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NEWSLETTER 14, JULY 2001 European Monitoring and Verification Initiatives: Sharing Experiences

In November 2000 SOMO (the Centre for Research on Multinational Corporations, located in Amsterdam) and the Clean Clothes Campaign international secretariat started a one-year project called "European Initiatives on Monitoring and Verification of Codes of Conduct in the Garment and Sportswear Industry." This project examines five national-level initiatives on the monitoring and verification of codes of conduct that have started in the Netherlands, UK, Sweden, France, and Switzerland in recent years. In these initiatives, companies, business federations, trade unions, and NGOs (including those that work together in the Clean Clothes Campaign) are cooperating within different frameworks (including pilot projects) to gain practical experience in the field of implementation, monitoring, and verification of code of labor standards. In our last newsletter we reported on the CCC's motivation to participate in these initiatives, and gave a short description of the different initiatives (see "Using Codes of Conduct: Some Background for the CCC Strategy Debate," Clean Clothes newsletter no. 13, November 2000).

Project Aims

With this project, the CCC and SOMO aim to:

• collect information so as to provide an overview of recent experiences of the five national level initiatives;
• improve the exchange of experiences between the national level initiatives so that the synergy between them increases;
• increase knowledge of common problems, bottlenecks, and best practices in the implementation, monitoring, and verification of codes of conduct;
• increase agreement of the consistent use and interpretation of terminology used in code implementation; and
• provide guidance for future national- or European-level initiatives and pilot projects on monitoring and verification of codes of conduct.

Overview of Initiatives

During the first four months of the project, an overview of these initiatives was compiled. This overview provides a comparative analysis of the national-level initiatives, including information about the organizational set-up of the national level projects, the structure of the pilot projects, and the lessons that have been learned so far from these initiatives. This paper can be seen as a useful input for further discussion on what the key elements of good monitoring and verification systems should contain. The main characteristics and lessons learned during the initiatives are highlighted, as well as critical issues that require additional attention. This should be considered an early inventory of items to consider. As project participants continue to learn from ongoing experiences new issues for discussion are expected to emerge.

You can find the overview and other information on the project as well as related initiatives at the project website: www.somo.nl/monitoring If you have no internet access you can order a copy from SOMO, Keizersgracht 132, 1015 CW Amsterdam, the Netherlands. Tel.: +31-20-6391291, fax: +31-20-6391321.

Roundtable Discussion

After the overview was finalized a roundtable meeting took place at the end of March in Brussels. At this meeting representatives of the different initiatives shared their practical experiences on two key areas of work: retailers' (buying companies) management systems and the auditing at the supplier level. The following summarizes a bit of what was learned during the discussion, from the perspective of CCC concerns on each of the two issues.

Management systems
Proper management systems are necessary at different levels in the supply chain (subcontractors, main suppliers, buyers). Prior to this meeting, the project group (made up of members of each of the five initiatives) decided it would be interesting to focus the roundtable discussion on the retailer (main buyer) level.

Within this context management systems have a double aim: to ensure that the labor standards in the code are implemented and monitored, but also to ensure that business is conducted in such a way (for example, in the way that deadlines and prices are set) that suppliers can meet the standards they are supposed to uphold. This last aim is connected to one of the critical issues identified by the project group: the crucial question of who pays for the costs associated with the implementation of codes, this has been referred to as the "true cost", and includes fair pricing that would allow for the full implementation of the code. The cost of independent verification, though often debated, is generally presumed to be much lower than the cost associated with code implementation.

Draft structure for such management systems were developed within the Swedish and the Dutch initiatives, and are currently being tested on the participating companies. This is being done with input from management and staff that have responsibility for the code of conduct.

As part of these management systems, documents (at the head office and offices abroad) are also examined. Some examples of the kind of documentation that companies could be asked to provide include:

• the policy or code of conduct (COC) with confirmation that the retailing company has adopted the same;
• documentation of the most common problems, in terms of compliance with the COC, in the countries and regions of the garment suppliers;
• copies of relevant country laws and other legal requirements;
• written/signed acceptance of the COC from suppliers;
• actual register of suppliers;
• evaluation of compliance with local legal requirements;
• documentation and findings from the retailer's internal monitoring activities; and
• corrective programs for suppliers.

While the companies participating in the Swedish initiatives still use slightly different codes, a common code of conduct (the Fair Wear Charter) is used in the Dutch initiatives. These Dutch companies have to explain in their social policies that the Fair Wear Charter is the minimum standard that applies to suppliers. The management system has to ensure that the company implements the code. Internal control has to be such that code implementation objectives can be reached. They also have to identify relevant processes (buying, quality control), which are also part of the general management system, and ensure that none of them create obstacles to the implementation of and ongoing compliance with the labor standards found in the code. There is text to this effect in the Dutch draft system. How this can work out in practice is not at all clear presently. The pilots are meant to generate information and data that can help transform these draft systems into more complete systems that can be made operational. One major stumbling block in relation to the effectiveness of retailer management systems is likely to be the relative power of the buyer vis-à-vis the supplier. Buyers are often much more powerful than the suppliers, and that particular relationship must be addressed. In the Dutch initiative, which involves small and medium sized enterprises, this has emerged as an important issue to deal with.

Different management systems will be necessary at the supplier level, where there are also many different types of companies. The ILO is currently conducting a research project on management systems, examining both the situation that leads companies to adopt social practices and steps taken following their adoption. Different levels in the supply chain are identified (headquarters, regional headquarters, suppliers) and at each level different people are being interviewed.

