#csr challenge

[sattva-csr]

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Another fire in Bangladesh

While the death toll of the collapsed factory building in Dhaka is still counting, another fire broke out at Tung Hai and claimed lives of 8 people. On Tung Hai's Facebook page, it said that customers include Primark, Penney's Stores, Agora, E.Leclerc, Peacocks, New Look, AWG Mode Center, Fox Flag, NV Carodel, Point Zero, Members Only Clothing, NKD Vertrebs, Inditex and QS Stores.

Inditex spokesperson explained that the retailer stopped working with the factory in June 2012.

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How far can corporate responsibility makes companies liable to unpaid compensation?

United Students Against Sweatshops (USAS), the Workers’ Rights Consortium (WRC) and the Clean Clothes Campaign (CCC) oblige Adidas to pay an Indonesian supplier's workers severance rather than the factory.

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Dynamics since the Honda strike: the scapegoat for strikes in China

Striking Chinese workers at a Honda Motor Co. parts maker in FoShan (South China) has put "Chinese factories/workers" under the spotlight (which also occur alongside Foxconn workers suicide incident).  Follow up news gradually fade out after Honda workers receive pay raise (and so do Foxconn workers).  Or is it?

"Why the workers strike?" is the question I always ask my suppliers whenever a strike occurred.  Very often, I was first being told that the strike was started by outsiders. Outsiders refer to paralegal who make a living form handling civil lawsuits.  They call themselves "citizen agent" (公民代理) in China (factory managerial staff called them black lawyer 黑律師).  FoShan Intermediate People's Court recently announced that citizen agent is restricted to handle a maximum of three litigation cases for every 2 years for the reason that these citizen agents "waste legal resources" in encouraging unreasonable litigation.  The FoShan Intermediate People's Court also requires citizen agents to give an undertaking not to take any monetary return from handling litigation cases.

It is meaningful that the announcement came from FoShan, where the Honda factory is located and where its workers strike that brought worldwide attention.  Not that I know (from the news) that these citizen agents are responsible for the Honda strike.  Citizen agents are the scapegoat for strikes in China and restricting them appears to be the quick fix.

With the lack of real labor union in China, there is no mechanism to handle labor grievances between employee and employers.  Strike appears to be a low-cost and effective means left to the workers: It brings attention and it makes the local government looks bad when it is in the news.  The local government will then has a stake in sorting things out.

Ask three times rule

I think if indeed there is no true area of improvement or challenge in the first place, even a lawyer/citizen agent is not capable to make a wave.  Whenever there is an issue, ask three times why it occurred.  That works for "why the workers strike?", "why there is a need to work excessive overtime?", "why workers still have to work on Sunday?" etc etc.  Ask the questions multiple times and ask all the parties: the factory owner, the managerial staff, the foremen, the line leaders, the workers and the security guards.

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Challenge of worker age verification in China

It has been reported recently that there are at least one million duplicated I.D. card number in China.  The Chinese government urges citizens to renew their I.D. card with duplicated number and it would be handled free of charge.  It has further confirmed our frustration in verifying age of workers in China.

Under the wave of social audits in China by various foreign retailers, it is less common nowadays to find an exporting factory hires child labor (worker who is under the age of 16) intentionally.  Nearly all of the cases of child labor that I came across in recent years were due to the fact that falsified I.D. card or borrowed I.D. card of siblings has been used by workers during the hiring process.

The first generation of I.D. card has been issued in China since 1986.  It is an I.D. card with photo and all the information (name, DOB, registered residential address and I.D. card number) is hand-written.  The government has started to renew all the first generation I.D. card to second generation I.D. card in 2005 but this huge task has still not yet completed by now.  Information on the second generation I.D. card is all printed and searchable by police within its computer system.  Interested parties can turn to National Citizen Identity Information Center to verify an I.D. card photo and information.  This would be useful for employer to sort out the outrageously falsified I.D. cards.  However, the challenge in verifying age of worker remain:

Photos of first generation I.D. are of poor quality.  I had my moment in unable to match a worker with his/her I.D. card face to face during an audit.

Peasant couples are allowed to give birth to 2 children and people with the same surname reside in the same village in rural area.  I.D. card can be easily borrowed among siblings or cousins.  Given that children under the age of 16 can also get an I.D. card (it will be valid for only 5 years), there are a lot of 'I.D. card exchange' going on between those who stay in rural area and those who leave home village for jobs in the cities.  It is more challenging to tell if a worker use a borrowed I.D. card  or not as they are related and with similar appearance.

With the requirement for migrant workers to get a 'temporary resident card' (暂住証) in the city fades out nowadays.  The only time for an employer to check out one's identity would be at the time of applying for social insurance for workers.  It is logical that a worker who uses a borrowed I.D. card would not want to pay for someone else's social insurance.  However, with the easily obtain social insurance waiver, very few factories has 100% social insurance coverage for its workers.  A worker can choose not to enroll in the mandatory social insurance scheme.  So once a worker is hired, there is no 'check point' exists that require identity verification.

