Economic and Social Security Cluster, 8 Sept. 2004 Asia-Europe People's Forum.

TNI

November 2005

CORPORATE SOCIAL RESPONSIBILITY: TAMING THE PROFIT HUNGRY BEASTS WITH "CODES OF CONDUCT"?

Codes of conduct: Straight jacket or protective clothing?

by Apo Leong
Asia Monitor Resource Centre, Hong Kong

Quotes

"In the US, our workers decided not to set up a union," Mr. Menzer said, "It was the same
in China, Bangladesh other developing countries." Mr. John Menzer is the head of Wal-Mart’s
international operations. The ACFTU (official union in China) on two occasions openly
attacked Wal-Mart for not allowing it to organize its 18,000 workers. (SCMP 2 Sept 2004)
Every time before the brand people come to do auditing, the management would launch mass
mobilization, and lecture us how to consider the whole picture, i.e. to avoid creating mass
unemployment because of one sentence we make. (Xiao Chen Hotline, 2 Aug 2004)
What is a code of conduct? Do you mean company regulations? Yes, we have very strict
regulations, and if we make mistake, we will be fined. Quality control is very high in this company.
(Pun Ngai, 2004)

These are vivid illustrations by TNCs senior staff, labour activists and workers responding to the new
phenomenon of corporate social responsibility movement. On one hand we are repeatedly told of shining
examples of ethnical and social business and there are more to come, but when we approach rank and file
workers, their real stories are totally different, if not dismay. Most of them do not know what it is all about,
and worse still, there is usually no proper and reliable report back system or mechanism to the workers after
an audit is made. Even if the FLA, GAP, Mattel audits reports are available publicly on the website, there is
no local language translation for workers. This defeats the amplified purpose of codes for respecting
workers’ rights as the working people whom the codes would like to serve are not accessible to the
information directly.
TNC monitoring has a long history, as long as a new global supply chain which consists of workers in the
south, manufacturing capital in Asia and western buyers. Consumer movement organisations in developed
countries have been playing a particularly important role in pushing TNCs to improve working conditions by
organising consumer boycotts in major shopping centers in big cities such as London, New York, Paris,
Amsterdam, and elsewhere. In response to this sort of pressure and other pushing factors, companies
introduced corporate codes of conduct and internal/external inspections to monitor compliance to the codes.
With the weakening power of governments and trade unions, the privatisaiton of labour rights monitoring
moves ahead by leaps and bounds. Accordingly, professional and systematic regulation of the labour
practices of TNCs has developed, accompanied by the emergence of a standardized monitoring process
performed by auditing companies, and various certifications, such as SA8000, ISO14000, etc. New
pro-business NGOs and auditing/consultancy firms are formed, which in turn create job opportunities and
income for many who reap for profits at the expenses of the workers. They are competing with each other,
despite some five major ones are talking about harmonisation (SA8000, WRC, Fairwear, FLA, ETI). The
multiplicity, overlapping and endless auditing of these codes have been a major complain by many suppliers.
They also complain being coerced to pay for corrective actions, certifications, and bear most of the blame.
But then, they will shift the burden to workers, or to relocate to darker corners, or to outsource to other
suppliers. There are dozens of books and journals on this subject, some even teach managers how to deal with
CSR, auditing in a smart way. We are aware that some suppliers would employ consultants to fabricate a
‘model facility’ and to train ‘happy workers’ to meet the auditing demands.

