Update: Baby Steps in Bangladesh

Nearly a year after the deadly fire at Tazreen Fashions factory, and nearly seven months after the devastating collapse of the Rana Plaza building, a group of labor rights activists, advocates, and professionals gathered to discuss progress made toward worker rights and workplace safety in Bangladesh's enormous garment industry.

I'm not going to summarize all that was said - if you are interested in the details, I suggest you check out the tweets from the event #TazreenRanaPlaza and read the report "Still Waiting", which was published by Clean Clothes Campaign and ILRF. (Video in 3 parts here)

Instead, I've summarized my "take-aways" from the panel discussion and recent media coverage.  I've also listed some actions we can take in support of workers' rights and to send a message to brands and retailers that we expect them to take responsibility for their supply chain and that they should better protect human and labor rights throughout their operations.

The Workers

In short, Bangladeshi workers are still fighting for their rights.  Despite all the talk and all the attention, workers are not earning a living wage and continue to work in unsafe conditions.  There are positive developments, but they have been slow coming.  Just this week, we've seen an apparent deal between government officials and factory owners regarding wage increases and an agreement between Accord and Alliance brands that will allow factory safety inspections to begin.  However, labor unions do not have the right to collectively bargain, in fact they are still not allowed a seat at the table during discussions between government officials, factory owners, and multinational brands.  The pervasive attitude that workers are commodities, are easily replaced, presents a problem.  Union leaders face intimidation without protections and without the right to freedom of association. Thus, any immediate gains in labor rights will be gradually chipped away if that attitude and philosophy is allowed to persist.

Despite recent wage gains, there is still far to go. When workers receive higher wages, the surrounding supporting businesses, including housing, see it as a sign they can increase their prices.  As a result, the economy improves but workers experience little tangible gain.  Many workers support elderly or infirm family members and pay for education for their children.  Very few have savings.  Thus, if unable to work, due to illness or injury, the worker's entire family suffers.

While the above applies, generally, to the current workforce, we shouldn't forget those who cannot work, whether due to factory fire, building collapse, or other tragic event in the workplace (and there are many that never receive media attention).  The Tazreen fire and Rana Plaza collapse focused attention and resources.  A victim compensation fund has been established, but those funds are not yet sufficient to cover the losses and they have not been adequately allocated to the victims. Some victims are permanently disabled, no longer able to work. Others might be able to return to work if they receive proper health care, rehabilitation, and, in some cases, prosthetics.  However, few have received the care they need in order to return as productive members of society.  Even if they received compensation, it has since run-out.  Without savings, the injured cannot pay for additional necessary care.  They become a financial burden on their families.  Some families are forced to take the children out of schools and put them to work in factories, so to replace lost wages, perpetuating the cycle of poverty.  In the meantime, the Bangladeshi garment sector has flourished.

The Government

Two Bangladeshi government officials were present at the panel discussion and were given a chance to speak.  The following comments are based on my personal interpretation of their comments and behavior.  When confronted with the lack of progress regarding labor rights and factory safety, the reaction was defensive.  It appears the government is feeling the pressure from worldwide media attention.  They also believe they should be in control of the process of Accord (and Alliance) implementation, specifically as related to how funds for improvements and maintenance are allocated to the garment factories and how victims are compensated.  This may explain why change has been so slow.  This also presents a problem, because about 10% of the Parliament is made-up of factory owners. Corruption is already rampant, and desire to control the allocation of millions of dollars should raise red flags.  However, the officials made some good points, especially related to our responsibility to pick up the bill, likely through higher product prices.  This is valid and we should expect it.  In fact, if we aren't paying higher prices for garments purchased from Bangladesh, then we should investigate whether the companies are doing their part to improve working conditions.  Either consumers will pay higher prices or the brands and retailers will take a hit.  That said, since the Bangladesh garment sector is growing, we should expect the government and factory owners to do their part as well.

