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Multi-stakeholder Regulation: Privatizing orSocializing Global Labor Standards?

DARA OROURKE*

University of California, Berkeley, USA

Summary. This paper evaluates leading non-governmental labor regulation initiatives in theUnited States and Europe. It comparatively assesses the codes of conduct and monitoring systemswithin these initiatives, discusses their different models of regulation, and proposes criteria forevaluating their effectiveness. It identies critical factors which appear to support more effectivenon-governmental regulation, such as substantive participation of local stakeholders; public trans-parency of methods and ndings; and mechanisms that bring market pressures to bear on multi-

national corporations, and simultaneously support processes of multi-stakeholder problem solvingwithin factories and global supply chains. 2006 Elsevier Ltd. All rights reserved.

Key words labor standards, regulation, corporate codes of conduct, monitoring, apparel indu-stry, NGO

1. INTRODUCTION

The most dynamic experiments in globalgovernance are not about national regulatorypolicies, international trade agreements, or eveninternational agency initiatives. Rather, a newclass of governance institutions has emergedthat involve private and non-governmentalstakeholders in negotiating labor, health andsafety, and environmental standards, monitor-ing compliance with these standards, and estab-lishing mechanisms of certication and labelingthat provide incentives for rms to meet thesestandards. These non-governmental systems of

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traditional labor regulation (see Bernstein,2001), while critics conversely assert that non-governmental regulation is a cynical attemptto free industry from the last vestiges of stateregulation and union organizing (see Justice,2001). Some fear non-governmental systemsof regulation will preempt or crowd-outworker organizing efforts and the current roleof unions, while others believe these systemscan support worker empowerment and partici-pation in shop-oor negotiations. Some believemonitoring and certication will provide con-sumers with a false sense that problems havebeen solved and will de-mobilize internationall b d i l i hil

World Development Vol. 34, No. 5, pp. 899918, 2006 2006 Elsevier Ltd. All rights reserved

0305-750X/$ - see front matter

doi:10.1016/j.worlddev.2005.04.020

www.elsevier.com/locate/worlddev


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that falls under the heading of global gover-nance is suspect, unaccountable, and likely tobenet multi-nationals more than workers,communities, or the environment. Even laborgovernance regimes driven by NGOs from thenorth can be viewed as top-down, consumer-oriented, elite forms of regulation ( Rodri-guez-Garavito, 2005 ).

It is within this critical frame that new sys-tems of non-governmental labor standards,monitoring, and regulation must be evaluated:rst, for their general effectiveness, and second,for their accountability to local stakeholders.This paper seeks to critically and constructivelyengage this heated debate and assess emergingsystems of non-governmental labor monitoringand regulation. Based on interviews with staff of the leading initiatives in the United States

and Europe, interviews with multi-nationalmanagers and advocacy organizations, a reviewof the existing literature and program docu-ments, and direct evaluation of monitoring of factories in China, Indonesia, and Mexico, thispaper details efforts at non-governmental laborregulation, explains how these systems func-tion, describes the challenges they face, andevaluates their effectiveness in improving laborpractices. The concluding concern of the paperis whether and through what institutionaldesigns these systems could more effectivelyimprove conditions in factories, and morebroadly operate as effective, credible, andlocally accountable systems of governance.

The paper begins by describing and evaluat-ing the leading non-governmental labor regula-tory programs in the United States and Europe:the Worldwide Responsible Apparel Produc-tion (WRAP) certication program, SocialAccountability International (SAI), the FairLabor Association (FLA), the Ethical TradingInitiative (ETI), the Fair Wear Foundation(FWF) th W k Ri ht C ti

substantive participation of local stakeholders;public transparency of methods and ndings;and mechanisms that bring market pressuresto bear on multi-national corporations, andsimultaneously support processes of multi-stakeholder problem solving within factoriesand global supply chains.

2. NON-GOVERNMENTAL LABORGOVERNANCE

Non-governmental systems of labor monitor-ing and regulation are both more diverse andmessier than traditional government stipulatedxed rules and standards, monitoring andenforcement, and judicial review ( Arthurs,2001; Lipschutz, 2000; Reinicke, 1998 ). Non-

governmental initiatives involve multiple actorsin new roles and relationships, experimentingwith new processes of standard setting, moni-toring, benchmarking, and enforcement. Theyinclude chains of standard setters, layers of monitoring and enforcement, and competingsystems of incentives and action.

To some degree this reects the move fromfactory-centered, state regulation focusing onindividual sites of production, to supply-chainand brand regulation, focusing on multipleactors in a production chain. The aim of thenew non-governmental governance is to createa network of regulators, involving multiplestakeholders along global supply chains usingNGOs, rms, and sometimes government agen-cies in setting standards and monitoring proto-cols. Enforcement relies largely on marketsanctionseither through inter-rm purchas-ing decisions or NGO consumer campaignsthat seek to inuence consumer purchasing.

A diverse family of regulatory strategies areinvolved. In this paper, I use internal monitor-i t f t it i d t d b

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the protection of health and safet y, wages andhours, and treatment of women. 1 While thegeneral range of issues addressed in these sys-tems is now fairly similar ( van Tulder & Kolk,2001), the details of codes can vary consider-ably. Appendix A presents a summary of thecodes of conduct advanced by the four primaryUS monitoring systems. Key debates however,continue around issues such as freedom of asso-ciation, wages (minimum vs. prevailing vs. liv-ing), and the scope of non-discriminationclauses. Systems for implementing and evaluat-ing code compliance are obviously critical tothe credibility of these codes. Increased pres-sure from labor and human rights groups hasmotivated a growing number of multi-nationalcorporations to adopt codes of conduct and tosubmit to some form of external monitoring. 2

To these ends a number of initiatives haveemerged over the last several years to fosterthe implementation, monitoring, and verica-tion of codes.

