Fair play in supply chains

The 2012 AFL footy season is over, but the news last month that Sherrin footballs were being produced using child labour highlighted the risks facing procurement staff when manufacturing supply chains extend overseas.

ECO-Buy’s Business Development Manager, Mary Dunne, caught up with Nick Savaidis from Etiko to talk about the issues.

Q1. Sherrin has in place a global corporate social responsibility compliance program which prohibits use of underage workers, and their contractors and sub-contractors are independently audited. What more could Sherrin realistically have done to avoid this situation?

A. The US Department of Labor publishes an annual report – List of Goods Produced by Child Labour or Forced Labour – which highlights sports balls and India as being high risk. Jalandhar, India, where the Sherrin sub-contractor was based, is an area renowned for sweatshops and forced labour. The US Dept of Labor report is publicly available, so purchasers need to pay attention to this type of information and put in place appropriate strategies to manage the risk.

Having a code of conduct or compliance policy isn’t in itself enough. The reality is that suppliers will agree to comply in order to win the business, and it is unfair to place the blame solely on them when brand owners shop around the developing world for the cheapest production and are focused on achieving the lowest price contract. Often the value of these contracts is so low that the local supplier would be unable to meet the costs of compliance anyway, and this just increases the risk that they will use unethical working practices in order to deliver the contract.

Purchasers must accept that responsibility goes up the supply chain and ultimately sits with them and the decisions they make. An ethical supply chain at the lowest possible price isn’t realistic. 

Q2. Many companies who have manufacturing supply chains overseas rely on certification schemes such as SA8000 (social accountability standard) and Fairtrade to help ensure ethical working practices are in place. Yet in September 2012, 300 workers died in a fire in Pakistan at a factory which had been audited as being compliant with SA8000 only a few weeks before. Workers told investigators that they were threatened by management if they had told the truth about working conditions when the auditors were on site. Clearly any certification scheme is not 100% watertight - how much should purchasers rely on these schemes and what else should they do?

A. No certification scheme is 100%, but it is at least a start. How the scheme is audited is key – for example, the audit regime should include unscheduled inspections to ensure that workers cannot be ‘coached’ in advance or threatened by management. With some schemes the auditors themselves don’t have advance notice of the inspections they will be undertaking. The Fairtrade organisation has a set of standards covering labour practices which includes a combination of scheduled and unscheduled inspections. Purchasers should steer clear of anything which claims to be ‘Guaranteed Ethical Supply’ as this is meaningless. We call it a “tick and flick” approach, whereby purchasers just accept at face value what a supplier says without any further checking or verification. 

At Etiko we have established stitching centres in local villages, so it is easy for the women to walk to work close to their homes. I also visit suppliers myself and visit workers in their homes, taking different translators with me. Being visible to, and part of, the local community does help minimise the risk of something going wrong.

A particular strength of the Fairtrade scheme is that it engages with workers, and ensures they have an active say in how their workplace is managed. Workers committees and cooperatives also decide how the Fairtrade premium should be applied (the premium is an additional payment over and above the agreed price to support local social, environmental and economic development initiatives). The Fairtrade organisation is currently working towards standards for clothing and footwear, which means that it will become increasingly relevant to purchasers across government and business looking at categories such as uniforms.

Q3. Supply chains can be highly complex, with many tiers of sub-contractors. Given the Sherrin and factory fire examples above, how does the Fairtrade certification scheme minimise the risk of unethical or illegal working practices taking place somewhere in the supply chain?

A. Fairtrade certification does not allow it unless every supplier in the chain is certified in their own right. Detailed records must be kept ensuring the traceability of the product at every stage of the process and these records are audited.

Further information:

Etiko is a Melbourne-based Fairtrade certified supplier of fashion, footwear and sports equipment. For more information, click here.

For more information on Fairtrade, click here.