Study of A Proposal (and its alternatives) to Amend the Textile Labelling and Advertising Regulations: Applying the Conference Board’s Optimal Policy Mix Framework

3. Initiatives that Support Improving Working Conditions in the Apparel Industry

Since the turn of the century, the world has witnessed rapidly improving working conditions in the apparel industry, particularly in developed countries where governments take very seriously the enforcement of labour laws.

However, working conditions have not improved as rapidly in less developed countries. First, the lower levels of development and the widespread poverty that exist in many countries contribute to conditions under which poor labour standards can exist. Such countries may suffer from a structural inability to enforce any standards, never mind labour standards. Policies may stress the importance of gainful employment for the masses and not working conditions. Indeed, stringent labour laws may not even exist. Appendix B provides a descriptions of selected issues that have an impact on the achievement of this policy objective.

Around the world, several organizations and programs have been working to improve working conditions. Those that the Conference Board has characterized as prominent examples of organizations and programs dedicated to the improvement of labour standards in the apparel industry are listed in this section of the report, along with a brief description of their activities.

The report groups the organizations and program into four main categories:

• The ETAG initiative, which is primarily focused on disclosure (a class by itself);
• Those who promote fair labour practices through codes of conduct (voluntary or government-led);
• Those who provide certification of manufacturing facilities and processes; and
• Those based on rule of law or legal changes.

Further information on these initiatives is found in Appendices C, D, E and F.

3.1 Disclosure and the ETAG proposal (Canada)

This is the option that led to this report. As such, it is a major new development in Canada, and the Conference Board has been asked to provide its own interpretation of the various aspects of the ETAG proposal.

The ETAG stakeholders (see Appendix B) are asking for mandatory disclosure of manufacturing sites through the CA Number registration system. As noted, the ETAG proposal seeks to amend the Textile Labelling and Advertising Regulations of the Textile Labelling Act basically to require mandatory disclosure of manufacturing sites on labels of apparel sold in Canada. The details of the disclosure are unclear and vary depending on which ETAG stakeholder you talk to. At a minimum, ETAG stakeholders are looking for disclosure of the location of the final assembly site of the garment. Some ETAG supporters are looking for more detailed information, including the location of cutting, sewing, finishing, assembly, pressing, laundering, and shipping (assuming this is being done by subcontractors).

Since requiring a large number of identification numbers to be added to clothing label might be problematic because of space restrictions, several options are being considered. One option would require the additional information to be posted on the CA Number web site, which would provide the required disclosure. In cases where the legal entity responsible for the garment has a large number of such garments to register, perhaps a product type number could be used on the label to direct consumers to the page or pages outlining the required disclosures for that garment or type of garment. Alternatively, a link could be provided from the CA Number to the company web site, where information by category of product would be listed.

The proposal does not specify how consumers would be informed about labour practices, only that the manufacturing location information would be used for further information-gathering activities. The intent of the ETAG proposal, as described during interviews and focus groups, is to have third parties, presumably NGOs and organized labour institutions in the respective countries, do their own investigations, based on the disclosure, and report their findings on working conditions to the public. The details and timing of this process is also not clear, but one could envisage news releases to the public, Internet links from the CA Number web site, or a "disclosure web site," where information about labour practices would be found. Obviously, one would need to figure out how to best get information from this process to consumers in time to inform their purchase decisions. The proposal assumes that consumers who are concerned about labour standards used in the manufacture of apparel would make the effort to refer to the information when deciding what to buy.

In general, the Conference Board finds that the mechanics of disclosure described by ETAG are ill-defined or impractical in the following respects:

• Current labels lack the space needed to carry information on manufacturing location(s) and labour standards.
• The ETAG proposal would rely on other mechanisms, such as the CA number web site or other specialized web sites, to disseminate information about the fairness of labour standards. This would be awkward for consumers, at best, if only because of the large number locations and the frequency of change.
• ETAG suggests no mechanisms to ensure that the information provided on labels would reflect a balanced view of labour standards. The Conference Board believes that other alternatives that provide balanced and/or independently verified information to consumers directly would be better.
• The proposal singles out the Canadian apparel industry, subjecting it to increased scrutiny and uncertainty at a time when the global apparel industry is in turmoil and the roles of Canadians within it are uncertain.
• To disclose manufacturing addresses is to disclose the wrong information, since it fails to inform consumers about what may be of concern to them, namely the labour standards used in the making of a garment. Indeed, the country of manufacture information found on every garment label provides as much useful information to consumers as would an address of a manufacturing plant.

Based on its interpretation of the proposal, the Conference Board believes the government needs to think about the ETAG strategy of disclosure in light of what other countries are doing to address the issue of fair labour standards and in light of several realities facing the Canadian apparel industry in particular. To help in this area, the Conference Board concludes this section with suggested improvements to the proposal.

