Sweatshops: The critical public anti-globalization issue: What are the facts?
> BY FRANK VOGL
Copyright © 2002 by The Earth Times. All rights reserved

Right now, leaders of transnational corporations (TNCs) are traveling to Manhattan for the annual meeting of the World Economic Forum, while an army of anti-globalization protesters is also descending upon New York--but the two sides will not meet. The rhetoric from either camp is unlikely to be fresh and compelling, leaving the media once again to focus on street demonstrations and sidestep the crucial issues of substance.

Why are they crucial? Because the ways in which public opinion- especially in Western Europe and North America now--are influenced by the globalization debate will impact key international official negotiations in the immediate months ahead on trade, investment, foreign aid and the environment. Also, public opinion is more swayed by anti-globalization pictures of sweatshops in Asia than by pro-globalization essays from Washington "think tanks." The public is more influenced by dramatic campaigns against popular brands of shoes and clothes said to be produced by mercilessly exploited workers in Africa, Asia and Central America, than by good global corporate citizenship speeches by the titans of TNCs.

The new research will be especially useful to the debate because it deals exclusively with sweatshops in Asia. The research case studies focus directly on two of the major firms that are often vilified by the anti-globalization forces. It shows that important innovations are taking place in Vietnam with regard to child labor, workplace health and safety, financial support for very poor families and social responsibility attitudes of TNCs.

The research does not seek to defend the companies. It does not claim that all TNCs are behaving well. It does not enter into polemical debates about the appropriate levels of wages for Asian workers relative to American workers. But it does provide perspectives on extremely controversial globalization issues that are needed to break the impasse in the high-level globalization debate.

My hope is that both the pro- and the anti-globalization forces, and the media as well, will focus on the research findings of an expert team led by Laura P. Hartman, Professor of Business Ethics at DePaul University in Chicago. Her focus is ethics. Her fascination, aroused by the anti-globalization protests, is whether it is possible for companies to operate factories in poor countries that are profitable, ethical and accountable.

Hartman does not belong to the pro- or the anti-globalization interests, nor has her research been funded by any of these interests. She talked about her interests at a meeting in 2000 of the Fellows Program of the Ethics Resource Center. This is a program in which about 60 invited people with expertise in organizational ethics (drawn from civil society, government, major corporations, consulting firms and academia) meet to discuss what the program's chairman, Steven Potts, former Head of the US Office of Government Ethics, calls the "burning big issues in ethics."

Hartman raised the question of whether we can find some model factories in very poor countries that are not classic sweatshops but healthy workplaces where employees are respected and treated with dignity. Members of the Fellows Program were skeptical but, being convinced that the search was important and pioneering, they agreed to provide initial funding.

Researchers have now visited Asian factories, met with scores of corporate officials, conferred with experts from the International Labor Organization and interviewed managers, workers, the families of workers and public officials in Asia. Several case studies have been completed. Others are now in an advanced stage and the full study, currently under the working title of "Exploration of Management Alternatives to Global Labor Challenges," will be in the bookshops later this year.

Hartman and her colleagues have been searching for hard evidence in factories in very poor countries of excellent practices that can serve as replicable models. She has been striving to discover why factory owners have introduced improvements and how and why they have sustained them. She has looked at the ways in which new practices are being monitored and how major TNCs are being held accountable. The researchers have focused exclusively on actions that can be measured and objectively evaluated in the field.

Her overall conclusion so far from the research is: "Insufficient attention has been paid to firms which engage in truly good and beneficial activities with regard to their workforces, where the result is not a 'sweatshop' environment but instead is an economically viable enterprise in which laborers are respected and treated with dignity."

Charge: TNCs have no incentive to do what is right by their Asian workers. Is that true? TNCs have traditionally asked only two questions of suppliers: Can you produce high quality products at a very low price? And can you provide assurances that you will be a totally reliable supplier? Now some TNCs are asking many more questions that go to the heart of working conditions in factories. They have been pushed to do so by the rage of consumers and investors over reports of sweatshop exploitation in poor countries. Hartman suggest that Adidas, Nike and no doubt many other TNCs are responding to the pressures and the negative press with detailed social-responsibility action programs that establish clear standards and demand compliance.

The implementation of these standards is making it increasingly evident to TNCs, says Hartman, that their new approaches yield major benefits. These include: heightened productivity; stronger morale; decreased attrition; enhanced worker commitment and loyalty; better relations with local communities; improved social cohesion and civil stability; lower training costs; strengthened TNC reputation; reduced TNC risk management; greater TNC shareholder trust; and more positive consumer perceptions. In sum, these TNCs are learning the hard way that good ethics contributes to a stronger balance sheet.

Charge: TNCs take no broad, industry-wide social-responsibility interest in the developing countries in which they operate. Is that true?