Identity verification can be more of a retailers' interest (to prevent hiring child labor).  The followings are some good examples that are practical:

Maintain a written copy of verified I.D. card information with National Citizen Identity Information Center or local police of new hires.

Post a letter to the registered address on the I.D. card of a new hire and have his/her family post it back to the factory as a confirmation of registered residential address.

Have the new hires report to the HR department at random intervals between 1 month to 3 months with their I.D. card post hiring.  This will sort out those who have returned their I.D. card to the 'lender'.

Have the new hires report to the HR department at random intervals between 1 month to 3 months without their I.D. card and fill in the job application form again.  Those who used borrowed identity may not able to recite information on date of birth or I.D. card number anymore.

For factories that implement C-TPAT policies, efforts in worker job reference check, identity verification/ background check can further enhance identity verification process for hiring of workers in sensitive areas (finance, accounting, warehouse, security guard, drivers, etc).

National Citizen Identity Information Center website:

http://www.china.com.cn/chinese/zhuanti/sfz/528649.htm

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To bribe, or not to bribe? The value of integrity in China

Yesterday, a mainland Chinese 18-year-old boy was sentenced to jail in Hong Kong for 6 months, for sitting Advanced Placement Examinations on behalf of a Hong Kong student for RMB 2500.  This boy has already being admitted by a prestige university in the U.S but his life has changed since then.  He pleaded for lesser sentences and explained cheating in exams is very common place in China.

The Economist wrote that China has ‘well-earned reputation for pervasive academic and scientific misconduct…fraud remains rampant and misconduct ranges from falsified data to fibs about degree, cheating on tests and extensive plagiarism”. (The Economist: Academic Fraud in China) China has a long history of plagiarism.  When I was in high school, my Taiwanese teacher talked about a high-profile example. A few decades ago when China and Taiwanese relationship was much tense, publication on literature and academic work of each other were banned.  A Chinese post-graduate student copied a Taiwanese scholar’s book as his thesis but his Chinese professor could not say anything about it as no one was supposed to read anything Taiwanese.  His professor has no choice but to remain silence on the issue.

In China, Chinese are very well aware of academic qualification fraud.  It is even being seen as an indicator of level of corruptness of government officials.  Government officials who bought their way up are typically equipped with advanced degrees, which are obtained by their personal secretaries who study on behalf of them.

China, the second biggest trading partner of United States, ranked 79th out of 180 countries in the Corruption Perceptions Index (CPI) of Transparency International in 2009 (United States ranked 19th and Hong Kong ranked 12th).  CPI measures the perceived level of public-sector corruption.  Corruption and CSR are closely related.  CSR in essence is about companies trying to do the right thing and be in compliance with the law.  If law is being neglected or easily ‘waived’, depending on one’s bargaining power to get a waiver, it makes things more challenging.  Take social insurance in China for example.  Most foreign retailers would press for 100% social insurance coverage at least of one of the five items: workplace accident insurance on its Chinese suppliers (China social insurance covers workplace accident insurance, medical insurance, unemployment insurance, retirement and reproduction).  However, suppliers always manage to get a waiver to waive 100% social insurance coverage.  The question I was being asked frequently during supplier meeting was that why me, as a representative of a buyer, press for unreasonable social insurance coverage while their government also does not require.  That is a good one.  It is still to blunt to ask ‘where and how you get the waiver?’ in China.  But I do not blame them.

Shanghai Social and Legislative Committee (上海市政協社會和法制委員會) has conducted a survey in June 2010 and 90.2% of the respondents responded that being honest/ having integrity will suffer lose or at a disadvantage.  In one way, this reflects the distrust of the public-section sector officials.  In mid June, 2010, mainland Chinese newspapers quoted Supreme People's Procuratorate of the People's Republic of China (最高人民检察院) sources that 70% of the whistle-blowers receive retaliation.  Interestingly, this ‘source’ can no longer be found in the internet by now and Supreme People's Procuratorate of the People's Republic of China released a statement 3 days after the news report, saying ‘it is inaccurate’ (http://www.spp.gov.cn/site2006/2010-06-22/0005428070.html).  Recently, a farmer in HuNan successful got hold of Wen Jiabao during his observation tour and complained about a land subsidence problem that he is facing.  He was compensated with RMB 50000 days after but was warned by local police and government officials of ‘making trouble’.  He was under extreme pressure and now fled from his home village (Mingpao news 7/16/2010).

To stick with the ‘Chinese game plan’ may indeed be the safe play and it may be the only self-defensive mechanism that is available to average Chinese, when independent judiciary is absent in China.  To put all these in CSR context, dealing with transparency issues with Chinese suppliers are complex.  A supplier that show progress in being more transparent is a huge step to make, given that Chinese has not been rewarded for having integrity or honest in business practice.  Disclosure in accurate time record and payroll of workers possibly implies possible tax fraud or violation of legal requirement.  Unrealistic expectation in pace of improvement may force  suppliers to play the ‘Chinese game plan’ again, like the majority.

