F. Implementation of Apparel Industry Codes of Conduct
Fundamentally, a code of conduct relies on its credibility; the extent
to which it is taken seriously by industry, unions, consumers and government.
Implementation is a crucial determinant of a code's credibility. This
section will describe the various ways that companies attempt to ensure that
their stated policy on child labor is adhered to in the facilities that produce
their apparel overseas. It will begin with a general discussion of the
challenges that companies face in implementing a code of conduct or policy with
provisions on labor standards. Next, it will review the various elements of
code implementation that are employed by the importers of garments who responded
to the survey. These elements include efforts by manufacturers and retailers to
streamline their supplier base, efforts to increase transparency of
implementation, active inspection and monitoring programs, the use of
certification of compliance or contractual language with suppliers and
inspection, and research on prospective contractors. The section will conclude
with a discussion of the various ways that the respondents have handled or plan
to handle violations of their child labor policies.
1. Implementation Challenges
a. Organization of production
The challenges of implementing a child labor policy for a given company in
the apparel industry differ greatly and depend on how production is organized.
Generally, the closer the relationship between the importer and the company
actually producing the items, the greater the ability to influence labor
conditions, including prohibitions on child labor, in the production facilities.
Conversely, the longer the chain of production, and the more levels of
contractors, subcontractors and buying agents used, the more complex and
challenging is the implementation. If, however, there is commitment to effective
implementation, this can be accomplished under any organization of production.
To illustrate, a manufacturing company that produces most of its imports in
wholly-owned facilities abroad has more control over production conditions and
can more easily implement its child labor policy than can a firm whose
production takes place in the facilities of hundreds or even thousands of
contractors and subcontractors. Some of the manufacturers surveyed have
different policies for wholly owned plants and contractors. A manufacturer or
retailer with an ongoing relationship with a contractor and that accounts for a
large percentage if not all of that contractor's orders can more easily ensure
its child labor policy is being respected by that contractor than can a
manufacturer or retailer that only uses that contractor for an occasional order.
Retailers are often - but not always - more removed from the production
process than are manufacturers. However, the large retailers, because of the
enormous bargaining power they wield over suppliers, also have the ability to
require vendor compliance with any child labor standard they develop. In
addition, retailers that directly contract out the manufacture of private-label
merchandise overseas can directly influence the labor conditions in the
Often, entities all along the garment production chain - retailers,
domestic-based manufacturers, buying agents and foreign manufacturers - each
have their own policy regarding child labor in overseas production. For
example, members of the apparel export industry of Guatemala have developed a
code of conduct intended to apply to all exporters in the country.78 Apparel manufacturers'
associations in Honduras and El Salvador are also developing their own codes of
conduct. On the one hand, the development of many different codes - with
differing standards on child labor - may be confusing and complicate
implementation. On the other hand, the proliferation of codes creates growing
opportunities for cooperation among the various actors along the supply chain in
developing and implementing standards on child labor and other working condition
b. Streamlining of supplier base
As discussed earlier, U.S. manufacturers and retailers often procure apparel
products from hundreds, even thousands, of suppliers all over the world. These
suppliers may also subcontract parts of the production to other manufacturers or
sewing shops. The sheer numbers of contractors used - as well as the use of
subcontractors - present definite challenges to companies with codes of conduct
or policies banning the use of child labor in the production of the apparel they
sell. Many companies that responded to the survey indicated that they expect
subcontractors to comply with their policies, but often did not specify how this
was to be achieved.
Some of the companies that responded to the survey have sought to tighten
their control over the production process through streamlining their supplier
base - limiting or even eliminating the use of subcontractors, reducing the
number of contractors they use, and in some cases, establishing long-term
relationships with their suppliers. While, at times, these efforts have come
about as a result of the development and implementation of codes of conduct,
some companies indicated that they are part of their normal business decisions
and make the most sense from a quality and efficiency standpoint.
- Two manufacturers (Kellwood and VF Corporation) specifically stated that
they do not allow any subcontracting because they want to control production as
much as possible.
- Several respondents (Dillard Department Stores, Fruit of the Loom, The Gap,
Liz Claiborne, Nordstrom, Phillips-Van Heusen, Salant, Sara Lee, Sears, Spiegel
and Talbots) indicated that they do not permit contractors to subcontract any
production without their prior approval.
- Fruit of the Loom stated that, while it avoids contractors who engage in
subcontracting, occasionally it must permit subcontracting because a contractor
might not have the right type of equipment to perform a particular operation.
In those cases where Fruit of the Loom allows subcontracting, it noted that
before granting approval, the subcontractor is expected to agree in writing to
Fruit of the Loom's code of conduct.
- Some companies (Sara Lee and Talbots) reported that they prohibit the use
of any subcontracting facility that they have not first inspected.
- Liz Claiborne stated that it discourages subcontracting since it creates
special problems with regard to the application of Liz Claiborne's code.
- Some respondents (Phillips-Van Heusen and Nordstrom) stated that they
submit subcontractors to the same audit and inspection procedures as
- Some respondents (Fruit of the Loom, JCPenney, and Kmart) indicated that it
is the responsibility of the contractor or supplier to verify or take the
necessary steps to ensure that their subcontractors are in compliance with their
- Nike stated that it does not currently require its subcontractors to agree
to its code of conduct, but intends to in the future.Some companies are reducing
the number of suppliers they use:
- Kmart Corporation, Liz Claiborne and Salant reported a reduction in the
number of vendors they use in order to gain better control over production.
- Levi Strauss reported that, in an effort to be more efficient and to
rationalize their sourcing, they have gone from about 700 contractors before
introducing their code of conduct to a current level of 450 contractors. As
Levi Strauss explains, "The Company is rationalizing its supplier base,
with development of business partnerships based on terms of engagement, service,
financial stability, community support and long-term mutual profitability, not
simply low cost, as the key objective."79
Certain respondents stated that they encourage the development of long-term,
strategic alliances with vendors:
- Kmart Corporation ('Kmart') indicated that it encourages strategic vendor
alliances with established companies that produce high-quality goods and comply
with all laws.
- Oxford Industries ('Oxford') said that it generally tries to establish
longer-term relationships with its contractors because such relationships
usually result in higher quality, more reliable delivery dates and better value
for its customers. Oxford stated, however, that it is not unusual for a
contractor to be used only for one program or season because of its inability to
meet expectations for quality, delivery or price.
