Is policing your suppliers effective ? - the WTO-column

Are you suppliers not using child labor, paying the minimum wages and in general sticking to the Chinese labor law? The answers on those questions do raise concern among the larger foreign companies investing or purchasing in China, because they might think themselves it is a good idea to stick to a bit of corporate responsibility. And if those companies do not think it themselves, they have stakeholders who might remind them about those responsibilities.

Apple was the last one when one of its main suppliers in China, Foxconn, was accused this summer of mistreating their workers, according to a British tabloid, upsetting the trendy iPod-crowds. Apple send an inspection team to check, and they concluded that apart from some minor mistakes, Foxconn sticked to the rules Apple had set, the inspection showed. On the internet current en former employees started to hit out against the company but it seemed basically back to business. Apple was not the first one to get into trouble, and would possibly not be the last one. That is why you need a policing system, right? If all was well, you did not need to monitor your suppliers.

The industry for policing and implementing the CSR or corporate social responsibility in China has been booming. Apart from the resources companies need internally to organize their systems, they employ consultants, organize training sessions and - of course - monitor whether their suppliers actually stick to the policies. My perception of the whole CSR-industry was that although it would never be flawless, it would work to a certain degree.

Of course, the average shoe producer has to deal with thousands of suppliers and that would make the case not easy. Still, it seemed like that maybe all was not well, but that there was a system in place that could identify outrageous sweatshop conditions and deal with them.

That was until I recently started to browse through some carefully hidden academic assessments. Boy, was I wrong. The image that raises from the studies I have seen recently is of a system that is faulty at best. It does not suggest that things are really bad, but that the suppliers have been very good in misleading those corporate monitors, and actually sometimes bribed them. Since the multinational companies sending the monitors were not to eager to get bad news, monitors "learned to look away", reports say. The main training workers got was actually in learning what to tell the monitors.

Is this a case of the emperor wearing no clothes? The key players in this industry have no interest in standing up and telling the system in itself is not working. That would be killing a golden goose. Perhaps the situation without this faulty CSR-system might actually be worse, so it is understandable that the fact that the current CSR-system seems bankrupt does not have to mean it should be abolished right away. The Chinese banks are also doing quite alright for a technically bankrupt industry.

But what I have not noted is a debate on how things can become better. Of course, it is hard to do as if everything is alright and start improving since that could be seen as an admission that not all is well. Now it seems some important debates are long overdue.

Fons Tuinstra

PS: It is a pity a day has only 24 hours. So I missed a discussion on CSR at the Reuters headquarters in New York, although the opinions varied on how interesting the discussion actually was. Here a report at Global Voices by Rebecca MacKinnon and here by Stephen Frost of CSR-Asia . The whole event can be seen here.

PSS: Honestly: I had written the whole stuff long before Business Week was repeating the same doubts on the audits .