The Multinationals - Brands and Retailers

The biggest difference between the Accord and the Alliance is also the most revealing about U.S. corporate philosophy related to their overseas suppliers.  Where the Accord is binding, the Alliance is not.  Alliance members, including Walmart and Gap, refused to join the Accord because the terms were too restrictive.  U.S. corporations who have signed on to the Accord don't seem to have that concern.  The grievance and remediation process under the Accord takes work and requires trust, and it appears the Alliance members aren't willing to take that leap.  There is also no requirement for the Alliance to fund improvements to safety and operations in the factory and, although the applicable organizations have established a fund, there has been no formal method to allocate funds to the applicable factories (see "The Government" above re: allocating funds to factories).  What should be obvious, and hopefully multinational corporations in all sectors are beginning to see the light, is that the traditional audit and remediation process no longer works (if it ever truly did, and that is a matter of debate).  Purchasing corporations need to start taking ownership for their entire supply chain, and that means establishing closer relationships and continuous involvement.  Hopefully, financial commitments toward improving factory conditions and increasing wages in Bangladesh will create this sense of ownership in the sustainability of operations, which includes integrated relations with labor unions.  The unique opportunity for corporations to work cooperatively toward these collective goals in Bangladesh, as they are through the Accord (and, to a lesser extent, the Alliance), bodes well for inevitable necessary improvements in other countries.

The successes and failures resulting from implementation of the Accord and Alliance will dictate changes throughout the region and industry.  We must not wait for another fire, another collapse, to act in Pakistan, India, Burma/Myanmar, or elsewhere around the world.

What You Can Do

Use your voice and use your purchasing power to tell brands and retailers you haven't forgotten about labor rights and workplace safety. 

• Tweet, Facebook, send emails, make phone calls, tell your friends and family, do whatever you do to spread the word about differences between the Accord and the Alliance, and why Alliance members should continue to be pressured to take responsibility.  It's not too late for Alliance members to formally join the Accord and they should do so, to formalize their commitment and to reduce confusion in implementation of improvements. 
• Tell Alliance members you expect them to contribute to health care, rehabilitation, and long-term care of victims of all factory disasters. 
• Above all, continue to buy products made in Bangladesh, favor the Accord members when possible.  The workers are counting on us to keep demand up so their industry continues to grow. 

Five Things You Should Remember About the Bangladesh Tragedy

Background: On April 24, 2013, the eight-story Rana Plaza building in Savar, Bangladesh, collapsed. The building housed five garment factories, which reportedly manufactured and supplied clothing to several major western brands including Benetton, Dress Barn, KiK, Mango, The Children’s Place, Primark, and Wal-Mart. The current official death toll is reported to be 1,130, but local activists suspect it is actually much higher. Compensation will only be distributed to families who can provide official proof, through a DNA match of a family member to a body; therefore, a lower official death toll count is viewed as a way to reduce the government's compensation costs. Regardless, at this official death toll, the Rana Plaza collapse is the world’s second deadliest industrial disaster on record, after the India Bhopal gas leak. 

Relevant facts:

• The Bangladesh garment manufacturing sector brings in about $15.6 million annually and makes up about 80% of the country’s total exports. Sixty percent of these goods are shipped to Europe, 23% to the U.S., and 5% to Canada. Bangladesh is the 2^nd largest apparel exporter after China, and has the lowest comparable minimum wage, $37 month. 
• In November, a Bangladesh garment factory fire killed 112. Products for Wal-Mart, Disney, and Sears were produced in the Tazreen Fashions factory although, allegedly, through unauthorized subcontracting arrangements (which are disturbingly common in developing nations with large garment manufacturing sectors). 
• Workers at the Tazreen Fashions factory claimed their bosses ordered them to stay at their sewing machines, even as the rumor of the blaze spread. When workers did try to escape, they found “women’s exits” were padlocked and the “male” stairwell was filled with smoke and bodies. 
• The WRC (Workers Rights Consortium) estimates it would cost $3 Billion over five years to bring approximately 4,500 Bangladesh factories up to standards, or about 10 cents per garment produced.

1. How did it happen? Pervasive corruption, poor construction, and a workforce without rights.

The long answer to this involves delving in to the long and torrid history of multinational exploitation of cheap labor in developing nations. We’ll save that for another day. For now, here are some of the more important pertinent factors that led to the factory collapse:


• Building and factory owners use substandard construction materials and frequently neglect to obtain proper building permits. (Update 06/03/13: a survey of garment factories done by the Bangladesh University of Engineering and Technology found 3/5th of the country's garment factories are "vulnerable to collapse")
• When permits are obtained, there is little follow-through or supervision, leaving building owners to operate unregulated, to the extent they may build additional unauthorized stories.
• Within the factory, building and factory owners and management frequently use unauthorized generators and machinery, which cause vibrations that impact structural stability.
• Bangladesh suffers from a shortage of trained inspectors and systemic corruption, especially at the local level.
• Government officials are allegedly “scared” to enforce the meager existing regulations (video) because of the economic power of the garment industry in Bangladesh.
• Labor activists and union organizers report being intimidated by government officials, many of which have a vested financial interest in the garment industry. A year ago, a popular and vocal labor activist was found murdered, his body showing signs of torture. Despite pressure from international groups and governments, the murder investigation is stalled.