The ETAG proposal may seek to provide too much information: industry stakeholders genuinely believe that detailed disclosure of their manufacturing locations increases the risk of supply chain disruption, poaching, and industrial espionage because, by providing too much information, it greatly simplifies and facilitates such activities. Perceived secondary benefits resulting from the disclosure of location (such as being able to find out about competitors’ supply chains) are discounted by the industry because of the fear of:

• Being misrepresented;
• Being seen as exaggerating efforts or the success of those efforts;
• Becoming a target of specific and special interest groups; and/or
• Being discredited as a result of the disclosure of a single negative event.

This suggests that the government needs to think in terms of the quantity of information necessary to inform consumers effectively on this issue.

The reliability of the information provided by the ETAG proposal is also in question. The stakeholders that support the proposal believe that the process is sufficiently transparent to force compliance by the industry since any undesirable behaviour would be more easily investigated by those concerned about labour standards. Industry stakeholders genuinely believe that simply disclosing the manufacturing location does little to directly inform consumers about working conditions and that does it not help improve labour standards. They believe what is required instead is a concerted effort aimed at selecting suppliers and enforcing manufacturing policies and procedures that do. In either case, the process by which stakeholders would verify the accuracy of the information provided on labour standards is not specified. The stakeholders that support the proposal are confident that the information provided would be accurate and would reflect the perspective of its stakeholders. The industry is concerned that misinformation or conflicting information would confuse, rather than inform, consumers. This suggests that the government would need to find ways to ensure that the information being released to consumers is reliable.

The manageability of the information required under the ETAG proposal is a concern for the industry: The disclosure process does appear to be manageable for apparel manufacturers and retailers that carry a limited number of products and styles. However, data obtained from the Retail Council of Canada suggests that, as a group, the industry manages more than 660,000 different models, styles, and sizes of apparel, made by over 16,000 suppliers in 81 countries. This is a lot of geographically dispersed information points, particularly when one considers that individual suppliers might represent several manufacturing plants. It is unclear to the Conference Board how the proposed disclosure would work effectively for large industry stakeholders that manage tens of thousands of products made in hundreds of factories in dozens of countries around the world, particularly when a number of them would change over time. Leading retailers, especially, feel the brunt of the increased scrutiny and with it the increased danger that local management shortcomings in far away places will be ascribed as company policy—with disastrous results in the short run. Even companies whose culture has long been based on making such improvements have been criticized by some for not going fast enough or not going further with their efforts. These experiences have led industry stakeholders to invest in codes, procedures, and auditing to ensure compliance. Yet they remain reluctant to publicly disclose the nature of these efforts for fear of someone else uncovering a single case of non-compliance. In other words, the industry largely believes it is doing its best with a difficult situation and refuses to risk putting too much information about specific manufacturing locations in the public domain.

The limitations of the information provided needs to be acknowledged: Disclosure of location could be accomplished by requiring manufacturers to add a label that specifies the address of the manufacturing site. But what is the additional usefulness of this information for consumers in the case of locations in Lesotho or China? The ETAG proposal assumes the new and more useful information would eventually be forthcoming for consumers, namely, the labour standards used at the manufacturing location. However, it is likely to take some time for stakeholders to decisively and accurately portray the labour standards used at thousands of manufacturing sites around the world. Moreover, Canadian industry stakeholders believe that in the current operational context efforts by Canadians relative to the issue are wasted if the substandard manufacturing locations that are identified can merely move on to another buyer whose standards are not as high. A concerted global effort by all manufacturers and retailers worldwide is what is required. In the meantime:

• Would consumers make an informed decision based on claims or verified information on labour standards for, say, 10 or 20 per cent of the available manufacturing locations?
• Would consumers worried about working conditions used to manufacture apparel be satisfied by knowing that coats and mitts are made under satisfactory labour standards?
• Similarly, would knowing that one brand of T-shirt was sourced from a factory using unsatisfactory labour standards be sufficient consumer information? Would it drive purchase decisions for all purchases from that retailer or would it only impact the particular brand of T-shirt?
• Finally, at what point are the labour practices of a particular manufacturing location in doubt? For example, would a one-time report be sufficient to inform consumers or are consumers more interested about multiple occurrences that establish a track record of substandard behaviour?

This suggests that the government would need to think about how much information is required to enable consumers to make informed decisions, taking into account the limitations of that information.

The Timeliness of the information for consumers is another issue: It is quite common for apparel for one season to be ordered and manufactured during the previous season. In such cases, the information about the working conditions used in manufacturing would perhaps arrive several months after the actual manufacturing. Is that an effective way to inform consumers or is the information about labour standards used in the manufacture of the garment required at the time of purchase?

