Last summer, Nike Inc. was hoping it had put to rest questions about labor practices in its overseas factories. Former Atlanta Mayor Andrew Young had just released a mildly critical report on conditions in the sneaker giant's 350 plants around the world, and Nike had pledged to make improvements. But in early November, Nike was blindsided by a San Francisco human-rights group, which leaked a confidential Ernst & Young audit of a Nike plant in Vietnam. The E&Y report painted a dismal picture of sweatshop conditions that Andrew Young apparently never saw.
Nike's may be one of the most publicized cases of botched monitoring, but it is far from unique. Its high-profile embarrassment, however, underscores the need for a comprehensive, standardized auditing system that could be used industrywide.
NEAR A DEAL. The good news is that one may be at hand. On Nov. 24, Nike and a half-dozen other apparel makers will meet with human-rights and labor groups to hash out guidelines for a monitoring system. The assembly is part of a Presidential task force on sweatshops that has already issued a code of conduct for U.S. companies. Now, it is close to agreeing on procedures for auditing their overseas factories and those run by subcontractors to ensure the code is upheld.
The plan under discussion is similar to what human-rights groups say is the best monitoring program now in existence--one that Gap Inc. set up at an El Salvador plant in 1996. There, the retailer has bypassed the paid consultant route, relying instead on an outside group composed of local church, university, and labor leaders who interview workers off-site and mediate their complaints with management. The apparel task force plan wouldn't go that far, but by mandating that such groups be used as advisers it would be tougher than one announced in October by another group of retailers, including Toys `R' Us Inc. and Avon Products Inc.
The task force is still fighting over how much control companies would exercise. But they have agreed that a monitoring association with a governing board of industry and human-rights and labor groups should accredit auditors, and then companies would choose which one to hire. The group also has agreed that auditors such as E&Y must work with local human-rights and labor groups to try to avoid the problems of the Nike audit.
Making sure that third-party auditors get the complete story is essential. In Nike's case, for example, E&Y turned up serious violations of Vietnamese labor and environmental laws. But it missed others, including forced overtime and verbal and physical abuse by managers, according to Transnational Resource & Action Center (TRAC), the San Francisco human-rights group that issued the report on Nov. 7.
TOO CLOSE. According to TRAC, E&Y missed those abuses in part because it failed to hold interviews with workers away from the factory. Dara O'Rourke, a TRAC researcher who made three visits to the plant as an environmental consultant for the U.N., spoke with half a dozen employees of Tae Kwang Vina Industrial Ltd., a Korean subcontractor.
TRAC also says E&Y mistakenly certified that the plant was in compliance with the Vietnamese minimum wage of 19 cents an hour on a 208-hour month. E&Y's figures show the factory pays workers $45 a month for 267 hours a month--20% below the minimum, says O'Rourke. Nike spokesman Vada Manager says he can't explain the discrepancy. E&Y declined comment.
U.S. companies must do a more credible job of monitoring to convince concerned consumers that imported clothing and toys are not made under Dickensian conditions. While the apparel task force doesn't seem prepared to go as far as Gap--which itself has refused to extend its system to other plants--its approach can work. Companies would give up more control than they might like. But critics wouldn't actually get to see an employer's dirty linen. If an association governed by both sides oversees monitoring, it would strike a balance that would help eliminate sweatshop conditions such as those in Nike's Vietnamese plants. And from the point of view of the companies, having a seal of approval from a Presidential task force that includes human-rights and labor groups is an easy route to a credibility that has thus far eluded most.