Brussels, 20 February 1998
European Commission (DGV) and U.S. Department of Labor:
Joint Report on the Main Issues Emerging from the Symposium
1. Introduction
2. Why Codes of Conduct?
3. Contents of Codes of Conduct
4. Scope of Codes of Conduct
5. Implementing Codes of Conduct
A. Transparency of Codes of Conduct
B. Internal v. External Monitoring
C. Who is to Monitor?
D. A Supplier Certification Regime
E. SMEs
6. How to Deal with Breaches of Codes of Conduct
7. Involving Authorities in Developing Countries
8. Codes Discussed at the Symposium
9. Topics for Further Discussion
A. Topics Concerning Scope and Standardization
B. Topics Concerning Implementation
1. Introduction
The Symposium was organised jointly by the European Commission and
the U.S. Department of Labor. It brought together representatives
from a wide range of organisations with a shared interest in the
development and implementation of codes of conduct on labour
standards. These organisations included businesses, labour unions and
non-governmental organisations.
Codes of conduct are still a recent development and this gathering
was a first attempt to share experiences from both sides of the
Atlantic. This report does not try to give a detailed account of what
was said and by whom. Its aim is to give an overview of the different
issues raised during this one-day meeting, to record ideas that were
presented and to identify those topics that need further
consideration. It does not, however, give a detailed account of what
was said and by whom.
The transatlantic dialogue on codes of conduct will continue at a
follow-up event to be held in December 1998 in Washington, D.C., at
which some of the issues raised in Brussels will be discussed in more
depth. The present paper is intended to be a basis for these further
exchanges.
2. Why Codes of Conduct?
At the Symposium there was widespread agreement that more needs to
be done to eradicate violations of labor standards at the workplace,
among which the exploitation of young children causes the greatest
concern amongst consumers. No one, whether they are consumers,
businesses, or governments, wants to be associated with exploitative
employment practices which, nonetheless, are endemic, particularly in
the developing world. But whenever there is a link between well-known
corporations and such violations of human rights at the workplace,
the media are quick to publicise it. The contrast between the promise
of global commerce and the misery of exploited workers makes for good
news stories.
In the words of one speaker from a non-governmental organisation
(NGO) dedicated to labor advocacy, the recent proliferation of codes
of conduct reflects the failure of governments and international
organisations to enforce minimum labour standards. He added, however,
that corporate codes of conduct are no substitute for national and
international labour regulations enacted and implemented everywhere.
Public and private initiatives in the area of labour standards should
be seen as complementary and mutually reinforcing. As for corporate
codes of conducts, in the worst case they are established purely as a
public relations exercise to reassure consumers that they do not have
to worry about the social conditions under which certain products are
manufactured. In the best case, codes of conduct, the speaker pointed
out, could provide a means of enforcement through contracting in the
absence of viable alternative enforcement mechanisms.
Ideally, codes of conduct would, however, become the basis for
joint efforts to seek lasting improvements of working conditions.
This ambition seems to be behind many partnership initiatives
involving business organisations, labour unions and NGOs.
Another speaker pointed out that, aside from pure public
relations, there are valid business reasons for companies to improve
the conditions of work through codes of conduct. For one thing,
business partners who follow codes of conduct are also the ones that
are likely to deliver a good product on time and at a fair price.
Second, where workers are treated fairly there likely will be higher
productivity, lower turnover, and fewer workplace disruptions.
A representative from the business sector added that, in addition
to heightened consumer concern over exploitative labor conditions,
businesses support codes of conduct because they want to ensure that
no competitor is able to gain an advantage through such exploitation.
Indeed, codes of conduct can be used in a defensive way by trying to
discourage the purchase of goods that are produced under socially
undesirable conditions. This may generate fears that such codes of
conduct might become a new form of protectionism that prevents
producers in poor countries from gaining access to markets in the
developed world.
One speaker did point out that, based on his own industry's
experiences, there are a few cautionary notes regarding codes of
conduct:
1. Adoption of codes suggest a level of universality
and clarity about workplace standards that are not always present.
2. Codes may be ill suited to promote innovative social protection
programmes, particularly as they divert attention from the government
responsibility to promote economic and social development.
3. Codes may also suggest for the business community
that the responsibility ends at meeting the code.
4. Codes may scare off small business; there should be a way to
get smaller enterprises directly involved.