- VF Corporation noted that it usually uses buyer agents and plants that have
already established a reputation with VF Corporation.
c. Impact of textile import restrictions
Some companies raised the issue of apparel import quotas, which limit the
amount of merchandise that can be shipped into the United States, and the
effects these quotas have on their choice of contractors.
- Levi Strauss stated that quotas limit its ability to freely choose foreign
contractors with whom to do business, as individual foreign producers "own"
and control certain allocations of quota. According to Levi Strauss, this
system results in a limited choice of apparel contractors with which it can do
business. Because of this limited choice, Levi Strauss stressed the importance
of establishing partnerships with contractors and their communities.
- Nike said that it sources apparel products from numerous factories in
several countries in order to avail itself of open quota. Nike indicated that
because it must produce where quota is available, production is often limited to
a short period of time at any one facility.
An important issue regarding the implementation of corporate codes is their
transparency, or the extent to which foreign contractors and subcontractors,
workers, the public, nongovernmental organizations and governments are aware of
their existence and meaning. Contractors, subcontractors, workers, and other
interested parties who are familiar with codes can enhance their implementation
and effectiveness. Transparency reinforces the message of codes and leads to
more credible implementation. When transparency is lacking, interested parties
cannot benefit fully from a code of conduct.
There are several concrete ways by which U.S. companies add transparency to
the implementation of their codes of conduct:
- Some U.S. corporations hold training sessions with foreign suppliers
(contractors or subcontractors) to make them aware of their code of conduct and
implementation expectations. Some companies require foreign suppliers to sign a
statement indicating that they have received the code of conduct and understand
its meaning and implementation expectations, including possible penalties for
lack of implementation.
- Some companies also train their own employees or buying agents on their
code of conduct to ensure that individuals at all stages of the purchasing
process are aware of its provisions.
- A small number of U.S. corporations require that the contents of their code
of conduct be posted in production facilities at a location that is accessible
to workers (e.g., a lunch room or entrance to locker room). In some cases, the
U.S. company translates the code into the local language.
- A small number of companies solicit input from outside groups in developing
and implementing their code.
Most of the respondents with child labor policies indicated that they have
distributed copies of their policies to all suppliers, but few stated that they
had communicated their existence to a wider audience or engaged in efforts to
train those who are responsible for implementation. Many respondents stated that
they did not know whether workers were aware of the existence of their codes.
The following is an overview of the respondents who indicated that they had
actively engaged in communicating their policies to contractors, plant managers,
employees, and workers:
- Fruit of the Loom, The Gap, Spiegel, and Warnaco indicated that they go
over their codes of conduct with facility managers to ensure these individuals
- Liz Claiborne stated that its Chairman periodically meets with key
suppliers to emphasize the company's expectations with respect to workers'
- Kellwood reported that it periodically brings foreign contractors to the
U.S. to receive training, including on Kellwood's code.
- Levi Strauss also conducts educational seminars for groups of contractors.
A few respondents indicated that they have special programs to inform their
own managers and/or other employees about their code or policy.
- Federated Department Stores, Levi Strauss, Nike and Oxford all stated that
they train their employees on compliance requirements.
A few respondents have special training for buyers or internal
- Federated Department Stores ('Federated') has its corporate counsel,
corporate quality control and overseas offices' managerial staff conduct
- Oxford, which places responsibility on its own employees to ensure
compliance with its policy, reported that its managers receive training in
compliance with applicable labor laws, and that its corporate human resources
department and attorneys answer questions and interpret the laws.
- Levi Strauss said that it continuously educates its employees - including
merchandisers, contract managers, general managers in the sourcing countries,
and other personnel at every level of the organization - on its code.
- Wal-Mart buyers are required to attend special internal educational
seminars on how to work more closely with manufacturers to ensure their
- Levi Strauss conducts annual global training programs for its Terms of
Engagement audit managers. In June 1996, for example, Levi Strauss conducted a
five-day training program in the Dominican Republic for Terms of Engagement
auditors and sourcing managers from around the world.
- Liz Claiborne reported that it has intensified training for
sourcing/manufacturing personnel in spotting labor abuses
- Phillips-Van Heusen is providing training to employees who are on its
auditing teams. The company also indicated that it issues regular communications
and newsletters to its off-shore offices, quality and sourcing personnel on
developments and issues concerning workers' rights, including child labor.
Only a very few respondents indicated that they have tried to ensure that
production workers in overseas facilities know about their code or policy by
specifically requiring that copies of such a statement be posted. Only three
companies stated that they unconditionally require contractors to post their
- The Gap requires that its code, which has been translated into 39
languages, be posted in each contractor facility.
- Liz Claiborne, which has translated its Standards of Engagement into more
than ten different languages, requires all contractors to post the Standards in
the local language in common areas, such as cafeterias or locker rooms, of every
facility where Liz Claiborne products are made.
- Phillips-Van Heusen stated that it insists that every facility post its "PVH
Shared Commitment" poster, which contains guidelines and standards on
worker's rights. The poster is printed in English and Spanish, and is sent to
Asia with instructions for it to be translated into local languages.
Nike and Sara Lee stated that their codes are posted at some facilities:
- Nike indicated that its code is posted in all its footwear contractors'
factories in two or three languages, but this is not necessarily the case for
its apparel contractors. Nike stated that its footwear contractors produce
exclusively for Nike, while its apparel contractors often produce for many other
companies. Nike often uses any one apparel contractor for only a short period
- Sara Lee indicated that it posts notices of employees' rights at its
wholly owned facilities in English and the host language.
Some companies include information on the posting of who to contact in the
case of problems or questions regarding implementation of the code:
- Liz Claiborne's Standards direct individuals who have a problem or
complaint to get in touch with Liz Claiborne country managers.
- The Gap indicated that at the bottom of its poster, it provides the phone
number of a buying agent or sourcing-compliance personnel.
- Sara Lee's posters in its wholly owned facilities include information on
whom to see with complaints.
