Globalisation

Multi- Stakeholder Initiatives in China - Spotlight on ethical trading initiative

A group of Hong Kong Labour organisations and trade unions

For the past three years nine Hong Kong labour groups and trade union organizations, including the Hong Kong Confederation of Trade Unions, have been involved in a multi-stakeholder initiative (MSI) developed by the British group, the Ethical Trading Initiative (ETI). The Hong Kong groups and ETI have committed hundreds of working hours to the preparation, discussion and implementation of this initiative, but there has been almost nothing to show for this time and effort. For this reason and because many of the problems seem unsolvable without major structural changes to the working of ETI, in the summer of 2006, the Hong Kong groups involved decided to withdraw. The following article gives some background to the project and highlights the key problems in the hope that it will spark debate and discussion for a wider structural review.

Background

The Ethical Trading Initiative (ETI) is a well-known and respected alliance of companies, non-governmental organisations (NGOs) and trade union organizations whose basic objective is to ensure that the working conditions of workers producing for the UK market meet or exceed international labour standards. It is currently working on various multi-stakeholders initiatives to explore and develop complementary approaches to code implementation. ETI is unique as an instance of tripartite involvement and this distinguishes it from other multi-stakeholder initiatives. Hong Kong trade unions and the International Confederation of Free Trade Unions (ICFTU – now the International Trade Union Congress (ITUC)) – have always been relatively supportive of ETI for its resistance to corporate-led projects that exclude the role of trade unions in their CSR work.

The exclusion of trade unions from most corporate strategies on CSR is extremely common as many companies seek to work alone or with NGOs. This strategy helps to ensure that the companies retains control over the CSR project as it can – and does – exclude the NGO from its factories with relative ease in spite of the fact that a trade union’s place in inherently inside the factory. MSI projects, especially involving trade unions, are especially vital in work inside China where freedom of association is denied and the only trade union is the state-sponsored All-China Federation of Trade Unions.

ETI members started an informal China working group to look at potential work inside China. In March 2003, it became a full tripartite group. In 2003 ETI began work on a Joint Occupational Safety and Health Committee project (JOSHC) and contacted Hong Kong groups to participate in the project. According to ETI the project was to work with suppliers to put in place elected worker health and safety committees, to take forward sustainable operation of health and safety in the workplace. The group hoped that a by-product of this work would be improvement in effective worker-management relationships and increased proactive involvement of workers in representing their colleagues.

From Hong Kong, five groups participated in developing the training materials and organising the factory work (such as the health and safety audits, etc.); these were Asia Monitor Resource Centre, Labour Action China, Labour Education and Service Network, the China Labour Support Network and the Chinese Working Women Network. Four other groups were involved as advisors to the project, namely, China Labour Bulletin, The Hong Kong Confederation of Trade Unions (HKCTU), The Liaison Office of the ICFTU/Global Union Federation/HKCTU/Hong Kong Trades Union Council (IHLO) and the Clothing Industry, Clerical and Retail Trade Employees General Union.

Apart from the Hong Kong-based groups the ETI members also included the following companies: Asda, Boots, The Body Shop, CWS, Debenhams, Marks & Spencer, Monsoon, New Look, Next, Pentland, Sainsbury’s, Tesco, William Lamb Footwear, and WH Smith; the trade unions, International Textile, Garment and Leather Workers’ Federation (ITGLWF) and Trades Union Congress; and the NGOs, Catholic Agency for Overseas Development and Women Working Worldwide.

There were then high hopes for the JOSHC initiative —both from the Hong Kong groups and local trade unions and from the IHLO. However in practice the project has shown little originality in its objectives and outcomes. There are obvious difficulties in using a tripartite model in China, in particular when the aim is worker empowerment. Nonetheless many of the problems that have arisen are not a result of the restrictive political environment surrounding the project. They are a result of poor communication and project enforcement that has enlarged rather than narrowed the discrepancy in understanding across all parties about the principles and means of implementation of the project. These communication problems appear to be the result of the structure of ETI itself.

Brief Review of the JOSHC Project

In 2003 the ETI China Working Group (CWG) contacted Hong Kong groups about the project and eight groups came on board (the Hong Kong clothing union became involved as the project progressed). All groups and the ETI partners (the brands and the ETI secretariat based in London) spent the next two years drafting the formal project proposal and Terms of Engagement (TOE). After nine drafts a final proposal was agreed in September 2005.

In May 2005, HK representatives participated in the ETI Biannual Meeting and discussed relevant issues with CWG members. Participating corporates handed in list of nominated suppliers. Several problems concerning communication, confidentiality, commitment and implementation were raised and discussed with some apparent success.