3. Contents of Codes of Conduct
The kinds of labour standards covered by the various codes of
conduct differ widely and the common ground does not seem to stretch
far beyond the rejection of child labour. Codes of conduct often use
ILO conventions for the definition of core labour standards
(prohibition of child labour, forced labour, discrimination on
grounds of sex, race, religion etc., and the guarantee of freedom of
association and collective bargaining). Other initiatives use the
Universal Declaration of Human Rights and the United Nations
Convention on the Rights of the Child. Codes may also include other
issues such as health and safety, working time, wages and benefits,
disciplinary measures and housing.
Trade union rights, for their part, differ from other labour
standards in that they are enabling rights and not specific outcomes
in terms of workplace conditions. They are a means of achieving
better conditions and they are regarded by many as a prerequisite.
Consequently, trade union participants at the Symposium expressed the
fear that respect for other labour standards might be regarded as a
substitute for freedom of association and collective bargaining and
bargaining rights. They also stressed the importance of free trade
unions for the effective monitoring of codes of conduct.
The Symposium illustrated the enormous variety in the content of
codes of conduct. One speaker expressed the view that it is necessary
to tailor codes of conduct and particularly monitoring to specific
sectors. However, there were many calls for standardisation of codes
of conduct -- and these calls came from across the spectrum of groups
represented. Several company representatives and trade unionists
called for better co-ordination of codes of conduct.
The trade unionists' arguments focused on the need to avoid a
'pick-and-choose' approach whereby companies select the most
convenient code of conduct for them. They also stressed that a
co-ordination of codes of conduct would help the suppliers or
subcontractors who might have to comply with a different code of
conduct for each of their major customers.
One company representative explained that there are similar
discussions in progress on various continents and that some form of
co-operation and co-ordination needs to be established between these
processes involving companies, human rights organisations and trade
unions. Another company representative went even a step further and
called for the development of a single code of conduct. The multitude
of codes leads to confusion, this speaker argued, and this is likely
to slow down their adoption by many organisations.
4. Scope of Codes of Conduct
The Symposium participants also discussed how far down the supply
chain a code of conduct should reach. There are clear-cut cases: one
extreme would be a fully controlled foreign subsidiary; on the other
end of the spectrum would be producers of a minor input bought
through the open market (e.g., dyes for textiles). In the former
case, codes of conduct must be observed; in the latter, a code might
be impossible to implement. In between there is a vast grey zone.
Small and medium sized companies (SMEs) were mentioned by several
participants as a special case. Even a relatively small importer in
an industrialised country can have considerable buying power. What it
might lack, though, is the ability to carry out monitoring, including
on-the-spot checks.
What seems to matter is the degree of control a company has over
the employment conditions of all workers employed by sub-contractors.
Such control is not only exercised through direct ownership or large
orders, but also through the award of licences for the use of
intellectual property rights (a large publisher or media corporation
could have thousands of licensees using copyrighted material). One
speaker suggested that companies shorten their supply chains as a
means of insuring that labor standards are respected.
5. Implementing Codes of Conduct
A. Transparency of Codes of Conduct
It was well understood by the participants that once a code has
been developed it needs to be brought to the attention of a wide
range of people: workers, suppliers, other interested stakeholders,
and the general public. Employees who are protected by a code must be
informed that it exists. Business partners need to be told about the
code and the way in which it affects contractual obligations. To
enhance the effectiveness of a code it is also useful to advise trade
unions and NGO's of its existence, and in particular on its content,
scope and monitoring. Finally, businesses may want to inform the
general public and particularly consumers of their adherence to a
code of conduct. Large companies selling well-known consumer products
may use the code of conduct to establish or enhance an ethical brand
image. It may also be helpful to convey a message about a company's
code of conduct through product labels.
The pros and cons of instituting a labeling program, a related
issue, received a good deal of comment, especially from the European
participants. The discussion centered not on whether labeling is a
good thing in and of itself, but rather whether such a regime could
be made credible to consumers given the multitude of entities along
supply chains. In the words of one participant:
Social labeling will be extremely difficult: standards, ideas, etc
are different. It could just be a label and then it wouldn't have a
meaning. The smaller company has no chance to control their whole
process. . . . They can live in fear from day to day that their whole
stock just bought will turn out the next day to be made by child
labour and they have no way that they have could find out. . . Even
for bigger companies with high standards it is difficult to control
this.
This problem is also present in the context of codes of conduct
(e.g., certification, SMEs and monitoring).
Another participant rued the multiplication of labels and just how
difficult it is for consumers to understand what they represent, much
less verify their credibility. He mentioned that for this reason they
were looking into the possibility of a uniform label "at the European
level."
B. Internal v. External Monitoring
A key question regarding the implementation of codes of conduct is
whether they are used as an internal management tool or as a public
commitment to the outside world. Some companies prefer to remain
discreet about their internal code which is designed to help them
establish solid and durable business relations with their suppliers.
