Manufacturing: The Burden of Good Intentions

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Comply or Die
It would be easy to cast these factory bosses as simply greedy and corrupt — until one looks at the pressures they face. Auditing came into vogue at the same time that Western firms were pushing harder than ever for lower prices and faster turnarounds. From the mid-1990s onwards, "many multinationals were telling factories, 'Give me this cheaply, give me this quickly — and, by the way, comply with your local labor law, or our code of conduct, whichever is higher,'" says Ayesha Khan, a manager with BSR, a CSR consultancy.

That's all but impossible to do under current market conditions. Competition between factories is fierce, and their profit margins have shrunk. There's a glut of Chinese and Indian factories competing for Western clients, so if a factory doesn't pass audits, multinationals can just walk across the street. With the Chinese workweek capped at about 50 hours (including overtime), strict new labor laws and growing competition for workers, it's getting tougher to comply with the law, pay the minimum wage, make order deadlines — and earn a profit. Says Rosey Hurst, founder of Impactt, an ethical trade NGO based in London: "I have a large deal of sympathy for the fakers."

Most big companies still operate what NGOS have called the "comply or die" model, in which factories are given a couple of months and little support to correct mistakes. "Historically, corporate social responsibility has been this top-down approach," says Khan. "The buyers are afraid, so they push down their ideas onto the factories." But it's often unrealistic to impose these Western CSR ideals overseas. "We've transferred the jobs to the developing world," says Hurst. "But we haven't transferred the skills or expertise needed to provide decent jobs." Many companies don't care (as long as the audits look good), but more progressive firms are working to develop creative new ways to improve factory conditions, moving far beyond mainstream tactics like auditing and standard codes of conduct.

They're smart to do so, because, in some ways, auditing is helping to promote the very practices it purports to detect. In The China Price, Alexandra Harney describes how Chinese suppliers set up "five-star factories" whose model working conditions impress auditors, while also creating "shadow" factories to meet actual order deadlines. With a minimum of paperwork or safety codes, staffed by migrant workers who often put in 12-hour days seven days a week, these shadow factories are unregulated, but common. The craze for auditing has, paradoxically, led factory owners to create such factories. It also sops up resources that could be channeled toward improving labor conditions. "If factories are getting monitored on average 25 times a year, that's every two weeks you have to check your records and talk to workers," says Michael Kobori, head of supply chain social and environmental sustainability at U.S. garment manufacturer Levi Strauss. "It's no wonder management is so occupied with these monitors that they have no time to make improvements."

Moreover, factory owners are frequently required to pay for their own audits — a fact that Auret Van Heerden of the Washington-based Fair Labor Association calls "something of a dirty little secret." One manufacturer with 15 factories in seven countries told Van Heerden that he had to deal with more than 250 audits a year, each costing an average of $1,600. Small wonder many factory managers see multinationals' codes of conduct as a plot to blunt their competitive edge. In a pre-audit pep talk to workers one Chinese factory manager railed: "Social responsibility is in essence trade barriers, uplifting our costs and slashing our competitiveness."