Hartman looked at a project that refutes this assertion. The UK International Business Leaders Forum (IBLF) launched the project in late 1999, with the participation of Adidas, Nike and others to strengthen health, safety and environment conditions in footwear factories across Vietnam. The focus was on factories that were not currently under contract to supply major TNCs.

Nike and Adidas are participating in this project. Their experts are working with others to develop low-cost health, safety and environment innovations in factories that can yield valuable improvements. This effort is still at an early stage, but the pilot work is encouraging.

Charge: TNCs that claim to be socially responsible still take an arms-length approach to sub-contracts and to supplier firms that they do not own--basically, they just don't care about workers in these factories.

Hartman notes that both Nike and Adidas are major foreign contractors in Vietnam, which gives them great leverage over supplier factories. Her findings from factory visits suggest that the TNCs are "walking the talk." They accept what Adidas says simply as, "Outsourcing supply does not mean outsourcing social responsibility."

On evaluating new potential suppliers, Hartman reports that Adidas has found significant challenges in Vietnam, "including poor age documentation, paying less than minimum wages, local licensing of foreign-owned factories, maximum working hours exceeded, disciplinary rules not being published and wages docked as punishment."

Securing remedies has demanded that the factory owners "bought into" the Adidas reform effort--the response has been good, both because of fear that non-compliance would mean lost contracts and because they have gradually learned the benefits of full compliance for productivity and profitability. Adidas now has staff working with suppliers to enable them to come into compliance with new standards on labor treatment, health, safety and environment.

A component of effective buy-in is the involvement in factory improvements of the workers themselves. Hartman highlights in her case studies a number of examples where workers made suggestions to reduce accidents in plant operations that were simple, inexpensive and effective.

Charge : TNCs routinely use child labor. And, if they are publicly vilified on this count, then they just callously fire young people found to be in their factories.

Hartman reports on an audit of an Adidas supplier factory in Vietnam where it was found that 10 percent of the 2000 workers were under age. She says that international employers like Adidas and Nike recognize that firing young people from factory jobs can bring ruin to their families and send the youths into the drug and prostitution rackets. They are working with local communities and nongovernmental organizations (NGOs) to directly address this critical problem by developing innovative youth education programs.

Implementing the programs can be difficult, with many young people preferring to work than go to school, and with many factory owners reluctant to comply. Incentives are being developed to overcome these and other obstacles to implementation. The potential long-term social benefits can be formidable, Hartman suggests.

Charge: TNCs pay inadequate attention to critical issues of family incomes in their practices in developing countries. Pregnant women and young mothers are often routinely unable to get decent jobs, leaving them and their families destitute. Hartman looked at Nike programs in Vietnam, which the firms is also promoting elsewhere in Asia, to provide micro-enterprise loans. "The micro-loan program helps to create a healthy community, which then provides other sources of income in the community, better workers and additional sources of support for the families of current workers, raising the whole village's standard of living," says a Nike executive quoted by Hartman.

In each country, Nike has teamed with local NGOs in an effort to ensure that ongoing support is available for borrowers and that the programs are integrated. The loans are very small but very effective. Hartman has visited with recipients of the loans and tracked the benefits. She reports there have no loan defaults. Charge: Cultural insensitivity is common by the managers of TNCs.

Hartman provides insights into work that has been undertaken by Nike in Vietnam on this issue. Often, foreign managers have had basic language difficulties that have strained employee relations. Frequently managers have failed to appreciate that the ways used to motivate employees and build trust with them are different in Vietnam than in the US. The Nike program has been seeking to address these kinds of issues.

Programs have been developed to make foreign managers acutely aware of critical cultural issues in order to strengthen working relationships in factories. At the same time, additional programs are being developed to assist Vietnamese workers to learn how to adapt to new roles as they are promoted into managerial positions.

Hartman and her associate researchers have taken an in-depth look at some work by the International Labor Organization (ILO) in Asia that relates to this key area and focuses on poor management systems and skills in supplier factories; poor communications; language barriers and low employee literacy rates. Again, in these areas the study finds encouraging developments. Hartman has gathered an outstanding team of colleagues to pursue this research, including two other academic leaders who are members of the Ethics Resource Center's Fellows Program, Professor Sandra Waddock of Boston College and Professor Gary R. Weaver of the University of Delaware. Other contributors to the research include Charles Bodwell and Ivanka Mamic, who are associated with the International Labor Organization, Professor Denis G. Arnold of Pacific Lutheran University, Professor Sandra Rahman of Newbury College near Boston and Professor Richard E. Wokutch of Virginia Tech.

This research only relates so far to some aspects of labor and human rights of people in poor nations working to produce the goods that fill our department stores. This is precisely the kind of knowledge that needs to be strongly supported and built upon if serious people engaged on both sides of the globalization debate are going to move forward, shifting public understanding and media coverage from verbal abuse to constructive dialogue. Enhancing understanding of efforts to translate TNC social responsibility rhetoric into effective, replicable actions to bring dignity to workers in the world's poorest nations is an excellent start.