Trying to secure decent working conditions Do corporate social responsibility audits improve risk management in global garment supply chains?

University dissertation from Stockholm : KTH Royal Institute of Technology

Abstract: Most consumer goods, such as garments, toys,and electronics, are now produced in global supply chains. This outsourcing of manufacturing to regions with lower production costs has raised concerns over labor rights violations. Retailers and brands have responded to this by introducing policies, so-called codes of conduct, outlining minimum requirements for working conditions at their suppliers.The widespread use of codes of conduct as a voluntary means of managing the risk of labor abuse in global supply chains has led to intensive debates about the impact of suchcodes at the point of production. Has companies’ work with codes of conduct within the voluntary corporate social responsibility (CSR) framework managed to secure good working conditions, and if not, to drive improvements at the factory level? This thesis examines the question empirically by analyzing 288 code of conduct audits of garment factories conducted between 2004 and 2012 by Fair Wear Foundation (FWF), an independent non-profit multi-stakeholder organization. The data consist of audits of 229 sewing factories in Asia, Eastern Europe,and North Africa that supply European garment brands.Paper I analyses the non-compliances listed in the audit reports and whether factories audited several times by FWF improve over time. The results show that even rigorous multi-stakeholder audits seldom identify violations of freedom of association and harassment of workers, thus demonstrating the difficulty of present audit methodology to capture these violations. Improvement over time could be seen when analyzing the 43 garment factories where more than one audit was conducted by FWF. However, these improvements were moderate, i.e. compliance increased by only 7–15% between audits. Paper II examines one specific aspect of code of conduct compliance, i.e. chemical safety for workers,thatthe literature finds is an area where improvements are likely to be seen. By examiningthis areain detail, we hope to identify what characteristics correlate with compliant factories and what improvements can be seen over time. Theresultsshow that 43% of the suppliers received remarks on chemical safety at the first audit. A binary logistic model was constructed including the number of previous audits, characteristics of the suppliers,and characteristics of the relationshipbetween the brands and suppliers thought to be associated with better compliance. The only statistically significant finding from this was that onlyamongfactories audited ten or more times was there a clear increase in the number of factories receiving no remarks on chemical safety. 5In conclusion, the two papers showed a high degree of non-compliance in the supply chain of European garment brands and that audits seemed to underestimate levels of non-compliance for some types of code violations. Improvements could be seen, but these were moderate and in some cases onlyevidentafter what is often viewed by companies and their suppliers as excessive auditing. In this sample of European garment brands,characteristics of the factory and of the relationshipwith the buying company could not predict levels of compliance. Given companies’extensive investments in private regulation of working conditions, the findings have important implications for scholars, corporate managers, CSR practitioners, labor rights campaigners, as well as governments wishing to improve working conditions in global supply chains. Recommendations to companies include: i) invest more effort in finding compliant factories when sourcing new suppliers as improvements are not easily achieved;ii)focus more efforts and resources on implementing corrective action plans at the supplier level than on re-auditing; andiii) actively seek, developand apply new methods to achieve factory-level improvements to complement the conventional audit methodology. Regarding the last recommendation, recent developments in CSR practices have shown that brands and multi-stakeholder initiatives are now moving in this direction.

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