The observance by multinational companies of international labour, human rights and environmental standards is an issue of increasing concern among policy-makers, social partner organisations and individual companies. Codes of conduct and "social labels" are more and more at the forefront of attempts to ensure that certain minimum standards are upheld in trading relationships. However, concerns are increasingly being voiced over the quality of these statements of intent and their verifiability. To contribute to this debate, in November 1998 the European Commission organised a workshop devoted to the exchange of good practice in relation to the monitoring of codes of conduct and social labels.
In recent years, the associated issues of the observance by multinational companies of international labour standards, the fight against child labour and the promotion of "ethical trading" have received increasing attention at both European and international levels, partly as a result of a growing consumer backlash against companies found to be in violation of such basic standards. Both the Union of Industrial and Employers' Confederations of Europe (UNICE) and the European Trade Union Confederation (ETUC) have expressed a commitment to these issues with, for example, UNICE adopting a declaration on international labour standards (EU9807117N) and ETUC framing a resolution calling for the inclusion of social clauses in trade agreements (EU9801177F). The European Commission has been engaged in a dialogue with the United States on these matters for some time and in February 1998, an EU/USA symposium was held, with the participation of a number of social partner organisations as well as individual companies, to discuss measures to safeguard basic international labour standards (EU9802188N).
At international level, the 1998 International Labour Organisation (ILO) annual conference launched proposals for a new Convention and Recommendation concerning the prohibition and immediate elimination of the worst forms of child labour- including slavery, forced labour, trafficking, debt bondage and serfdom, illegal activities, prostitution, production of pornography and the use of children in hazardous work including mining and quarrying and domestic work. The text of these new standards is currently going through a consultation process, with the aim of adoption at the 1999 annual conference.
Individual companies are increasingly responding to consumer pressure by drawing up codes of conduct and "social labels" highlighting, in a variety of ways, their commitment to upholding certain labour, human rights or environmental standards. However, there has so far been little standardisation in relation to the fundamental rights covered and the manner in which compliance is monitored and assessed.
The workshop
The European Commission organised a workshop in Brussels on 25 November 1998, aimed at facilitating an exchange of ideas and good practice between practitioners in the area of monitoring codes of conduct and social labels, as well as highlighting areas for improvement in existing practices. The event attracted a range of participants from across Europe, including representatives of companies, trade unions, non-governmental organisations (NGO s), the ILO and international organisations such as the World Federation of the Sporting Goods Industry.
A particular theme of the workshop was the hope that, through facilitating dialogue and the exchange of information, concrete actions and commitments in relation to the eradication of child labour may be developed between European-level social partners in sectors not already covered by such agreements. The social partners in the textiles industry (EU9709150N), in footwear (EU9810131F) and in commerce (EU9801177F) have already signed such codes or conduct and statements.
The impetus for the workshop also derived from the realisation that US-based multinationals have been more active in this area than their EU-based counterparts. A report from the European Parliament's committee on development and cooperation has found that although more multinational companies have their headquarters in the EU than in the USA, a higher proportion of US multinationals have so far adopted codes of conduct.
Despite the declaration of good intentions on the part of social partner organisations and individual companies, many parties are increasingly of the opinion that codes of conduct remain little more than window-dressing unless they are backed up by a credible and independent system of monitoring. The workshop therefore sought to explore three key questions:
- should there be a convergence of codes of conduct, or a standardised code?
- what kind of monitoring frameworks currently exist and could these be rendered more effective?
- what are the viable options available for monitoring?
The workshop concluded with a discussion of partnership building in respect to monitoring mechanisms.
Convergence or a standardised code of conduct?
Research recently undertaken at the request of the ILO's Working Party on the Social Dimensions of the Liberalisation of International Trade reviewed over 200 operational and model codes of conduct. Considerable diversity was found amongst the codes reviewed, particularly in relation to the labour issues addressed. For example, only 45% of codes made specific reference to the abolition of child labour and only 15% of the codes had relevant references to the principle of freedom of association and collective bargaining. The latter principle was considered by most workshop participants to constitute a fundamental precondition for the operation of effective codes of conduct, and its omission was therefore seen as a significant shortcoming.
