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Sweatshops dont lie, case study for Bangladesh RMG.

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Its a case study for : Detecting Unethical PracticesDetecting Unethical Practices at Supplier Factories: The Monitoring and compliance challenge.

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Sweatshops dont lie, case study for Bangladesh RMG.

  1. 1. 2 Detecting Unethical PracticesDetecting Unethical Practices at Supplier Factories: The Monitoring and compliance challenge
  2. 2. 4 Presented by Group 6 Mahmud
  3. 3. Case contents Group 6 The China story Nike Wal-Mart Alternative strategy Challenge Recommendation Low cost –low wage Compliance initiatives Compliance initiatives FLA & FFC True facts
  4. 4. 6 The China story ….
  5. 5. Food, CLOTHING, shelter– Basic needs!! Clothing business is a tricky one– WHY ??? Personal Experience in Garments Order Placement Life is not FAIR !!! Why ?? 7 Factories- Monitoring Compliance Challenges
  6. 6. Scenario Comparison : China/Bangladesh Growing Order Made in Bangladesh Tagline Women empowerment Reduction in unemployment Economic development Wage issue Safety Child Labor Income Discrimination Long hours/weekend Accidents 8 China Bangladesh
  7. 7. Maintaining two sets of Books. Hiding the use of underage workers and unsafe work practices. Meeting requirements by secretly shifting production to subcontractors. Coaching managers and employees on answering questions posed by auditors. “Jamai Ador” !! 9 Factories deceive Buyers Audit :
  8. 8. 10 The reality is .. …
  9. 9. 11 Case study : China supplier map
  10. 10. 12 World's leading supplier of athletic shoes and apparel and a major manufacturer of sports equipment Nike
  11. 11. Nike Unannounced audits in 99 factories in 18 countries in 2005, revealed 1587 violations, an average of 15.9 per audits. In South East Asia,
  12. 12. Nike
  13. 13. 15 Nike : Value Matter of respect: Environment, Safety and Health Agents, Consultants & Professional Services Social Responsibility Code of Ethics Violations Alert line Nike’s Code Leadership Standards While Nike’s Code of Conduct lays out the expectations of Nike over their contracted factories, the Code Leadership Standards articulate the steps factories can take to put the Code into practice and how Nike measure their efforts and compliance. visits factories in the supply chain 1.77 times per.
  14. 14. 16 Nike : Management/Labor Assessment All Nike-contracted focus factories receive comprehensive management audits every one to three years depending on their compliance record. A B C D E
  15. 15. 17 Overall Rating Nike’s rating status : Most factories contracted to Nike received B ratings in FY07-09.Factories receiving an E rating had insufficient information to rate the factory.
  16. 16. 18 Management Audit Verification Tool MAV MAV covers the full worker experience, delving deep into four core areas: 1. Hours of work 2. Wages and benefits 3. Labor relations And 4. grievance systems In FY08, Nike conducted 82 MAV audits in 80 factories. In FY09 the number of MAV audits was 33. The majority of audits were conducted in North Asia and in apparel factories, reflecting the substantial number of apparel factories in the supply chain
  17. 17. 19 Management Audit Verification Tool MAV Overall, the top issues identified in management audits of Nike-contracted factories were 1. Lack of systems, 2. Lack of knowledge 3. lack of commitment, with lack of systems around empowerment of compliance and HR staff.
  18. 18. 20 Management Audit Verification Tool MAV Overall, the top issues identified in management audits of Nike-contracted factories were 1. Lack of systems, 2. Lack of knowledge 3. lack of commitment, with lack of systems around empowerment of compliance and HR staff.
  19. 19. 21 Environment, Safety and Health Assessment SHAPE Nike implemented a new Environment, Safety and Health auditing methodology in FY07, conducting 48 audits in FY07, 302 in FY08, and 267 in FY09 The lowest-scoring environmental, safety and health issues across all contract factories in FY07 included hazardous materials, control of hazardous energy and fall protection. In FY08 the top three were confined spaces, control of hazardous energy and hazardous materials. FY09 top issues were hazardous materials, hazardous waste and machine guarding. Some changes in the top areas identified From FY07 to FY09 reflect concentrated efforts by Nike with contract factories to address recurring issues, including hazardous materials and occupational exposure limits.
  20. 20. 22 WAL MART
  21. 21. WAL MART Wal-Mart’s Supplier Code of Conduct and Compliance Monitoring Program:  Established In 1992  Reflex Wal-Mart’s fundamental expectations of its suppliers related to social and environmental conditions  Utilized to evaluate employment practices and environmental compliance
  22. 22. Compliance with Laws Voluntary Labor Labor Hours Hiring and Employment Practices Compensation Freedom of Association and Collective Bargaining Health and Safety Dormitories and Canteen Environment Gifts and Entertainment Conflicts of Interest Anti-Corruption Financial Integrity The Standards are utilized to evaluate employment practices and environmental compliance in facilities producing merchandise for sale by Wal-Mart. Suppliers must also comply with Wal-Mart's Gift and Gratuity and Conflicts of Interest policies and conduct their business in an ethical manner that is consistent with accepted auditing principles. for Suppliers WAL MART
  23. 23. WAL MART Compliance formalities prior to contract: Prior to going for a contract with any supplier:  Review and sign a supplier agreement incorporated an expectation that the suppliers would comply Wal-Mart’s standards  Suppliers display Wal-Mart’s “Standards for Suppliers” posters in all the suppliers’ factories  factory management was required to sign that it had read and fully understood  A copy of this poster in the relevant language had to be posted in a public place within the factory
  24. 24. WAL MART Global Procurement Services Group (GPSG) Established in February 2002 by Wal-Mart for: Identifying new suppliers Sourcing new products Building partnerships with existing suppliers Managing Wal-Mart’s global supply chain of direct importers Providing workplace standards training to suppliers Enforcing compliance with Wal-Mart’s supplier standard
