Business and Human Rights in a Time of Change (Christopher L. Avery, Nov. 1999)
3. Steps towards change
3.1 Business groups putting human rights on their agenda
"The Caux Round Table Principles for Business," adopted by a group of U.S., Japanese and European business leaders in 1994, state that business has certain responsibilities, including the following:
We believe that as global corporate citizens, we can contribute to such forces of reform and human rights as are at work in the communities in which we operate. We therefore have a responsibility in those communities to…respect human rights and democratic institutions, and promote them wherever practicable.[270]
In 1997, 14 Canadian companies announced an "International Code of Ethics for Canadian Business."[271] The code says: "We believe that wealth maximization for all stakeholders will be enhanced by resolution of outstanding human rights and social justice issues." Signatory companies pledge that they will "support and promote the protection of international human rights within our sphere of influence" and will "not be complicit in human rights abuses." Another section of the code says companies will "strive for social justice and promote freedom of association and expression in the workplace" and will "ensure consistency with universally accepted labour standards, including those related to exploitation of child labour."[272]
In April 1998 the Confederation of Danish Industry published Industry and Human Rights, a guide to help companies come to grips with human rights issues. This guide was developed in co-operation with the Danish Center for Human Rights.[273] The introduction states that the guide is intended for use by companies operating in or trading with countries being criticised for human rights violations. "Its sole aim is to help companies recognise that they share a common responsibility, which society is increasingly imposing upon them, for the protection of human rights."[274]
In the U.S., Business for Social Responsibility (BSR) is an alliance of over 1400 member companies and affiliated companies.[275] Its Business and Human Rights Program helps companies:
i) develop company human rights policies and systems for independent monitoring;
ii) engage in dialogue with human rights organisations, labour unions and governments; and
iii) address issues arising through sourcing and manufacturing in developing countries, such as worker health and safety, child labour, forced labour, working conditions, and environmental standards.[276]
The BSR website provides extensive information about human rights designed to help companies develop their policies and practices.[277]
The Confederation of Norwegian Business and Industry (NHO) has published a detailed checklist on human rights issues for companies, entitled "Human rights from the perspective of business and industry - a checklist."[278] The checklist, available in English and Norwegian, was drafted in cooperation with Amnesty International. It includes passages from relevant articles of the Universal Declaration of Human Rights, followed by questions companies should ask themselves when formulating their policies. The NHO notes that the Norwegian Government is "calling for companies to take a more conscious, responsible position on human rights": "Respecting and promoting human rights is an integral part of Norway's foreign and development co-operation policies. Accordingly, government assistance to Norwegian businesses abroad is based on the assumption that business and industry are willing to undertake this responsibility."[279] The NHO says "it is in companies' own best interests to foster respect for the principles of constitutional justice and human rights":
The Norwegian authorities and public opinion within the country are becoming increasingly critical of businesses that try to ignore or avoid dealing with issues related to human rights. The respect accorded to enterprises is increasingly becoming a factor of whether and, if so, how they deal with such issues.[280]
The NHO notes that a company human rights policy may include:
i) "open support for the UN Universal Declaration on Human Rights and the ILO standards";
ii) "measures that help raise awareness about internationally recognised human rights standards, including support for educational projects related to human rights"; and
iii) "contact and dialogue with individuals, NGOs, other companies and local and national authorities on the question of how human rights can be protected and violations prevented."[281]
The NHO says "companies may also choose to establish a dialogue with the authorities on issues involving specific violations on the part of the authorities," including raising cases of "victims of torture, random arrests, illegal imprisonment or miscarriages of justice."[282]
These initiatives provide important recognition by the business community that support for, and promotion of, human rights are not outside the scope of the private sector's responsibilities. As for the voluntary codes, they are significant but not sufficient. Maurice Williams, President of the Society for International Development, has drawn attention to the fact that private sector codes are no substitute for enforced standards of public policy:
While these declarations of intentions are praiseworthy, they are entirely voluntary and hortatory. Systematic reporting on their application is largely lacking. Most private firms place the efficiency of their operations well to the fore of social concerns, as is the accepted business ethos. In fact, competition in the market-place is such that few firms are likely to take human rights standards seriously outside the framework of enforced public policy in favour of uniform application of social and environmental standards. Public spirited firms seek to cooperate with governments in the setting of such standards.[283]
3.2 Companies adopting human rights principles
Amnesty International's guidelines state that companies should adopt policies on human rights that:
i) explicitly support the Universal Declaration of Human Rights;
ii) set forth procedures to ensure all operations are examined for their potential impact on human rights;
iii) provide safeguards to ensure that company staff are never complicit in human rights abuses;
iv) enable issues about human rights and the rule of law to be raised with government authorities;
v) provide for human rights training of all employees within the company;
vi) commit the company to promote respect for international human rights.[284]
The International Confederation of Free Trade Unions (ICFTU, an independent organisation representing 125 million workers in 213 trade unions from 143 countries and territories) and International Trade Secretariats (ITS, the international trade unions for various employee sectors, associated with ICFTU) adopted in 1997 a "Basic Code of Conduct covering Labour Practices," a minimum list of standards that they consider should be included in all company codes of conduct covering labour practices.[285] The Basic Code focuses on internationally-recognised labour rights and refers to relevant ILO Conventions. Provisions of the ICFTU/ITS Basic Code include: freedom of association and the right to collective bargaining are respected; employment is freely chosen; there is no discrimination in employment; child labour is not used; living wages are paid; hours of work are not excessive; working conditions are decent; and the employment relationship is established. The ICFTU and ITS are discussing with a number of individual companies and industry associations the contents of labour practice codes and how those codes will be implemented and monitored.[286]
Canadian law professor Craig Forcese set forth the following criteria for company policies on human rights in a publication of the Montréal-based International Centre for Human Rights and Democratic Development:
Businesses should introduce human rights codes of conduct and abide by country guidelines. Specifically, these codes and guidelines should contain:
- a pledge to observe the core labour rights, namely, freedom of association and the rights to organize and bargain collectively, a ban on convict and forced labour, non-discrimination in employment and a ban on exploitative child labour;
- a pledge to observe other important labour rights; namely, safe and healthy working environments, fair wages, and fair working hours and overtime;
- a pledge not to reinforce the repressive capacity of a repressive regime by generating products, revenue, infrastructure or lending credibility to the regime, with a repressive regime defined as one that is a systematic violator of human rights;
- a pledge not to invest in countries in which the business's activities induce repressive activity or support the repressive capacity of a repressive regime or where the business cannot, by reason of the overall human rights environment, maintain the workplace standards set out in its code of conduct;
- a pledge to exert a positive effect by intervening with authorities and business partners to improve respect for fundamental human rights norms wherever the business is in a position to exert positive influence; and
- mechanisms for independent monitoring, a guaranteed non-retaliation for workers reporting code violations and some provision for training employees and contractors to implement the code appropriately.[287]
Human Rights Watch in 1996 identified five essential reasons why companies should have codes of conduct on human rights (and independent monitoring of their human rights practices):
1. It is the right thing to do in terms of community responsibility;2. Employees are more likely to identify with the goals of an organisation that respects human rights;
3. Consumers are increasingly well informed about how products are manufactured;
4. Local communities are demanding respect for human rights even if their governments do not;
5. Protection of corporate image by not being associated with human rights violations.[288]
The changes in business thinking discussed in section 1, and the various pressures on the private sector discussed in section 2, have spurred some companies to adopt human rights policies. They do so partly as a defensive move: they want to avoid the media attention and reputation damage that Shell, Unocal, Nike, Rio Tinto, Freeport-McMoRan, Enron, BP and others have suffered in human rights controversies, or at least to be better prepared than those companies were. They also act to gain competitive advantage: they realise they will have to address human rights issues sooner or later, and doing it sooner will give them an advantage over corporations that lag behind; in recent decades they saw those companies that resisted environmental accountability (in the futile hope that interest would fade) suffer financially and in terms of reputation. Companies are starting to realise that in the next century it will be very difficult to be a world-class company if they have a second-class human rights record.