The research found a considerable absence of uniformity in the definition of principles underlying codes of conduct, The ILO in particular, was concerned about the disparity between self-definitions and international labour standards, as only a third of codes reviewed bore any reference to principles enshrined in ILO Conventions or Recommendations. Indeed, only a single code referred to the ILO's 1977 Tripartite Declaration of Principles on Multinational Enterprises and Social Policy. This diversity in the selection of labour issues was also evident in the case of the "social labels" reviewed by the ILO and suggests that the drawing-up of codes is extremely ad hoc, involving a variety of partners with differing levels of access to information and bargaining power.
One method which would counter the levels of diversity and selectiveness in codes of conduct would be to introduce some form of standardisation. This method has been pioneered by the Council on Economic Priorities, Accreditation Agency (CEPAA), which has developed a "social accountability standard" (SA 8000). This standard was developed and field-tested with the assistance of an international advisory board made up of representatives from companies, human rights organisations, certification professionals, trade unions and academics. SA 8000 is based on a number of existing international human rights standards, including the United Nations Convention on the Rights of the Child and ILO Conventions. It aims to provide an international benchmark on labour issues similar to other globally operational standards, such as ISO 9000 for quality control. SA 8000 prohibits child and forced labour as well as endorsing the principle of freedom of association.
At the November 1998 workshop, this standardised approach was supported by Simon Zadek, interim chair of the Ethical Trading Initiative in the UK. He supported the adoption of a model code of conduct with provisions largely consistent with the procedures embodied in the SA 8000 standard. Other speakers equally preferred a common standard in order to prevent unfair competition and "social dumping". However, at the same time, a number of participants expressed concerns that codes of conduct could be utilised or perceived as indirect forms of protectionism on the part of developed northern hemisphere countries against competition from the southern hemisphere. Generally, the discussion raised the issue of the "grey area" between international regulations and private voluntary initiatives, and the need for a closer integration of the two.
However, few global corporations have so far adopted a standard such as SA 8000 and it was argued at the workshop that standardisation is problematic and that codes of conduct and monitoring systems need to be aligned to the differing needs of various sectors and companies. It was argued by some parties that adhering to a common code may be particularly difficult for small and medium-sized enterprises (SME s), given their limited resources. Other individuals, on the other hand, felt that a common approach was essential for any real impact on the problem and that a coordination of codes of conduct would greatly assist suppliers or subcontractors, which would otherwise have to comply with a series of different codes of conduct.
The European Parliament (EP) committee on development and cooperation strongly advocates the need for a code of conduct at European level that does not set new standards, but is based on assisting the implementation of existing international labour standards. Representatives of the Parliament also emphasised the considerable potential of the social dialogue, which it views as a "ready-made mechanism for improving consultation and monitoring of European companies in the developing world".
It was also emphasised by a number of participants that codes of conduct should not act as a substitute for national and international labour standards, or collective bargaining mechanisms, but should be used as a first step towards furthering long-term improvements in working conditions.
Addressing the problem of child labour
One of the key concerns of "ethical trading" is the eradication of the use of child labour. The ILO estimates that there are approximately 250 million child labourers around the globe today. A number of initiatives were discussed at the workshop, which not only require monitoring multinationals' codes of conduct, but also taking an active role in rehabilitation, particularly of child labourers. Organisations supporting the struggle against child labour strongly emphasise that the removal of children from employment alone does not solve the problem and could indeed serve to aggravate it, as children are driven into more hazardous and clandestine forms of labour through poverty and a lack of education. Rehabilitation, particularly through education is therefore a key issue.