For this research project the ILO is using a combined sectoral and regional approach. They plan to look at three sectors (sports shoes in Asia, apparel in Central and South America, and possibly food production in Africa), at least 3 multinational enterprises in each sector (both large and small enterprises). Outputs will be a report on each sector, plus a final report. This project does not audit the companies, the focus is strictly on the management system development. The project is trying to compile feedback from those involved what makes such systems work, what makes them fail.

Auditing Suppliers

The second topic discussed at the roundtable - supplier level audits - has been much more widely discussed than management systems, and a lot more experience with different types of audits of working conditions of suppliers (and subcontractors) is available. People involved in the initiatives generally agree that there is a strong need for international standards for auditing. For example, it has been suggested that the ILO could develop such standards. The problems that have been encountered in the different initiatives could provide useful input for the development of such standards.

Currently there are a lot of examples of company-controlled auditing, usually heavily criticized. In Central America NGOs have started to become specialized in monitoring, carrying out the auditing themselves. It is clear that there is still quite a lot that needs to be learned about auditor competency, and especially about the context and methods necessary to ensure that auditing techniques really work. In the European initiatives most of what has been learned to date on auditing has been done in the context of the UK's Ethical Trading Initiative (ETI) and the Swedish initiative. A more extensive description on activities so far (and lessons learned) can be found on the project website.

In their pilot in Zimbabwe (on the horticulture industry) ETI found that the rigor of professionally trained auditor's approach and their experience on some aspects, such as health & safety was a clear benefit. On the other hand, the social survey techniques that NGOs and academics had developed during years of research were much more powerful at accessing worker's opinions on a range of issues. For example, the predominantly women workers were only willing to share their experiences of sexual harassment in the workplace if they were talked to in confidence, in their own language, and with someone they could relate to and trust.

The South Africa wine pilot set out to test three approaches to monitoring -- a university researcher, a company technologist co-interviewing with a union representative, and a company technologist interviewing with an interpreter. After a first review by local stakeholders methods were modified substantially for the second round of inspections that was carried out on four of the farms during the 2000 grape harvest which included teams of NGO and trade union representatives, as well as academics, with members of staff from the ETI member supermarkets. The result was a much more detailed picture of on-farm labor conditions. Although this method was more accurate and made use of the considerable expertise of local labor rights and trade union organisations, it was also found to be slow and cumbersome. Inspection reports and improvement plans have been slow to materialize because of the large number of people involved.

ETI found that the process of including trade unions helps create capacity at local level (ex. developments now taking place in South Africa and Zimbabwe which wouldn't have happened if those organizations hadn't been engaged in the process). Codes have more credibility if other organizations "buy in." But they found that much more needs to be learned about auditor competency, and it is too soon to make general statements on this. For now this needs to be explored on a case-by-case basis
ETI will publish a workbook on some of their results.

In the Swedish experience, pre-studies were seen to be an essential way to identify both labor problems and local partners with whom to cooperate. These pre-studies consisted of a desk study (literature review) of the prevailing situation in the countries and interviews to gather general background information on the situation. The pre-studies acted as a sort of "ice breaker" to meet workers, who shared their views on many things. In this way, the pre-studies were a sort of gateway to the audits. The approach tested in the Swedish pilots is to do interviews (carried out by NGOs, researchers, and consultants) outside of the factories. After the four audits carried out so far, the project coordinator is convinced that if they hadn't done these interviews, and had relied only on the factory inspections (even though these inspections included talking to the workers) it would have been difficult to ever find out the truth about working conditions and workers concerns. At issue are not only the location of worker interviews (at the factory or away from the facility at a more neutral location), but also the level of preparation that informs the way in which interviews are conducted. In the Swedish initiative, inspections were made armed with the information obtained earlier from the workers.

Roundtable participants acknowledged that there is a need to minimize the risk for workers and those who do interviews. The way to do this seems to depend largely on the local context. Interviewing also is time-consuming: for auditors, but most importantly for the workers who often have very little free time at all. Something that needs to be resolved is how many interviews are needed? How should the auditing process relate to other ways of involving workers, such as complaints procedures?

Another problem relates to the multiplicity of codes and audit systems: the more codes, company audits, SA 8000 audits, etc. that they are faced with the smarter companies and the suppliers will be at hiding things. Already in several of the workplaces audited in these pilot projects workers have been told what to tell buyers and auditors, and there were indications of two sets of books and overtime cards.

The CCC is very skeptical about the role that professional social auditors can play in monitoring and verification systems. It is important for the CCC to consider the impact of professional/commercial auditing and evaluate how they can help achieve the campaign's goal of improving working conditions. Commercial auditors in some experiences appear to be very skilled in terms of technical matters (ex. wage systems, checking production) as well as some other areas, where the expertise of specialized auditors is useful (ex. health and safety). But they can overlook things and have an extremely limited understanding of the way workers perceive issues that are relevant to them. Also they tend to audit against local practices (i.e. "conditions are better here then at other facilities in the region..."), not against the standards in the code of conduct. They look at the legal minimum wage and not the living wage. They have limited understanding of restrictions on working hours: they tend to say that the workers want to work, want to earn as much as possible as soon as possible, but never seem to ask the workers what they think about working hours. They are sent in with little or no training. Two or three days training for an auditor is not enough, not in a complex field.

Upcoming event

As part of this project on monitoring and verification a conference is planned for early October. These experiences, referred to above, and those relating to other critical issues of importance to monitoring and verification will be discussed. Watch the project website for updates on the project (a discussion paper on the key elements of monitoring and verification systems is expected for the fall) and for more details on the conference.