3. FIRM INTERNAL COMPLIANCEMONITORING

Many large brands and retailers have devel-oped procedures for monitoring supplier com-pliance with their newly created codes of conduct. The Gap, for instance, has a VendorCompliance department with over 100 staff responsible for monitoring the implementationof the companys code of conduct throughoutits global supply chain. Levis, Disney, Wal-

Mart, H&M, and other companies have estab-lished similar programs. These corporationsand others have spent literally millions of dol-lars on these internal monitoring systems. Thishas been motivated in part by perceived (andrealized) costs of being accused of sweatshop

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ance as an additional task, while others are hir-ing dedicated staff to conduct pre-certicationaudits of contractors and on-going assessmentsof code compliance.

Nike was one of the rst companies in theapparel and footwear industries to develop aninternal compliance division. In 1992, Nikeestablished a code of conduct on labor andenvironmental practices for its network of sup-pliers (now over 950 factories around theworldnone of which Nike ownsemployingover 700,000 workers). Supplier compliancewith the code is monitored through a programof internal evaluation conducted rst by Nikestaff, and then reviewed by external accounting,health and safety, and environmental consult-ing rms. Nike has developed internal monitor-ing tools such as its SHAPE audit (Safety,

Health, Attitude of Management, PeopleInvestment, and Environment), MESH pro-gram (Management, Environment, Safety, andHealth), and its latest M-audit, that allowthe company to integrate the evaluation of labor and environmental issues into broadermanagement practices and training (see http://www.nikebiz.com/labor/mesh.shtml ). MESHand the M-audit resemble the ISO 14000 man-agement system, though it seeks to go furtherby evaluating actual factory performance. Nikenow has approximately 80 staff who monitorlabor and environmental conditions in thecompanys contractor factories. Reebok andadidas, Nikes main competitors, have estab-lished similar programs that combine in-houseassessment with audits by consulting rms.

Reebok for instance, has instituted a worldwideHuman Rights Production Standards FactoryPerformance Assessment system, while adidashas created Standards of Engagement forlabor practices, health, safety, and the environ-ment for all its subcontractors (based on inter-

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MULTI-STAKEHOLDER REGULATION 901
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management systems for evaluating and rank-ing subcontractors. Requirements to improvelabor conditions simply extend the scope of commitments agreed to in the code of conductand subcontractor memorandum of under-standing. Providing some evidence that this ef-fort is earnest, Nike, Reebok, and Adidas haveeach cancelled a handful of contracts due topoor performance and an unwillingness of con-tractors to meet their code.

It is hard to determine how much improve-ment rm-led codes of conduct and monitoringprograms have achieved. Little public researchexists on the impacts of codes and self-monitor-ing on workplace conditions. Firms naturallyassert that these systems respond effectivelyand sufficiently to labor concerns. Many com-panies continue to argue that they alone (per-

haps with the assistance of a consulting rm)have the knowledge and ability to solve laborproblems in their supply chains. However, judging by press reports, neither activists northe general public appear to put much credencein corporate self-evaluation and monitoring(Connor, 2001a, 2001b ). Based on recent casesin which codes and monitoring have been usedfor public relations rather than improving laborconditions, many stakeholders criticize volun-tary codes and internal monitoring for theirvulnerability to corporate manipulation(ORourke, 2002 ).

4. EXTERNAL MONITORINGAND CERTIFICATION

Growing public awareness and further activ-ist pressure have led to a recent profusion of programs in the United States and Europe toestablish standardized codes of conduct andsystems of monitoring that are conducted by

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the monitoring and how), certication (whethera factory or a brand is certied), and reporting(what is publicly disclosed). Appendix B high-lights some of the differences in these systems.

(a) Worldwide Responsible Apparel Production

The WRAP certication program is the mostcorporate-focused, and least publicly participa-tory, of the external monitoring and certica-tion systems. WRAP was developed in 1998by the American Apparel Manufacturers Asso-ciation [now the American Apparel and Foot-wear Association (AAFA)], and begancertifying factories in June 2000. WRAPsboard members include major apparel brandssuch as Vanity Fair Corporation, Sara Lee,

Kellwood, and Gerber Childrenwear. TheWRAP Certication Board consists of individ-uals primarily from the private sector, althoughthe majority of its board members are not di-rectly affiliated with the apparel industry(MSN, 2001a ).

WRAP began by creating its own code of conduct called the WRAP Principles. The12 WRAP Principles include standards forchild and forced labor, and workplace andenvironmental protections. However, theWRAP Principles also contain unique require-ments for customs compliance and drug inter-diction, which support tight security controlsover suppliers and shipments. The WRAP Prin-ciples are widely viewed as the weakest stan-dards of any of these systems and the least

transparent monitoring and certication pro-gram (MSN, 2001b ).WRAPs program certies individual manu-

facturing facilities not brands. The WRAP Cer-tication Board accredits rms to be externalmonitors of manufacturing facilities. WRAPh dit d 12 it t d t i



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through the WRAP certication process; how-ever, WRAP officials have not disclosed howmany of those have been certied to meet itscode (personal communication with K. Naah,WRAP, March 26, 2004). The countries inwhich WRAP has certied the most factoriesinclude China, Mexico, and the DominicanRepublic.

WRAP has been criticized by a range of stakeholders for its perceived industry biasand low level of public transparency. WRAPdoes not disclose the names or locations of cer-tied or audited factories, and has not disclosedany audit ndings (or even what an audit lookslike). WRAP currently has no plans for provid-ing information to consumers or other stake-holders. WRAP certication is designed to beused by factories as a selling point in their

negotiations with retailers and brands. WRAPalso currently lacks NGO and civil society par-ticipation in monitoring or verication. Auditsare primarily pre-announced, and conductedby rms paid directly by the factories being au-dited.

