Firms come under fire over sweatshops

Firms come under fire over sweatshops

Victoria Knight, Dow Jones, Brussels

The working conditions were terrible.

More than 3,000 women toiled for up to 70 hours a week in a
stifling hot factory without access to cool, clean drinking
water. They risked being fired, or even prosecuted, for joining
unions. And they were paid a mere 2 euro a day.

When activists uncovered that Adidas Salomon AG was buying
sweatshirts produced in these conditions from the PT Dada factory
in Indonesia, the German company responded. It forced the
Indonesian factory's management to install watercoolers,
reinstate fired union activists, and stop humiliating
punishments.

"High profile retailers know they must act because consumers
want this issue addressed," says Scott Nova, executive director
of the Washington-based Worker Rights Consortium.

Human rights campaigners such as him are successfully stepping
up pressure on European companies to improve working conditions
in poor developing countries.

Some, like Adidas, are trying to cooperate but others are
resisting and Third World governments aren't doing much to help.
And even the most receptive multinational companies find that
their best efforts aren't enough to satisfy many critics.

Until recently, European textile companies escaped censure.
Anti-sweatshop campaigners such as the Fair Labor Association
were born on U.S. campuses. Activists focused their energies
attacking Nike Inc. and other U.S. companies.

In the past few years, however, the issue has crossed the
Atlantic. Human rights leaders, trade unions, and religious
groups have formed a loose alliance called the Clean Clothes
Campaign and have begun attacking Adidas, Hennes & Mauritz AB,
Benetton Group SpA and other European companies who buy textiles
everywhere from Indonesia to India, Mauritius to Moldova.

Governments around the globe provide only limited guidance.
Both the Organization for Economic Cooperation and Development
and the UN's International Labor Organization sets out minimal
standards, banning child and forced labor for example. But both
companies and campaigners complain that many Third World
governments don't enforce ILO rules. And the OECD guidelines
aren't binding on companies.

As a result, campaigners prefer to pressure companies through
damning exposes. They fed information to journalists about
Benetton subcontractors who they claimed were using child labor.
The Italian garment maker denied the charges. In Adidas's case,
activists leaked news about its Indonesian subcontractors to
German television stations.

The German company hired a former Save the Children Campaigner
to run its subcontracting program, joined the Fair Labor
Association and began pressuring its suppliers. It commissioned a
study of incomes and living costs in Indonesia and when the
results are released in the second half of 2003, Adidas has
promised to use them to set workers' future pay levels.

For companies that cooperate with activists, the payoff is a
potentially powerful marketing tool. Fair Labor Association
members can sew the Fair Labor Association 'FLA' label into their
clothing.

Cooperation also serves a defensive purpose. In the U.S., Nike
went through a painful consumer boycott during the mid 1990s and
European companies fear similar actions might cross the Atlantic
unless they act.

And yet, the activists continue to tussle with textile makers,
even with the good student Adidas. One major issue concerns
monitoring. Who should check that companies live up to
commitments? In April this year, the German company agreed to let
independent monitors conduct unannounced inspections at factories
and do follow-ups at those plants that don't make the grade.

Many activists still don't think this is enough. They
criticize the Fair Labor Association because it doesn't have any
trade union members on its governing board.

Campaigners also test company claims. Last year, the Clean
Clothes Campaign attacked Holland's largest retailer Vendex KBB
NV, saying some of its Indian and Sri Lankan subcontractors force
workers to stay on the job for up to 90 hours a week for only 40
euro a month.

"Vendex's current code of conduct and monitoring system are
ineffective," the organization said.

Vendex says it is in talks with Dutch activists to tighten its
monitoring. It's Hema subsidiary also is considering independent
checks of its subcontractors.

"We do our best to ensure that all our suppliers are treating
their workers correctly, but there's always a possibility that an
NGO finds a situation," says Bonnie Linthorst, a Vendex
spokeswoman. She can't confirm or deny the chargers against
Indian and Sri Lankan subcontractors, saying the factories
involved weren't named in the report.

Trade unions and human rights activists are also targeting
Pinault-Printemps-R edoute SA, the French retail conglomerate
that owns Gucci and a string of other luxury high street brands.
The campaigners allege that Pinault's La Redoute sourced some of
its products from Myanmar, formerly Burma, a country with a
record of using forced labor.

"We made the decision not to import goods from Burma" and "we
don't run sweatshops," counters Thomas Kamm, a Pinault spokesman.

Once problems are identified, most campaigners and companies
agree that it is better to work with suppliers than desert them.

Adidas has canceled contracts in a few cases in China after
discovering factories that employed children and using forced
prison labor. But aside from such outright violations, the
company presses management to make improvements. Otherwise, it
fears workers will suffer the most, losing their only source of
income.

"Only if there's no cooperation will we terminate contracts,"
says William Andersen, Adidas's Director of Social and
Environmental Affairs for Asia.

Dealing with subcontractors in the developing world requires
coalition building. When the Hong Kong Christian Industrial
Committee complained about conditions for workers making
footballs at a factory in mainland China, Adidas started
pressuring the factory's management to increase pay, reduce
working hours and improve safety.

But Adidas's leverage is limited. It accounts for only 10
percent of annual production. So it has asked other major buyers
to make similar demands. Negotiations on the issue continue.

Simple economics will always continue to push multinationals
to search out low cost production centers. Developing countries
are desperate for their investment. But since consumers insist on
safeguards, expect much more sweating in coming years over Third
World sweatshops.