One example mentioned in this context was that of the Rugmark Foundation, which seeks to address the problem of child labour in the carpet industry. The project involves two elements: an inspection and certification system, whereby producers which do not use child labour are issued with a label; and a rehabilitation and social programme, whereby importers pay 1% of the cost to contribute to these programmes. The project was developed in India in 1993 with assistance from the Indo-German development corporation. Currently, the majority of German importers are importing carpets with the Rugmark label and there are currently negotiations in the USA, UK, the Netherlands, Switzerland and Luxembourg over licence agreements.
Recognition was also given at the workshop to the ILO's International Programme on the Elimination of Child Labour (IPEC), which began in 1992 and currently operates rehabilitation projects in partnership with international, national and local agencies in more than 50 countries. The programme aims to develop and strengthen the capacity of agencies at local, regional, and national levels for developing sustainable action programmes aimed at eradicating child labour, as well rehabilitating child labourers.
It was recognised that at the European level, support frameworks for monitoring are relatively underdeveloped at present. However, there is now perceived to be a great deal of interest and a political will to advance this area. The EP committee on development and cooperation is keen to establish a "European monitoring platform" made up of independent experts. The platform would receive reports from companies on progress made in this area, receive complaints, and publicise results of an annual social audit.
A Dutch trade union representative at the workshop proposed the idea of a system of certification for suppliers either at a national or European level. Supplier certification would ensure that contractual relations would exist only if there were evidence that the supplier complied to standards specified in a code of conduct. A certification system was seen as being less problematic for SMEs, as it would be more financially viable than external monitoring. It was also stated that a pragmatic and realistic approach was required, as a gradual adjustment in respect of these issues is all that can be expected and such a change will take time due to the often extensive nature of the supplier networks.
A number of innovative initiatives are being taken at the national level. The UK's Ethical Trade Initiative (ETI) - a collaborative alliance of companies, trade unions, NGOs and the UK government - was highlighted as a positive example. The ETI has recently issued for consultation its own model code of conduct and aims to act in support of an exchange of information and good practice, as well as launching a number of pilot projects in developing countries.
At the workshop, the SA 8000 standard was referred to as a viable framework to which companies could adhere, as it was thought that a common framework of reference would overcome any confusion in relation to which standards needed to be monitored, and would enhance credibility in an area where implementation is currently very fragmented. It was indicated that the retail sector in Germany is currently considering the adoption of the standard.
As to whether companies should be sanctioned if they do not comply to core labour standards, it was felt that sanctions do not constitute a positive development in this area and that assistance and cooperation at the present stage is more feasible. In some cases, it was felt that monitoring should not really occur until companies have had a chance to receive advice and assistance to amend their practices. This point was seen as particularly relevant for SMEs, which possess a lower capacity to implement these changes. The EP proposal suggests that it is more productive to look at a system of incentives and rewards, as is a feature of the EU Generalised System of Preferences (GSP), which gives companies preferential trade conditions if they comply to a set of standards.
Options for effective monitoring
The issue of how codes of conduct should be monitored and how their implementation should be verified clearly lies at the heart of the credibility of any such initiatives. However, inspection and verification is a highly sensitive and complicated issue, considering the complex nature of supply chains and the question of how and by whom monitoring should be carried out.
The was a general consensus among participants at the workshop that an external monitoring system would be most effective. It was argued that the introduction of such a system would give higher levels of credibility to the code or label vis-à-vis consumers. It was argued that auditors or monitors should have close links with local experts and organisations. This was not only seen be more cost effective, but was also held to be more likely to ensure greater access. Local knowledge should also be used to identify key problems with labour standards and common methods of evasion.
The accreditation of monitors was considered to be another issue requiring resolution if the standard, independence and reliability of verification visits was to be ensured.
Phil Wells, from the Fairtrade Foundation, suggested that one way forward to ensure effective monitoring was through collaboration and alliance-building within a sector, as such an approach has the benefit of maximising the influence over suppliers, and may actually reduce monitoring costs. At European level, this is already occurring in sectors such as footwear and textiles and in commerce, as outlined above.
