Codes of Conduct: A Recent Innovation

Codes of conduct have become increasingly common in recent years, par ticularly in the apparel sector. While the first codes of conduct in the apparel indus try were developed in the early 1990s,21 today, the majority of the major apparel manufacturers and retailers have developed or are developing codes or business policies that address child labor and other working conditions. Many companies are now revising their codes to incorporate lessons learned from their own or other companies' experiences. While this report focuses on the child labor provisions of codes of conduct, many of its findings can be generalized to the other labor provi sions that codes often address.

The recent proliferation of codes of conduct can be attributed to several factors. With media reports and exposés on child labor becoming more frequent, consumers -- and therefore companies -- are becoming increasingly concerned about the conditions under which the garments they purchase are made. Companies' adoptions of codes of conduct serve to ease consumer concerns -- and their own -- that they may be contributing to the exploitation of child labor. Often com panies adopt codes to project a positive image and protect their brand-name or quality reputation. Some are motivated by good intentions; some by bottom-line considerations -- many by both.

The analysis of codes of conduct contained in this report is based on a voluntary survey and follow-up telephone interviews with the largest U.S. retailers and manufacturers of apparel. In its review of the extent and effectiveness of codes of conduct in the apparel industry, the report has benefitted from the input of repre sentatives of industry, human rights groups, religious groups, trade unions, workers, academics and other governments.22 Appendices B and C list the companies surveyed and reproduce the codes of conduct they provided. Site visits were under taken to six countries -- the Dominican Republic, El Salvador, Guatemala, Honduras, India, and the Philippines -- that produce garments for the U.S. market in an attempt to learn more about how codes of conduct are implemented on the local level. Appendix D provides additional information on countries visited and persons and organizations with whom Department of Labor officials met.

Companies with codes of conduct or policies prohibiting the use of child labor in overseas production facilities use a variety of methods to define child labor. Some companies refer to "national law" or "international standards." Some companies, in an effort to avoid adverse publicity, even require their suppliers to comply with minimum age requirements that are above the minimum age mandated by national law or international standards. This is because there is no certainty of what minimum age for employment is "publicly acceptable," and some companies are prohibiting the employment of "teenagers" in the 14 - 17 age bracket to avoid workers who could be considered "children."

While many companies have adopted codes either to prevent, or in response to, adverse publicity, having a code of conduct can, ironically, make companies more vulnerable to criticism if conditions are found that violate their code. Indeed, some companies still consider it "safer" to avoid any public declaration of their standards through a code of conduct.

Furthermore, the most important developments today do not lie so much in adopting codes, which are already widespread, but in the ways companies are devis ing to implement those codes. Some companies have adopted codes before fully developing methods to implement them. As Chapter II notes, the international ap parel industry is complex, with many U.S. companies sourcing from hundreds or thousands of overseas buying agents, contractors and subcontractors. For this rea son, implementation presents definite challenges for many importers.

Some companies require their quality control personnel to double as social auditors, while others are engaging outside firms to survey compliance. Still others ask their contractors to sign a contract certifying that they do not hire children, and then rely on the word of the contractor without further verification. Some companies are experimenting with new approaches, literally learning as they go. Some have begun working with unions, human rights and religious groups to establish a moni toring system.

Credibility is the critical element for codes of conduct. Without it, the prom ises contained in a code are hollow and the credibility of the company falters. Com panies' success in assuring the public that their policies on labor practices abroad are indeed being followed will depend on the three key elements of implementation that are discussed in detail in Chapters II and III -- (1) transparency, (2) monitoring, and (3) enforcement.

First, codes of conduct cannot be effectively implemented without transpar ency. It is critical that all actors affected by a code buying agents, contractors, subcontractors, union representatives and the workers themselves be aware of its provisions. Research conducted for this report suggests that codes of conduct con ceived in the headquarters of U.S. apparel importers are not necessarily well known in the overseas facilities that produce their garments.

Second, while a credible system of monitoring -- to verify that a code is indeed being followed in practice -- is essential, there is no agreement on the best way to conduct monitoring. Some companies only monitor their largest contractors or contractors that produce private-label merchandise for them and rely on buyer agents or self-monitoring for other facilities. Several methods of monitoring are currently being used and developed, including monitoring by outside auditors and local and international NGOs. The most effective type of monitoring may vary according to the characteristics of the importing company, such as whether it has a strong presence abroad or whether it is vertically integrated. It appears that the closer a company is to the production, the more leverage it has to ensure that the conditions at manufacturing facilities comply with its policies. There also appears to be some dispute among retailers, manufacturers, overseas contractors and other par ties as to who has the ultimate responsibility for monitoring.

Third, the issue of enforcement presents some complex issues. If a company discovers child workers in a facility, the quickest and perhaps easiest way to resolve the problem is to require their immediate dismissal. A small number of companies have strived to come up with more comprehensive solutions to the problem such as providing financial support for the education of the children.

These are some of the pitfalls and challenges that companies face in attempt ing to enforce their code of conduct in overseas facilities. An effective implementa tion program can be time-consuming and financially burdensome. But just as com panies invest in the quality of their clothes, they are now learning how to effectively invest in the quality of their labor conditions.