Until the late 1990s only a few companies had adopted policies that seriously addressed international human rights issues. Those in the forefront included Levi Strauss, Reebok and The Body Shop.
The Levi Strauss "Global Sourcing & Operating Guidelines," adopted in 1991, say that the company will only do business with partners that adopt certain employment, health and safety standards. Levi Strauss says that if it determines any business partner is in violation of these standards, "the company may withdraw production from that factory or require that a contractor implement a corrective action plan within a specified time period. If a contractor fails to meet the corrective action plan commitment, Levi Strauss & Co. will terminate the business relationship."[289] The guidelines also include the following provision: "We will favor business partners who share our commitment to contribute to improving community conditions."[290] The Levi Strauss "Country Assessment Guidelines" say: "The diverse cultural, social, political and economic circumstances of the various countries where Levi Strauss & Co. has existing or future business interests raise issues that could subject our corporate reputation and therefore, our business success, to potential harm. The Country Assessment Guidelines are intended to help us assess these issues."[291] The guidelines say one of the factors the company assesses is "whether the…[h]uman rights environment would prevent us from conducting business activities in a manner that is consistent with the Global Sourcing Guidelines and other company policies."[292] Levi Strauss, applying its Country Assessment Guidelines, decided to withdraw operations from Burma (Myanmar) in 1992, stating: "Under current circumstances, it is not possible to do business in Myanmar without directly supporting the military government and its pervasive violations of human rights."[293]
Reebok's "Human Rights Production Standards," adopted in 1992, say that the company's "devotion to human rights worldwide is a hallmark of our corporate culture."[294] The standards cover non-discrimination, working hours/overtime, forced or compulsory labour, wages, child labour, freedom of association, and workplace safety/health. Reebok says it applies these standards in its selection of business partners: "To assure proper implementation of this policy, Reebok will seek business partners that allow Reebok full knowledge of the production facilities used and will undertake affirmative measures, such as on-site inspection of production facilities, to implement and monitor those standards."[295] Reebok annually recognises four young human rights advocates with its Reebok Human Rights Award (a grant of $25,000 to a human rights organisation designated by each recipient).[296]
The Body Shop's "Trading Charter," adopted in 1994, includes the following statements:
We aim to ensure that human and civil rights, as set out in the Universal Declaration of Human Rights, are respected throughout our business activities. We will establish a framework based on this declaration to include criteria for workers' rights embracing a safe, healthy working environment, fair wages, no discrimination on the basis of race, creed, gender or sexual orientation, or physical coercion of any kind. We will support long term, sustainable relationships with communities in need. We will pay special attention to those minority groups, women and disadvantaged peoples who are socially and economically marginalised….We will institute appropriate monitoring, auditing and disclosure mechanisms to ensure our accountability and demonstrate our compliance with these principles.[297]
The Body Shop also has adopted a "Statement of Human Rights Principles," which includes the following assertions:
While we respect cultural differences, and are aware of the economic disparities that exist within and between countries, we believe that the civil, political, economic, social and cultural rights outlined in the Universal Declaration of Human Rights (UDHR) are universal, indivisible, interdependent and inter-related. Our goal is to encourage the creation of working and living conditions where people can fulfil their potential, where their human rights are respected without prejudice, and where they can determine their own destiny. We will seek business partners who share this commitment.[298]
The Body Shop's principles include one of the strongest statements of any company about its responsibility to promote human rights in the societies where it operates:
Raising awareness of human rights at every level will empower individuals and communities. We aim to educate ourselves on human rights issues and to use our influence and our trading relationships to promote respect for human rights. We will campaign passionately for human rights where we believe our involvement will contribute to positive change.[299]
The Body Shop has conducted through its retail shops a number of campaigns on human rights issues. For example, in 1998 The Body Shop and Amnesty International joined forces to celebrate the 50th anniversary of the Universal Declaration of Human Rights with a campaign that involved Body Shop customers in over 1400 stores internationally "making their mark" (putting their thumbprint) on a petition on behalf of human rights defenders; over 3 million thumbprints reportedly were collected.[300]
Today many more companies, including Royal Dutch/Shell, BP Amoco, Nokia, Statoil, Norsk Hydro, Rio Tinto, and BT (British Telecommunications PLC), have adopted human rights policies. The policies of several of these companies explicitly state that the company supports the Universal Declaration of Human Rights. For example, BP in 1998 incorporated the following statement into its business policies:
We will pursue our business with integrity, respecting the different cultures and the dignity and rights of individuals in all the countries in which we operate. We support the principles set forth in the UN Universal Declaration of Human Rights, recognising the role and enforcement responsibilities of governments.[301]
BP noted in its 1987 social report that under its self-certification process, each year about 10,000 employees in positions of responsibility worldwide must certify that they understand the business policies, that they have brought the policies to the attention of their staff and any third parties acting on BP's behalf, and that they are to the best of their knowledge in compliance with the policies. They are instructed to bring forward any concerns they might have about implementation of the policies.[302]
Another example of a recently-adopted human rights policy is that of Royal Dutch/Shell. Its "Statement of General Business Principles" now includes provisions recognising the responsibility of Shell companies:
To respect the human rights of their employees;….
To conduct business as responsible corporate members of society, to observe the laws of the countries in which they operate, to express support for fundamental human rights in line with the legitimate role of business and to give proper regard to health, safety and the environment consistent with their commitment to contribute to sustainable development.[303]
In 1998 Shell published its first social report, entitled Profits and Principles - does there have to be a choice?[304] The introduction speaks of a thorough and far-reaching review Shell has been carrying out, and says: "We had looked in the mirror and we neither recognised nor liked some of what we saw."[305] Shell says it is developing new thinking and processes to help it better manage its social and ethical responsibilities, to measure performance and to report regularly. The report says the company supports the Universal Declaration of Human Rights, and has taken steps including the following "to ensure we act in the best possible way when confronted with human rights issues":
- We speak out in defence of human rights when we feel it is justified to do.
- We engage in discussion on human rights issues when making business decisions.
- We have established a regular dialogue with groups which defend human rights.
