Is policing your supplier effective? Part two - the WTO column

Last month I raised the question whether the current monitoring system for suppliers as a part of the corporate social responsibility or CSR was working. The answer was, partly to my own surprise, a clear "no". Academic studies and a set of articles in Business Week that appeared after my piece was done, came to the same conclusion. Policing suppliers does not work anymore, and might have had only a limited impact op labor conditions to begin with. It is time to ask ourselves whether one of the pillars of the CSR-policies of the larger companies, monitoring their suppliers, is not completely bogus.

Feedback on my articles is always a good sign and this time was no exception. What took me again by surprise was that everybody, including the auditing companies themselves, agreed with the basic conclusion of the article: the monitoring system is bankrupt. Of course I tried to invite them to join a more public debate, but since they were negotiating new contracts with some larger firms, they thought it was not the good moment to discuss whether they were trying to sell fried air to their clients. Fair enough.

I do not think you have to be a clairvoyant to see that this point will be picked up by what is called in the jargon the 'sweatshop movement'. Now the monitoring system seems to have lost its momentum, it will at a certain moment cease to exist as a legitimate excuse against sweatshop accusations. So, it is urgent time to come up with alternatives. The question is: who will do that, since the industry itself is all to eager to uphold the last bits of credibility as long as the system lasts.

The people in the policing industry continue to stress that their clients have a genuine interest in upholding labor standards. One of them writes:

However, the fact that the audits are not entirely legitimate does not mean that the factories do not honestly want to be compliant with the majority of labor regulations. With regards to installing appropriate safety equipment, not hiring child labor, or ensuring a healthy factory and dormitory environment, I have seldom encountered factories that are not willing to invest some money and effort to make the required changes.

Two real problems are identified: overtime as most migrant workers are paid per piece, not per hour and often prefer themselves to work long hours. Further, there is a lack of compliance concerning taxes and benefits. Partly, that is cause by the current labor regulations, one of them says:

However, it is the inflexibility of the government labor regulations that leave the factories in a situation that forces them to falsify information in order to pass factory audits.

One way or the other: there is here an issue that should be dealt with. The Organization for Economic Co-operation and Development (OECD) just got in December green light from its advisory bodies of employers and trade unions to start in 2007 a project on corporate sociale responsibility in China. While the focus is on Chinese companies, the broader discussion on one of the pillars of CSR might just be the kind of project that would fit an organization like the OECD.

Fons Tuinstra