Unrealistic expectations are an issue: The ETAG proposal is unique to Canada. As such, it exposes our apparel industry to an unrealistic expectation of stakeholders relative to their ability to redress unacceptable labour practices on foreign soil. For example, once full disclosure is implemented, taking action against unfair labour practices by refusing to source from facilities using manufacturing practices that are seen to be unacceptable (even when the facility in question refuses to comply with requirements) may be characterized by some stakeholders as "running away" from the problem. As Birnbaum says in his book, "even for companies who want to make a serious effort, serious limitations remain".¹⁵ Disclosure may also make it more difficult to start sourcing from locations whose labour standards may be in doubt, as doing so will expose such stakeholders to the expectation that Canadians can change the practices used in other countries. This suggests that the government would need to think about acceptable responses to labour practice abuses, and if industry is asked to avoid such sources of apparel, about the level of support required to implement trade initiatives that seek to improve conditions in the long run.

The complexity of the issue needs to be acknowledged: ETAG stakeholders describe the changes required by the ETAG proposal as simple in the sense that with relatively few legislative changes the requirements for disclosure of location would begin. However, the implications of the changes are very complex and largely undefined.

The application of the proposal to the apparel industry is of particular concern: This proposal might not be as contentious if it was meant to apply to all domestic industries or to industries that fully control or own the supplying manufacturing facilities. Indeed, in the chemical industry it is the process used to manufacture the chemicals that presents the competitive advantage, not necessarily the location of manufacture. Disclosing locations in such an industry would not be so problematic. However, because the proposal singles out an aspect of the apparel industry that is considered to be a key competitive advantage, the level of opposition to disclosure is not surprising.

If we assume that consumers are keenly interested in information about the labour standards used in the production of apparel sold in Canada, the ETAG proposal provides an interesting new approach internationally, one that has never been considered outside of domestic apparel markets. However, the approach is also somewhat incomplete because it leaves to others, to chance, and to conjecture significant features that should be part of any effective information tool for consumers in this area. As a result, the Conference Board suggests that the government examine the ETAG proposal in light of the issues raised by the report.

3.1.1 Addressing Concerns with the Proposed Disclosure Initiative

There are many ways in which the government could work to address concerns that have emerged and that are captured in summary form by this report. Indeed, the government could substantially modify the disclosure proposal to more effectively contribute to the issue of fair labour standards in the apparel industry. In particular, the government could incorporate the types of voluntary and certification initiatives that have emerged in Europe and the United States. The following represent a selection of ideas that might help address some of the emerging concerns:

• The government could conduct more definitive research about the type of information that consumers require to make ethical purchasing decisions. This would then become information that retailers would want to review before making their own purchasing decisions. By not focusing narrowly on disclosure but rather on consumer information, the government would address issues that are fundamental in making any proposal an effective policy tool to inform consumers. Specifically, the research needs to find ways to better link consumer information about labour standards with disclosure information.
• The government could help determine whether supply chain information is proprietary for the apparel industry and, if so, help devise mechanisms to protect such information from unauthorized use. For example, the information might only be released when it is required to inform consumers about fair or unfair labour practices and only after they have been independently verified.
• The government could help sponsor a more broadly acceptable process to verify the information provided on labour practices used in the production of apparel sold in Canada. Unverified, or unbalanced information based on the perspectives of one or two stakeholder groups may lead only to confusion for consumers, as claims and counterclaims are aired publicly.
• The government could determine and help differentiate the needs and practices of large integrated complex retailers and manufacturers from those of the smaller, less complex participants that use intermediaries, such as importers and buying agents. In the case of unmanageably large supply chains, a risk management approach could be a more effective way to request and provide information about manufacturing labour standards.
• The government could help determine the level at which labour standards information is required for consumers to be informed. Is it labour standards used and promoted by the retailer and its suppliers, or is it the labour standards actually employed in the production of the apparel they are purchasing? This would be useful in determining whether consumers want labour standards information at the garment, the manufacturing location , the manufacturing country, or the retailer level.
• The government should research and help determine the conditions under which its stakeholders think it acceptable, if not advisable and desirable, for Canadian apparel importers not to source apparel from particular facilities. Similarly, it could help characterize the conditions under which it is acceptable to leave suppliers that are not willing or able to raise labour standards to an acceptable level within a reasonable period of time. By focusing on expectations, the government would also address issues that are fundamental in turning any proposals into effective policy tools to improve labour standards around the world.
• The government could incorporate voluntary features of various alternatives used around the world, which increase the value of the information provided to consumers without making public vast amounts of proprietary information. For example, confidential disclosure of location information to a third party, followed by public disclosure of labour practices, either country or company specific, might provide more valuable information to consumers.

The OPM process treats the ETAG proposal to amend the textile labelling and advertising regulations as a means to an end, not as an end in itself. Because the ETAG proposal is but one proposal along a continuum of instrument choices that could be used by government to achieve its objective, there may not be a reason to try to modify the ETAG proposal to make it more acceptable. There are alternatives. For starters, the government could more effectively coordinate the efforts of its many departments in fulfilling their responsibilities to promote fair labour standards, whether global or national. It could help support and build upon initiatives already in place around the world, for example by piggy-backing on one or more of the certification initiatives or incorporating one or more of the emerging codes of conduct into a Canadian initiative. The remainder of this chapter describes some of these initiatives.