- We are developing awareness training and management procedures to help resolve human rights dilemmas when they arise. This includes a guide to human rights for managers….[306]
Shell's second social report, published in 1999, includes a progress report on the company's human rights commitments.[307] It explains that Shell's letter of assurance process (each of Shell's Country Chairmen is required to write an annual letter to the Group Managing Director explaining how the company's General Business Principles are being applied) now includes specific references to human rights. The report includes an explanation of Shell's policy on the use of force and firearms by security personnel.[308] It mentions that the company launched a special human rights site on its intranet (internal computer network). The section updating human rights developments in Nigeria includes the following statement: "[Shell] does not use force or seek armed intervention to suppress demonstrations by communities protesting peacefully, even if it disrupts production….It believes strongly that dialogue is the answer to such situations."[309]
BT's board of directors reportedly approved a new statement of business practices in March 1999 that includes a section on human rights. Amnesty International's UK Business Group commented: "This is a significant step for a company which has not been targeted by NGOs and therefore does not have a pressing need to improve its image and appease its critics."[310] Jan Walsh, BT's Head of Corporate Reputation and Social Policy, said:
Our commitment to addressing the human rights context of our operations reflects our aspirations as a global company to minimise the risk of transgressing international law and of violating widely held norms of acceptable behaviour. The Universal Declaration of Human Rights is an appropriate framework for us to use because of its international legitimacy and because it will facilitate our future efforts to develop human rights benchmarks….[311]
Human rights and development advocates are watching to see how each new policy will be implemented and monitored, recognising that if a company adopts policies without also training staff, introducing accountability and providing for independent monitoring, there may be little change in corporate culture and conduct. What ultimately matters is what a company does in practice about human rights, not what it declares in its company code.
Looking at corporate codes referring to human rights issues that have been adopted so far, shortcomings are evident:
i) Most human rights policies have been adopted by companies only after they and/or their industry have come under attack in connection with human rights abuses. Most codes with a human rights component are found at apparel companies and oil companies. It is very disappointing that companies in other industries are usually silent on the subject.
ii) Of those corporate codes that do include mention of human rights issues, most take a minimalist approach, referring only to issues for which their industry has been criticised. For example, the codes of many apparel companies have provisions about working conditions and child labour/forced labour. While those commitments are welcome, there is seldom any reference at all to the company's responsibility to support and promote fundamental human rights in the wider society where it operates…indeed in apparel codes there is seldom any mention of the term "human rights" at all.
iii) Some companies that adopt a code as a defensive measure in response to pressure do not give priority to implementing their code after the pressure abates. The Canadian Government drew attention to this problem in a 1998 Industry Canada report:
[W]hile codes are voluntary - firms are not legislatively required to develop or adhere to them - the term 'voluntary' is something of a misnomer. Voluntary codes are usually a response to the real or perceived threat of a new law, regulation or trade sanctions, competitive pressures or opportunities, or consumer and other market or public pressures…[O]nce the code is in place, the initial pressure that led to its creation may dissipate, which could cause compliance among adherents to taper off.[312]
3.3 Human rights training for employees
Amnesty International states that companies can improve their ability to promote human rights by "providing effective training for their managers and their staff in international human rights standards, preferably with input and assistance from non-governmental organizations."[313] "To be effective, a corporate human rights policy must become an integral part of the company's culture."[314]
Too many companies that have adopted fine-sounding human rights principles have made little or no effort to train their managers and staff in the practical application of those policies, and have no system for assessing whether those principles are being implemented. In fact often employees are not even aware of such policies. When I have telephoned multinational companies that have adopted human rights principles to obtain a copy of the document that includes the policy, I have found that many employees are not even aware that such principles exist.
A recent report by the ILO about codes of conduct noted:
Not infrequently, codes launched with much publicity in an import country are unknown, unavailable or untranslated at producing facilities; even where available, workers may have no way of reading the code or reporting non-compliance without disciplinary treatment or dismissal….Experience suggests that the current lack of standardized principles and procedures hinders good quality in implementation of codes, and prevents the reporting of comparable data to help measure progress in the enterprise, and within or across industry sectors. The lack of standardization also contributes to suspicions of third parties about internal monitoring processes and exploitation of labour conditions due to cultural relativity in MNE [multinational enterprise] practices.[315]
Royal Dutch/Shell is one company that has taken some first steps in developing a training process. Shell's training guide for managers, "Business and Human Rights: A Management Primer,"[316] was written with the help of independent experts. Its foreword notes:
Western investments in developing countries, in particular, are increasingly the focus of human rights concerns. The power of 20th-century communications means that these debates, and the issues and experiences they spring from, can no longer remain internal to either our organisation, or anyone else's. They are public, and important to millions of people….We need to participate in this discussion with the care and thoughtfulness our companies have always brought to bear on important questions.[317]
The foreword goes on to say that the handbook was prepared "to facilitate a better understanding of human rights, its history, vocabulary and dilemmas, and to help Shell companies identify and understand their role and responsibilities in supporting human rights."[318]
One of the questions posed in the handbook is: "How should a company be expected to express its support for international human rights standards in countries that don't fully observe them?"[319] The handbook admits that Shell needs to undertake more discussion of this dilemma, but notes it is vital for all employees to be aware of the company's societal responsibility "to express support for fundamental human rights in line with the legitimate role of business."[320] It goes on to say that Shell companies…
can develop human rights goals appropriate to their own situations, and commit to entering into dialogue with policymakers about the need to remove constraints on their ability to achieve them. How this dialogue is conducted - whether publicly or privately, for example - depends upon a company's assessment of the situation. While this may include an external communications strategy, the focus should remain on achievement of concrete human rights goals rather than "playing to the gallery", either at home or abroad.[321]
Shell's 1999 social report refers to training of the company's security personnel:
In all countries where security personnel carry firearms they are trained in the responsible use of force. In addition, in 20 countries the armed security guards are trained in accordance with the latest (1st Jan 1998) Group Security guidelines on the use of force, which are based on UN principles and codes of conduct and on international human rights standards. Urgent efforts are in hand to ensure consistency with the latest Group guidelines in the remaining three countries.[322]
BP Amoco's steps to raise staff awareness about human rights have included developing intranet sites providing employees with specific guidance on human rights issues, and contact information for international human rights and development organisations.[323]
The Norwegian oil company Statoil, in its 1998 Annual Report, notes that it has started human rights training for its employees:
Respect for human rights will be demonstrated through Statoil's actions. The group faces social systems and attitudes in many of the countries in which it operates that do not accord with the values on which its business is based. In order to exert a positive influence, make its commercial principles known and participate in the dialogue on human rights in these nations, Statoil needs well-informed employees. An extensive internal training programme is building a foundation for translating the group's attitudes into practical action.[324]
It will be important for all companies to ensure that human rights training:
i) explains in plain language international standards on civil, political, economic, social and cultural rights - and how those rights are relevant to the company's operations internationally and locally;
ii) includes among the trainers people from human rights NGOs and people who have practical experience addressing human rights issues in the particular country and locality;
iii) focuses not just on managers at headquarters, but is effectively delivered to all staff and managers at all the company's operations worldwide;
iv) is pragmatic and specific rather than academic and vague;
v) addresses local issues and difficult fact situations that may arise in the particular country;
vi) is delivered in local languages whenever necessary to ensure full understanding by all staff;
vii) explains to employees how company procedures will ensure each staff member is individually accountable for applying the company's human rights policy, and how the overall policy will be implemented and independently monitored; and
viii) makes clear to employees how they can report non-compliance with the company's human rights principles without any risk of retaliation.