(b) Social Accountability International (SA8000)

Social Accountability 8000 (SA8000), a vol-untary workplace standard patterned on theInternational Organization of Standards sys-tem (e.g., ISO 9000 and ISO 14000), was cre-ated in 1997 by the Council on EconomicPriorities (a US NGO), and now administeredby an NGO called SAI, with an advisory board

made up of representatives from multi-nationalrms, international unions, and NGOs. SAIseeks to motivate factories as well as memberbrands to implement the SA8000 code of con-duct and to be audited by accredited auditors.SAI is responsible for accrediting these auditing d ti t i i f dit f t

these provisions remain highly controversial,as it is not clear, for instance, exactly whatqualies as effective parallel means of represen-tation in countries such as China. SA8000 alsoincludes a section on management systems thatrequires policies and procedures and docu-mentation systems that demonstrate ongoingcompliance with the standard.

SA8000, similar to WRAP, certies manufac-turing facilities, not brands or retailers. Theidea behind this system is that brands andmerchandisers will seek out factories that havereceived SA8000 certication, as they look toISO 9000 certication to verify quality stan-dards. SAI i s also developing a Signatory Mem-ber program 4 which requires members to movetheir supplier factories toward SA8000 compli-ance, and to periodically report progress in

meeting this goal.SAI discloses lists of certied facilities andtheir locations but does not publicly disclosewhich facilities have lost their certication orwhich were rejected in their applications. Threehundred and fty-four factories in 39 countrieshad been certied under SA8000 as of March2004. The largest percentage of these facilities,26% (93 factories), are apparel or textile rms.It is not clear whether or what percentage of Signatory Members contract facilities have re-ceived SA8000 certication.

A number of concerns have been raisedabout the SAI strategy. Critics have arguedthat it is impossible to certify that any fac-tory is in compliance with the SA8000 standardbased on a 1-day audit, once per year. Others

point out the limitations of a voluntary, fac-tory-centered initiative that has to date certiedless than 100 apparel factories out of an esti-mated 100,000 factories producing for the USmarket (a critique which can be leveled at allof these systems). The SA8000 auditing proce-d h l b iti i d b NGO f

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controversial of current initiatives to establishmonitoring and verication. The FLA origi-nally focused only on the apparel and footwearindustries, but has recently expanded to coverother industries producing university-logogoods. As of April 2004, the FLA consistedof 12 participating companies, primarilylarge brand apparel and footwear merchandis-ers, several non-governmental or ganizations,and about 175 university affiliates. 5 Throughthese universities, over 1,100 collegiate licensees(companies producing goods that bear one of these universities logos) are participating inthe FLA monitoring program.

The FLA has developed a Workplace Codeof Conduct and Principles for Monitoring,accredits, monitors, reviews audits, and reportson audit results. The FLA advances a monitor-

ing system which requires companies seekingcertication to rst inspect internally all of theircontract factories by the end of their imple-mentation period. Companies are also re-quired to hire external monitors to evaluate atleast 30% of their supplier factories during t herst 23 years of the certication process. 6

Over 2000 internal company audits havebeen conducted, and 292 external auditshave been submitted to the FLA as of April2004.

The FLA model has also come under refrom a number of unions, NGOs, and studentactivists for being overly controlled by theindustry ( Benjamin, 1998; MSN, 2001a ). Criticspointed out that rms could select and directlypay their own monitors, had a say in which fac-

tories were audited, and only disclosed summa-ries of auditing results. Student activists havealso criticized the FLA for failing to advancea living wage and for not sufficiently supportingunion and womens rights.

The board of the FLA responded to theseiti i i A il 2002 b i j

external complaint procedures and internalmanagement systems reviews of brands. TheFLA also recently unveiled a transparencyinitiative that provides tracking charts of individual factories (without names or loca-tions), detailing non-compliance ndings byFLA-accredited monitors and tracking pro-gress of participating brands in remediatingthese problems. Eighty-four tracking chartshave been published to date on the FLA website, with a goal of publishing all external auditreports by the end of 2004.

(d) Ethical Trading Initiative

The ETI was initiated in England in 1998.ETI is an alliance of companies, NGOs, tradeunions, and the British Government, working

to identify and promote good practice in theimplementation of codes of conduct of laborpractice, including the monitoring and indepen-dent verication of the observance of code pro-visions. ETI was established explicitly as anexperimental learning initiative, designed tohelp identify and disseminate information onhow best to implement labor codes that benetworkers in global supply chains. ETI runs pilotprojects and commissions research, in collabo-ration with partner rms and NGOs, whichseek to examine specic challenges of codeimplementation, monitoring, and remediationof problems in supply chains.

ETI has conducted pilot projects in a numberof countries, evaluating for instance, codeimplementation and monitoring in apparel pro-

duction in Sri Lanka, India, and China, horti-culture in Zimbabwe, bananas in Costa Rica,and wine in South Africa. These pilots arekey to the ETI strategy as they generate infor-mation on issues such as how to monitor forchild labor, how to evaluate the quality of 1-d dit h diff t t t ib t

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and what problems and challenges implement-ers face.

(e) Fair Wear Foundation

The Dutch Clean Clothes Campaign (2001) ,in collaboration with trade union representa-tives and Dutch retailers, established theFWF in 1999 (after ve years of discussionsand negotiations on code issues) to work withassociations of small and medium sized enter-prises in the Netherlands, and to oversee theimplementation of a code of conduct throughretail supply chains. The FWF has developeda code of labor practice, based closely onthe ILO core standards, and requires compa-nies to monitor their supply chains and toestablish independent verication and worker

complaint procedures. The FWF will certifycompanies that are implementing the codeand have a system in place to gather evidenceon factory conditions in their supply chains.FWF is responsible for verifying that the codeis being implemented in a percentage of eachrms factories.

The FWF has conducted pilot studies in gar-ment factories in India, Poland, Romania, andIndonesia to test its monitoring and vericationprocedures. Within the context of these pilotprojects, participating companies have con-ducted internal inspections of their supply facil-ities and the FWF has performed externalverications to spot-check these ndings. Thisprocess has led to the FWF now requiring mem-ber companies to use a management system that

stipulates the maintenance of a supplier registry,establishment of management and worker train-ing programs, implementation of internalmonitoring (in which the Dutch retailer moni-tors working conditions in its suppliers), andfollow-up procedures for evaluating corrective

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trial and Textile Employees (UNITE), theAmerican Federation of Labor-Congress of Industrial Organizations (AFL-CIO), and anumber of human rights, labor, and religiousNGOs in 1999. The WRC had 121 collegeand university members as of March 2004,and focuses primarily on factories producingapparel for the university market.