Finally, a few companies have made an effort to communicate information on
their codes of conduct and monitoring programs to the general public, including
- Levi Strauss and The Gap have sections on their codes of conduct in their
annual reports to shareholders.
b. Transparency of Implementation Process
Many consumer and other non-governmental organizations have stressed the
need for transparency in the process of implementing codes of conduct. Some
groups have called on companies to make public the findings of their factory
investigations, which are discussed in the monitoring section below.80
Some companies have actively solicited input from international
organizations, NGOs, government agencies and academics in developing and
implementing their codes of conduct:
- Levi Strauss stated that it solicited a wide range of ideas from such
groups in developing its Terms of Engagement and Country Guidelines and
continues to do so in their implementation. Levi Strauss' questionnaire
response said: "By working with various parties, we have improved our
ability to verify facts, craft new solutions, and strengthen implementation of
our standards." The company also stated that when evaluating a prospective
business partner for potential adherence to its code, it relies on advice from
outside organizations and community leaders, as well as interviews with workers
both on-site and away from the contractor's facilities.
- Liz Claiborne and The Gap have worked with U.S.-based and local NGOs to
develop ways to increase transparency in the implementation of their codes,
mainly through NGO monitoring, which is discussed below. Liz Claiborne also
indicated that it has consulted with NGOs during its investigation of alleged
violations of its code.
- Sears indicated that in Bangladesh, at the suggestion of an NGO, it has
sent a letter to a local garment workers' union directing them to notify Sears
if any problems arise regarding its policy.
Monitoring is critical to the success of a code of conduct: it gives the
code credibility in the eyes of consumers and other interested parties. Yet,
most of the policies we have examined do not contain detailed provisions for
monitoring and implementation, and many companies do not have a formal
monitoring system in place.
a. Monitoring of Codes of Conduct in the Apparel Industry
The companies surveyed indicated that they utilize a variety of means to
monitor that their codes of conduct or policies on child labor are respected by
their suppliers. Figure II-4 illustrates the structure of monitoring
relationships in the apparel industry.
Few companies have a formal system for monitoring compliance with their
codes of conduct. Monitoring is usually part of a larger process that includes
issues such as quality control and delivery coordination. For this reason, it
is not always clear to what extent site visits focus on the code implementation.
A few companies check employment records and other documents relating to the
workforce during their site visits, but very few companies indicated that they
interview workers as part of monitoring.
Click here for a larger
Some companies monitor their codes more actively than do others. Active
monitoring may consist of site visits and inspections by company staff, buyer
agents or other parties, to verify that suppliers are actually implementing the
importing company's policy on child labor. Companies also may use contractual
monitoring, whereby they rely on the guarantees made by suppliers, usually
through contractual agreements or certification, that they are respecting a
company's policy and not using any child labor in production. This may be seen
as "self-certification" by contractors or suppliers. Most of the
companies that responded to the survey utilize a combination of active and
contractual monitoring. Some companies, however, rely exclusively on
contractual provisions without any significant active monitoring.
i. Models of Active Monitoring
There are four active monitoring models that are being used by U.S.
corporations with respect to their codes of conduct: (i) internal audits by
company personnel (who may or may not be trained in monitoring compliance with
labor standards), (ii) external monitoring conducted by buying agents or
suppliers, (iii) outside audits conducted by independent firms hired by the
company, and (iv) NGO monitoring, conducted by human rights, consumer and/or
labor groups. These models may be used in various combinations. (Table II-4
shows the type(s) of monitoring used by the companies that indicated they have a
system of active monitoring.)
Internal Monitoring: A number of companies have developed internal
monitoring systems to implement their codes of conduct. These systems use local
or regional company personnel or employees from U.S. corporate offices to
monitor labor practices. Internal monitoring may be used by companies that are
reluctant to grant access to their facilities, procedures and business practices
to outside monitors.81 It is
most common among large companies that are vertically integrated, i.e., those in
which the corporation owns or directly controls all steps of the production
monitoring is less common for companies, particularly retailers, that do not own
or control the factories that make the products they sell. Some retailers
internally monitor only those plants producing private-label merchandise which
they import directly. U.S. retailers and manufacturers who use hundreds or
thousands of foreign contractors may find it a logistical or financial hardship
to monitor all of the facilities from which they source.
External Monitoring: Some U.S. companies rely on their buying
agents to monitor compliance with their corporate code. This procedure avoids
the financial and logistical burden of performing monitoring functions, but also
removes the U.S. corporation from the direct line of control in implementing its
Outside Audits: The central reason for monitoring the
implementation of a corporate code of conduct is generating credibility.
Corporations that conduct internal monitoring or depend on monitoring by buying
agents or contractors are sometimes seen as having a vested interest in not
finding anything wrong in their production systems.
TABLE II - 4
Monitoring Strategies for Compliance with International Child Labor
( Based on Responses to Department of Labor Questionnaire )
|Ames Department Stores
|Burlington Coat Factory
|County Seat Stores, Inc.*
|Dayton Hudson Corporation
|Dillard Department Stores
|Dollar General Corporation
|The Dress Barn, Inc.
|Family dollar Stores
|Federated Department Stores
|Fruit of the Loom
|Home Shopping Network, Inc.
|JC Penney Company
|Jones Apparel Group
|Land's End, Inc.
|Levi Strauss & Co.
|The Marmaxx Group**
|May Department Stores*
|Mercantile Stores Company
|Montgomery Ward Holding Company
|Neiman Marcus Group*
|Ross Stores, Inc.
|Sara Lee Corporation
|Sears Roebuck & Company
|Stage Stores, Inc.
|The Talbots, Inc.
*No response received
**Designated as business confidential
therefore information reportable.
aInternal Monitoring: Companies use existing
personnel or bring in employees who work for the company in other locations to
monitor labor practices, on a regular basis.
bExternal Monitoring: Companies rely on buying
agents to monitor labor practices.
cOutside Audits: Companies use independent
accounting, auditing, testing or consulting firms to monitor - among other
things - labor practices.
dNGO Monitoring: Companies use local or
international non-governmental organizations to monitor labor practices.
e Not specified: Companies either do not have a
policy or did not specify how the implementation of their policy is monitored.
1Company does internal monitoring in situations
where it contracts directly with a manufacturer for production of private-label
2Company reported that it is developing an
independent monitoring capability to be executed in concert with local NGOs and
The outside monitoring of another company's corporate code of conduct is a
relatively new endeavor. Accounting and auditing firms have a long tradition of
making field visits and reviewing financial records of client corporations.