3.2 Codes of Conduct and Similar Initiatives

A number of initiatives based on codes of conduct have emerged in response to the pressing need for fair labour standards in the apparel industry worldwide. These codes enjoy a remarkable degree of alignment around core labour standards, whether initiated independently in Canada or around the world by individual apparel retailers and manufacturers or whether special purpose entities were created to administer the codes.

On one hand, stakeholders unanimously applaud these codes as steps in the right direction. Some stakeholders see them as very effective, since they allow organizations that subscribe to them to highlight their efforts and the minimum standards to which they manage supply chain labour standards.¹⁶ At the same time, many stakeholders express concern about the codes as not rigorous enough, sometimes poorly financed, or poorly enforced. There may also be variations in the way organizations manage their adherence to the codes themselves, and between one organization and another. The following codes were selected to represent a cross section of Canadian and international codes-based initiatives. More information on the initiatives mentioned in this section can be found in Appendix C.

3.2.1 Company-specific Ethical Standards by Retailers, Manufacturers, or Importers

Many retailers and suppliers in the Canadian apparel industry have their own codes of conduct, which they administer and enforce within their supply chains. For example, one major Canadian clothing manufacturer and importer has a 20-page code of ethics. It has hired inspectors who live and work in the regions where their subcontractors are located. These inspectors regularly go to work sites, unannounced, and ensure that all the required standards are met within manufacturing plants. Checklists are prepared and items that are not up to standard have to be addressed by a specific date when a new audit is conducted.

Some clients, typically resellers or retailers, aggressively drive these standards. One leading Canadian women’s apparel manufacturer mentioned that since they have been producing apparel that guarantees high standards of production, buyers are willing to pay higher prices to purchase their products. This manufacturer is committed to continuing to produce these more expensive garments and is convinced that this trend will follow with other manufacturers.

Clients and manufacturers such as these are feeling the pressure from the public, consumers, and action groups who require assurances about ethical standards. In the case of the large Canadian clothing manufacturers mentioned above, the supplier will take larger clients, typically large retailers, on tours to show them where items are being manufactured. These tours are meant not only to demonstrate the quality of manufacturing but also the favourable working conditions under which the items are made and the lengths the manufacturer/importer goes to ensure the proper conditions for making the apparel.

The resources for this type of attention to clients is not always possible for smaller suppliers, who have to rely on agents and other middlemen in the supply chains for their products. However, adherence by these agents and middlemen to codes of conduct, plus independent verification, could inform even the smallest firms of the working conditions in countries where rights and conditions workers enjoy in Canada may not exist or be readily enforced.

3.2.2 Client-specific Codes such as Students Against Sweatshops in Canadian Universities

Students Against Sweatshops groups across Canada have been raising awareness around the issue of labour standards used in producing apparel bearing their universities’ logos and colours.¹⁷ Groups in many provinces have started campaigns to pressure their schools and universities to adopt codes of conduct governing the production of clothing. Students are actively campaigning for sweat-free campuses in 18 different universities across Canada. Codes adopted by Western, Guelph, and Dalhousie were deemed not to be stringent enough by Student Against Sweatshops. On these campuses, students are mounting campaigns to strengthen the codes and expand the requirements.

3.2.3 Client-specific Codes in the United States, such as The Workers' Rights Consortium

The Worker Rights Consortium (WRC) is a non-profit organization created by college and university students and administrators, and by independent labour rights experts, to assist in the enforcement of manufacturing codes of conduct adopted by colleges and universities. These codes are designed to ensure that factories producing goods bearing college and university logos respect the basic rights of workers. More information about this initiative can be found at www.workersrights.org.

Box 3: The Responsible Trading Guidelines, in Brief Laws and Workplace Regulations The laws and regulations of the countries where goods are made shall be complied with. Forced Labour Forced labour shall not be used, whether in the form of prison labour, indentured labour, bonded labour, or otherwise. Child Labour No person shall be employed under the age of 14, under the age interfering with compulsory schooling, or under the minimum age established by law, whichever is greater. Harassment or Abuse Corporal punishment and other forms of coercion, abuse or harassment, whether psychological, sexual or physical, shall be prohibited. Discrimination Discrimination in hiring or any other terms or conditions of work, other than bona fide occupational requirements allowed by law, based on race, colour, national origin, religion, disability, gender, sexual orientation, marital status, or political opinion, shall be prohibited. Freedom of Association Employees shall be permitted to exercise lawful rights of free association. Hours of Work The laws on working hours of the countries where goods are made shall be complied with and employees shall be entitled to at least one day off in every seven-day period, except as required to meet urgent business needs. Health and Safety Conditions in all work and residential facilities shall be safe, clean, and consistent with all applicable laws and regulations regarding safety and health. Wages and Benefits Employees shall be paid the higher of the minimum wage required by the laws of the countries where goods are made or the prevailing local industry wage and shall be entitled to all legally mandated benefits. Deductions from wages, not provided for by the laws of the countries where goods are made, shall not be permitted without the express permission of the employee.