The WRC employs three broad strategies: (1)inspecting factories from which the WRC hasreceived worker complaints; (2) pro-activeinspections in countries with patterns of poorlabor practices; and (3) information disclosurerequirements. The WRC does not certifycompany compliance with a code of conduct,conduct systematic monitoring, or accreditmonitors. Instead, the WRC encourages (butdoes not require) participating universities to

adopt codes of conduct that closely resemblethe WRCs model code, which includesstrong provisions for a living wage, womensrights, and recognition of workers rights tofreedom of association. The WRC requiresmember universities to commit to broad publicdisclosure and to develop mechanisms to verifyinformation reported by companies and theirsuppliers.

The WRCs goal is to ensure that factorieswhich produce university branded apparelcomply with the model code of conduct,and in particular with rights to freedom of association and collective bargaining. TheWRC also seeks to educate workers themselvesabout university codes, so that workers may re-port code violations to local NGOs or the

WRC. The WRCs investigative efforts rely oncollaboration with local NGOs and activists,personnel from either the WRC, its board, oraffiliated university members, and labor andhuman rights experts.

To date, the WRC has conducted detailedi ti ti t b t d f t i

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The WRC is not without its critics. TheWRC has been criticized (and publicly op-posed) by a n umber of rms and universityadministrators. 8 Opponents have accused theWRC of representing a gotcha model of monitoring, more focused on identifying prob-lems and embarrassing rms, than on resolvingproblems ( Brown Daily Herald, 2000 ). And theWRCs in-depth inspection system has beencriticized for having a limited scope and cover-age.Interestingly, the WRC, along with ETI,FLA, FWF, and SAI is now collaborating ona joint initiative in Turkey (see http://www. join.org ) that seeks to produce guidancenotes on best practices in the monitoringand implementation of freedom of association,wages, and hours of work. The project is work-

ing to collaboratively assess the quality of audits; remediation and corrective action pro-grams; and complaints mechanisms. The jointinitiative also seeks to analyze ways in whichleverage could be enhanced through coopera-tion across these multi-stakeholder initiatives.

Several other initiatives, while not explicitlyfocused on codes and monitoring, are alsopotentially supportive or complementary tonon-governmental labor regulation. These in-clude the Global Reporting Initiative (GRI)and the United Nations Global Compact initia-tive, created by the UN General Secretary in2000 (see http://www.unglobalcompact.org ). Itshould be noted, however, that neither of theseinitiatives require external or independent mon-itoring or verication of any kind, but rather

remain essentially self-reporting and disclosuresystems.

5. MODELS OF NON-GOVERNMENTALGOVERNANCE

tion, accountability, and transparency of inspection results can vary considerably. Andmore importantly, these systems also vary intheir underlying models for improving laborpractices in global supply chains.

Traditional labor regulation, now often dis-paraged as command-and-control policy,might be thought of as largely a state-centric,local policing model of governance. Clear,xed rules are established, and governmentinspectors police compliance with these stan-dards to advance a kind of interventionistregulation ( Knill & Lehmkuhl, 2002 ). Non-governmental labor regulation represents asignicantly different model of regulation,involving multiple stakeholders participatingin standard setting, monitoring, and sanctions(or incentives). And as we have seen, these

non-governmental regulatory initiatives oftenvary in their underlying regulatory models.The FLA, SAI, FWF, and WRAP are all rmlycentered around enlisting market drivers forimproved supplier performance. WRAP andSAI advance a system based largely on factorycertication. These initiatives certify that man-agement systems are in place to guaranteeacceptable performance in individual factories.Certication provides a stamp of approval thatis designed to attract customers to self-selectingfactories. WRAP and SAI tap into the motiva-tions of individual factories seeking to connectinto socially concerned corporate buyers, asfactories are audited only if they ask (andpay) for the evaluation. These systems involvean advanced form of privatized regulation

(Knill & Lehmkuhl, 2002 ).The FLA, FWF, and ETI deploy marketpressures by creating supply chain policingsystems involving multiple stakeholders. Thisadvances a kind of collaborative regulationor regulated self-regulation ( Ayres & Braith-

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and local NGOs, which motivate WRC inspec-tions. Factories, and the brands purchasingfrom them, are targeted through this bottom-up process. The WRC then puts pressure onbrands to improve conditions, and at the sametime works to facilitate worker empowermentand organizing to negotiate improvements.Supporting freedom of association and collec-tive bargaining are primary goals of the WRC.

These different systems create a spectrum of new regulatory processes: from privatizedregulation, to more collaborative regulation,to more socialized governance of global pro-duction networks.

6. LIMITS TO NON-GOVERNMENTALREGULATION

There are obviously a number of weaknessesand challenges to making these different regula-tory systems effective. Non-governmental gov-ernance faces many of the same mundanechallenges as traditional government monitor-ing and enforcement, including coverage, train-ing and capacity of inspectors, incentives of monitors, corruption, and so forth.

The long and mobile nature of apparel sup-ply chains, and the difficulty of sometimes evenlocating garment factories, is a critical chal-lenge for non-governmental monitoring sys-tems. Major apparel companies such as theGap source their products from over 3,300 fac-tories in 70 countries. Disney is estimated tosource from over 30,000 factories, Walmart

from even more ( Wach & Nadvi, 2000 ). Theability of rms to move production quickly be-tween factories and to hide behind multiple lay-ers of ownership makes systematic inspectionsextremely difficult. 9 A number of critics haveraised concerns that non-governmental moni-t i i l i it t f t i th t t

is simply accessing information on factory loca-tions, workplace conditions, audit ndings,remediation efforts, and worker concerns.