3.4 Independent monitoring
Amnesty International states:
All companies should establish mechanisms to monitor effectively all their operations' compliance with codes of conduct and international human rights standards. Such mechanisms must be credible and all reports must periodically be independently verifiable in a similar way to the auditing of accounts or the quality of products and services. Other stakeholders such as members of local communities in which the company operates and voluntary organizations should have an opportunity to contribute in order to ensure transparency and credibility.[325]
The Dutch Sections of Amnesty International and Pax Christi International note that a company should extend such a monitoring system to its suppliers, sub-contractors and joint ventures. They stress the importance of involving local organisations in the monitoring process:
Accuracy and credibility is enhanced if the monitoring programme involves local labour, human rights, religious or other institutions who have the trust of workers and knowledge of local conditions. Monitors rooted in local communities will be best qualified to detect essential, but not easily quantifiable, facts which relate to human rights, like non-discrimination, harassment, the right to organize, etc.[326]
Elaine Bernard, Executive Director of the Harvard Trade Union Program, has put forward "general overall principles of independent monitoring" that she says are necessary "to breathe life into the promise of any 'code of conduct' or indeed, any claims of 'good employer' practices":[327]
i) Independent: "Monitoring must be independent of business and the government."
ii) Ongoing: "Monitoring must be ongoing, not ad hoc, nor simply a publicity, celebrity visit. Monitors must have ongoing access to both the workers and workplace - and workers must be able to talk with monitors in complete confidentiality and with no reprisals."
iii) Institutional: "Monitoring needs to be institutional and to have independent authority beyond a 'great man' or 'great woman'." The monitoring agency needs sufficient resources.
iv) Indigenous: "Monitoring must have an indigenous component. That is, it must be on the ground, with local people, who speak the language, who live in the country where workplaces are being monitored."
v) Trusted: "Monitoring groups must be trusted by the workers and with a track record within the country."
vi) Knowledgeable: "[F]or monitoring to be truly effective, the monitors need to have people who have knowledge about the work process under review and an appreciation of what is common practice and what is not."
vii) Transparent: "The work of the monitoring group must be as open as possible. Transparency needs to be written into any monitoring agreement so that the monitors have the right to communicate information without corporate pre-screening or control."[328]
Elaine Bernard says that if the above conditions cannot be met, NGOs "should not be dragged into monitoring….For example, if rights are so consistently denied that there is no 'trusted' indigenous human rights or workers group to partner with, we should state openly that 'independent monitoring' is not possible in this environment - and furthermore, that any code of conduct under such circumstances is meaningless."[329]
Richard Howitt, the Member of the European Parliament who introduced the recently-adopted European Parliament resolution concerning codes of conduct for European transnational corporations (described in section 2.4), has drawn attention to the need for independent monitoring:
I believe that voluntary codes of conduct on their own are inadequate. In the two years of preparation for this parliamentary report, I have observed that many companies and business associations express their codes in glossy documents with fine words. When I ask the question "how are these to be implemented?", or "how have these voluntary standards changed business practice?" or "have they led to compensation for a complainant?", there is a deafening silence. This is not to say that these voluntary codes are drawn up in bad faith, which I don't believe to be the case. However, if these codes are to be worth the paper they are written on, companies and industry-wide associations who are responsible for them must place far greater emphasis on implementation, including independent monitoring, complaints mechanisms and redress. My resolution in the European Parliament was designed to encourage voluntary codes which are accompanied by such measures….No company can have a credible code of conduct, unless within that code is a system of monitoring and implementation.[330]
The U.S. Department of Labor, in a 1996 study of corporate codes dealing with child labour, noted that "a credible system of monitoring - to verify that a code is indeed being followed in practice - is essential." The study found that "most of the codes…do not contain detailed provisions for monitoring and implementation," "many of the companies do not have a reliable monitoring system in place," and where monitoring was undertaken "there seems to be relatively little interaction between, on the one hand, monitors, and on the other hand, workers and the local community." The study noted with concern: "It also appears that monitors have a technical background in production and quality control and are relatively untrained with regard to implementation of labor standards."[331]
Sir John Browne, BP Amoco's Chief Executive, recognised that social and human rights principles alone are not enough:
Setting and meeting one's own standards is only part of what is required. Companies need to win and retain public trust. That comes only through a track record of delivery and a transparency which allows everyone to see exactly what is happening. That means we have to be open to dialogue with local communities and non-governmental organisations and open to scrutiny even when it is uncomfortable. It also means we have to develop the means of verification, an independent auditing process to underpin the company's own assurance.[332]
BP's 1997 social report states: "Assurances of good behaviour are insufficient without independent verification."[333]
A recent Economist article noted: "The best codes now tend to be monitored by outside auditors. Companies realise that merely making promises risks adding hypocrisy to the list of charges against them."[334]
A leading book on the subject of corporate social auditing explains why there is increasing pressure on companies to have their human rights and social record independently assessed:
One common concern arises from the increased disclosure of corporate social and ethical performance; there is a need to establish methods for assessment, verification and disclosure that meet the requirements of both companies and outside parties. "Glossy" social reporting no longer satisfies the demands of groups that have the power to support or undermine a company's market position, through organizing consumer boycotts or blocking planning permission. Nor does a gloss over a company's ethics help in attracting creative, dedicated and responsible employees who feel a strong sense of identity with the company and whose commitment is vital for overall business success. Shareholders themselves are also demanding to know more about social and ethical performance as an increasing number of high-profile cases highlight the financial consequences of unethical business behaviour.[335]
The New Economics Foundation, a London-based organisation which is working with companies to develop techniques for social auditing, emphasises that the integrity of a social audit is dependent on meaningful involvement of stakeholders in the process:
If the process is to be credible, then the dialogue with stakeholders must be meaningful and, most importantly, the key indicators which result from the accounting process must be developed by the stakeholders themselves, in line with international human rights instruments. So the paradox of how to measure human rights can perhaps be resolved if the assessment of the expression of rights involves the people affected.[336]
Few companies have commissioned an independent social audit, and even fewer have made them public. In India, The Tata Iron and Steel Company in 1979 was one of the first in the world to commission a social audit, carried out by a three-person committee (a judge and two professors). The audit was made public.[337]
The Body Shop in January 1996 published a statement of its social performance, that was independently verified by the New Economics Foundation. The Body Shop's auditing process involved participation by a committee of stakeholders. The company also commissioned Kirk Hanson, a professor of business ethics from Stanford University's Graduate School of Business, to evaluate the company's social record. The Body Shop's founders, Anita and Gordon Roddick, wrote about the social audit process in the company's Social Statement 1995:
We went into the social audit with a sense of "damned if we do, damned if we don't". We are pleased with the result. It has been a long and detailed process, which we now feel we can recommend to others. We are already finding that it is helping us run our business better and we are delighted to see that different parts of the business recognise the improvement points necessary to maintain the support of their stakeholders. We now have a list of strategic targets and priorities for action described as "next steps" goals for each stakeholder group which will drive us on towards the millennium with greater confidence about those human relationships which are integral to our success.[338]
The Roddicks, publicly recognising both the positive and negative findings of Kirk Hanson's social evaluation, said: "The integrity of the business shines through amidst some ineptitude, some lack of attention, some good old fashioned neglect….We have much to improve."[339]