Based on this expertise, some U.S. accounting and auditing firms have expanded
their functions to include monitoring of compliance with corporate codes of
conduct. Representatives of these companies say that their expertise in
examining payroll records, for instance, gives them a comparative advantage in
checking for compliance with child labor and other provisions of codes of
conduct. Other types of companies offering their services include firms engaged
in compliance with safety and health regulations, investigative consulting
firms, and specialized companies that have been created for this very purpose.
However, since all such auditing and consulting firms are normally hired - and
paid for - by the U.S. importer or the vendor being monitored, their total
independence is subject to challenge.
NGO Monitoring: Critics of internal, external and outside auditing
point to the fact that company representatives, buyer agents or outside auditors
may not be in the best position to ascertain that a contractor has violated a
company's code. Aside from the charge that these auditors may have a vested
interest in not finding violations, some have noted that corporate
representatives and auditing firms may not speak the local language, and workers
or plant managers may not feel entirely comfortable discussing their work
situation with them. To ease these problems, some companies are developing
monitoring systems where they use local and international NGOs, or religious or
human rights groups to conduct or assist in monitoring. Some companies may adopt
such monitoring in response to negative publicity or with the hope of preventing
crises from arising. This is a very new practice, however, and has only been
tested in a few cases. Furthermore, there are certain issues - including
financial ones - that need to be resolved for this approach to be sustainable.
ii. Active Monitoring
Active monitoring may be done through regular site checks, formal audits or
evaluations, or special visits by corporate staff. The frequency and intensity
of visits vary greatly from company to company. In addition, some companies may
use different systems of monitoring for different types of facilities. For
example, they may focus their site visits on their larger or more publicized
suppliers, or may only monitor those facilities from which they directly import
or which manufacture their private-label merchandise.
Several respondents indicated that they are currently stepping up their
monitoring of overseas and domestic production facilities. Some, such as Jones
Apparel Group ('Jones') and Kellwood, indicated that they are in the process of
expanding their extensive domestic monitoring systems to cover international
Respondents had very different views on which type of monitoring is more
- Some companies feel very strongly that they can do the best job of
monitoring themselves, and have the greatest incentive to do so. They also
believe that monitoring internally is the most efficient way, since problems are
reported directly to management and can be dealt with more quickly.
- Other companies expressed the view that independent, outside monitors may
be able to get a more accurate picture of labor conditions or may be more
credible than internal monitoring.
Internal monitoring, which employs companies' own staff to monitor for
compliance, is the most widely utilized form of active monitoring among
monitoring is most commonly done by quality control, merchandising or internal
auditing staff; country, regional or contract managers; or senior management.
Monitoring of labor policies is usually combined with monitoring for quality and
other standards. While the personnel conducting the visits are usually
specifically trained to monitor for quality control, it is not always clear that
they are trained to monitor compliance with labor policies.
Some respondents, particularly manufacturers, indicated that they have a
strong in-country or regional presence in many of the countries where they
manufacture, making it easier to conduct frequent inspections of contractors'
- Fruit of the Loom, for example, said that contract managers and field
personnel visit foreign facilities on at least a weekly basis to check on a
number of production issues. These personnel are also trained to look for code
of conduct violations and have forms to red-flag problems for senior management,
from which further scrutiny and a warning may follow. In-country personnel also
make suggestions and recommendations to contractors on how to improve their
- Nike stated that it has extensive personnel located in the countries where
it produces, and that each contractor has specific Nike "in-house"
personnel assigned to it. They visit apparel contractors every two to three
days and report back to headquarters with their findings.
- The Gap reported that, once it places an order with a contractor, its
in-country staff is constantly monitoring for quality and compliance with its
code, sometimes three to four times a week. These visits are both announced and
unannounced. The Gap also indicated that its senior field representatives also
conduct formal compliance evaluations every 18 months.
- Levi Strauss noted that it has a global infrastructure of people in the
communities where it does business. It stressed that its employees have the
authority - and the responsibility - to take any steps necessary to ensure
compliance, and it has found that in many cases its employees can work with
partners and address issues before they become a problem.
- Sara Lee reported that most of its contractors are located in the same
areas as the plants it owns and are constantly being monitored by Sara Lee
personnel. Sara Lee noted that since its contracts are typically large enough
to use entire plants (rather than partial runs), its personnel have freedom of
access to contracting facilities and often make unannounced visits.
- Liz Claiborne staff does scheduled and unscheduled spot inspections of
facilities, and requires all country managers and Liz Claiborne representatives
to complete an annual, 11-page human rights questionnaire for every supplier.
- Tultex Corporation ('Tultex') reported that it charges regional managers
with the responsibility of following up with vendors, and that these managers
make frequent visits to their factories.
- Levi Strauss has a team of 50 full-time auditors who are based in the
regions where they work. These auditors and other in-country employees visit
contractors on a regular basis to review quality, production processes and Terms
of Engagement issues. Levi Strauss said that all contractors and subcontractors
are audited at least once a year, unless problems are found, in which case they
are done more frequently - sometimes three and four times a year. Audits often
include interviews with employees, both at the factory and away from the
- Jones, for example, reported that its U.S.-based quality control staff,
which visit overseas facilities, have been instructed to make sure Jones'
policies are implemented. Jones also indicated that in 1997 its domestic
in-house auditing staff will be sent to visit all of Jones' larger suppliers.
Jones anticipated that while the visits are to be unannounced, Jones' buying
agents will probably be advised of the auditing teams' presence in their
- JCPenney Company ('JCPenney') reported that it has instructed its
associates and buyers to watch for and report any legal violations or
questionable conduct to management for follow-up and, when necessary, corrective
- Fruit of the Loom reported that senior management and/or corporate counsel
conduct on-site contractor audits to confirm compliance with the company's code
and other agreements. These audits include a review of employment and labor
practices, including an on-site confirmation that workers are of legal working
- Kmart stated that it is increasing its regular and surprise on-site
inspections of manufacturing facilities. Last year, Kmart conducted 45,000
visits worldwide through its Quality Assurance Department. Kmart investigators
have a checklist of what to look for during inspections.
- Land's End's quality assurance team and agents visit existing vendors to
monitor standards and assure quality of products.
- The Limited reported that its quality assurance and internal audit teams
make regular and unannounced on-site inspections of facilities.
- Liz Claiborne is requiring non-sourcing senior managers and employees who
visit factories to evaluate working conditions and fill out a "report card."