There are also clear power asymmetries be-tween multi-national corporations, non-gov-ernmental inspectors, advocacy groups, andworkers ( Rodriguez-Garavito, 2005 ). Somecritics warn that companies are controllingthese processes, co-opting NGOs by changingthem from watchdogs to partners, andundermining strong local laws and unions(Justice, 2001). Having NGOs play the role of regulators may also ultimately undermine tra-ditional regulatory processes ( ILO, 1998; Nadvi& Wa ltring, 2001 ). Others fear that elected gov-ernments are actually ceding some of their sov-ereignty to consumers through these systems.Clearly the shift to non-governmental regula-

tion focuses more attention on consumers(rather than the state or unions) as the key con-stituent of monitoring and enforcement.

A number of critics have also noted thatcodes and monitoring activities can actuallyhurt workers ( Esbenshade, 2001; Liubicic,1998). Monitoring reports can lead rms tocut contracts with poor performing factories,leading to job losses. Firms may reduce over-time at a factory working beyond a code of conducts limit, despite workers needing thesewages to survive. Workers may also be pun-ished after complaining to auditors as these sys-tems often have limited protections for workerswho complain. Even when monitoring is effec-tive, some of the most hazardous jobs may beshifted further down the supply chain or into

the informal sector to avoid the selective gazeof non-governmental regulation.Some critics also argue that monitoring,

when it is conducted by local NGOs, can im-pede unionization or crowd out the effortsof local worker organizations. Compa (2001)di l i C t l A i

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stakeholders in these processes do not feel thatthey control or are beneting from northern-lednon-governmental regulatory systems.

Finally, critics also point to a number of problematic versions of non-governmentalregulation. For example, Global SocialCompliance (formerly a division of Pricewater-houseCoopers), a monitor for many largemulti-nationals, depends largely on data pro-vided by management, conducts very cursory

inspections of factories, and holds worker inter-views inside the factories ( ORourke, 2002 ).Factory managers often know who is beinginterviewed, for how long, and on what issues.This kind of monitoring can divert attentionfrom the real issues in a factory, provide a falseimpression of performance, certify that a com-pany is sweat-free based on very limited evi-

dence, and actually dis-empower the workers itis meant to help. While there is no single perfectway to monitor a factory, there are clearlyproblematic monitoring practices that arenot transparent, accountable, or benecial toworkers.

7. LOCAL PARTICIPATIONIN GLOBAL GOVERNANCE

While there are clearly problematic versionsof non-governmental regulation, and variationsamong even the most promising of these initia-tives, there has been movement over the shorthistory of these programs to address criticalconcerns about forms and levels of stakeholder

participation, public disclosure of information,and mechanisms of accountability over rmsand their monitors. In particular, there havebeen a number of efforts to increase theaccountability of these systems to local stake-holders, consumers, and northern advocacy

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workers, and communities in producer coun-tries. This combines top-down pressure cam-paigns with bottom-up organizing, often justied or protected by formal codes and mon-itoring systems.

These dynamics can be viewed most clearlythrough specic cases, which might actuallybe considered failures of corporate internalmonitoring. These cases involve garment facto-ries that produced for MNC brands or retailers

in which major problems were identied thathad either not been found or not been remedi-ated by these rms. Strategic alliances of NGOsand unions have used codes and monitoringsystems as a framework within which to exertpressure and demand accountability over thesefactories, and to expand space for local workerorganizing. Brands and retailers that are mem-

bers of the FLA, and that have publicly com-mitted themselves to codes of conduct andmonitoring systems, have been targeted in thisorganizing. FLA membership, which was orig-inally dismissed by many activists as largely PR(see Benjamin, 1998 ), appears to have created awindow of accountability over multi-nationalbrands and retailers that NGOs have been ableto work through. In fact, an interesting compli-mentarity seems to be emerging between theFLA and WRC effortswhich only a few yearsago were viewed as diametrically opposed.

In a series of cases involving both the FLAand the WRC, including factories in Mexico,Indonesia, the Dominican Republic, Guate-mala, and the United States, a pattern of inter-nal and external, top-down and bottom-up,

worker-to-consumer, strategies have been em-ployed to resolve problems in specic factoriesand to build local worker organizing efforts.For example, in the now famous Kukdong casein Mexico (Barenberg, 2003 ), there was animportant combination of formal procedures

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protecting the edgling union organizing. Sim-ilar, though locally unique dynamics occurredin cases at the PT Dada factory in Indonesia,the BJ&B factory in the Dominican Republic,the Choi Shin factory in Guatemala, and theNew Era factory in upstate New York. 10 Thesecases offer a potential model of more locallyparticipatory, and accountable, global gover-nance. This model involves:

NGOs and/or unions targeting factories

producing for branded MNCs that can gar-ner media attention in the United States orEurope. These groups often look for compa-nies that are in one of the multi-stakeholderinitiatives. NGOs and unions conduct research onpotential cases on the ground in countriesin which they have local partners or

researchers. When a promising case (i.e., one withegregious conditions and potentials for solu-tions) is identied, the groups begin organiz-ing to ensure there is worker capacity andthe potential for a successful campaign.These groups need worker voices for legiti-macy and effective accountability oversolutions. The local and international groups jointlydevelop a strategy for the campaign. Sometimes a specic incident ignites thecampaign, sometimes a research expose. The re alarm is pulled and mediaattention is generated. A code of conduct is publicly invoked toshow that the brand or retailer is not living

up to their own public pronouncementsand is violating the terms of their participa-tion in a monitoring initiative. The monitoring group or groups areasked to evaluate the problem. A process isinitiated where the WRC and FLA conducti ti ti d ti t ith th b d

If, or usually when, the contractor tries tooppose or co-opt the workers or renege onthe agreement, international pressure is initi-ated again, focusing on the brand. Local organizing tries to take hold and toestablish a union that can survive withoutoutside support and monitoring. Local bargaining occurs over remediationof the problems in the factory, and seeks tocreate on-going means for negotiation

between workers and management. The FLA and WRC conduct follow-upmonitoring and establish systems of commu-nication from local groups to Washington,DC to verify that problems have been reme-diated and the worker rights are beingrespected.