Kirk Hanson said of The Body Shop's social auditing process: "To my knowledge, no other company has permitted such an extensive and public evaluation of its social record by an outside individual."[340] He predicted that social auditing would become a more common practice: "Social performance today has profound importance for commercial performance…the social audit will eventually be done much as the financial audit is now done."[341]
In 1997 The Body Shop published its second Values Report, including a social audit independently verified by the New Economics Foundation.[342]
A precedent-setting 1996 independent monitoring agreement was the key to resolving a dispute that arose when a garment manufacturer in El Salvador supplying The Gap was accused of abuses including child labour, forced overtime, unsafe working conditions, and threats to prevent workers from organising.[343] The Gap had adopted a code of conduct before the allegations came to light, but according to the executive director of the U.S. National Labor Committee in Support of Democracy and Human Rights in El Salvador, no worker at the factory in El Salvador had ever seen the code, and it had not even been translated into Spanish.[344] The Gap and the Salvadorian supplier agreed to a system of periodic on-site visits to the factory by independent monitors. The Independent Monitoring Group is composed of the Human Rights Institute of the University of Central America, the Human Rights Office of the Archdiocese of San Salvador, and the Labour Studies Centre (CENTRA). Labour groups had insisted that independent monitoring was necessary to make The Gap's "Sourcing Principles & Guidelines" work in practice. They believed that only independent monitors could ensure that the process would be thorough and objective, and ensure that workers would be able to speak freely without fear of harassment or loss of employment.[345]
The then U.S. Labor Secretary Robert Reich reportedly said The Gap's agreement was an "important step" because the major retailers and manufacturers "have been somewhat reluctant to police their contractors here and abroad." He went on to say that "this raises the question for other big retailers who haven't moved in this direction - why not?"[346]
U.S. President Clinton in 1996 appointed the Apparel Industry Partnership, a panel of representatives of apparel companies (including Liz Claiborne, Nike, Phillips Van-Heusen and Reebok) and non-governmental organisations (NGOs), to address the issue of sweatshops in the apparel industry. The task force's mandate was:
1. To ensure that the products companies make and sell are manufactured under decent and humane working conditions, and
2. to develop options to inform consumers that the products that they buy are not produced under exploitative conditions.[347]
The Apparel Industry Partnership released its "preliminary agreement" in November 1998, including a "Workplace Code of Conduct" and "Principles of Monitoring," to be administered by a new "Fair Labor Association"; an "amended agreement" was issued in June 1999.[348] The New York Times reported in November 1998: "After the task force's 18 members remained stalemated for months, nine of the group's more centrist members began negotiating among themselves and finished thrashing out an agreement."[349] Several key organisations that had been part of the Partnership (the Interfaith Center on Corporate Responsibility [ICCR]; the AFL-CIO; the Retail, Wholesale and Department Store Union; and UNITE, the nation's leading apparel union) rejected the agreement and refused to endorse it on the grounds that it was not strong enough.[350]
The Apparel Industry Partnership's "Workplace Code of Conduct"[351] includes prohibitions against forced labour and child labour, a maximum work week of 60 hours, and recognition of freedom of association and the right of all employees to "be treated with respect and dignity." On the issue of wages, the agreement provides: "Employers shall pay employees, as a floor, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher…." The agreement also calls for a Department of Labor study on existing wages in relevant countries and how they compare with the amount needed to meet workers' basic needs. Critics said the agreement should have guaranteed a living wage; Reverend David Schilling of ICCR said: "A factory may be clean, well organized and monitored, but unless the workers are paid a sustainable living wage, it is still a sweatshop."[352]
The "Principles of Monitoring"[353] say that independent external monitors should conduct periodic announced and unannounced visits to factories, and that the monitors should consult regularly with human rights, labour, religious and other local institutions likely to have the trust of workers and knowledge of local conditions. Critics said this did not ensure effective independent monitoring because it would allow companies to use their own auditing firms to carry out the monitoring without requiring active participation by local human rights organisations that would be more likely to act independently and to have the trust of workers. UNITE said the agreement "allows companies to pick the factories that will be inspected by monitors chosen and paid by the company"[354]; "the companies pick their monitors and the factories to be monitored so there won't be surprise inspections."[355] UNITE also expressed concern that…
this agreement will reinforce the tendency to view voluntary corporate codes of conduct as a substitute for the enforcement of existing laws and the adoption of legislation and trade agreements designed to protect the rights of workers in the global economy. While such codes can in some circumstances supplement the rule of law in protecting workers rights, they are a step backward when they undercut the demands and actions of the anti-sweatshop movement and allow corporations to carry on business as usual.[356]
The agreement was also criticised by UNITE and others on the grounds that it allowed companies to continue to produce goods in countries that systematically deny worker rights. Sister Dolores Brooks of ICCR said: "We are pleased that the Workplace Code includes respect for the right of workers to freely associate and bargain collectively. However, the Agreement does not spell out what companies need to do in countries where this internationally-recognized right is denied."[357]
The agreement calls for creation of a Fair Labor Association (FLA) to certify monitors and expel companies not in compliance.[358] Within three years of signing on, companies are required to have 30 % of factories monitored by external monitors; in subsequent years about 10 % of a company's factories must be inspected annually. Critics said 10% per year is not enough.[359]
Four NGO members of the Apparel Industry Partnership that supported the final agreement (Lawyers Committee for Human Rights, International Labor Rights Fund, Robert F. Kennedy Memorial Center for Human Rights, National Consumers League) said:
[While the accord] is not a perfect agreement, it does lay the foundation for creating a practical and enforceable monitoring system that will help improve working conditions….The FLA [Fair Labor Association] will accredit independent external monitors; oversee the monitoring process, including final decision-making as to which factories are subjected to independent monitoring; decide whether individual companies are in compliance with FLA standards, based on a review of reports by these monitors; and report publicly each year on the performance of each company that is participating in the process.[360]
As of 12 September 1999, ten companies had joined the FLA agreement: Adidas, Kathie Lee Gifford, Levi-Strauss, Liz Claiborne, LL Bean, Nicole Miller, Nike, Patagonia, Phillips Van-Heusen and Reebok.[361] On 9 September 1999 the FLA announced the appointment of Charles Ruff as the first chair of its Board of Directors.[362] Mr Ruff served as White House Counsel from 1997-1999; his previous positions include U.S. Attorney for the District of Colombia, Acting Deputy Attorney General in the Department of Justice, Director of the Watergate Special Prosecution Force, and Chair of the Multinational Panel to Inquire into the Curbing of Violence in the South African Elections. The FLA said on 9 September that it plans to hire its first executive director during the next month, that it would begin active operations later in 1999, and that the first inspections of factories would take place during the year 2000.[363]
Over 100 U.S. universities are affiliated with the FLA, in an effort to ensure that companies producing goods under their licenses are operating in accordance with the Association's principles.[364] But United Students Against Sweatshops (USAS) is calling on universities not to affiliate with the FLA, and instead to join their Worker Rights Consortium, a more rigorous monitoring system requiring that companies pay a living wage that meets the basic needs of workers, and publicly disclose the location of their factories so that human rights and labour groups can independently monitor them.[365] Jess Champagne, a member of the USAS Coordinating Committee and a Yale University student, reportedly stated in October 1999: "We…want truly independent and effective verification by local groups who are trusted by workers to ensure that universities' codes of conduct are being enforced."[366]
The University of Michigan reportedly will be adding the following statement to all its licensing agreements with apparel companies:
Effective not later than January 1, 2000, The University of Michigan will require each licensed manufacturer to disclose to the U of M the location (name, city and street address) of each factory used in the production of all items which bear The University of Michigan marks. The University of Michigan reserves the right to disclose this information to third parties, without restriction as to its further distribution in conjunction with The University of Michigan Advisory Committee on Labor Standards and Human Rights.[367]