- In addition to auditing by quality control personnel, Phillips-Van Heusen
recently organized an Employment Practices/Workers' Rights Task Force, made up
of employees who are not directly involved with production sourcing. These
employees, on a part-time basis, periodically visit contractors worldwide,
inspect facilities, and compare their findings to evaluations done by sourcing
personnel. According to PVH, the task force does not attempt to reach all
factories, but tries to reach representative vendors in all regions. The task
force does not reveal which vendors will be visited. Inspections include a
review of facility documents, and contractors are asked to provide proof of age.
- Warnaco indicated that its personnel occasionally make unannounced visits
of foreign contractors to monitor for compliance with its Business Partner Terms
Some retailers indicated that they concentrate internal monitoring efforts
on those facilities that produce private-label merchandise or brands sold
exclusively at their stores:
- Federated stated that it routinely inspects all facilities that produce
private-label products for Federated for compliance with laws on child labor, as
well as safety and health standards.
- Nordstrom reported that it conducts random inspections of contractor
facilities in cases where it contracts directly with a manufacturer for the
production of private-label merchandise. These visits, both announced and
unannounced, monitor for compliance with all applicable laws and confirm that no
child or forced labor is used.
- Wal-Mart indicated it is increasing its inspections of domestic and
overseas factories, focusing on those factories that produce lines sold
exclusively at Wal-Mart, such as the Kathie Lee line.
Implementation of child labor policies may differ, depending on whether
goods are produced at wholly owned facilities or contractor facilities, or
purchased through buying agents:
- Oxford stated that it is quite confident of its own facilities' adherence
to all laws, and made a distinction between implementation in wholly owned
facilities versus contractor facilities. Oxford Industries utilizes its
internal audit staff to periodically check compliance with applicable laws and
Oxford policy in all of its wholly-owned facilities. For contractors, Oxford
reports that it is the responsibility of the Oxford contract manager or employee
who hires the contractor to take reasonable steps to ascertain that the
contractor is in compliance and to document those steps. Oxford also indicated
that quality-control staff and higher-level managers visit contractor facilities
during production runs a couple of times a year. Oxford stated that while
quality control staff is in plants more frequently, it does not have the same
clout as managers to exact immediate change.
- Sara Lee stated that through its direct control and management of its
wholly-owned facilities, it is able to ensure that its Operating Principles are
being implemented and followed at those facilities. When Sara Lee purchases
apparel from a domestic supplier that has secured the products from a
subcontractor, it expects the supplier to meet the requirements of those
External monitoring, or monitoring of suppliers' production facilities by
buying agents, is used by at least nineteen respondents.84 While some of these
respondents rely on buying agents for most of their imports, others only use
buying agents in certain cases.
- Dillard Department Stores ('Dillard') charges its buying agents with the
responsibility of periodically monitoring production, to ensure that quality
goals and Dillard's policies are realized, including that on child labor. These
inspections are done three to four times a year, and agents are required to
return a form indicating their findings.
- Dress Barn requires its buying agents to monitor production facilities
during the manufacturing process for goods specifically ordered by Dress Barn.
The agents are required to examine a range of labor and employment practices,
and use an extensive audit form during the visit. This audit form includes
questions specifically addressing child labor.
- Mercantile Stores Company ('Mercantile') reported that its buying agent is
responsible for implementation of its child labor policy and is instructed to be
vigilant regarding child labor. Mercantile believes that its vendors are aware
of its child labor policy because they are required to sign it.
- Stage Stores, which currently uses AMC's code (but is developing its own
code), did not specify its monitoring system. However, AMC - a buyer's
cooperative which orders imported merchandise on behalf of its retail
shareholders - indicated that AMC vendors are "aware" of its code,
which contains provisions prohibiting child labor. Vendors go through an annual
certification process, which includes a variety of quality assurance issues and
meeting AMC's code. AMC said that it has employees in most countries from which
it orders apparel.85 In a few
countries where AMC orders are small it relies on "commissionaires,"
who act as buyer agents.
- Venture Stores ('Venture') purchases essentially all imported apparel
through a buying agent. The agent is aware of Venture's policy not to purchase
merchandise from foreign vendors who use child labor and is required to comply
with this policy. While Venture requires its buying agent to certify that child
labor was not used in the manufacture of any merchandise, it does not indicate
how it ensures compliance, other than through visits by Venture personnel when
- VF Corporation and Sara Lee, when using buying agents, have them inspect
production facilities. VF Corporation's buying agents go to plants two to three
times during the course of production - for an initial audit, a final audit, and
often one in-between.
Kellwood, Nike, Price/Costco, Inc. and Wal-Mart all indicated that they
currently use or have in the past hired outside auditing, accounting or
consulting firms to monitor compliance with their codes of conduct:
- Nike stated that every Nike contractor is subject to unannounced spot
checks by the consulting firm Ernst & Young. Nike reported that Ernst &
Young has been doing audits for several years, and indicated that while all of
its footwear facilities have been audited by Ernst & Young, not all apparel
contractors, particularly those where Nike has very little production, have been
audited. Ernst & Young reviews the contractors' books and interviews
employees, according to Nike. On child labor, the auditors look at birth
certificates or other evidence, if available. Nike says the auditors conduct
interviews with employees away from their managers. When violations are found,
Nike asks the factory manager to set up a timetable for remedying the problem.
- Kellwood said that it recently began using Ernst & Young and Contractor
Services Compliance Corporation to conduct outside monitoring overseas.86 Kellwood indicated that the
initial visits are scheduled, but once the system is in place the outside
monitors will also do unannounced visits on a regular basis. The monitors do a
random sampling of interviews with workers, according to Kellwood. Kellwood
stated that it deals with the finest retailers, and wants them to feel confident
that they are getting a product of value, made in accordance with national laws
and moral and ethical standards. It believes outside monitoring is part of the
"cost of doing business."
- Price/Costco, Inc. ('Price/Costco') reported that as part of its
quality-assurance program, which has been in place since 1995, it uses an
outside auditor to inspect vendors' facilities. These outside audits are only
done where Price/Costco buys through a U.S. wholesaler - not where Price/Costco
is the importer of record, in which case it does its own monitoring. The
outside auditors look at labor conditions and labor force make-up, in addition
to a variety of quality-assurance issues. Price/Costco indicated that the
outside audits are paid for by the vendors.