However, there are strong motivations for companies to make their
commitment public and to show consumers that a company sells products
manufactured under adequate employment conditions. A company code of
conduct can help to establish an ethical brand image that can become
a source of competitive advantage.
The overwhelming consensus at the Symposium was that in order to
establish such an advantage a company must submit to external and
independent monitoring, although this does not necessarily imply that
internal monitoring will have no useful role to play. In fact,
several speakers stressed the need for parallel channels of
communication through which violations of labour standards can be
signaled to those who are in charge of enforcing a code of conduct.
By multiplying the feedback channels it may also be possible to
minimise the risk of retaliation against workers who speak out
against poor employment conditions.
C. Who is to Monitor?
Several speakers emphasized that monitoring -- be it internal or
external -- must be carried out professionally. It should not be
primarily the responsibility of either trade unions or NGOs. The
preconditions for professional monitoring are that the standards are
clearly defined and that staff has been trained for carrying out
factory inspections, including health and safety checks. One speaker
suggested that there could be public support for the production of a
handbook and of training material for those who have to make sure
that a code of conduct is respected. Issues related to codes of
conduct and their monitoring could also be included in the curricula
of business schools, universities and vocational training courses.
No clear picture emerged from the discussion of the kind of
institutions that could offer professional external monitoring
services. While the model of financial auditing seemed to be present
in many participants' minds, one speaker warned against pushing the
analogy too far and stressed the need for monitoring institutions to
combine professional competence with civil legitimacy. This speaker
argued that it is not sufficient to audit management systems and
procedures; the monitoring of codes of conduct also requires the
establishment of a dialogue process. This could only be achieved by
new hybrid institutions that can combine these two essential
attributes.
Several speakers stressed the need for the accreditation of
monitors. In addition to ensuring professionalism, this would also
constitute a guarantee that monitoring is truly independent. The
accreditation process could be overseen by a foundation in which
representatives from businesses, organised labour and human rights
organisations would co-operate. Another role of such a foundation
could be to determine what remedial action would be acceptable once a
breach of a code of conduct has been found.
Despite calls for the professionalisation of monitoring, trade
union representatives in particular stressed that their organisations
had a very important role to play in the implementation of codes of
conduct and some speakers even suggested that the existence of trade
unions on the shop floor might make external monitoring unnecessary.
In the words of one labor participant, "The best monitoring is having
a trade union, freely selected by the workers, in the plant
representing the workers." It was also stressed that trade unions can
rely on their informal networks and direct contacts with workers to
gather information on employment conditions.
In the absence of local trade unions, NGOs could have a more
important role to play with regard to monitoring. One trade union
speaker qualified them as 'ad-hoc watchdogs,' adding, however, that
they would not normally have the expertise to examine complex
workplace practices.
D. A Supplier Certification Regime
Participants also discussed the issue of certification of
suppliers. In a certification regime, contractual relations with
other companies would only be entered into if these other companies
produce evidence that they comply with the standards laid down in a
code of conduct. The certificate proving this compliance would have
to be renewed at regular intervals following a social audit of the
company. A certificate could be revoked if there are substantiated
complaints about violations of the standards required by the code of
conduct. As soon as codes of conduct are more standardised and a
generally accepted monitoring procedure has been established, there
could be systematic certification of suppliers.
E. SMEs
Such a certification procedure would, to some extent, address the
specific problems of small companies with monitoring. Several
speakers pointed out that small companies do not have the resources
to carry out their own (internal) monitoring and that the costs of
independent monitors would be prohibitive to them. Thus, codes of
conduct could lead to a distortion of competition to the detriment of
SMEs. By alleviating the costs of external monitoring, a supplier
certification regime could make it financially feasible for SMEs to
implement codes of conduct.
A number of arguments were presented underlining that, even in the
absence of a certification regime, smaller businesses can still take
part in the development and implementation of codes of conduct.
Smaller companies are likely to deal with fewer suppliers than large
companies. Furthermore, several smaller businesses can pool resources
and carry out joint monitoring operations.
A related initiative presented at the Symposium consisted of
requiring exhibitors at international fairs to pledge their
compliance with a code of conduct. This would give SMEs at least some
reassurance that they are buying from an acceptable supplier.
6. How to Deal with Breaches of Codes of Conduct
The easiest option to deal with breaches of codes of conduct might
be to sever contractual relations with suppliers. There seemed to be
a consensus that this should only be the last resort, however. There
is no guarantee that exploited workers will actually be better off if
their employer loses an important contract.