This modelor some variant of itwhich

combines both top-down exposes and pressuresin consumer countries, with bottom-up orga-nizing and worker mobilization in producercountries, and sometimes surprising roles forbrands in pushing contractors and local regula-tors, has been successful in a hand-full of casesaround the world. And while it is extremelylabor intensive and expensive, it appears thatit can produce successful, participatory, locallyaccountable improvements in factory condi-tions.

8. DESIGNING MORE ACCOUNTABLEGLOBAL GOVERNANCE

This schematic of more participatory and

accountable non-governmental labor regula-tion, while certainly not proof of global trends,provides at least the outlines of strategies forpromoting more effective and democratic non-governmental governance. These experimentshighlight potential responses to current power

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widespread skepticism. Key stakeholders needinformation on locations of factories, resultsof inspections and audit reports, and detailsof progress in remediating problems. TheFLA is moving toward increased transparencyof this kind. And the WRC has established ex-plicit systems for transferring information toboth local stakeholdersunions, NGOs, work-ers, etc.and international organizations, stu-dents, and the media.

Support for fuller and more meaningfulworker participation in non-governmental reg-ulation is also critical. Workers obviouslyshould play a central role in identifying prob-lems in these factoriesas they are on the fac-tory oor every day and have clear incentives(although also disincentives) to raise issues.But they should also be involved in negotiatingsolutions to problems and determining work-place conditions for the future. The WRC hasexperimented with local AccountabilityTeams that include workers (although notworkers or union representatives from the fac-tory involved in the dispute, in order to avoidconicts of interest), local NGOs, and otherlocal experts (such as human rights lawyers,academics, etc.). The WRC and Clean ClothesCampaign have also been pushing for greaterworker participation in remediation and prob-lem-solving processes, the creation of deliber-ative arenas, and systems through whichremediation efforts are incorporated into collec-tive bargaining processes. As Barenberg (2003,p. 8) explains, the substantive goal is to gener-ate compliance norms that are, in some mean-

ingful sense, autonomously shaped by localinterests, and pragmatically suited to localproblem-solving.

A number of other experiments in workerparticipation have been advanced recentlyaround the world that point to similar goals

d d i O i t ti i t i

aim with these elections is to produce a sustainedimprovement in working conditions by promoting

better communication between management andthe shop oor . . . Its our hope that issues can betaken up by the worker representatives, saysMr. Cahn [a ReebokVice President]. We have inspec-tions of factories, both announced and unannounced.But you just dont have the assurance that things willbe the same the next day. Factories in China areincredibly sophisticated at nding ways to fool us.The best monitors are the workers themselves.

The Reebok experiment represents a smallstep forward on worker participation in China,and similar experiments have been reportedrecently in other foreign-invested factories inGuangdong, Fujian, Zhejiang, and Shandongprovinces ( Xinhua, 2003 ). Although it is stilltoo early to evaluate the impact of these elec-tions, the cases do show that MNCs can createwindows of opportunity for worker organizingand real representation even in countries thatseek to control or repress unions.

Another experiment of this nature involvedcreating and supporting workplace health andsafety committees in contract factories for mul-ti-national footwear companies in Guangdongprovince in China ( Szudy, ORourke, & Brown,2003). This project sought to support workerparticipation in identifying and resolving prob-lems inside factories, and in advancing broadersystems of monitoring and corporate account-ability. Participating factories (producing shoesfor adidas, Nike, and Reebokall members of the FLA) created or expanded health andsafety committees, began regular inspections

of production areas, and worked with manag-ers to eliminate or reduce identied hazards.The committees also worked to develop newand better mechanisms for workers to reportproblems, new processes for identifying andeliminating hazards, and new systems of

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one arena through which to advance theseexperiments.

Voluntary initiatives of these kinds of courseare more rare than regular. It is thus neces-sary to design non-governmental governancesystems to take advantage of their main moti-vating forcecivil society pressures on multi-national rms. Adversarialism, pressure, andcredible threats of lost sales are importantmotivators for the positive collaboration and

joint problem solving that some of these initia-tives facilitate. It is thus necessary to designinto these programs mechanisms for publicinput and countervailing pressure. Continuouspressure on rms to be both more open, andto accept that labor and environmental issuesrequire continuous improvements, have beencentral in motivating changes, and in address-ing the most intractable problems of sweatshopproduction.

Effective non-governmental regulation thusmust facilitate public mechanisms of externalpressure on brands and factory managers, andat the same time, motivate internal corporatemechanisms for nding problems, conductingroot cause analysis, benchmarking solutions,experimenting, and implementing new systemsof management and accountability. Essentiallythere is a need to create a balance between fos-tering conditions for workers, activists, andconsumers to participate in nding and solvingproblems (often through pressuring rms), andcreating conditions for collaborative problemsolving. Creating space for local deliberationand worker participation, and supporting key

enabling rights, are central to including work-ers more meaningfully in these processes andsupporting their efforts to organize themselves.

Finally, there is a critical need to design theseinitiatives to strengthen and complement,rather than replace or weaken local state regu-l ti I t f th WRC i ti ti i

the potential of opening up and strengtheningregulatory systems, and bringing in new voicesand mechanisms for motivating improvementsin global supply chains. They also harbor theperil of privatizing regulation, effectively clos-ing off democratic forms of regulation andbypassing local regulation by advancing top-down, elite governance systems.

In some regards, the distinctions betweenthese systems are beginning to break down.

There is some convergence underway in codesand monitoring regimes that is blurring theboxes presented in this chapter. Factory moni-toring now sometimes includes union officials.Supply chain monitoring is employing NGOsto monitor factories. And NGO investigationsare sometimes coordinated with powerfulbrands. Nonetheless, there are still critical dis-tinctions between these initiatives on issuessuch as the roles of workers and advocacy orga-nizations, transparency of results, and strate-gies for remediation of problems.