Independent judiciary system in China and whistleblowers free from retaliation are critical to better law enforcement and thus reduce corruption in China.  Without that, China a still far away from another breakthrough in development.

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Foxconngate marked the change in industrial relations in China

China and Vietnam are alike in the sense that both countries have only one true national labor union to speak of (which also associates with the government).

Based on my experience, Vietnam is being viewed to be more prone to worker strikes when compares with China. Vietnam workers appear to be more aware of their rights and industrial relation is dynamic enough to negotiate collective bargaining agreements with factory owners.  Strikes mostly relate to request to provide benefit that is more than the legal requirement or simply request for wage increase.

On the other hand, workers in China appear to be less aware of their rights.  It is still not uncommon to interview workers nowadays and find that they do not really understand how to calculate their wages and overtime compensation (Chinese factories favors the use of piece rate system and production bonus make it complicated to understand, even for CSR auditors sometime).  In the past, strikes in China mostly related to factory closed down without paying the workers.  In 2007 to 2008, most of the strikes related to the introduction of the Labor Contract Law, when factories attempted to lay off workers and rehire them to avoid possible compensation before the Labor Contract Law became effective, or strike simply occurred due to lack of understanding of the law or fear of what could have happened.

Foxconn incident somehow marked the threshold of the change in industrial dynamics in China. The basic wage of Foxconn workers increase from RMB 900 to RMB 2000, so far, in 2010 due to serious of workers committing suicides.  In the meantime, Honda factory workers started a strike and successfully reach agreement in pay raise of 34%.  As TIME’s 2009 Person of the Year-- Chinese workers, realize that perhaps they are all deserved to be paid better! A few strikes have been started in other well-known international retailers’ factories since then to request for pay raise.  Federation of Hong Kong Industries Vice President said to Mingpao reporter that he worries that there will be a widespread of strikes to ask for pay raise in China.  With minimum wage recently increased in China and with Euro depreciate against RMB, factories in China are facing challenges again.

After all, I am glad that industrial relations become more dynamic in China.  Very rare workers opened up to us during workers interview and a few workers have said to me that there is no point telling the true in the workplace when nothing will be changed at the end.  Indeed, many retailers still spend disproportion amount of resources in auditing and most often do not have sufficient resources to follow through.  Problems are always found but unresolved.  I am glad that the playing field is changed and demand of Chinese workers are heard.

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Forced labor in cotton plantation in Uzbekistan

Many of you may have not heard of Kyrgyzstan and Uzbekistan until the recent ethnic conflicts broke out in the area. The countries were strategically divided by Stalin in a way to fracture races (to smash nationalism and ensure ethnic conflict) in order to prevent ethic group to flight against him.

Uzbekistan is the world's second-largest cotton exporter and fifth largest producer (reference 1). Since the Soviet era, everyone in the society is being called to help in the farm during harvest period, and that includes kids from schools.  During the cotton harvest season, from September to November/ December, schools in Uzbekistan are all shut down to 'free' the teachers and students to work in the farm as cotton is still being harvested manually there.  They are given free meals while they work in the farm (a few news reported that children are also compensated with money).

Working in plantation can be a high risk occupation due to the presence of chemicals in the field from pesticides and fertilizers.  Insufficient or lack of health and safety training therefore expose these young children to chemicals through direct contact or inhalation.

Although China, South Korea and Bangladesh are the major buyer of cotton from Uzbekistan, the issue of forced child labor in cotton plantation seems has not been reported in the China or Hong Kong media.  Various apparel retailers attempted to boycott Uzbekistan cotton since the issue has been reported in US and Europe a few years ago.  However, it is not an easy task to adopt supply chain traceability practices to enforce this cotton initiative.  Cotton supply chain is non-transparent and complicated.  Cotton is spinned into yarn, yarn is then weaved into fabric.  The current CSR scope has to include at least yarn supplier and fabric mills in order to make it happen.  Uzbekistan government had been tightly controlling the issue of travel visa to foreigner during its annual cotton trade fair, in order to prevent any party that are not really intended to buy cotton to spy on who are the potential buyers.  Without knowing which companies have imported Uzbekistan cotton in China, Korea and Bangladesh, retailers can only rely on yarn suppliers and fabric mills' statements that Uzbekistan cotton is not being used.

If you are interested in the issue and agree that forced child labor should not be encouraged, find out what your favorite apparel brands are doing on it.  Express your concern as a customer!

The following link is an NGO that has been working on issues around cotton plantation.

http://www.bettercotton.org/index/188/bci_members.html

reference 1: http://www.theodora.com/wfbcurrent/uzbekistan/uzbekistan_economy.html