Some speakers advocated a pragmatic approach that gives suppliers
a chance to mend their ways over a specified period of time. This
raises difficult problems because it implies that breaches of codes
of conduct will be tolerated for limited periods of time. The
question, then, is how big a departure from the code is acceptable
and for how long without risking the credibility of the code in the
eyes of consumers.
7. Involving the Authorities in Developing Countries
The role of the authorities in developing countries in the
implementation of codes of conduct received little attention during
the Symposium. However, one speaker representing a sector with
long-standing experience in monitoring in East Asia stressed that
governments in developing countries are "as committed to the
well-being of the workforce as any other legitimate government." The
speaker suggested that It would be useful to invite some officials
from these countries to meetings such as this EU-US Symposium.
Several speakers also stressed the need to not only eliminate the
employment of children in conditions that are hazardous to them, but
also to provide them with the education and training that will enable
them to be productive workers as adults and otherwise fulfill their
human potential. One speaker from the business community called for a
concerted business/government partnership to help the governments of
developing countries achieve such a goal for their children.
8. Codes Discussed at the Symposium
Implicit throughout the discussion was that, in their co-operation
with labor and NGOs, companies will seek to find the right balance
between their need for credibility and the requirements of business
reality in a competitive world. Current codes that are the product of
tri-partite or joint labour-business negotiation generally reflect
this balance.
For example, in the United States the Apparel Industry Partnership
(AIP), launched in 1996 with the encouragement of President Clinton,
brought together a number of major apparel and footwear companies,
trade unions and non-governmental organisations campaigning for human
rights or for consumer protection. The AIP has developed a model
workplace code of conduct which is to be monitored both internally
(by the participating company itself) and externally (by independent
monitors).
The participants also discussed an international partnership
initiative that was recently launched by the Council on Economic
Priorities (CEP) which developed a 'global standard for ethical
sourcing,' called Social Accountability 8000.
European representatives discussed The Clean Clothes
Campaign, launched in the Netherlands in 1990 with the aim of
improving employment conditions in the clothing industry around the
world. The Campaign's code of conduct was developed in
consultation with international trade union organisations, NGOs and
several Asian networks of labour organisations.
Particular to Europe is the development of codes of conduct by the
two sides of industry (management and labour). According to the
Treaty Establishing the European Economic Community, the European
Commission is responsible for promoting the dialogue between
management and labour at the European level ( Social Dialogue'). The
European Social Partners' meet regularly at the cross-industry level
and in a number of sectors.
The trade union and employer representatives of the European
footwear industry adopted a first code of conduct on international
labour standards in 1995. This code focused on the elimination of
child labour, as did the 1995 agreement between EuroCommerce and
Euro-Fiet for the retail sector.
In 1997 labour and management in the textile and clothing sector
agreed on a much more comprehensive code of conduct covering not only
child labour, but also forced labour, trade union rights and
non-discrimination in employment, together with monitoring and
enforcement elements.
These European Social Partner' codes of conduct aim at covering
all companies in their respective industries, be they large or small.
The European codes are to be incorporated in national, regional and
plant-level collective agreements. One European trade union
representative expressed the view that the new European Works
Councils (which are mandatory information and consultation bodies in
large businesses with employees in several EU Member States) could be
a good place for the further development of codes of conduct.
9. Topics for Further Discussion
A number of issues on which further work is required clearly
emerged from the First EU-US Symposium:
A. Topics Concerning Scope and Standardization
(1) what issues should be included in codes of conduct
(i.e., child labor, forced labor, harassment, discrimination, health
and safety, freedom of association, wages and benefits, hours,
overtime compensation)?;
(2) how to deal with displacement effects resulting from codes,
especially in the area of child labor?
(3) to whom and to what degree should codes apply (small v. large
companies, variation according to a country's level of economic
development)?;
(4) how far back in the supply chain should codes apply?; and
(5) what are the benefits/costs from a "one size fits all"
approach (standardization)?
B. Topics Concerning Implementation
(1) who should perform monitoring (private firms,
labor, NGOs) and what would be the role of the stakeholders that did
not directly perform monitoring?
(2) who should pay for the monitoring?
(3) who should train and certify monitors?;
(4) what does the monitoring process consist of?;
(5) does the monitoring process have to be uniform across company
sizes and countries given differing levels of development?;
(6) how are codes of conduct to be enforced/ what would be the
penalties assessed for violations?;
(7) what is the role of labels and other forms of public
communication to explain the use of a code?; and
(8) how to make codes transparent to workers, consumers and other
interested parties?