3.2.4 Retail Council of Canada’s Responsible Trading Guidelines

The Retail Council of Canada (RCC) has created Canada’s Responsible Trading Guidelines (RTG) for association members.¹⁸ These guidelines are meant to apply to finished consumer goods purchased for resale to consumers. According to the RCC, "The goal . . . is to see Canadian retailers adopt these guidelines on a voluntary basis, and implement them according to their business needs and practices."

Although the guidelines are voluntary, they appear to be modelled on principles that are similar to those of other fair labour initiatives. The actual wording of the guidelines, reproduced from the Retail Council Web Site, appears in Box 3.

As of February 2003, the RCC’s suggested implementation plan for the guidelines has the following steps:

• The RTG shall form part of any agreement the retailer enters into with its suppliers.
• The retailer shall evaluate its suppliers by assessing their observance of the RTG.
• The retailer shall assign responsibility for the implementation of the RTG to a responsible member of management.
• Employees to whom the RTG applies shall be informed of it through the posting of the code in a prominent place in the local languages spoken by the employees and managers.
• Employees to whom the RTG applies shall be provided with a confidential means of reporting violations of the RTG to the retailer and shall not be disciplined, dismissed or discriminated against for providing information about the observance of the guidelines.

As mentioned above, the guidelines were developed by the RCC partly as a contribution to negotiations with ETAG and partly as an effort to voluntarily achieve the policy objective that is the subject of the report. ETAG stakeholder suggested during interviews that these guidelines were not acceptable because of their voluntary nature (i.e., retailer can choose to ignore them), because they were not complete and because of the lack of third party verification processes to ensure that the guidelines are actually followed. As mentioned above, the guidelines only ask retailers to use reasonable efforts to require their suppliers to provide decent, legal, and humane working conditions at the manufacturing stage. Those suppliers are also asked to use reasonable efforts to require their contractors to include these guidelines in their contracts.

3.2.5 Clean Clothes Campaign’s Code of Labour Practices

This European-based Code of Labour Practices sets forth minimum standards for wages, working time, and working conditions and provides for observance of all of the core standards of the ILO, including Conventions 29, 87, 98, 100, 105, 111, and 138. Box 4 outlines the basic requirements of these conventions. They are minimum standards meant to apply throughout the industry and in all countries. The code is not a trade protectionist measure. It is not meant to be used as a means to close the markets of some countries at the expense of workers in other countries.

Box 4: Selected Fundamental ILO Conventions C29, Forced Labour Convention C87, Freedom of Association Convention C98, Rights to organize and Collective Bargaining Convention C100, Equal Remuneration Convention C105, Forced Labour Convention, 1957 C111, Discrimination Convention C138, Minimum Age Convention, 1973

3.2.6 Ethical Trading Initiative (United Kingdom)

The Ethical Trading Initiative (ETI) brings together companies, unions, and NGOs to identify and promote good practices in the implementation of codes of conduct, including monitoring and independent verification. Companies such as Anchor Seafoods, Body Shop, Chiquita, Levis, NEXT, Marks and Spencer, Safeway stores, Brooke Bond Tea, Tetley Tea, and Twinings are members. The ETI has developed a multi-sectoral Base Code based on ILO standards. It includes provisions for a living wage, freedom of association, and security of employment. ETI members are currently participating in four pilot projects, testing various models of code verification. Details of the initiative can be found at www.ethicaltrade.org.

3.2.7 The Fair Labour Association (United States)

The Fair Labour Association (FLA) is a U.S. non-profit organization established in 1998 to protect the rights of workers in the United States and around the world. The FLA is the successor to the Apparel Industry Partnership (AIP), which was initiated by the White House in 1996 to address labour rights standards in the apparel industry. The FLA Charter Agreement outlines an industry-wide code of conduct and monitoring system. The FLA accredits independent monitors, certifies that companies are in compliance with the code of conduct, and serves as a source of information for the public. The companies participating in the FLA are Adidas-Salomon, GEAR for Sports, Jostens, Inc., Joy Athletic, Levi Strauss & Co., Liz Claiborne, Nike, Patagonia, Reebok, Eddie Bauer, Phillips-Van Heusen, and Polo Ralph Lauren. More information about the FLA can be found on the organization’s web site at www.fairlabor.org.

3.2.8 Fair Wear Foundation (Netherlands)

The Clean Clothes Campaign (CCC) was successful in bringing together Dutch NGOs, labour centrals, and associations of apparel retailers and manufacturers in a five-year process of negotiations for an industry-wide code of conduct that has provisions for independent monitoring and certification. This became the Fair Wear Foundation.

