Commentary: Sweatshops: No More Excuses

The anti-sweatshop movement has advanced by fits and starts in recent years: Protesters demanded action, and apparel makers responded with a few steps forward--and a wealth of arguments about why they couldn't do more. Now, in just the past month or so, the adversaries are starting to find some common ground, and key elements of a credible sweatshop monitoring system are falling into place.

On Oct. 7, Nike Inc. sought to appease student protesters by releasing the locations of 42 of its 365 factories--reversing its long-standing insistence that doing so would put it at a competitive disadvantage.

Then, on Oct. 18, Reebok International Ltd. released the first independent factory audit undertaken by a human-rights group, involving two Indonesian plants. Liz Claiborne Inc. did the same a few days later, with a remarkably candid outside report on a Guatemalan factory. And Mattel Inc. will soon publish an even more comprehensive review of eight plants in four countries, using hundreds of specific labor standards.

"CRITICAL MASS." All three companies should be applauded for the breakthrough: The audits mark the first time companies have allowed truly independent outsiders with expertise in labor issues to rake over their factories--and then make the unpleasant findings public. Now that the leaders have set a new precedent, other companies will have a more difficult time dragging their heels. "We have raised the ante with external monitoring, which we initiated because we had gone as far as we could by ourselves," says Reebok CEO Paul B. Fireman.

Meanwhile, efforts to construct industrywide inspection systems are finally beginning to jell. Furthest along is the Fair Labor Assn. (FLA), a monitoring group made up of industry and human-rights representatives that was created last fall by a Presidential task force. In September, former White House Counsel Charles Ruff signed on as the FLA's first chairman, giving the group some badly needed leadership. And in recent months, Adidas-Salomon AG and Levi Strauss & Co. joined the eight founding companies, which include Nike, Reebok, Liz Claiborne, and Phillips-Van Heusen, adding to the momentum. "Now, we have a critical mass, enough to start the ball rolling," says Liz Claiborne General Counsel Roberta S. Karp, co-chair of the task force that formed the FLA.

Keeping the heat on the FLA and others have been human-rights and student groups. On Oct. 18, United Students Against Sweatshops announced an even stricter monitoring scheme, which will pressure companies to do even more. And a new study shows that even after companies had pledged to clean up their factories, chronic abuses continued. A New Jersey group, Press for Change, just completed a survey of 2,300 workers at five Nike factories outside Jakarta employing 45,000 people. More than half, interviewed by an Indonesian human-rights group, said they had seen colleagues yelled at or mistreated, and a third said they had been compelled to work overtime. Nike spokesman Vada Manager says the company, which hasn't yet seen the survey, would look into the matter.

Nonetheless, the new level of scrutiny by Reebok, Liz Claiborne, and Mattel marks a turning point in the anti-sweatshop movement. Since the early 1990s, many major apparel companies have adopted labor codes of conduct for their factories and set up internal monitoring efforts. But these efforts have gained scant credibility. Companies refused to let outside groups see what inspectors found, so critics had no way to judge whether anyone knows what really took place. Until now, that is.

HARSH DETAIL. Then, about a year ago, Reebok agreed to outside monitoring. It allowed a respected nonprofit social-research group in Jakarta called Insan Hitawasana Sejahtera (IHS) to conduct inspections of two nearby shoe factories that employ more than 10,000 of the company's 75,000 workers worldwide. An IHS team surveyed workers, performed tests of health and safety, and worked with managers of the

Korean-owned factory to remedy the problems they uncovered. The IHS found a wide range of violations, including poor ventilation, harmful chemicals, inadequate toilets, and sex bias. The report explains how managers agreed to remedy some problems--and candidly lays out those management has failed to address.

Liz Claiborne went even further. In 1997, Guatemalan religious and human-rights activists formed the Commission for the Verification of Corporate Codes of Conduct (Coverco), which last year began inspecting a 900-worker plant outside Guatemala City that belongs to a Liz Claiborne supplier. Liz Claiborne has given BUSINESS WEEK the first report, completed on Oct. 15. In often harsh detail, Coverco lays out the problems it found, from 16-year-olds pressured to work overtime to complaints about inaccurate wage payments. It tells how a line supervisor refused to allow a pregnant worker to leave for the hospital when she went into labor--implying that the delay may have led to her baby's being stillborn the next day.

Coverco also outlines its dialogue with plant managers, who have worked to fix some problems and stonewalled on others, the report says. It says that cooperation improved last summer after the factory's owner, unnamed in the report, replaced the managers. Says Liz Claiborne's Karp: "This is exactly what we wanted: to learn what the problems were and figure out how to make them better."

Mattel has taken an even more rigorous approach. Rather than set up one-time pilot projects like Reebok and Liz Claiborne, the Los Angeles toymaker has appointed an outside group to create a monitoring system, requiring factories to meet hundreds of detailed standards. The group, Mattel Independent Monitoring Council for Global Manufacturing Principles, is headed by S. Prakash Sethi, a management professor at Baruch College in New York with experience in enforcing codes of conduct. Another council member is Murray L. Weidenbaum, head of Ronald Reagan's Council of Economic Advisers.

In the past year, a team of 50 Mattel managers and outside experts has drawn up standards for five countries where Mattel makes toys. They lay out everything from how many toilets are required per worker to how many calories company cafeterias should serve workers daily. The team audited eight plants in China, Indonesia, Malaysia, and Thailand employing 30,000 workers, and results have been sent to Mattel's CEO for release in November, the company says. Notes Sethi: "We tried to build criteria to measure objective outcomes, like square feet in a worker dorm, which hasn't been done before."

The pioneers have shown that outside monitoring by human-rights groups can work, even if the results are painful or embarrassing. Other manufacturers and retailers, largely on the sidelines, should set aside their qualms and join their colleagues as they begin, little by little, to lift global labor standards.

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