However, organisations working in this area have been witnessing a lot of problems in practice. In many
cases, factory owners are well informed beforehand about inspections, allowing them to clean up the mess.
Interviews with workers are arranged by management, and in any case, most workers have no freedom to tell
the truth, for fear of being laid-off or disciplined. In a recent case of mass chemical poisoning of a GP
battery factory in China, workers complained that no improvement after the auditors were gone, but the
facility was certified in 2001 up to the required ‘health and safety standards’. Even if inspections are done
‘independently’ and can bring provisionally improvements, workers play a very passive role (if any) in the
process, and it is therefore not likely to be sustainable. In the late 90s, when we made a counter offer to the
ETI pilot project on worker education as a component of their initiative, they turned us down instantly. To
us, pre-audit worker education is very important, as workers should have the right to know their basic labour
rights and the contents of the codes and to learn how to exercise them. This should make an audit more
meaningful.
Although many argue that the existing problems are merely procedural ones and therefore, can be fixable
with more capacity, stricter auditing and more transparency in the process. It is difficult for us to believe that
the phenomenal problems are rooted in the real nature of codes as ‘privatised labour regulation’ which is
often, and if not all, subsumed to the logic of PR and more fundamentally of making profits.
Nevertheless, more and more labour organisations and activists have been attracted to the code-based strategy,
almost as if it provides an alternative to trade unions and other forms of worker -organising. Some justified
by saying that we need to engage constructively as direct action/campaign fatigue is happening in western
groups, non-engagement is more damaging, and recognizing good guys would bring positive changes. Our
monitoring project began with a criticism with this emerging trend. This kind of engaging strategy in
practice is not empowering existing worker organising but replacing or hindering the more basic and
fundamental principal of workers self organising. We believe that, rather than pressuring brand-names to
implement codes in supplying factories, or to work with them in code enforcement, assisting workers to
organize in workplaces largely managed by TNCs is the sustainable way to improve labour conditions in Asia.
It is well understood that freedom of association (FOA) is not taken up seriously by most of the codes, and
even if this is taken up, auditors would propose or accept ‘parallel means’ to replace genuine trade unions.
What we found out in typical cases, these parallel means are only top down means such as credit clubs, or
leisure groups set up mostly by the companies, headed or manipulated by the human resource officers. We
are now trying to develop a participatory labour monitoring system, through which external monitoring
groups can work for better working conditions, together with workers and without harming workers’
autonomy.

We would like to argue that even if the best existing code was fully implemented, the basic issue of workers’
rights would still be addressed. This is because workers would continue to be ‘objects’ rather than ‘subjects’
of the whole codes of conduct exercise where they continue to have no say in matters of where, when and
how they work. TNCs and their ‘independent monitors’ would essentially continue to run workers’ lives,
determining what their rights were, and whether or not they were being exercised. The recent cut and run case
in Central America (Gildan in Honduras) is an alarm bell to those who are so obsessed with codes of conduct
movement. – how to pressure brands once workers are organised. Other problems include confidential
agreement with the companies in codes monitoring, which has become a straightjacket for NGOs and
activists.
Looking at the bigger picture, we should not only address the piece meal approach of attacking the fallacies
and defects of this or that code and its auditing process, but to maintain or broaden our challenges to the
whole political economy of present system. Therefore, the improvement of working conditions on the basis
of voluntary codes and consumer-centred campaigns is constrianted exactly within the context that market
allows, no matter how many concessions a few individual companies can make. However, at the same time,
the very contradiction that it is based on the market makes it possible for workers to ultilise corporate codes
of conduct as a means to organize themselves in and against capital, under certain conditions.
A fundamental issue surrounding Codes of Conduct, then, is credibility, and the extent to which they can be
taken seriously. A more basic point is one of power: who has the power to determine what is acceptable in
the workplace, and who has the power to make sure these standards are met?

Key references:

AMRC, A Critical Guide to Corporate Code of Conduct, Hong Kong 2004
Steve John and Stuart Thomson, New Activism and the Corporate Response, Palgrave 2003
Michael Hopkins, The Planetary Bargain – Corporate Social Responsibility Matters, Earthscan, 2003
Tom Curtin, Managing Green Issues, MacMillan, 2000
Simon Zadek, The Civil Corporation – the New Economy of Corporate Citizenship, Earthscan, 2001
Jem Bendell, Barricades and Boardrooms – A Contemporary History of the Corporate Accountability
Movement, UNRISD, 2004
Asian Labour Update, various issues
Wick Ingeberg, Workers’ Tool or PR Ploy? – A Guide of Codes of International Labour Practic e,
SUDWIND, 2003
Maquila Network Update, September 2004, volume 9, no. 3
NGLS/UNRISD, Voluntary Approaches to Corporate Responsibility, 2002
Steve Hilton and Giles Gibbons, Good Business, Texere 2002
Ann Zammit, Development at Risk, South Center and UNRISD, 2003
Pun Ngai, Globalised Factory Regimes and ‘Re-organised Moralism’: Transnational Corporate Codes of
Conduct and Labour Politics in China, Hong Kong 2004
Globalisation Monitor no. 16, August 2004 (in Chinese)
Apo Leong, Approaches to Promote Workers Rights, in Forum, April 2004 (in Chinese)