Even though workers reported the cracks in the walls, and an inspector advised building and factory owners to evacuate the building, workers were told to return to work or face punishment, which could include docking of pay, reduced hours, or firing. As a result, many workers were in the building when it collapsed, despite the obvious signs something was wrong.


2. What are multinationals doing? Depends on the company, but something potentially groundbreaking.

The official accord (pdf), signed by 40 companies to date, requires a 5-year commitment, and includes the following key components:


• Legally enforceable contract 
• Independent, thorough, and credible factory safety inspections with publicly available reports
• Mandatory repairs and renovations underwritten by Western retailers (funding options are negotiable)
• Signatory companies must stop doing business with any factory that refuses to make improvements, after a notice and warning process 
• Workers and unions have a substantial voice in factory safety, including development of a complaint mechanism and reporting process 

H&M, the largest purchaser of garments from Bangladesh, has signed on to this accord, as have three U.S.-based corporations: PVH (parent company of Calvin Klein, Tommy Hilfiger, and Izod), Abercrombie & Fitch,and Sean John.

Gap and Wal-Mart declined to sign on to the accord due to the legally binding component, which they claimed opened them up to frivolous lawsuits. Instead, they have put together their own agreement, along with members of the National Retail Federation, which will not be legally binding and does not discuss financing factory improvements. The lack of financing arrangements presents the biggest hurdle for success, as most factory owners don’t have the funds available to make necessary improvements without increasing the cost of products sold or reducing wages.

Wal-Mart’s efforts to avoid responsibility should come as no surprise given recent actions regarding their Bangladesh operations.  After the Tazreen fire, Wal-Mart shareholders rejected a proposal to require suppliers to report annually on safety issues at their factories by a 50-to-1 margin and they have rejected a proposal to readdress the issue at the upcoming June 7^th shareholder meeting; however, Wal-Mart said it would donate $1.6million to help start a new Bangladesh fire and safety training academy and claim they are working with other stakeholders and lobbying the Bangladeshi government to improve worker safety standards.

The terms and implementation of the accord (and any other agreements) are important for the obvious reasons of making tangible and sustainable improvements for the lives of workers in Bangladesh. They are also important because, due to the attention currently focused on Bangladesh, multinational organizations will be watching the degree of follow-through and the amount of continued attention from consumers, media, investors, and NGOs. This type of multi-stakeholder cooperation is, in many ways, groundbreaking, in that it is international and has commitment from high-ranking government officials. As such, it will be seen as a template for future agreements in other countries and industries.  Any deviations and failures will be viewed as justification for reducing commitments in future arrangements. Thus, participating companies must be held to the standards they have set and held responsible for any deviations or failures to achieve promises. In the same respect, successes can be built-upon and we should applaud companies as they achieve their goals.


3. What are labor rights and other organizations doing? What they have always done: making sure companies are held responsible for labor right violations.

There are several organizations working on tracking labor rights issues in Bangladesh and other developing nations. These are some of the best resources:


• BHRRC tracks and compiles media coverage, NGO and association efforts, legal decisions, and corporation responses related to business and human rights issues worldwide.
• Labor rights organizations, including the International Labor Rights Forum and Worker Rights Consortium, provide a variety of information about labor rights violations. 
• The International Labour Organization, UN Global Compact, and the UN Human Rights Council-endorsed Guiding Principles provide information and guidance regarding international human and labor rights standards for multinational operations.

Advocacy groups and research centers are important resources for evaluating important developments, such as the new Bangladesh accord, as well as learning about and staying up to date on major issues in various industries and countries.


4. What is the Bangladesh government doing? We’ll see…

The Bangladeshi government claims it has taken a more forceful stance on workers’ rights. After the Tazeen fire, the government assigned a special task force and stepped up factory inspections, whereby 700 garment factories were found to have faulty safety standards out of the 2400 factories examined since February 7^th. However, there was no indication efforts were made to address these problems. After a series of worker protests, the cabinet approved an amendment to the labor law, giving workers greater freedom to form trade unions and government agreed to raise the minimum wage.