In October 1999, Nike became the first large apparel company to disclose the names and locations of overseas factories which make athletic gear carrying the names of U.S. universities; the company listed the details of 42 factories in 11 countries on its website.[368] Several universities had threatened to terminate licenses with manufacturers that do not identify their factories; Nike's announcement was expected to put considerable pressure on other apparel makers to do the same. U.S. student groups and anti-sweatshop groups, which had been campaigning for such disclosure on the grounds that it is a prerequisite for allowing independent groups to check working conditions, welcomed Nike's move. Eric Brakken, an organiser for United Students Against Sweatshops (a coalition of university groups), commented: "What Nike did is important. It blows open the whole notion that other companies are putting forward that they can't make such disclosures."[369]
In another initiative, five U.S. universities (members of the Collegiate Licensing Company) are undertaking a factory monitoring pilot programme in late 1999 with Verité,[370] an independent monitoring organisation based in Massachusetts. Under the programme independent monitors will visit factory sites where merchandise bearing the university logos are produced. The monitors will work with management and employees with the aim of ensuring compliance with labour code standards; a report will be prepared for each site detailing what steps were taken to comply with code standards. The objective of the pilot project is to develop case studies of code implementation and to demonstrate how an independent third party can assist manufacturers in resolving compliance issues.[371]
In August, September and October 1999 nine major U.S. retailers (Nordstrom, Gymboree, Cutter & Buck, J. Crew, Brylane L.P., DonnaKaran International, Phillips-Van Heusen, Polo Ralph Lauren and The Dress Barn) agreed to help fund an independent monitoring scheme for the factories they use in the Northern Marianas Islands (a U.S. commonwealth in the Pacific; Saipan is the largest island). The monitoring reportedly will be organised by Verité, and will include unannounced factory visits and investigation of complaints by workers.[372] The agreement was part of a settlement by those companies of a class action lawsuit brought against 18 retailers for allegedly conspiring with Marianas factory owners to deprive apparel workers of labor rights.[373] As of 7 October 1999, litigation in that case was still pending against other major U.S. retailers including The Gap, Tommy Hilfiger and Wal-Mart.[374]
On 18 October 1999 Reebok made public a detailed report by an independent Indonesian research firm which criticised working conditions at two Indonesian factories employing 10,000 workers producing Reebok footwear. The report, entitled Peduli Hak, is available on Reebok's website.[375] The report faults the factories on a number of counts, including: managers failed to communicate adequately with workers, most workers were functionally illiterate and could not understand their rights relating to overtime pay or the collective bargaining agreement, it was more difficult for women to obtain promotions, and health and safety procedures were deficient (especially concerning the use and handling of chemicals). The report mentions some corrective steps taken by managers at the two factories, but also indicates issues management has failed to address. Reebok said that based on the report it has pressed for improvements to the factories costing $500,000.[376] The two factories are not owned by Reebok, but they reportedly account for more than 75 percent of Reebok's footwear production in Indonesia. Reebok said it has made Indonesian-language copies of the report available to the factory workers, and presented the report at a meeting with its footwear contractors.[377] Reebok stated it is "the first company in the footwear industry to make public an in-depth, third-party critique of labor conditions in factories making its product."[378] The monitoring firm reportedly had full access to factory records and workers, and spent over 1400 hours inspecting the factories, observing working procedures and interviewing workers.[379] Reebok says it "guaranteed that the research team would be able to work independently, without intervention from Reebok or the factory management."[380] Reebok Chairman Paul Fireman said "We have raised the ante with external monitoring, because we had gone as far as we could by ourselves."[381] He also made the following comments:
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….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.[382]
Reaction to Reebok's release of the Peduli Hak report was generally positive. Sidney Jones, Director of Human Rights Watch Asia, stated: "If companies are going to think about truly independent studies of their overseas operations and taking real steps to improve the conditions of these workers, this is a useful example. They asked the right questions, developed a useful methodology, and they've done it all with the fullest possible transparency and made the findings public."[383] Scott Greathead, CEO of World Monitors (a New York business and human rights consulting firm), said: "There's a new corporate awareness that honesty and full disclosure are better than hiding behind veils of secrecy."[384] While human rights advocates generally welcomed the initiative, some have observed that there are deeper issues which still need to be addressed, and they are calling on Reebok to provide better wages and to allow the workers to form unions. David Schilling of the Interfaith Center on Corporate Responsibility said: "I would have hoped there would have been a greater examination on the right to freely associate in the workplace."[385] Jeff Ballinger, a consultant at the John F. Kennedy School of Government at Harvard University and a member of Press for Change (which educates consumers on factory conditions in Asia), commented: "This is the company that moved to China and Indonesia to get away from union contracts. They say that this is a communication problem. It's really a power distribution problem. These workers lack the power to represent themselves."[386]
Shortly after Reebok's report was released, Aaron Bernstein (Business Week Associate Editor, respected for his coverage of global labour issues) reported that apparel company Liz Claiborne had given Business Week a copy of "a remarkably candid outside report on a Guatemalan factory" which belongs to a Liz Claiborne supplier.[387] The report was prepared by the Commission for the Verification of Corporate Codes of Conduct (Coverco), formed in 1997 by Guatemalan religious and human rights activists. The report details a number of abuses, including 16-year-olds pressured to work overtime and complaints about inaccurate wage payments. Bernstein noted that it also "tells how a line supervisor refused to allow a pregnant worker to leave for the hospital when she went into labor - implying that the delay may have led to her baby's being stillborn the next day."[388] The report says that Coverco discussed the problems with plant managers, who addressed some problems but not others. Eventually the factory's owner replaced the managers, and Coverco says cooperation with managers has now improved. Roberta Karp, Liz Claiborne's General Counsel, said: "This is exactly what we wanted: to learn what the problems were and figure out how to make them better."[389]
Bernstein also reported in Business Week that Mattel, the toy company, will publish in November 1999 a "comprehensive review of eight plants in four countries [China, Indonesia, Malaysia and Thailand], using hundreds of specific labor standards."[390] While the initiatives by Reebok and Liz Claiborne were one-off pilot projects, Mattel has appointed an outside group (Mattel Independent Monitoring Council for Global Manufacturing Principles) to develop and implement a monitoring system. The head of the Monitoring Council is S. Prakash Sethi, a management professor at Baruch College in New York with experience in monitoring codes of conduct. Mattel's standards for its factories are practical and precise, specifying for example how many toilets are required per worker and how many calories company cafeterias should serve workers each day. Sethi says that the Monitoring Council has "tried to build criteria to measure objective outcomes, like square feet in a worker dorm, which hasn't been done before."[391]
Referring to the initiatives by Reebok, Liz Claiborne and Mattel, Bernstein commented in Business Week: "All three companies should be applauded for the breakthrough: The audits mark the first time companies have allowed truly independent outsiders with expertise in labor issues to rake over their factories - and then make the unpleasant findings public." Bernstein observed that this "new level of scrutiny" marks "a turning point in the anti-sweatshop movement;" he believes "other companies will have a more difficult time dragging their heels."[392] He concluded:
The pioneers have shown that outside monitoring by human-rights groups can work, even if the results are painful or embarrassing. Other manufacturers or retailers, largely on the sidelines, should set aside their qualms and join their colleagues as they begin, little by little, to lift global labor standards.[393]
SA 8000 (Social Accountability 8000), the anti-sweatshop initiative by the Council on Economic Priorities (see section 2.6), aims to provide global standards on workers' rights and factory conditions, applicable internationally to all companies. SA 8000 includes a call for companies to pay a living wage. In 1997 CEP set up the Council on Economic Priorities Accreditation Agency (CEPAA), an association to administer SA 8000 and to accredit those who will serve as external monitors to assess compliance with the standards. CEPAA's international advisory board consists of representatives from business and NGOs, as well as academics.[394]
There is increasing pressure on companies to move towards "social audits" that are accorded the same priority and conducted with the same rigour as financial audits. This does not mean that such audits should be the exclusive preserve of the same accounting firms that carry out financial audits.