Unions, NGOs, retailers, and manufacturers are represented on a Fair Wear Foundation committee that will hire external monitors, evaluate their reports, and certify apparel companies and their supplier factories. This is an example of the type of verification arrangement that could be used in Canada as an alternative to the ETAG proposal. In the Netherlands, agreement has been reached on a voluntary code that includes strong provisions on freedom of association, hours of work, and a living wage. The Fair Wear Foundation will ensure that the codes are being applied fairly and will certify compliance. More information about the Fair Weather Foundation can be found on the organization’s web site at www.fairwear.org.

3.2.9 FairWear Homeworkers Code of Practice (Australia)

The Textile, Clothing and Footwear Union of Australia (TCFUA) and its supporting coalition of religious and NGO partners in the FairWear campaign have succeeded in pressuring close to 40 major retailers and over 50 manufacturers and fashion houses to sign the Homeworkers’ Code of Practice. This code is unique in addressing the specific problems of home workers and it offers another approach whereby a stakeholder-supported code has obtained the support of industry (as opposed to industry codes being supported by other stakeholders). Appendix D reproduces a detailed description of this code.

3.2.10 Conclusions about Codes of Conduct

Based on the number of initiatives uncovered by the research, codes of conduct are a fairly popular, although fairly recent, type of initiative whose aim is to ensure fair labour standards. They are seen by many as an effective way to inform consumers of the types of efforts being made to ensure fair labour standards in various industries, most notably apparel. Because they outline in relative detail the agreed-upon standards that signatories will follow, they allow for more transparent verification and reporting.

However, because they are quite new, there are concerns that over time stakeholders will begin to criticize them as not stringent enough. Other stakeholders complain that the codes are not being managed closely enough by the industry and that verification may not always be effective. While it is true that we may never be able to satisfy all stakeholders with any initiative, a multitude of criticisms of this type tends to reduce the perceived value of a code.

Already in the United States, some codes are being abandoned in favour of others that provide added features praised by stakeholders. This has led to a proliferation of codes and a resulting dilution of the number of apparel industry participants that subscribe to any one code. The proliferation of alternative codes may eventually lead to confusion, as consumers compare and contrast the various codes under which the apparel they want is produced.

3.3 Initiatives that Provide Certification of Manufacturing Plants

A number of initiatives aim to support fair labour practices by offering to certify factories that produce apparel. These initiatives are similar to codes of conduct in that they help set minimum labour standards under which goods are produced. Unlike codes, however, which tend to apply to large clients, such as retailers and universities, certification is meant to apply to the facilities that produce or manufacture apparel. Thus, it is the manufacturing plants used by apparel customers that are certified to be using fair labour standards, with the assumption that retailers would want to use such manufacturing sites in the production of apparel. As such, these initiatives represent another alternative to the ETAG proposal.

There are fewer examples of certification, perhaps because of its cost, which is usually borne by the manufacturing facility, and perhaps because certification mainly appeals to facilities in the developed world that already offer fair labour standards to workers. Indeed, a nonconforming plant in the developing world might have to change significantly before it would consider applying for certification. If we assume that unfair labour standards are driven by a lack of resources locally, it is unlikely that certification alone will substantially impact the issue of fair labour standards in apparel. Nevertheless, as conditions improve throughout the world, certification can become a sign that retailers can spot to identify, relatively easily, the plants that employ fair labour standards. It can also help newly certified facilities come to the attention of socially responsible retailers. As the number of certified facilities increases, it will become increasingly possible for retailers to use only certified manufacturing plants.

3.3.1 FairTrade Labelling Organization

The FairTrade Labelling Organization (FLO) is a non-profit, membership-based association of National Initiatives (17 members worldwide) who promote fair trade labelling in their national markets. They do this by:

• Lobbying governments for support;
• Negotiating with importers and retailers; and
• Running education programs with the aim of supporting marginalized producers on the road to sustainable development.

The label identifies FairTrade products so that consumers will buy them, giving FairTrade producers access to international markets on fair terms. FairTrade products do not currently include apparel, but the concepts used in FairTrade could be adapted to apply to it. Information about the FairTrade initiative can be found at www.fairtrade.net.

FLO is the only certification system in the world where producers do not pay for their certification. The consumer pays for the FairTrade system. Traders pass on to consumers the higher FairTrade price and the premium that is paid to producers for FairTrade products. The National Initiative in the country where the products are sold charge the licensee a fee for using the FairTrade label. This pays for all of FLO's certification and monitoring costs and for the National Initiatives marketing expenses. Including the cost of the system in the retail price, makes FairTrade labelling sustainable.

3.3.2 Social Accountability International (United States)

Social Accountability 8000 (SA8000), is a voluntary, multi-sectoral standard for auditing and certifying corporate responsibility. It was developed by the U.S.-based Social Accountability International (SAI), the former Council on Economic Priorities Accreditation Agency, in 1997. This standard is primarily intended for use by manufacturers and suppliers.

SA8000 standards are based on ILO and United Nations conventions and the Universal Declaration on Human Rights. The standards have a section on social accountability with subsections on child labour, forced labour, health and safety, freedom of association, discrimination, working hours, disciplinary practices, and remuneration. It also has sections on "control of suppliers, subcontractors, and subsuppliers," addressing concerns and taking corrective action, as well as maintaining records. More information can be found on the SAI web site at www.sa-intl.org.

