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.