In the autumn of 2005 the TOE, criteria for supplier selection and a series of crucial documents were agreed upon and the project was launched in October. However several crucial agreements had not been implemented. For instance, nominated suppliers did not live up to the criteria of supplier selection agreed in May 2005. One of the suppliers revealed that the buying company had ceased orders since April 2005; three other suppliers were later found unsuitable for the project. Local corporate representatives had been poorly briefed. The Occupational Safety and Health (OSH) workshop to prepare the suppliers (as agreed in the project proposal) had failed to take place; a short introductory briefing was held instead and yet none of the suppliers who participated had fully understood or were completely signed on to the project.

As a result of these shortcomings only one out of the five original suppliers had formally signed onto the project and the rest had no agreed or clear idea of the exact nature and expected outcome of the project. Indeed even when the project finally got off the ground and the five HK groups began work inside the factories they found that their corporate or/and supplier partners in all site-teams still knew very little about the project. Thus rounds and rounds of briefing and negotiation started anew and still none of the groups could proceed with concrete work on site. By June 2006, one out of the five corporates dropped out; three out of four nominated suppliers either dropped out or were then concluded by the corporates to be unsuitable for the project.

Key Problems

Lack of shared vision
The Hong Kong partners had proposed since 2004 several crucial steps in creating the essential shop floor conditions for meaningful worker representation, such as stronger and more pro-worker mechanism including workplace elections and greater worker representation in the JOSHC. Despite many rounds of explanation from Hong Kong partners to London, these steps, though not without controversy, have not yet been formally debated with all the parties involved, thus creating confusion, disagreement with some and procrastination with others. No agreement was reached even on the eve of implementation in some site teams. Failure to mediate a levelled understanding of worker participation in the China project has undermined the unique principle and position of ETI by risking too much emphasis on the blessing of corporates and the promotion of a business case to them. The resulting discrepancy concerned matters of fundamental principles underpinning the initiative. This should not be confused with, nor could it be abridged by, ETI’s insistence on it being the NGOs’ responsibility to communicate.

Poor communication at almost every level
The problem of communication was repeatedly stressed, and yet no effective measures were taken to improve it. The internal communication from the UK corporate office to their local office about the basics on CSR and the JOSHC project was unsatisfactory. Moreover, supplier selection proved defective and those who had been selected were poorly briefed about ETI and the concrete steps of implementation of the project. None of them had officially signed up to the project. Both the HK groups and the local ETI coordinator became caught up in a swamp of futile negotiation with uninterested local corporate reps and confused suppliers.

Lengthy decision making
The lengthy and out-of-context decision-making of ETI UK undermined the project’s progress. Despite two years of discussion and drafts, every single detail still had to be decided in the UK. Despite the existence of a Project Advisory Board in Hong Kong, we have seen very little respect for this body or any effort to empower the local parties to make decisions according to the agreed proposals. Apart from the inevitable delays, decisions made often disregarded concrete conditions here in HK and the mainland. For example, the need to recruit an independent technical inspector was agreed at a very early stage. Despite the fact that this appointment was central to the project’s success, the decision was put off until February 2006, which again suspended the progress.

Weak corporate commitment
The most important reason for the ultimate failure of the current project has been the weakness of the corporate commitment to the project or indeed to CSR in general. Some companies involved do not have quality in-house monitoring or code implementation mechanisms. Many local representatives are concurrently also in other, sometimes even conflicting, positions, for instance being sourcing manager and compliance officer at the same time. Most of the local offices do not have an effective workers’ complaint handling mechanism. And we seriously doubt the possibility for any improved effectiveness in the future given the poorly laid groundwork. It is hardly surprising that many local representatives are so reluctant to join the project.

The critical question of real-term responsibility sharing between the companies and the suppliers has never been clear. In one site team, the corporate’s reluctance to commit to longer-term business relations and to share the financial risks posed real concerns to the supplier in participating in the project, as evidently the latter lacks capacity in fixing the OSH problems on its own. The Hong Kong partners have raised these questions to ETI and the corporates. The reaction of the corporate in concluding that the selected supplier was not suitable and a replacement would be made is disappointing. It shows only the intention of the corporates and ETI to accomplish ‘a project’ but not giving real support to the suppliers in solving genuine problems which the corporates themselves are part of.

Experience has shown that strong corporate support is essential to enforcement and problem resolution. For a long-term endeavour like the JOSHC to succeed, the company would have to devote much more resources and effort.