The SA8000 system is modelled on the ISO 9000 system used by companies to ensure quality control. SAI trains and accredits social auditing firms and individual auditors, who are hired by companies to certify their and/or their suppliers' compliance with SA8000 standards. Nine organizations can currently certify compliance to SA8000. As of March 2002 there were 117 SA8000 certified facilities, spread across 25 industries in 24 countries. This is a relatively small number of facilities, given that the initiative has been in place for over 5 years. However, this reflects only some of the limitations of certification alternatives, not the effectiveness of the process at ensuring and promoting the existence of fair labour practices.

3.3.3 Worldwide Responsible Apparel Production (United States)

The Worldwide Responsible Apparel Production (WRAP) factory certification program was launched in January 2000 by the American Apparel Manufacturers Association (AAMA). It contains requirements that ensure fair labour standards More information on this certification initiative can be found at www.wrapapparel.org.

This factory-based certification program is particularly rigorous, reflecting the quality of the certification. It has the following stages:

• Self-evaluation;
• Independent review by certified evaluators; and
• Final review by the WRAP Certification Board.

Its appeal for U.S. apparel manufacturers is its less onerous standards and the fact that responsibility for seeking, paying for certification, and achieving compliance lies entirely with local factory owners, not with North American companies that contract out the manufacture of their products. For more information, refer to www.wrapapparel.org.

3.4 Laws and Other Legislative Requirements

Most of the laws used to ensure fair labour standards in the apparel industry are typically enacted by the governments in which the apparel production facilities exist and apply to all industries, not merely the apparel industry. As a result, the Conference Board only found one case where laws were enacted in support of fair labour standards for apparel.

This section provides examples of how laws can be used to support the promotion of fair labour standards:

• One is an example of a domestic law that requires disclosure of supply chain information. The law apparently aims to identify the domestic apparel industry’s use of home workers, i.e., apparel workers that are working outside factories, sometimes part of the underground economy.
• A second example is an information disclosure law whose aim appears to be to better inform shareholders and other stakeholders of the labour and environmental practices used by its national firms around the world.

While the objectives of both examples are considerably narrower than the ultimate objective covered by this report, they do provide new ideas to be considered as Canada looks for ways to show leadership through legislative change.

3.4.1 Australia’s Retailers Ethical Clothing Code of Practice

The Retailers Ethical Clothing Code of Practice is an example of a law enacted by an Australian state government (Victoria) to support a code of conduct (described earlier in Section 3.1.9). This brand new law is designed to help provide a new tool for tracking the largely invisible workforce in Australia, from the top of the contracting chain down.

One of the key objectives of this law was to help identify this important component of the Australian underground economy. It basically requires Australian retailers to take action when exploitation of home workers is uncovered in this process of complying with the Fairwear Homeworkers Code of Practice. The code provides requirement for retailers to share with the Textile, Clothing and Footwear Union of Australia information from their commercial records related to clothing industry suppliers and contracts. The code is meant to apply to Australian workers only and does not cover those in other countries.

The fact that there was a need for such a law in the State of Victoria to support progress toward the use of fair labour standards in the apparel industry may suggest similar legal changes are required in Canada to support the use and promotion of fair labour standards here. In Australia, this was a domestic problem. This is a much narrower application than what is being considered in Canada by the ETAG proposal, where the primary target appears to be apparel manufactured anywhere in the world under unacceptable conditions. Appendix E reproduces a document prepared by FairWear Australia, the code of conduct organization, and by TCFUA VICTORIA, the union named in the legislative requirements.

3.4.2 France’s New NRE Law

France’s new law, "Nouvelles Regulation Economiques" (NRE) is another laws-based initiative that will require all nationally listed corporations in France to report to shareholders and stakeholders on a range of sustainability issues—including the environment, employees, the local community, and international labour issues.

The NRE is not a comprehensive reporting system. It imposes a legal obligation for corporations to publicly disclose against a limited set of qualitative and quantitative indicators relating to the social and environmental impacts of their activities. The bulk of the NRE's reporting requirements centre on a number of widely accepted stakeholder themes. The regulations make it mandatory for corporations to report on employees, community, the environment, and International Labour Standards. This type of initiative could be used as a model to enact legal requirements for disclosure of practices, including international labour practices, used in the production of apparel. This disclosure would fall short of the requirements of the ETAG proposal but would increase the amount of information currently available to consumers and other stakeholders (see appendix F).

3.5 Recent Developments in Canada

As described in this section, social responsibility issues and the desire to eliminate sweatshops have joined the mainstream in thinking about the right way to do business in the Canadian apparel industry. Certain new initiatives are emerging, such as the initiative taken by university students to ensure the ethical standards of suppliers who supply apparel and shoes on the campus. Other organizations have created their own standards, some formalized in internal or shareholder documents, others more like guidelines. Many governments, including municipal governments, are ensuring that clauses are inserted into their contract documents or tender documents requiring suppliers to maintain ethical standards. A fairly impressive range of actions is being taken to raise the level of ethical business behaviour in apparel across Canada.