- Wal-Mart hires a third-party agency to conduct routine visits of overseas
factories with which Wal-Mart contracts directly.
The Gap and Liz Claiborne are currently experimenting with NGO monitoring at
some of the contractor facilities from which they import:
- The Gap, in cooperation with a number of NGOs, has worked to develop an
NGO monitoring mechanism at Mandarin International, an independent contractor in
- The developments that led up to this third-party monitoring pilot began
with alleged violations at Mandarin, including the use of child labor, forced
overtime, unsafe working conditions, intimidation of workers to prevent union
organizing and firing of union leaders.87
- When The Gap's own investigation of the allegations regarding Mandarin did
not come up with any evidence to corroborate the complaints, NGOs and human
rights groups called for the use of "independent" monitors. After
considering cancelling its contracts with Mandarin and pulling out of El
Salvador, The Gap instead signed an agreement in which it consented to explore
the viability of an independent monitoring program in El Salvador and agreed to
re-approve the Mandarin plant as a Gap contractor once it felt confident that
the plant could effectively implement its code.88
- In January 1996, The Gap and some NGOs formed an Independent Monitoring
Working Group (IMWG). Members of the IMWG traveled to El Salvador to visit the
Mandarin plant, met with various parties, and solicited input from more than 75
U.S. and international human rights, labor, religious, academic and business
groups to develop a working model for independent monitoring.
- The IMWG developed the following definition of independent monitoring: "An
effective process of direct observation and information-gathering by credible
and respected institutions and individuals to ensure compliance with corporate
codes of conduct and applicable laws to prevent violations, process grievances,
and promote humane, harmonious, and productive workplace conditions."89
- In March 1996, Mandarin managers, workers, and current and former union
leaders signed a resolution that included, among other elements, the formation
of an independent monitoring team in El Salvador - the Independent Monitoring
Group of El Salvador (IMGES). With these developments, The Gap re-approved
Mandarin for the production of its goods. The team of monitors, made up of
volunteers of local human rights organizations, is based near the plant, has
regular access to it, and can receive and investigate complaints from workers
without fear of reprisal.90
- Liz Claiborne is currently developing its own NGO monitoring pilot program
with the expectation that such a monitoring capacity will improve reporting on
compliance with its Standards of Engagement.
- Liz Claiborne reported that monitors will listen to the concerns of
workers and management, review compliance with local laws, compare factory
practices with its standards, and create mechanisms for workers to report
grievances in privacy, including telephone numbers to call or locked drop-off
boxes for written complaints.
- According to Liz Claiborne's survey response, "key elements for the
program will be independence and an understanding of local issues." Liz
Claiborne also noted that it expects to adapt and improve the program based on
data and input from the pilot effort, the monitors, and involved NGOs and
iii. Contractual Monitoring
Many respondents require their suppliers, buying agents or
contractors to abide by their policy on child labor through contractual
agreements or some form of certification process. These contractual obligations
are an expression by manufacturers and retailers of their expectation that the
contractors' or suppliers' business relationship with them is based on full
compliance with their policy or code. The incorporation of child labor policies
into contractual obligations in many cases shifts at least part of the burden of
responsibility for ensuring compliance onto the contractor, supplier or buying
agent. In addition, such contractual obligations provide a legal avenue for
terminating agreements on the basis of violations.
Some companies, particularly retailers, may have general language in their
purchase order or vendor contracts requiring vendors to comply with applicable
laws but have no mechanisms for monitoring compliance. In certain cases,
respondents indicated that they have no knowledge of how or where imported goods
they purchase are produced.
- A number of respondents indicated that compliance with their corporate code
of conduct or policy is part of their purchase orders or other contracts.
- Other respondents (Dollar General, Venture and Woolworth Corporation) also
indicated that their letters of credit contain provisions on child labor.
- Woolworth Corporation ('Woolworth') reported that its manufacturers must
complete a Certificate of Product Manufacture and Inspection - certifying that a
said factory was truly used to produce the garments and that no child labor was
used in their production - before letters of credit can be drawn down.
- Price/Costco's Import Vendor Agreement states that the vendor must secure a
written and signed confirmation from the owner of the "prime factory"
that the factory and all subcontractor facilities used are in compliance with
its child labor policy.
Several companies require written acknowledgment by their contractors,
suppliers or buying agents that they have read and understood their policies on
child labor. This is usually done through requiring contractors to review and
sign a code of conduct or a special certification form.
- Federated indicated that it requires its "core vendors" to
acknowledge annually in writing their understanding of Federated's policies
requiring full compliance with applicable laws, including those relating to
child labor. It reported that relationships are immediately terminated with
manufacturers and suppliers who fail to do so.
- The Limited also requires every supplier to periodically certify their
compliance and that of their subcontractors with its's policy, which includes
provisions on child labor.
- Mercantile indicated that it decided to put its child labor policy in a
stand-alone certification form that suppliers must sign because it did not want
that policy to be lost within a larger contract.
- Oxford reported that it is implementing a computerized tracking system to
ensure that each contractor has read and understood Oxford's sourcing policy and
acknowledged that it will be terminated in the case of violations of that
policy, which includes provisions on child labor.
- JCPenney, requires that foreign and U.S. suppliers of imported merchandise
obtain a manufacturer's certificate for each shipment certifying that the
merchandise was manufactured at a specific factory (identified by name, country
and location) and that no illegal child labor was employed in its manufacture.
- Talbots requires all international manufacturers to include a statement on
their shipping documents accompanying imported merchandise confirming their
adherence to the company's policy.
Some respondents require contractors to take on certain responsibilities or
actions themselves to ensure that the policy is not violated:
- Fruit of the Loom indicated that in signing its code of conduct,
contractors agree to require all their employees who are responsible for
implementing the code to review and familiarize themselves with it.
- JCPenney's purchase contracts require suppliers to impose the same
standards on their contractors as the company places on them (including
certification that no forced, indentured or illegal child labor was employed in
the manufacture of the merchandise).
- Kmart's purchase order requires suppliers to contractually agree that they
have "ascertained and financially warranted" that no child labor was
utilized in the manufacture of merchandise, and obligates them to be responsible
for and inspect their subcontractors. Vendors also must sign Kmart's Certificate
of Compliance (introduced in June 1996), certifying that they will increase
their factory inspections and take vigilant action to prevent problems.