Regarding the question of who should be responsible for monitoring and for accrediting monitors, views diverged. Trade unions and NGOs were considered by some to be the most relevant and experienced agencies, although for some participants the legitimacy of the monitoring process was seen to be under threat if these agencies were to be in control of it. A role for the ILO was envisaged by some parties, owing to its expertise and independent role and tripartite structure.
Building partnerships for monitoring
The meaning of "partnership" in the context of monitoring was interpreted widely. It was considered that a partnership needed to develop between international, national and local governmental agencies, NGOs and social partner organisations in order to fulfil this role.
Jean Lapeyre, confederal secretary of the ETUC, asserted that for partnership to develop and thrive, the right to the freedom of association was a precondition. He suggested a number of measures which might aid partnership and improve monitoring, the most prominent being a European database of suppliers that conform to an agreed European minimum set of social standards, including provisions on child labour. He also called on the Commission to take the lead in the monitoring field and set up a European Union monitoring unit.
There was considerable consensus regarding the aim and scope of partnership, as it was felt that the most successful partnerships were those that contained a rehabilitative element and thus generated long-term improvements in the lives of child workers.
The Clean Clothes Campaign, was presented by Ineke Zeldenhurst as a good example of partnership. This organisation has aimed to improve working conditions in the garment industry since 1990, through coalitions of consumer organisations, trade unions and researchers, which inform consumers of conditions and pressure retailers to take responsibility for these conditions. The campaign network has grown considerably and is operational in nine European countries with a network of over 200 NGOs. It also works with groups in Eastern Europe and South East Asia. The greatest success is reportedly that retailers and producers are now coming to the Clean Clothes Campaign, rather than the other way round as was the case at the beginning.
Conclusions
In summing up the key findings of the workshop, Odile Quintin, acting deputy director-general of DGV of the European Commission, drew the following key conclusions:
- basic international labour rights, such as the freedom of association, must underpin the framework of any code of conduct or label for it to have any real impact;
- codes of conduct should not act as a substitute for national or international labour standards and should complement and enhance institutionalised regulations;
- there is a need for further debate on whether a standardised European code of conduct should be developed;
- encouragement and positive support and advice should be given, as opposed to sanctions;
- external independent monitoring systems are the most legitimate and credible mechanisms;
- monitoring can be enhanced through the development of alliances with other similar producers, and by utilising the knowledge of local experts and organisations;
- there is a need for greater exploration as to what agency would be the most effective and credible in monitoring and in accrediting monitoring activities;
- partnership-building at a range of levels constitutes an important part of the solution to the problem;
- action in this area should be extensive and have long-term aspirations, ending with the rehabilitation of child workers; and
- lastly, it is important to realise that success will not come overnight and that workshops that facilitate an exchange of ideas and good practice are invaluable;
Commentary
The issue of child labour and its eradication has clearly moved up the political agenda in recent years, as a wider range of parties have become involved in working against it for varying reasons. While it has to be borne in mind that only a comparatively small proportion of child labourers work in the supply chain of large multinational companies (it is argued that most children work in agriculture, domestic services and family businesses), the actions by multinational companies could, nevertheless send a strong signal to other producers and to national and international administrations. The workshop revealed that work in this area is at a very early stage at European and international level, as many of the existing codes of conduct evidently contain some deficiencies. The workshop also indicated a degree of contention over whether a Europe-wide code of conduct and monitoring system would be appropriate. One area of agreement in the workshop was on the use of the social dialogue as a mechanism for furthering agreements or codes of conduct. In conclusion, the workshop was judged to have been fruitful in bringing together a wide range of participants to exchange their views and disseminate good practice. The next major event in this area will be a transatlantic dialogue on codes of conduct at Washington in December 1998. (Peter Foster and Tina Weber, ECOTEC Research and Consulting)