Working conditions in overseas factories that produce apparel for the U.S. market have become controversial, putting companies on the spot for their decision to transfer jobs to faraway countries. Here's how one company is responding.
Tomorrow, Reebok International Ltd. will become the first company in the footwear industry to release an in-depth, third-party examination of labor conditions in the factories that make its products. We are not making the report public because it shows our company in an unequivocally favorable light--far from it. We are releasing it because we think it is time to confront and accept responsibility for correcting the sometimes-abusive conditions in factories overseas. We'd like to encourage other multinational corporations to follow suit.
The report, titled Peduli Hak--Indonesian for "Caring for Rights"--assesses conditions in two factories, PT Dong Joe Indonesia and PT Tong Yang Indonesia, which employ approximately 10,000 workers to make our footwear. Reebok doesn't own these factories; we selected them because they account for more than 75 percent of our footwear production in Indonesia, and have many similarities with other athletic footwear factories in Asia.
We chose the independent research and consulting firm Insan Hitawasana Sejahtera (IHS) to perform the assessment, based on the recommendation of leading human rights professionals who credit it with impartiality and objectivity. To ensure the team's independence, we guaranteed IHS full access to factory records and workers, without intervention from Reebok or the factory management. We also promised in advance to make the IHS report public.
The report, based on 1,400 hours spent inspecting the plants, observing working procedures and interviewing workers over a 14-month period, highlights some disturbing facts about the working conditions there. For example, it criticizes the way the factories' managers communicate with workers, noting that most workers are functionally illiterate and could not understand their rights under their collective bargaining agreement or the details of their wage statements. The report also found that it was more difficult for women than men to obtain promotions or supervisory positions. It faulted the factories' health and safety procedures--in particular the procedures governing the use and handling of chemicals. The report also describes steps the factories' owners have been taking to rectify these problems.
Some of the flaws the IHS inspectors uncovered presented more of a challenge to correct than others. It is fairly simple to improve inadequate lighting, or ventilation where workers were being exposed to chemicals. And factories raised pay to bring it in line with the government's determination of a minimum living wage, since wages had not kept in line with the rapid fluctuations in prices following Indonesia's economic crisis. But it was altogether different when inspectors reported that drums containing the remains of hazardous substances were routinely left in areas accessible to the public, in violation of local hazardous waste laws. When the factory management changed its procedures to comply with the law, members of the local community protested; they had been collecting the drums and reselling them. In response, the factories adopted policies to allow for local collection of scrap metal and other non-hazardous waste materials.
Why did we undertake this potentially damaging workplace assessment, and why was it important to make the results public?
The simple answer is because of the commitment we at Reebok have made to respect the fundamental human rights of the nearly 25,000 workers in Asia who produce our footwear. That's why we placed a heavy emphasis on worker interviews (950 workers answered surveys; 500 took part in confidential interviews). It is also why we made Indonesian-language copies of the report available to the workers, and why we presented the report at a meeting with our footwear contractors.
But there is another reason, which is just as important. We want to encourage other multinational corporations that may be reluctant to open the doors of the factories manufacturing their products to in-depth inspections. Quite simply, we want to show that a detailed, critical report about factory conditions can be disclosed without the sky falling. And we'd like to change the attitude that has prevailed among many companies for many years--that they do not have any real responsibility for conditions in factories they do not own, or for the treatment of workers who are not their employees.
In 1992, Reebok adopted a code of conduct requiring that the factories of our global suppliers comply with internationally recognized human rights standards. Ever since, we have incorporated that code of conduct into our contractual agreements with factory owners and have monitored their compliance.
Despite these efforts--and those of some other companies--critics remained skeptical. They rightly point out that codes of conduct are little more than window dressing unless there is an effective process to monitor workplace conditions and determine whether standards are being met.
The Peduli Hak assessment was an attempt to address these concerns. But many multinational corporations that produce footwear, apparel and toys in the global marketplace remain fearful; although many now have codes of conduct, they are unwilling to undergo independent external monitoring, or suffer the embarrassment and expense that exposing workplace conditions might produce.
This fear of monitoring is seen in the reluctance of many companies to join the Fair Labor Association (FLA), which is chaired by former White House counsel Charles Ruff. The FLA has adopted procedures to accredit independent monitors who will be qualified to inspect factories for compliance with a Workplace Code of Conduct covering nine key areas: child labor, forced labor, discrimination, harassment, freedom of association, wages, health and safety, hours of work and overtime compensation.
Reebok and nine other companies (Adidas-Salamon AG, Kathie Lee Gifford, Levi Strauss & Co., Liz Claiborne, L.L. Bean, Nicole Miller, Nike, Patagonia, Phillips Van Heusen) have agreed to participate in the FLA's monitoring program. While this is a good beginning, it does not amount to the broadly representative segment of the business community that any monitoring program will require to be effective. Of course, we hope the Peduli Hak assessment will benefit thousands of workers in Asia--but we also hope that its publication will encourage other companies to join us in seeking solutions to substandard workplace conditions in the global economy.
Paul Fireman is chairman and CEO of Reebok International Ltd. The Peduli Hak report will be available Monday on the Web at www.reebok.com.