Weak monitoring and implementation
Initiating and coordinating the project with multiple stakeholders, ETI had a responsibility to bind the corporates to their undertakings. However, the structure of ETI appears to provide little guidance or rule enforcement to the corporate members. While the TOE clearly stated the corporates’ undertaking to proactive participation in detail, ETI has taken neither effective means nor sufficient action to ensure their compliance.
Instead of improving the enforcement of the project principles and agreed steps, ETI’s response to the problems that have surfaced so far was rather to insist on NGOs’ responsibility to persuade and get the suppliers on board. This is a serious oversight confusing the role and responsibilities of different stakeholders. Despite the efforts of the local groups involved—and their misgivings—these proved ineffective without proactive support from the local corporate representatives.

Recommendations

Shared Vision – CSR not PR
It is imperative that all those working on a MSI project have clear and well-defined aims and objectives, and that time is spent not on developing the words of an agreement but in ensuring that the spirit of the agreement is the same for all involved. Too much time can be spent in dialogue between the partners trying to bridge the gaps between different objectives rather than trying to collect partners with shared aims. If a project has as its aim the creation of a workers committee and an ultimate aim of generating genuine worker participation then this must be made clear to all involved and the persuasive argument of increased productivity and brand recognition should not be induced to get corporates on board who ultimately do not wish to see more than a successful ‘China project’ to show their clients and shareholders. In the case of ETI, much time was wasted on secretarial and administrative drafting rather than meaningful discussion of principles and as a result the disparate groups involved spent three years working with very different understandings of the project outcomes.

Ordinary CSR projects aimed primarily at improving corporate public relations are ten a penny but there are corporates who genuinely wish to see improvements and it is these who should be encouraged. We have seen several brand names who have joined corporate MSI projects and once they have joined, sat back and done nothing—believing rightly that their very enrolment in a project would afford them credibility for their ‘commitment’ to CSR; but little can be achieved with such partners.

Improved decision-making and decentralisation
There needs to be recognition that decision-making and time needs to be spent on the ground in China and Hong Kong and not in Europe or North America. Since the withdrawal of the HK groups, ETI has hired a full-time coordinator based in Hong Kong—a step which the local groups and unions hope will drastically improve both the problems over communication, the issues over the decision-making bias towards the London office and the lack of corporate awareness and ownership of the project. It is too early to say if the new post will resolve all these issues but it is clear that ETI is committed to making changes.

Long term vision
For many the ETI China project is just that – a short-term ‘project’ which will run for a few years and then end; but for the local groups, trade unions and more importantly the workers themselves, the improvement of working conditions and steps towards freedom of association in China is not a project but a life-long aim. Corporate members need to have a long-term commitment and there needs to be adequate follow-up in any project that does finally get off the ground so that the years of preparation is supported and developed.

Involving trade unions as full partners
The unique nature of multi-stakeholder initiatives involving trade unions needs to be further developed to allow the role of trade unions to grow as opposed to being seen—and treated—as a token of tripartitism. ETI emerged from the corporate structure and the local groups and trade unions became involved after the project’s conception rather than being involved at the start of the discussions. Trade unions involved in ETI need to ensure that they too communicate between both the unions involved in London (such as the ITGLWF) and the local Hong Kong union bodies, and that they share their knowledge of the workplace and worker organizing; otherwise there is little to distinguish ETI from other projects except for their cumbersome communication and decision-making structure.

Conclusion

ETI has taken many of the groups comments on board and, according to ETI material: ‘Many lessons have been learnt as the project has struggled to progress, with challenges in forming a common understanding between all stakeholders, and issues arising from trying to tackle a single rights issue in isolation from others. The group is currently reflecting on lessons learnt, and is in the process of constructing a revised pilot that will build upon previous experiences.’

This is heartening news and we hope that it will work. ETI has brought 37 corporate members to a common code and form a tripartite body with trade unions and NGOs. This is truly remarkable but the story should not end here. Further challenges lie in ensuring that the corporate members seriously practice long-term ethical trading. Recent experience shows that ETI is more of a protective shield than a propeller head to the corporate members. The learning approach and collective decision-making structure are ideally rosy but in fact allowing corporate members to procrastinate as opposed to taking concrete action. At times it has even appeared to give them leeway to avoid their responsibilities. Should these key issues remain unresolved, not only will the project remain unsuccessful in South China, but the wider value of ETI will be inevitably questioned.

The article above appeared in the Asian labour Update in the autumn of 2006 (ALU Issue No. 60, July- September 2006) and was drafted by IHLO on behalf of the groups concerned.