  25. 25. Audit Rating
  26. 26. 28 Audit Rating Green: 1. No violations or low-risk violations 2. Example of a Green violation is one or two missing pulley guards on sewing machines 3. Factories rated Green are re-audited after two years as an incentive for compliance Yellow: 1. Medium-risk violations, such as no pay slips for workers. 2. Re-audited after 120 days.
  27. 27. 29 Audit Rating Orange: 1. High-risk violations 2. Re-audited after 120 days 3. An example of an Orange violation is failure to pay legally required overtime premium Red: Serious violation use of 1. prison or forced labor 2. extremely unsafe working condition 3. employing more than two underage worker 4. serious worker abuse exceptionally long work hours
  28. 28. 30 Audit Rating Orange-Age: One or two underage workers are found A factory that receives an Orange-Age assessment is given 30 days to address the violation by discontinuing the use of underage workers and by properly compensating and repatriating the underage workers Disapproved: Four Orange ratings in a two-year time period After a year elapses, the factory can then only produce merchandise for sale by Wal-Mart if a Yellow or Green rating is achieved.
  29. 29. Alternative strategy To monitor the compliance issue, organizations have the following options
  30. 30. Fair labor Association LOVED AND LOST FLA, a non-profit collaborative effort of universities, civil society organizations, and socially responsible companies. FLA creates lasting solutions to abusive labor practices by offering tools and resources to companies. FLA conducts independent and unannounced audits of factories
  31. 31. Three key constituencies for FLA LOVED AND LOST Universities Civil society organizations (CSOs) Companies Universities Civil society organizations (CSOs) Companies
  32. 32. Benefit s of FLA : LOVED AND LOST Holding affiliated companies accountable for implementing FLA’s Code of Conduct across their supply chains. Conducting external assessments so that consumers can be assured of the integrity of the products they buy. Creating a space for CSOs to engage with companies and other stakeholders to find viable solutions to labor concerns.
  33. 33. Violation reports of FLA Unannounced audits in 99 factories in 18 countries in 2005, revealed 1587 violations, an average of 15.9 per audits. In South East Asia, average about was 22 violations per factory audits Unannounced audits in 147 factories in 30 countries in 2006, revealed 2511 violations, an average of 17.1 per audits. Asian countries average 37.4 violations per factories visited in South Asia
  34. 34. Fair Factories clearing house : Its a non-profit organization that uses technology to enable cost-effective, well-informed ethical business transactions and continuous improvements in global workplaces. It’s a collaborative effort to create system for managing and sharing information that would facilitate detecting and eliminating sweatshops and abusive workplace condition in foreign factories.
  35. 35. Fair Factories clearing house : Members would pool their audits information on off shore factories, creating a data base. Once a plant is certifies by a member company, other member would accept their result without having a audit at their own. Members will apply added pressure to the supplier to improve the working conditions and comply with buyer’s code of conduct. Besides, it would minimize ‘Audits Fatigue’.
  36. 36. 38 Challenges
  37. 37. LOVED AND LOST Challenges Pressure from their customers to keep the price low. Since, 1996, the prices paid for Men’s shirt and sweaters sourced in China were said to have dropped by 14 %, while the prices for clocks and lamps has dropped by 40%, toys and games had fallen 30 %. low cost seeker customer group will immediately run towards other low cost and less compliant suppliers.
  38. 38. Obstacles to achieve supplier’s compliance LOVED AND LOST The brands book and confirm orders lately and do change in their specifications frequently after booking. Factory manager sometimes confirm his raw materials in late resulting extra load imposed to workers to meet up the dead line. Auret van Heerden, CEO of FLA. Factory production layout is not organized Suppliers lack in required training to catch up the constant changes in buyer’s preference . Audit fatigue
  39. 39. 41
  40. 40. Recommendation Continue Fair Pay- some customers has this fair pay policy where they don’t negotiate much with the suppliers provided that supplier keeps their factory tidy and do their shipment on time along with quality. This “Fair Pay” policy should be widespread across all the big buyers. UN-FWF—recently United Nation and Fair Way Foundation started launching this program between the workers and a third party audit team without any sort of intervention from the factory representative.
  41. 41. Recommendation Continue 1 for All compliance policy- in Indonesia, Government law are so strict that the buyers don’t have to audit the factories. Government has established a set of compliance issue which is applicable for all suppliers and if they don't follow all those then that supplier cannot start its operation. This also reduced suppliers fatigue. Increasing number of unannounced audits- this would significantly alert the factories since most of the social audits are done in an announced manner. For example- Bureau VERITAS/ SGS ( audit firms) will tell suppliers that they will audit their factories from 4th January to 25th January anytime, this is called announced audit. In order to for better monitoring, such audit firms which is hired by the buyers should do random and unannounced audits. This would always keep suppliers on alert.
  42. 42. Recommendation Continue Initiating inclusive business idea to train and develop skill efficient labor force by buyers in a jointly manner with local suppliers. For example-mark & Spenser has initiated to train their local suppliers worker so that by 2015 1200 labor become skill worker and this will give M&S a better sustainable business.
  43. 43. Winners never quit …

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