In addition, the federal government has initiated its LDC Market Access Initiative, partly to strengthen economic growth through trade.¹⁹ This initiative became effective January 1, 2003. It embraces 48 LDCs. 34 of them in Africa. This is in line with efforts with other developed nations to help alleviate poverty by encouraging increased trade ties with LDCs. Through the WTO’s Agreement on Textiles and Clothing, quotas were to have been removed from apparel imports from LDCs in 2005. With these initiatives, Canada has accelerated the elimination of quotas from LDCs. Issues such as rules of origin and trans-shipments are being studied and discussed, as well as the possible effect these initiatives may have on domestic textile apparel manufacturers.

3.6 Conclusions on Labour Standard Developments Around the World

All the initiatives mentioned in this chapter are similar in trying to improve labour standards. As such, they provide important new insights around whether to consider the implementation of the ETAG proposal or one of its alternatives. All of the initiatives involve stakeholders as decision-makers and as key resources in achieving desired objectives. All of the initiatives include some form of reporting, some form of disclosure and, except for the French and Australian laws, most are voluntary.

However, none of the initiatives are viewed as directly addressing the issue of labour standards around the world. Perhaps as a result of this, many of these initiatives are viewed as only slowly contributing to the desired changes to labour standards in the apparel industry. This suggests to the Conference Board that the ultimate objective of stakeholders in this case may also be too broad for Canada to address directly. This would further suggest that Canada instead enact a series of measures, similar to the initiatives listed above, that more indirectly and gradually contribute to global solutions to the issue of fair labour standards in apparel.

All of the initiatives provide considerable assistance and guidance on ethical practices. In the process, they provide a very effective definition of the way in which apparel manufacturers need to behave to meet emerging standards. They also provide a roadmap for the types of components to include in any standard set up in Canada. They suggest that a standards needs to include requirements for :

• A prohibition on forced labour;
• A prohibition on child labour;
• A prohibition on harassment and abuse;
• Provisions for locally acceptable minimum compensation and benefits;
• Prohibition of discrimination;
• Health and safety requirements; and
• Freedom of association, unless this is prohibited by the local government.

In most cases, the onus remains on apparel industry participants to choose the manner in which to conduct their business in support of the standards. In today’s highly competitive world, all businesses pursue practices that provide a competitive edge. The initiatives mentioned help businesses publicly focus of the human aspects of doing business in the apparel industry, in support of objectives that Canadian consumers would likely support. But they don’t offer any guarantees—and still depend on the goodwill and social responsibility of industry participants.

Even with all the available resources for the world apparel manufacturers to do the right thing today, there are still entrepreneurs who, for cultural or financial reasons, will not abide by laws that enforce fair labour standards. Such entrepreneurs are willing to do whatever is necessary to avoid them. In Mexico, for example, there are reports of ships being converted into floating manufacturing sites. Once labourers are on board, the ship steams out to sea, to circumvent most of the applicable Mexican regulations. This type of practice is possible because entrepreneurs are willing to do it, workers are desperate enough to take part in such schemes, and governments are unable or unwilling to stop them. Even when they are able to do so, the entrepreneurs find somewhere else where the conditions are ripe for continuing the behaviours.

Again, this suggests that implementing a lasting solution to the issue of unfair labour practices in the apparel industry is not the sole responsibility of the Canadian apparel industry. Nor is it the responsibility of Canadian consumers or their governments and institutions to single-handedly solve an age-old problem. We can, however, contribute to the solution by continuing to work together, enacting laws domestically and implementing and enforcing codes internationally that will ensure that those employing unfair labour practices are penalized and those employing fair labour practices are rewarded. We can also encourage others to do so and contribute to international initiatives in meaningful and effective ways. In the end, all of the parties concerned need to confront and correct questionable business practices and only then will the benefit be felt by those who need it most.

 

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¹⁵ Birnbaum, page 158.

¹⁶ For an example of processes followed by a Canadian retailer, please refer to the Social Responsibility program of The Hudson's Bay Company, as at Feb. 2, 2003 at http://www.hbc.com/hbc/socialresponsibility/default.asp.

¹⁷ This information is based on material obtained from the Students Against Sweatshops campaign web site at http://www.campuslife.utoronto.ca/groups/opirg/groups/sweatshops/sas-c.html.

¹⁸ See the web site, as at Feb. 2, 2004 at http://www.retailcouncil.org/govrelations/national/archive/trd_guidelines.asp

¹⁹ For more information, refer to the LCD Market Access Initiative's web site, as at Feb. 2, 2003 at www.dfait-maeci.gc.ca/tna-nac/ldc_back2-en.asp.