And there is certainly no guarantee thatvoluntary codes of conduct and monitoringschemes will naturally converge on more com-plete or democratic systems of regulation. Theyare just as likely to diverge into a plethora of initiatives competing for the hearts and mindsof consumers, serving to confuse the publicand undermine the credibility of non-govern-mental initiatives. However, with strategic pol-icies and coordinated efforts, non-governmentalregulation could instead move toward morecredible, transparent, and accountable systems.A critical rst step in this direction would in-

volve monitoring organizations simply commit-ting to making their factory audits and auditingmethodologies public.

Another potentially promising avenue for-ward would involve efforts to build comple-mentarity and inter-operability between these

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the FLA and WRC indicates the potentials of combining complementary strategies and sys-tems.

Each of these emerging systems has clearweaknesses and challenges. Nonetheless, undercertain conditions, non-governmental regula-tion can inuence factory labor practices. Withincreased transparency, improved technicalcapacities, and new mechanisms of accountabil-ity to workers and consumers, non-governmen-

tal monitoring could complement existing stateregulatory systems. As they develop, new non-governmental regulatory systems should beevaluated along a number of criteria: (1) legiti-macyare key stakeholders involved in allstages of standard setting, monitoring, andenforcement? (2) rigordo codes of conductmeet or exceed ILO conventions and local laws;are standards measurable; and is monitoringtechnically competent? (3) accountabilityismonitoring independent, transparent, andaccountable to local stakeholders? (4) comple-

mentaritydo non-governmental regulatorysystems support state regulation and help toimprove standards and monitoring methods?

Governance in the global economy remains adaunting challenge. If these experiments innon-governmental regulation can be mademore transparent, accountable, and demo-cratic, it may be possible to build non-govern-mental governance into an important responseto the adverse impacts of globalization. At a

minimum, non-governmental regulation offersa glimpse of emerging strategies to regulate glo-bal supply chains and to begin the process of building new systems of governance over a fastchanging world. Locally accountable globalgovernance may still sound like a paradox, con-tradiction, or at the minimum a daunting chal-lenge, but it is exactly this challenge that iscentral to collective efforts to regulate the ad-verse impacts of global production systems,with admittedly new and fragile governanceinstitutions.

NOTES

1. As Nadvi and Wa ltring (2001), 34 note despite thetoothless nature of core labor standards, they havebecome a model for private social standards.

2. For comparisons of company codes, see van Tulderand Kolk (2001) , or company web pages such aswww.nikebiz.com , www.gapinc.com , etc.

3. Private, for prot monitors include Pricewaterhouse-Coopers (recently spun off as Global Social Compli-ance), Cal-Safety Compliance Corporation (CSCC),Societe Generale de Surveillance-International Certi-cation Services (SGS-ICS), Det Norske Veritas (DNV),Bureau Veritas Quality International (BVQI), Intertek

5. FLA members include adidas, Eddie Bauer, GEARfor Sports, Gildan Activewear, Liz Claiborne, New EraCap, Nike, Nordstrom, Patagonia, Phillips Van-Heusen,Puma, Reebok, Zephyr Graf-X, Human Rights First,and the National Consumers League. Notably, severalunion and NGO members of the original AIP left theorganization when it evolved into the FLA in protest of what they believed were insurmountable aws in theorganization and its monitoring procedures.

6. The FLA has to date accredited 11 organizations tocarry out this external monitoring. Each of thesemonitors is accredited to inspect factories in speciccountries. These include A&L Group, Cal Safety Com-

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8. Phil Knight, the CEO of Nike Inc., withdrew aplanned $30 million donation to the University of Oregon after their joining the WRC.

9. As one retailer in the ETI commented, I can knowmy supply chain at 9 a.m., then by 10 a.m. its alldifferent, ETI (2001).

10. See reports on these cases at the WRC and FLAwebsites.

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Lipschutz, R. (2000). Regulation for the rest of us?Global civil society, social regulation, and nationalimpacts. Paper prepared for Workshop on humanrights and globalization UC Santa Cruz December

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APPENDIX A. VARIATIONS IN CODES OF CONDUCT

Fair Labor Association(FLA)

www.fairlabor.org

Social AccountabilityInternational (SA8000)

www.sa8000.org

Worldwide ResponsibleApparel Production

www.wrapapparel.org

Workers Rights Consortium(WRC)

www.workersrights.orgChild labor Minimum age: 15; or 14

if country of manufactureallows; or age forcompleting compulsoryeducation

Minimum age: 15; or 14if meets developingcountry exemption; orlocal minimum ageif higher

Minimum age: 14; or agefor completing schooling;or minimum ageestablished by law;whichever is greater

Minimum age: 15; or 14if consistent with ILOpractices for developingcountries

Harassment andabuse

No employees shall besubject to any physical,

sexual, psychological,or verbal harassmentor abuse

No corporal punishment,mental or physical

coercion, or verbal abuse.No sexually coercive orexploitative behavior

No harassment, abuse, orcorporal punishment

in any form

No employee shall besubject to any physical,

sexual, psychological, orverbal harassment orabuse. No corporalpunishment

Non-discrim-ination

No discriminationin hiring, salary, benets,advancement, discipline,termination or retirement,on basis of gender, racereligion, age, disability,sexual orientation,nationality, politicalopinion, or socialor ethnic origin

No discrimination inhiring, compensation,access to training,promotion, termination orretirement based on race,caste, national origin,religion, disability,gender, sexual orientation,union membership, orpolitical affiliation

No discrimination on basisof personal characteristicsor beliefs. Question aboutdiscrimination based onseniority

No discrimination inemployment, includinghiring, salary, benets,advancement, discipline,termination or retirement,on the basis of gender,race, religion, age,disability, sexualorientation, politicalopinion, or social orethnic origin

Freedom of association andcollectivebargaining

Where right restricted bylaw, employer shall notseek state assistance toprevent workers exercising

right to FoA

Where right restricted bylaw, employer facilitatesparallel means for freeassociation and bargaining