Accounting firms and management consulting firms may be able to play a useful role in social audits, particularly in terms of ensuring that the process is correct and thorough, and that standards are applied uniformly. Auditing firms are showing interest in the market for social auditing. KPMG has created an ethical unit to provide what it describes as "an innovative service to assist companies to develop and assess their performance in social and environmental management."[395] PricewaterhouseCoopers (PWC) has launched a Corporate Accountability and Responsibility Evaluation Program that offers companies a computer software package to help them assess ethical performance.[396] James Warren, a partner in PWC's office in Guangzhou, China, said in February 1999 that before late 1997 ethical audits were rare, but in 1998 PWC conducted 1500 inspections in Guangdong province alone, and the call for them is growing.[397] Dr Jennifer Woodward, a consultant on Global Risk Management Solutions for PWC, recently noted:
Increasingly we are seeing companies recognise that human rights are the business of business….[P]ublicly communicated policies [on human rights] are a good start. There is a need, however, to find ways of embedding these policies into corporate culture so that they are integrated into the day-to-day management of the business….Work on developing effectiveness indicators for human rights is at a very early stage. PricewaterhouseCoopers' Reputation Assurance framework (RA5) includes a blend of qualitative and quantitative indicators to assist a company to measure and benchmark the effectiveness of its response to human rights issues. We acknowledge that these performance indicators are far from definitive. Therefore we are working with Amnesty International and other human rights organisations to develop a more complete and rigorous set of human rights benchmarks. In general, as the shift towards globalisation continues, more and more business people will find themselves facing human rights issues. Gradually we will see a shift from managing reputation crises following a media exposé, to companies gaining positive competitive advantage for their good record on human rights.[398]
While traditional accounting and management consulting firms may be able to play an important, contributory role in social auditing, they do not have a level of expertise and experience in social issues that would enable them to be the primary assessor in the monitoring of human rights issues. Moreover they may not be perceived by the public, by workers and by local stakeholders as being sufficiently independent of the company concerned, particularly if they have an ongoing contractual relationship with the company. The Nike case, described elsewhere in this report, demonstrates the limitations of using a traditional auditing firm for social audits. When allegations of abuses in Nike's Asian factories first arose in 1996, Nike denied the allegations and said: "Every Nike subcontractor is subject to systematic, unannounced evaluation carried out by Ernst & Young."[399] If that was indeed the case, the Ernst & Young oversight of labour issues apparently was not as effective as it should have been; it has since been recognised that there were a number of serious shortcomings at Nike's Asian factories in 1996. Human rights advocates who conducted a 1996 fact-finding mission examining Nike's factories in Indonesia concluded:
The Ernst & Young audits are thoroughly inadequate, mainly because the company is unknown to workers and hence not trusted. Workers are well aware that revealing the truth (let alone active dissent) often leads to reprisals….Through interviews with workers last week, the delegation discovered that the Ernst & Young monitoring teams are concerned primarily with product quality and whether production quotas are being met. Groups of workers at three separate factories were unanimous in claiming that monitors "never ask questions about the workers or conditions in the factories." At least two Nike-producing facilities weren't even audited in the last year.[400]
The Independent Monitoring Group of El Salvador (IMGES), established to monitor The Gap code of conduct in El Salvador as discussed above, argues that "for monitoring to function properly, monitors must be trusted by the workers. And - given the harsh and bitter experience that many [workers] face - representatives of local, respected civil society organizations will always be more trusted than outside auditing firms."[401]
An International Labour Office report recently noted: "Some evidence indicates that traditional financial accounting firms may be less independent due to inexperience in the detection of workplace violations and pre-existing contractual relationships with enterprise management."[402]
The Interfaith Center on Corporate Responsibility has been closely involved with monitoring issues, including the monitoring agreement for The Gap in El Salvador. The organisation says:
We believe local NGOs must play a central role in monitoring the workplace standards because local NGOs have skills that auditing, accounting and public relations firms do not….Monitors hired by companies to do social audits are trained to look at pages of figures, analyze [data] and check for quantifiable code violations. The skills required to detect violations of worker rights are different. Serious violations of freedom of association and various forms of harassment of workers often go undetected by auditors who come into an area, visit a plant, then leave. Independent monitors made up of local NGOs, rooted in local communities and having the trust of employees, are better qualified to detect the essential, but less quantifiable, elements in the workplace which relate to human respect, nondiscrimination, right to freely associate and to work in [a] safe environment free from fear.[403]
Many multinational companies that have recently adopted human rights principles have tended to be slow in adopting a system for independent monitoring or auditing. Some of them seem to be stalled at the point of discussing a range of alternative complex procedures for auditing and trying to decide how stakeholders should be consulted and who should be involved in carrying out the audit. While it is important to ensure an effective process for an independent social audit, there is a danger that companies may spend too much time discussing procedure at company headquarters and delay for too long the day when there is some practical focus on substance by genuinely independent monitors where it matters, at the site of their operations. Social auditing should not be looked at as an all-or-nothing proposition. Even if a company decides it needs more time to finalise plans for a comprehensive independent social audit, that should not prevent some form of pragmatic independent human rights monitoring from going ahead in the meantime.
Many companies, even some of those that endorse the notion of independent monitoring, seem to be finding it difficult in practice to take the step of agreeing to have their operations inspected by genuinely independent monitors. This is not surprising; companies are accustomed to having total control over their operations, and to being very careful in how they project the company's image to the outside world. But attempts by company managers to control the monitoring process by assigning the task to an auditing firm or organisation that is too closely associated with the company will be seen by many as more of a public relations exercise than a meaningful form of verification. Those with ultimate responsibility for monitoring must be knowledgeable about the local human rights situation, trusted by workers and stakeholders, and genuinely independent - not under the company's control or influence at all, and not in an ongoing business relationship with the company. There must be no grounds for any reasonable person to question the absolute impartiality of the monitors.
