Fair Labor Association

Although an increasing number of corporations publish comprehensive sustainable reports, the only means to find out about the real picture of CSR is via independent inspections. Media progressively report results of these inspections, which are often unsatisfactory. In terms of labor issues, the most notorious case is perhaps the series of suicides of workers in Foxconn factories in Mainland China, which occurred in 2010.

Taiwanese corporation Foxconn (sometimes called Hon Hai Precision Industry) employs about 1.2 million of workforce in Mainland China,⁹² which makes the company the largest employer in Chinese private sector. Company’s size, extension of its operations, and the fact that it is one of the principal suppliers of Apple, naturally draw a great media attention. Foxconn factories are now regarded as a benchmark of labor conditions in the electronics industry. In March 2012, a research carried out by the Fair Labor Association in Foxconn factories in Mainland China identified a minimum of 50 violations of China’s labor law and code of conducts, mainly in health and safety, worker integration and communication, wages and working hours. Apple, as a participating company to the Fair Labor Association since January 2012, should ensure that 100% of its supply chain meets the FLA standards. Similarly to a long-term partnership between Dell and Lite-On, Apple did not stop its cooperation with Foxconn despite the labor and environmental issues in its factories. Instead, they work together to find a solution to the problem.

The FLA is a multi-stakeholder non-profit organization based in the US that works towards protection of workers’ rights since 1999. Its board of directors is composed of company representatives, university representatives and NGO representatives.

Similarly to other CSR non-profit organizations, it has its own FLA Workplace Code of Conduct, to which members should abide after they join FLA. But so far, only 35 firms (none of them Taiwanese or Chinese) are listed as FLA participating companies and thus commit to the highest level of social compliance in their supply chains. 17 companies (Chenfeng and Qingdao Belle Maille from China, Esquel Group, Yee Tung Group and Mainland Headwear Holding from Hong Kong, Pou Chen

92 BBC News, March 29, 2012.

Corporation from Taiwan) have joined FLA as participating suppliers, which abide to lower CSR commitment. The FLA affiliated companies mostly operate in apparel and footwear industry, but with Apple joining in 2012, the scope of industries broadens to IT industry.

Besides monitoring the code of conduct and sharing the best practice, the FLA conducts inspections and audits in factories in order to evaluate companies’

compliance with national and international legal norms and code standards. After inspections, FLA continues to cooperate with factories by asking them to work out corrective action plans. Corrective action plans are then subject to follow-up checks by FLA in order to ensure that situation has improved.

Another FLA’s objective is to promote transparency in supply chains, which is reflected in all findings made public on FLA website. FLA also runs a third party complaint channel, under which any individual or any group may report on serious or persistent violations of workers’ rights in a company committed to FLA’s standards.

However, the complaint channel may be used only in situations when all other dispute resolution mechanisms have failed and so far has been used in 30 cases only.

In terms of labor compliance, the accreditation by FLA is probably recognized as the most advanced one. It is because the participating companies and their suppliers have to demonstrate substantial compliance with the FLA Workplace Code of Conduct.

The entire procedure of implementation, monitoring and evaluation takes two to three years. Every year, FLA itself conducts about 150 unannounced factory visits in the world. Most of them are conducted in China (53 out of a total of 149 random visits in 2010), because China accounts for the highest number of factories supplying the FLA affiliates (1 792 factories in 2010) as well as for the largest workforce (1 815 000 workers in 2010).⁹³

In fact, with more inspections and audits conducted in factories, more non-compliance issues are being revealed every year: 95% of the audits in 2010 violated at least one element of the code of conduct or legal norm. All the 53 audits carried out in China in 2010 detected violation of the right to freedom of association. Sadly, in China over 95% of noncompliance was found regarding health and safety, over 90% regarding

93 FLA, 2010, p. 10.

wages, benefits and overtime and nearly 90% regarding hours of work. 70%

noncompliance was reported in harassment or abuse, 40% in forced labor, and about 30% in child labor and discrimination.⁹⁴ Moreover, health and safety issues, freedom of association, discrimination, wages, benefits and overtime and work hours were found to be mostly substantive non-compliances, not just procedural ones.

Besides the random inspections that FLA labels as “IEM” (Independent External Monitoring), the organization also conducts “IEV” (Independent External Verifications) to examine the stage of the corrective action plans adopted by the companies and their suppliers. This is very important, because FLA is so far the only organization, which surveys the complete process from identification, data collection and examination of procedures, discovering the problems, co-developing remedies and corrective action plans to re-evaluations and follow-up checks.

Unlike the unannounced IEMs, IEVs are expected follow-up visits targeted at factories with critical and persistent labor issues. Consequently, IEVs are smaller in number (38 in 2010). The IEV inspections usually take place after two or three years so the companies have time to implement changes according to their corrective action plan. Although IEVs have been put in action for several years already and are more frequent every year, the overall situation does not seem to improve. Contrarily, IEVs conducted in 2009 and 2010 came to the same conclusion: not only numerous labor issues were not remedied, but new noncompliance emerged during the repetitive inspections, especially regarding health and safety and work hours. Furthermore, a higher number of harassment and abuses was discovered during the IEVs in comparison with general audits. It is not rare for auditors to work with false or unreliable data showing shorter working hours and higher wages. Sometimes, factory managers bribe auditors. Workers are trained how to answer to auditors’ questions. In fact, some (migrant) workers want to work as long shifts as possible in order to get higher pay and then leave.⁹⁵

After close examination of findings from FLA and other watchdog organizations, the following observation by The Economist may be used as a concluding remark:

94 FLA, 2010, p. 20.

95 The Economist, March 31, 2012.

“There is a growing evidence that appointing an outside body to audit and set standards, as Apple has done, is not going as well as it should.”⁹⁶

Nonetheless, some experts conclude that the overall situation is improving and the problems of forced labor and child labor were largely eliminated. The worst abuses probably still perceive in mining industry and agriculture, further down the supply chain. Currently, the biggest challenges for the first-tier suppliers of global brands are excessive hours and inadequate pay.⁹⁷