Vendors' signature of this Certificate also binds them to make a payment,
equivalent of 50 percent of Kmart's order, to a local human rights or children's
organization in case of failure to comply.
- Talbots requires its vendors to certify in their shipping documents that
they have a program in effect for monitoring their contractors.
Some respondents who utilize buying agents contractually obligate these
agents to implement their policies on child labor:
- Dollar General requires buying agents to warrant that merchandised
purchased for the company is not manufactured in violation of any human rights
- Spiegel requires its buying agents to implement its code.
Some companies require documentary proof of compliance or reserve the right
to carry out on-site inspections:
- Phillips-Van Heusen's contracts require facilities to have on-site such
documents as proof of age or wages paid.
- Fruit of the Loom requires contractors to provide proof of compliance,
including proof that all employees meet the minimum age.
- For some companies (e.g., Fruit of the Loom and Jones), endorsement of a
code or policy is also an authorization to allow the contracting company free
access to contractors' facilities and any information requested in order to
monitor for compliance.91
- Vendors who sign Russell Corporation's ('Russell') Vendor Policy give
Russell the right to conduct on-site inspections.
Some companies, although they have specific language prohibiting child labor
or general contract language requiring adherence to applicable laws, do not
appear to have any mechanism for compliance. The contractual language, in these
cases, is the only visible means by which these companies implement their
policies with regard to imported apparel.
- Ames' purchase order requires vendors to comply with all applicable labor
laws and states that failure to comply would result in cancellation. Ames'
buyers are instructed to stay alert to any indication that goods are being made
under unacceptable conditions, and states that if any such problems exist, it
would take action. However, Ames said that it uses agents for the purchase of
its imports and it generally has no knowledge or control over where the goods
- BJ's Wholesale Club, a division of Waban, indicated that any imported
apparel it sells is purchased domestically, and it has no control over which
countries or facilities that apparel comes from. Furthermore, it stated that it
has no knowledge of the workforce in those facilities.
- In its purchase order, Burlington Coat Factory requires that vendors
comply with all applicable laws, but no further compliance action is taken.
- Family Dollar indicated that its purchase orders have always required
vendors to comply with all applicable labor laws. However, Family Dollar gave
no indication of any compliance process.
- Home Shopping Network includes specific language prohibiting the use of
child labor in its purchase order terms and conditions as well as a
vendor-practices agreement. However, it gave no indication of how it implements
- Ross Stores' purchase order requires its vendors to comply with all
applicable laws and regulations. The company stated that it would not knowingly
purchase goods that are made by children or exploited workers, but does not
visit any manufacturing sites or have any other system for monitoring
compliance. However, Ross Stores indicated that it is reviewing its purchasing
process regarding foreign suppliers.
b. Evaluation of Prospective Contractors
While technically not a monitoring activity, evaluation of prospective
contractors with regard to labor standards is becoming an important aspect of
code implementation. At least seventeen of the companies that responded to the
survey stated that they have a process in place to evaluate overseas facilities
before they establish a business relationship with them.92 Such on-site evaluations or
inspections have long been made primarily to verify whether the facilities have
the physical capacity to meet quality and quantity specifications.
Increasingly, the working conditions and employment practices of prospective
contractors are also being evaluated, screening out companies that are violators
or have the potential for being so in the future.
- Several of the companies that conduct such evaluations indicated that
compliance with their policies on working conditions is an important factor in
the decision to place a production program with a contractor. These
evaluations, according to many, enable them to screen out contractors who do not
comply with applicable legal standards or who do not meet a company's own
- A few respondents indicated that such pre-contract inspections had enabled
them to avoid doing business with a facility that appeared to employ under-age
children, but most reported that when facilities are rejected, it is usually for
The evaluations typically involve an inspection of the physical plant and
include other elements such as reviewing company records (including employment
records), evaluating the workforce, and explaining company policies and
- Some companies use a standard checklist or questionnaire that includes
specific questions or criteria related to working conditions and employment
practices, including questions on the age of workers.
- Other companies, such as Land's End, indicated that they have an intricate
process to qualify vendors, but did not disclose what the process entails.
- Levi Strauss' initial evaluation of potential business partners is done by
a team of employees representing different divisions of the company and includes
one of its 50 specially trained auditors.93
Levi Strauss indicated that the evaluations take at least two full days to
complete, and auditors use a 20-page form to evaluate the policies, practices,
and conditions of the contractors. They also review payroll, personnel and
other records and check health and safety conditions. To get a "full
picture of a potential contractor's adherence to the Terms of Engagement
standards," the team also relies on unannounced visits, advice from outside
organizations and community leaders, and interviews with workers both on-site
and away from the facility.
- Fruit of the Loom reviews potential contractors' management experience and
financial condition to ascertain whether they can deliver quality products in
compliance with Fruit of the Loom's standards and all applicable laws.
- Salant reported that it looks for workers who appear underage or
malnourished during evaluations, and utilizes a checklist that includes a
question on whether contractors keep age records of all employees.
Two of the retailers who conduct pre-contract inspections of potential
contractors use an external organization to do them:
- When Wal-Mart contracts directly with an overseas manufacturer to produce
goods, it hires an outside agency to inspect factory conditions before work
begins. Wal-Mart indicated that this process has identified more than 105
factories that failed to comply with Wal-Mart's standards - and therefore are
not eligible for contracts with Wal-Mart.
- Price/Costco has an outside audit done of every new foreign facility in
cases where it uses a U.S. wholesaler who sells imported goods. These audits
include a site visit and evaluation of quality and volume capabilities, as well
as working conditions and labor force composition. Price/Costco indicated that
the vendor pays for the audits.
Some companies, such as VF Corporation, re-inspect facilities that they have
not used for few a seasons to ensure that they still comply with its standards.
- Federated maintains a database that includes all approved suppliers as well
as a "red-flagged list" of vendors that have been rejected.
Enforcement of corporate codes of conduct refers to how U.S. companies
respond to violations of their codes. Enforcement is essential to the success
of a corporate code. As a report on codes of conduct has stated, "without
adequate enforcement, codes can be mere public-relations ploys, misleading
consumers that workers' rights are actually respected in production."94
Information from those respondents who outlined their policies on
enforcement indicates that there are various levels of response to violations of
child labor policies. Most companies stated that they would first investigate
all allegations to confirm the use of child labor.95 Most also indicated that
they use graduated responses to confirmed violations, which include: a) monetary
fines or penalties; b) probationary status; c) demand of corrective action; d)
support of educational projects (particularly where child labor violations are
involved); e) cancellation of an individual contract; and f) severance of the
relationship. Positive reinforcement includes: a) retention of current
contracts; and b) awarding of additional contracts.
