Social responsibility in business

This is the first of two articles on business responsibility by Mayling Oey-Gardiner and Peter Gardiner, both social scientists and principal investigators in a factory human rights audit for the Reebok shoe producer, to be referred to in the following edition.

JAKARTA (JP): Business is no longer just about maximizing profits. Today consumers make other demands on businesses. They demand that businesses behave in a socially (and environmentally) responsible manner or else they will not buy their products.

Under these conditions reports with titles such as "Cruel treatment working for Nike in Indonesia" can be devastating for a product, as consumers may not want to buy such goods from companies where workers are said to be mistreated.

Particularly in developed countries where consumers are becoming better off, better educated and increasingly concerned about their environment, they are starting to demand products that are not only of good quality, but that are friendly to the physical and social environment as well.

Thus, consumers no longer simply seek the least expensive products for a given quality -- they increasingly seek out brands from companies known to be concerned with pollution control and environmental sustainability.

An additional dimension today includes whether or not the products are produced by businesses that are socially responsible -- that is, whether they abide by human rights standards in the workplace.

One aspect of business social responsibility is how business treats its workers. Here, companies often express their social responsibility in regards to workers as codes of conduct or production standards.

These codes or standards frequently include articles on such topics as non-discrimination, working hours and overtime, forced or compulsory labor, child labor, fair wages, freedom of association and collective bargaining, and a safe and healthy work environment.

For example, there may be corporate rules prohibiting discrimination against any worker or group of workers, large or small.

There are often rules on regular weekly working hours and maximum overtime hours and on conditions regarding overtime, i.e. when it is compulsory and when workers can refuse overtime work.

To avoid unfair competition and to abide by existing international conventions, such as the Convention of the Rights of the Child, there are also often rules prohibiting use of prison or forced labor as well as employing children below some minimum legal age.

Most important to workers are rules or standards requiring payment of "fair" wages and to allow workers freedom of association with unions or other work-related organizations.

Finally, attention is often paid to standards in the quality of the work environment -- the degree to which it is healthy and safe.

Social responsibility issues have come to the fore in this era of globalization. Multinational companies now produce branded goods throughout the world. Thus branded automobiles, electronics, garments, footwear and many other goods associated with one country are derived from parts or even final products produced in many other countries throughout the world.

This has increased pressures on producers to deal with human rights production standards in a wide variety of national contexts.

How branded goods are produced depends on the industry. In some cases the main company establishes factories either as a direct investment or as a joint venture. The toy industry is a good example of this type.

In other cases, local companies serve as "suppliers," receiving and filling production orders. This is common in much of the footwear and apparel industry.

In the case of actual ownership, the main company can directly implement its own codes or standards. But, for suppliers, the main company can only demand that their partners or suppliers abide by its standards as a condition for receiving their business.

This latter condition applies to Indonesian companies that act as suppliers -- producing branded goods destined for export to rich countries.

Here, for example, a number of American brand companies for garments or footwear have established human rights production standards that have to be followed by Indonesian suppliers if they want to receive orders from these American companies.

It should be stressed that these developments did not come about by themselves because employers saw the light and were willing to share their profits with the workers.

Non-government organizations (NGOs) and labor associations along with consumer groups have played a prominent role in the drive to ensure that workers are properly treated. And NGOs and journalists continue to monitor business activities in many developing countries, including Indonesia.

In addition, new businesses and accreditation boards and organizations have developed in recent years.

Business for Social Responsibility (BSR) is an established association that meets annually and provides a forum where business leaders can share and learn from each others' experiences in creating a more socially responsible environment for business to operate.

There are at least two ways for obtaining better conditions for workers. The first is by dealing with workers only, uncovering their problems and working to empower them in terms of their rights.

The second is by working with both management and workers in a transparent manner to improve human rights and working conditions and with both sides being aware of exactly what is being investigated. Both methods have been practiced in Indonesia.

An example of the first method can be seen in a study commissioned by Jeff Ballinger of Press for Change from the Jakarta-based Urban Community Mission, involving a survey of 11 Nike and two Bata shoe factories in Indonesia.

In September to October 1999, 25 interviewers were hired to query 4,000 respondents willing to answer seven questions related to human rights practices and with interviews conducted either in the factories during breaks or else after work.

Work was carried out behind the backs of management. They were neither informed nor involved in the survey.

Unfortunately, the scientific rigor of this exercise is open to some question. For example, some of the questions were rather subjective and inconclusive.

Respondents were asked if they had ever seen workers being shouted at or mistreated in this factory, with no reference to the time frame or whether they had experienced mistreatment themselves.

They were also asked simply about their complaints or negative experiences regarding their factory without any objective attempt to assess (e.g. via observation) the seriousness of these complaints.

Also unknown is sampling methodology and reliability of the information, for example, the degree to which seeking workers willing to be interviewed may have led to self-selection and biases in the results.

The results were published under a very provocative title and with a writing style designed to draw the attention of readers and potential consumers and, of course, to shock the companies.

This may put some pressure on Nike or Bata to improve conditions that are sources of major complaint or negative experience.

But it is questionable as an approach to gain the willing cooperation of management in improving human rights practices and overall working conditions.

As well, this approach may fail to uncover problems that require trained professional observation. Workers simply do not always recognize the problems they face, such as whether their working conditions are safe and healthy.