own.  There are plenty of legitimate business reasons for contracting production, but contracting does raise risks – especially if you contract with factories in low-cost production countries.

Factory owners have the primary responsibility for working conditions – after all they are the employers.  But apparel brands also have a role to play. They don’t employ the workers directly, but they do have a significant influence on working conditions.  When something goes wrong at a factory, it is often difficult to clearly assign responsibility – or to know how to respond.  We explore some of the options here.

  • Should we fire the factory?

    When problems – like child labour or forced overtime are found, one option is to terminate your business relationship with the factory.  This may seem like a natural response – no brand wants to be associated with these kinds of problems, and it seems like it sends a strong signal to factory owners.  If a Code of Conduct was signed, it should be clear what is expected, right?  However, most experts in sustainable supply chains  encourage brands to fire factories only as a last resort.  Why?

    1.  Firing the factory hurts workers more than anyone.  The most direct effect of firing a factory is that many workers may lose their jobs.  Most apparel workers – especially those in low-cost countries – live paycheck to paycheck, with little or no savings, and have no access to unemployment insurance.  In some countries, no work means no food.

    2.  Firing the factory does nothing to fix the problem.  Experience has shown that firing factories because problems are found does nothing to fix them.  Instead it encourages a culture of deceit and audit fraud.

    3. Brand policies can have unintended consequences.   This can be a difficult one to talk about, but research has shown strong links between common labour problems and management decisions at the brand level.  Excessive overtime is often linked to poor production planning and late changes from brands.  Child labour has been linked to unreasonable price demands.  Brands don’t deliberately cause these problems, but unintended consequences need to be considered.

    So if firing the factory isn’t such a good idea, then what?

  • Fixing the problems

    Working with factories to fix problems is more complex, but from a practical and ethical standpoint, many brands are realising this is the only way to make sustainable improvements in your supply chain.  This isn’t always easy, but there are a few things to start with.

    Identify the causes of the problem: It is easy to portray ‘bad’ factory managers as the beginning and end of the problem, but usually there is a lot more to the story. Economic pressures, misunderstandings about laws, or poor communication can all contribute to labour problems.

    Set up a corrective action plan:  Corrective action plans are agreements between the factory and the customer on how problems are to be resolved.  Good ones are time-bound, and ensure that both factory and customer play a constructive role.

    Contact the factory’s other customers:  If you know who the factory’s other customers are, it can be a good idea to contact them about working together to solve the issue.  This can both increase impact and reduce duplicate work and costs.

    If you conduct factory audits or have a Code of Conduct in place, you may already implement some of these steps.  But the real challenge is to prevent labour problems from occurring in the first place.  Working with a multi-stakeholder initiative can also help you with these processes.

  • Prevention

    Ultimately, the best way to deal with problems is to prevent them from happening in the first place.  If you own your factory, that is an easier process; in dealing with contractors, it can be more complex.  But certain things can help:

    Stable business relationships.  It makes sense – factories will pay more attention to your concerns – be it for quality or labour conditions – if they expect to have an ongoing business relationship with you.  Stable relationships improve communication and give factories incentives to invest the kinds of improvements and trainings that lead to better conditions.

    Training for workers and management.  In many apparel-producing countries, large-scale industrialization has only taken place in the last 20 or 30 years. In many cases laws and human resources policies for these new work environments are new, or not widely known.  It is also important to remember that many workers – and indeed many managers – are the first generation in their families to work in factories, and may be the first to work outside the home.  Your support for education on laws, rights and best practices can go a long way to helping to improve conditions.

    Show that you are serious about working conditions.  Factory owners commonly report that they receive mixed messages from customers.  They may receive a code of conduct from your CSR department, and a message to prevent overtime.  And then they may receive another message from your supply chain manager insisting that products be delivered on time, regardless of late changes. It is no surprise then, that many suppliers don’t take codes of conduct all that seriously – or are consistently put in a position where they cannot take them seriously if they want to stay in business.  A consistent message, and integrated policy is essential for sustained improvements.

  • Where does my responsibility end?

    Increasingly, in both law and public opinion, brands are being expected to take responsibility for the welfare of workers in their supply chains, even if they do not directly employ those workers.  In 2011, the United Nations adopted the ‘UN Framework for Business and Human Rights’ also known as the ‘Ruggie’ framework after its lead author, Harvard Professor John Ruggie.

    While the specifics of implementation are still evolving, it the framework lays out clear responsibilities for businesses with international supply chains.  The framework, which has been widely supported by both human rights organisations and major multinational corporations, makes allowances for differences in size and types of influence, but it clearly articulates a duty for businesses to respect human rights in their supply chains, and to provide ‘access to remedy’ when things go wrong – or when governments fail to act.

    An increasing amount of policy and law is likely to be derived from this framework, so it is recommended reading for all businesses operating internationally. CNV Internationaal has produced an introductory guide.

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