Some companies also resist independent monitoring and particularly the idea of publishing the results because they believe public criticism of the company is based on misperceptions, and they do not welcome the idea of engendering further public discussion of the company's perceived shortcomings. As Gordon and Anita Roddick commented when the 1995 independent social evaluation of The Body Shop was released:
One of the difficult lessons we have learned and perhaps are still learning is that although perception and our view of reality are often poles apart, it does not matter a damn. We must deal with perception as if it were reality, otherwise nothing changes. Our legendary grouchiness under criticism has sometimes stemmed from this perception/reality gap combined with a sense of unfairness, but we have promised to do better. This report has been a major step along the way.[404]
When The Body Shop commissioned and later published the independent audit, and when it accepted that along with the company's significant social achievements there were some shortcomings that needed attention, the public tended to welcome what it saw as signs of corporate humility, openness and integrity.
In this new era those companies that insist their social record is irreproachable and resist independent monitoring are inviting the very criticism they seek to avoid.
3.5 Companies working in partnership with the United Nations and World Bank
One recent example of companies addressing human rights and development issues is NetAid, launched on 8 September 1999. NetAid was formed by Cisco Systems (the world's leading supplier of computer networking hardware) and the U.N. Development Programme (UNDP). NetAid's website says it is "the beginning of a new, long-term effort to utilize the unique networking capabilities of the Internet to promote development and alleviate extreme poverty across the world. The NetAid Foundation will serve as a global exchange point to link people to successful agents and agencies of change."[405] NetAid states that its mission is to "use the Internet as a medium of social and economic change" aimed at building "a community of conscience dedicated to providing basic needs: food, shelter, legal protection, human rights and health care."[406] Cisco's Executive Vice President, Don Listwin, said NetAid's goal is "to provide a conduit for foundations, volunteer groups, corporations and individuals who have prospective solutions for Third World poverty to connect with people in poor countries who need help in obtaining education, finding markets for products, contacting health care providers or organizing workers."[407] He said Cisco has a social conscience, but also recognises that as the internet grows worldwide, "we'll be bringing more people into our business ecosystem."[408] The UNDP plans to help people in less developed countries get computer access to NetAid through the development of local internet access centers.[409] NetAid's website provides suggestions on how people can take action on these issues, and includes sections on "ending hunger," helping refugees," "saving the environment," "securing human rights," and "relieving debt."[410] Two other companies, KPMG (a leading accounting, tax and consulting firm) and Akamai Technologies (an internet communications company), have joined Cisco in sponsoring NetAid.[411] Cisco and KPMG reportedly have each agreed to spend up to $20 million on the project.[412] Televised rock concerts to be held on 9 October 1999 in New York, London and Geneva will help finance and publicise NetAid.[413] At the launching of NetAid, U.N. Secretary General Kofi Annan remarked: "NetAid is an inspiring example of the kind of corporate citizenship and public-private partnership that will be crucial in addressing the challenges of the 21st century."[414] John Chambers, President and CEO of Cisco Systems, said: "Netaid.org enables ordinary citizens as well as world leaders and major artists to take action to fight extreme poverty around the world. The Internet already has made a difference in the way business is done around the world. Now the world's most powerful web site can help make the difference in eliminating one of the globe's most pressing problems."[415]
Observers are watching to see how effective NetAid will be in making a difference at the grassroots level, and the extent to which it can overcome criticism that arose earlier in 1999 when the UNDP entered into another partnership with companies. Some NGOs criticised the UNDP for entering into a partnership with at least 16 multinational companies (including Dow Chemical, Rio Tinto, Citibank and AT&T) that paid $50,000 each towards establishing a "Global Sustainable Development Facility" (GSDF).[416] The companies were reportedly told by the UNDP that they would "benefit from the advice and support of UNDP through a special relationship."[417] Critics said that some of the companies joining that partnership had "tarnished records on human rights, labor and the environment," and that the partnership offered these companies "an opportunity to greenwash their images for cheap" while doing little to advance the UNDP's mission of serving the world's poor.[418] Ward Morehouse, president of the Council on International and Public Affairs, said: "The U.N. should be monitoring the human rights and environmental impacts of corporations in developing and industrialized nations, not granting special favours."[419] Joshua Karliner, Executive Director of the Transnational Resource and Action Center (TRAC), added: "The needs of poor communities around the world constantly conflict with corporate goals. Corporations often use child labor, obstruct trade unions, and engage in practices that destroy natural resources and pollute poor communities."[420] The UNDP defended the GSDF partnership, saying that "[t]he question…is not whether global corporations will increase their investments in developing countries, but how we can, as UNDP and others who are committed to sustainable human development, seek to ensure that at least some of these investments occur in ways that are pro-poor, pro-environment, pro-jobs and pro-women."[421] The UNDP pledged to "ensure that projects that would be coming under this initiative meet rigorous criteria, and are in compliance with all standards that the United Nations stands by."[422]
The website of Corporate Watch (whose parent organisation is TRAC) includes a section entitled "Corporatization of the United Nations." Corporate Watch condemns the U.N.'s increasing links with multinational corporations, commenting that "the UN seems to be scrambling for corporations' support, regardless of their social and environmental impact." The website criticises various collaborations between the U.N. and corporations, including The Business Humanitarian Forum, co-chaired by the U.N. High Commissioner for Refugees and Unocal (which Corporate Watch refers to as "a company with one of the worst human rights and environment records in the world.").
On the subject of partnerships between the U.N. and the private sector, Carol Bellamy, Executive Director of the U.N. Children's Fund (UNICEF, the U.N. agency with the most extensive corporate involvement), said recently that "it is dangerous to assume that the goals of the private sector are somehow synonymous with those of the United Nations, because they most emphatically are not." She said it is perfectly right and legitimate for business and the U.N. to be pursuing their different mandates, "and when they can work as partners, so much the better." She concluded: "But in coming together with the private sector, the United Nations must carefully, and constantly, appraise this relationship."[423]
Since June 1999 a number of corporations have sponsored food donations to the U.N. World Food Program, the amount of each donation dependent on the number of people who each day "hit" the "Donate Free Food" button on the Food Program's online web page: http://www.thehungersite.com. The average corporate donation per day is around $400 (80,000 hits at $.005 each). The companies involved in this project receive publicity and advertising as a result of their participation; advertising boxes for the day's sponsoring companies (which if hit takes the computer user to the company's website) appear after the "Donate Free Food" button is hit.[424]
The World Bank in 1997-98 helped to launch Business Partners for Development (BPD), "an informal global network of business, government and civil society, with the World Bank Group as an equal partner, that aims to produce solid evidence of the positive impact of tri-sector partnerships - both the developmental impact and the business impact."[425] The World Bank explained the thinking behind BPD:
Our starting point is the premise that there is growing pressure on companies to deliver, and demonstrate that they are delivering, value both to their shareholders and to the communities in which they operate. Corporate social responsibility is no longer an addition to the bottom line, but integral to it. New forms of partnerships are emerging that maximize the long term interest of the business sector along with the social and human development interests of the civil society and the state.[426]
Under the BPD program the World Bank and its more than 100 BPD partners are moving ahead with projects in four areas: youth development (coordinating partner: International Youth Foundation), water and sanitation (coordinating partner: WaterAid), natural resources (coordinating partner: CARE UK), and road safety (coordinating partner: International Federation of Red Cross and Red Crescent).[427] These projects "aim to benchmark good practice and to develop impact evidence."[428]