Lawful right of freeassociation, includingright to join or not join association

No employee shall besubject to harassment,intimidation, or retaliationin their efforts to freely

associateHealth and safety Safe and healthy workingenvironment required.Standard also applies toemployer-operated facilitiesapart from productionfacilities (e.g., housing)

Safe and healthy workingenvironment required. If provided, housing shouldbe clean and safe. Stepstaken to prevent accidentsand injury. Regular healthand safety training

Safe and healthy workingenvironment required.If provided, housing shouldbe safe and healthy

Safe and healthy workingenvironment required

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APPENDIX A continued

Fair Labor Association(FLA)

www.fairlabor.org

Social AccountabilityInternational (SA8000)

www.sa8000.org

Worldwide ResponsibleApparel Production

www.wrapapparel.org

Workers Rights Consortium(WRC)

www.workersrights.orgWages Local minimum wage or

prevailing industry wage,whichever is higher, andlegally mandated benets

Legal or prevailing industrywage, and meet basicneeds/provide discretionaryincome

Legal minimum wage Legal minimum wage andbenets. WRC coderequires paying aliving wage

Hours of work 48 h per week and 12 hovertime or the limitson regular and overtimehours allowed by the lawof the country. One dayoff in every seven

48 h per week and 12 hovertime maximum.Personnel shall be providedwith at least one day off inevery 7-day period.All overtime work shall bereimbursed at a premiumrate

Shall not exceed the legallimitations of the countriesin which apparel isproduced. One day off inevery 7-day period,except as required to meeturgent business needs

Not be required to workmore than the lesser of (a)48 h per week or (b) thelimits on regular hoursallowed by the law of thecountry of manufacture, andbe entitled to at least 1 dayoff in every 7-day period,as well as holidays andvacations

Sources : Organizational websites and MSN (2001b).

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APPENDIX B. US MONITORING AND CERTIFICATION SYSTEMS

Fair Labor Association (FLA)www.fairlabor.org

Social Accountability International(SA8000) www.sa8000.org

Worldwide ResponsibleApparel Production (WRAP)

www.wrapapparel.orgScope Apparel and footwear companies.

Licensees of affiliated universitiesFactories producing a wide rangeof products

Apparel industry

Governance Twelve-member board with sixindustry reps, ve NGOs, and oneuniversity rep.

Governing board has ve members,composed of one rep from CEP(Council on Economic Priorities),

three lawyers, and one businessperson.SAI also has an advisory board withmore diverse membership

Board of three officers and eightdirectors form the IndependentCertication Board. Primarily

industry reps.

Monitoringprocess

Companies must conduct internalmonitoring of at least one-half of theirapplicable facilities during the rst year,and all of their facilities during thesecond year

Manufacturers or suppliers are grantedthe status of applicants for 1 yearuntil they are veried by an accreditedCertication Auditor. The SA 8000Certicate must be renewed every2 years

Factories must undergo a three-stepprocess: Self-Assessment,Independent Monitoring, andFinal Review and Follow-up

Companies commit to use independentexternal monitors accredited andselected by the FLA to conductperiodic inspections of at least 30%of their facilities during their initial3-year participation period

Specially trained local audit teamswill be briefed by local NGOs andunions, speak to managers andworkers and check the records of thefactories. The SA8000 guidancedocument is the SAI manual thatassists the accredited auditors infulling this task. NGOs are alsoencouraged to undergo the processof becoming an accredited SAI auditor

Factories contract and scheduleselected Independent Monitors toperform onsite evaluations. Based onthis evaluation, the IndependentMonitor will either recommend thatthe facility be certied or identifyareas where corrective action mustbe taken before such arecommendation can be made

Factories are selected by FLA staff,with a focus on the largest and thosewith greatest risk of non-compliance.All monitoring must involveconsulting local NGOs. Monitors willuse a combination of announced andunannounced visits

Factories self-select for certication Factories self-select for certication

(continued on next page )

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APPENDIX B continued

Fair Labor Association (FLA)www.fairlabor.org

Social Accountability International(SA8000)

www.sa8000.org

Worldwide Responsible ApparelProduction (WRAP)

www.wrapapparel.orgCertication FLA certies an entire brand. A service

mark will be developed so consumersknow which companies are participatingand which have met the standards forcertication. Timely remediation,assessed by monitors and FLA staff,is required for certication

Certication means that a facility hasbeen examined in accordance withSAI auditing procedures and foundto be in conformance. Auditors lookfor evidence of effective managementsystems and performance that provecompliance. Certied facilities aresubject to semi-annual surveillance

audits

The WRAP Certication Boardwill review the documentation of compliance and decide uponcertication. The term of certicationwill be specied by the Board,based on criteria of risk factors.Over the term of the certication,the facility may or may not receive

an unannounced inspection to verifycontinued complianceCompany

requirementsCompanies must implement theFLA Code; internally monitor everyfactory every year according toFLA monitoring principles; andparticipate in independent externalmonitoring every year. All internaland external monitoring must includelocal NGOs

Manufacturers/suppliers adopt aprogram to pursue SA8000certication. Retailers becomeSA8000 Members and publiclyannounce their commitment to seekout socially responsible suppliersand assist suppliers in meeting theSA8000 social standards

Factories must meet WRAPprinciples and bear all costs of certication.Factories must apply, be registeredin the WRAP Certication Program,and perform self-assessment of itsfacility with the WRAP Handbookto determine if their facility complieswith the WRAP Principles

Reporting All internal and external monitoringreports will be provided in full to theFLA staff. The FLA will evaluate audits, jointly develop remediation plans,and then publish summary reportsof audit remediation results

Audit reports go to the companies andto SAI. Other parties can only receivethem after having signed acondentiality agreement with thecompany management and theaudit company

Audit reports are provided tofactories and the WRAP board

Publicdisclosure

Annual reports on each companybased on internal and external

monitoring. Participating companiesare publicly listed on the website.No disclosure of locations of certied factories

The public is informed only of factories granted certication

No public reporting. No mention of sites that receive, fail, or lose

certication.

Sources : Organizational web sites and MSN (2001b).

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Documents

Sesion7.Lectura1