While termination of a contractual relationship may send the strongest
signal regarding intolerance of child labor, a zero-tolerance policy has
immediate effects for the factory management and for the workers who would lose
their jobs when factory orders are canceled.
Resolution of the problem of child labor means different things for
different companies. In most cases, it simply means dismissal of the child
workers. For others, resolution occurs when the supplier puts satisfactory
monitoring systems in place. To a very few companies, such as Levi Strauss,
resolving the problem might mean contributing resources, if necessary, to
achieve sustained change. Some companies indicated that they believe their
ability to modify contractors' behavior depends greatly on the amount of
leverage they can exercise on those contractors. Companies have far less
leverage with contractors where they only have small production runs.
The vast majority of companies that responded to the survey reported that
they have never found any violations of the child labor provisions of their code
or policy. Some companies attributed this to their efforts to evaluate and
carefully select suppliers before entering into contracts with them. Others
indicated that child labor violations of their codes are less common than other
types of violations, such as health and safety.
Of the companies that responded to the survey, only four - The Gap, Levi
Strauss, Phillips-Van Heusen, and Sears - have confirmed instances of child
labor in overseas production facilities that were producing garments for their
account.96 In all of these
instances, the plant employing underage workers was an independent contractor.
- The Gap reported that, when it has discovered child labor in a facility
producing its merchandise, it took immediate action to either correct the
problem or terminate the business relationship with the facility.
- Levi Strauss reported that when it first began implementing its Terms of
Engagement, about five percent of its contractors were terminated due to a
variety of conditions, including the use of child labor. However, during
initial Terms of Engagement evaluations in Bangladesh, it found several underage
girls working in two contractor facilities. Levi Strauss stated that, rather
than having the underage workers discharged, it persuaded the contractors to
stop employing underage children, but to continue paying the girls even though
they no longer worked. Levi Strauss paid for the former underage workers'
tuition, books and uniforms to attend school, and the contractors agreed to
employ the girls once they had finished school.
- Phillips-Van Heusen reported that it has found child labor in several
off-shore facilities.97 The
company said that in such instances, it has discussed the problem with the
contractor and allowed 30 to 90 days to discharge the underage workers. In
three instances, the contractors complied. In the one instance that the
contractor did not comply, Phillips-Van Heusen discontinued its relationship
with the contractor. In one case, where it had a large concentration of
production with multiple contractors and sewing shops in one area, Phillips-Van
Heusen observed children in manufacturing areas who were not in school. The
company determined that educational opportunities were lacking, and made a
commitment to a multi-year project to improve the educational system.
Phillips-Van Heusen has built classrooms, provided for a well, electricity and
additional teachers, and purchased desks and supplies.
- Sears reported that in late 1994, the BBC brought to its attention that it
had found children working in a manufacturing facility in India that produced
garments for Sears. Sears subsequently contacted the U.S. importer that was
procuring the garments, and that importer denied that child labor was being
used. Sears demanded that child labor not be used, and asked that documentation
of age be required. The importer provided Sears with such documentation, which
contained a Government of India certification stamp. When Sears received a
videotape of a BBC broadcast, which clearly showed children working at the
facility, Sears demanded that its garments no longer be made there. Sears later
terminated the importer when it was found to still be using the facility
(although Sears pointed out that no goods from the facility were supplied to
Other companies have received allegations of violations of their policies on
- JCPenney stated that it had received allegations of underage workers by
its associates but determined after its own investigation that there had been no
- Liz Claiborne reported that after recently uncovering an alleged breach in
a Middle Eastern country, it is investigating the allegation in cooperation with
a U.S.-based human-rights organization.
Only a few companies - Kmart, Montgomery Ward, Salant and Venture - reported
that they would respond to violations of their child labor policy with immediate
terminations of the business relationship. Many others, including Fruit of the
Loom, The Limited, Nordstrom, Oxford and Ross Stores, indicated that violations
could be punished with terminations, but not unconditionally or before other
approaches were tried. Most companies outlined an incremental response to
Following are some examples of stated enforcement policies:
- Federated stated that if it is notified by a governmental authority or
determines on its own a serious violation of its policy, it will immediately
suspend all shipments from the subject factory and discontinue further business
until that factory institutes the monitoring programs necessary to ensure
compliance. If notified of a violation by another party, Federated will
immediately suspend further shipments, pending the supplier's explanation and
commitment to take satisfactory remedial action. Federated stated that it may
also take legal action.
- JCPenney reported that if, after full investigation, it determines that
misconduct has occurred, it would take appropriate corrective actions, which
could include canceling the affected order, prohibiting the supplier's future
use of the factory where the violation took place, or terminating JCPenney's
relationship with the supplier. If informed by a government of violation of
labor laws, it will immediately suspend shipments from the factory, with any
resumed shipments conditioned on verification that the supplier has put the
monitoring programs in place to ensure compliance.
- Jones indicated that it will generally first try to get remediation of the
problem before withdrawing. But it will take appropriate actions as warranted,
ranging from canceling the affected purchase contract or terminating its
relationship with the supplier.
- Kmart stated that if a supplier is found to be in violation, it will cancel
the order, with the supplier bearing the burden of any loss and responsible for
other damages. Furthermore, Kmart stated that it will sever its relationship
with the vendor, who will be assessed a payment, worth 50 percent of the
contract, to be donated to a human rights or children's organization in the
community where a violation occurred.98
- Liz Claiborne stated that it will first investigate reported violations to
find out the scope and nature of the problem, and the status of the workers
involved. It requests contractors to address the situation in a humane manner,
while ensuring that the facility be brought up to standards.
- Nike indicated that when a problem on an issue other than child labor has
been found, Nike has asked the factory manager to set up a timetable for
remedying the problem.
- VF Corporation reported that it would first do its own investigation of
allegations. If a violation were confirmed, it would try to first work with
contractors to correct deficiencies. If that does not work, VF Corporation
stated that it would terminate the relationship.