U.S. Companies Facing Greater Scrutiny on Human Rights Performance

Shoppers are now forcing retailers to be kinder to mankind as well as to animals and the environment. But will this help workers in poorer countries?

In 1992 Levi Strauss was discovered buying clothes from factories in Saipan, a small island 7,000 miles from the Californian coast, but still part of the United States. The jeans maker's local workers were underpaid, living in padlocked barracks and working in appalling conditions in contravention of American law. Immediately, Levi introduced new terms of engagement for business partners, which excluded suppliers who used child labour or forced employees to work unacceptable hours. Sub-contractors also had to comply.

By 1993, Levi had fired 5% of its 600 suppliers and exacted changes from another 25%. It severed links with Myanmar (Burma) and China. Corporate America largely ignored these moves, putting them down to Levi's unusual reputation for do-goodery. Despite previous campaigns against apartheid in South Africa, few companies believed that there was much point in being so "ethical" about "non-political" human rights.

But in 1993 the NBC TV network showed a videotape of children working in a bangladeshi factory that made Wal-Mart shirts under contract, and America's biggest retailer was forced to take similar steps.

According to Franklin Research & Development, a Boston-based ethical-investment firm, fewer than 5% of America's retailers and branded-goods companies are now tackling human-rights issues; but those that are include some ofthe world's most illustrious names, such as Levi, Wa]-Mart, Sears, Reebok, The Gap, Nike and Nordstrom.

The latest is Federated Department Stores, which owns Macy's, New York's largest shop. It announced last April that it was pulling out of Myanmar because of human-rights abuses there, following Liz Claiborne, a designer-clothing company, and Eddie Bauer, an American retailer and sportswear company.

Meanwhile, in Europe, ]KEA, a Swedish furniture store, recently decided not to sell carpets unless they could be certified as made without child labour. C&A, a Dutch store chain, has agreed to establish a code of conduct to help abolish child labour.

A new group including German rug-importers and a number of charities recently launched Rugmark, a trademark signalling that no children have been involved in the making of rugs - the first "human rights" label. By autumn Rugmark carpets will be distributed by big German retailers, such as Karstadt and Hertie, as well as Otto Versand, the country's second largest mailorder company. Lobbyists in America are pressing importers to join the scheme.

In many cases customers are responsible for the change. Eddie Bauer changed its policy on Myanmar after demonstrations outside its shops. A monthly poll of British consumers by the National Provident Institution, which runs a portfolio of ethical stocks, found that concerns about slavery and abuse of workers' rights now rank above those about greenery and animals - partly thanks to the killing in April of a 12-year-old Pakistani boy who was a symbol for children's rights.

Another recent poll of 30,000 British consumers for CWS, Britain's largest co-operative retailer, found that a third had boycotted stores because of concerns about their ethical standards; 60% said they would be prepared to boycott in the future.

In June 1994, the International Confederation of Free Trade Unions (ICFTU), a body representing labour unions around the world, launched a campaign to abolish child labour. Last year ICFTU failed to persuade the world trade body, GATT, to impose trade boycotts on countries that employed improper working conditions, but it has investigated about 50 firms and was partly responsible for the new stand on human rights at IKEA and C&A. ICFTU is now talking to German and Norwegian textile producers. Next on the list for investigation are the world's big toy manufacturers, including Toys 'R' Us.

Politicians have also joined the pack. At the instigation of Senator Tom Harkin, America's Depanment of Labour investigated 19 countries where 46 million children work making goods for American firms. It found that in South Asia (including India), where about half of all these children live, children were working 14-hour days in crowded factories and unsafe conditions. Colombian flower exporters are also in trouble for supposedly exposing children to toxic substances while harvesting flowers.

Senator Harkin has since introduced a bill to ban American imports made by children under 15. Companies now fear a wider bill making them responsible for the rights of anybody anywhere involved in the making of their products. Adding grist to the mill, ethical funds such as NPI and Franklin Research now want firms they invest in to put human rights into their corporate ethic. "Even without legislation', boasts Simon Billenness of Franklin, "human rights is set to become a leading retailing issue."

June 3, 1995

from The Economist