Additionally, the six-member committee investigating the Rana Plaza collapse announced it would seek life sentences for nine people, including the building and factory owners, engineers, and officials who approved building permits. Their rationale for this recommendation indicated that the collapse was due to shoddy construction, improper issue of building permits, and gross negligence of responsibilities to workers.


5. What can you do?


• Don’t stop buying products from Bangladesh. While boycotts are emotionally satisfying, the reduced demand has unintended consequences on the workforce we are intending to help. As demand decreases, multinationals reduce orders and factories have less money to distribute to their workforce, let alone address safety improvements. Poverty and overpopulation in many developing nations ensure factories will find workers, regardless of the factory conditions. Instead of boycotting, buy from the companies that have committed to legally binding improvement programs. 
• Don’t encourage the U.S. government to remove Bangladesh’s favored trade status. Even though it does send a strong signal to the Bangladeshi government, the related increase in costs will influence multinational buying decisions, and they will likely take their orders to other countries. 
• Don’t forget about the other countries with their own labor and human rights issues. Bangladesh has the world’s attention right now, and rightly so, but there are a plethora of problems in the worldwide garment manufacturing industry and each developing nation has their own unique set of challenges. Websites for BHRRC, BSR, and IHRB are fabulous resources for educating yourself about these issues and issues in other industries. 
• Do pressure Wal-Mart, Gap etc to join the accord by posting a comment on their facebook pages (Wal-Mart and Gap) and signing the petition.

As a final personal note, I believe factory audits and monitoring programs are not a long-term solution. It is way too easy for factory management to cheat the system: keeping multiple sets of books, bribing or threatening workers to comply, and making quick physical changes to factory layouts, in order to meet standards for the duration of the inspection. For long-term and sustainable change, we must:

• encourage governments to improve their regulations,
• provide financial incentive for factories to improve their conditions,
• ensure protections for workers to unionize, to educate themselves, and to exercise their rights, and
• pressure western companies to guarantee they only work with factories that adhere to higher labor and human rights standards.

All of these improvements can and should be part of a comprehensive approach or they will not stick. This seems like an enormous task, and it is, because a fundamental change in philosophy is needed, on top of changes in policies and practices. Companies and governments will need to stop viewing workers as commodities, useful only for the amount of product they can produce per hour, and start treating them as equal human beings; worthy of the rights ascribed to them by the international community. Only then will we see tangible and sustainable improvements throughout the garment manufacturing industry and beyond.

As always, I look forward to your comments and questions.

Happy 2013!

Sorry I've been MIA on the blog - I have several posts in draft format that need some attention, however, I am neck deep working on my literature review for school right now so those posts will have to wait. Until then, I hope you all are well and enjoying the beginning of this new year. See you soon!

Being "in the sweatshop business"

Earlier today, I read an interesting article about the ethical dilemma ABC faces reporting about recent factory fires in Bangladesh, specifically because Disney products are produced in at least one of the factories and The Walt Disney Company is ABC's parent company. This dilemma is worthy of exploration. My primary objection is with the title "Reporting on Sweatshops When Your Boss is in the Sweatshop Business," because classifying any company as being "in the sweatshop business" makes assumptions about a company's business model and approach to overseas production and labor rights (none of which were discussed in the article).

Subsequent I had this twitter exchange with @AntDeRosa which, upon reflection, illustrates some of the issues I have been hearing from CSR and sustainability practitioners (@peterfhart is the author of the article).

Disney

(Full Disclosure: I spent a year working in Disney's International Labor Standards group, the group specifically tasked with defining, implementing, monitoring, and remediating labor conditions in factories producing Disney products. As a result, I know more about their specific operations than I am allowed to discuss on an open forum and I also have a soft spot for the people I worked with. Keep this in mind as you read.)

As with many companies that have a complex supply chain, Disney's ILS program has practical limitations.  As I tweeted and stated in an earlier post, it is impractical to audit 100% of the factories in a complex, global supply chain and it is nearly impossible to ensure desired conditions exists year-round, even after a successful remediation program. This is not an excuse for problems that exist, just a statement of reality. There are definitely shortcomings to Disney's approach to factory monitoring and remediation, none of which I would feel comfortable detailing here. I would also like to see Disney adopt a Human Rights Policy. That said, Disney does deserve credit for actions they have taken, for initiatives they participate in freely, and for a policy of pushing for improvement over "cutting and running". I won't defend Disney, specifically, any further. Everyone needs to make up their own mind as to whether a company is adequately addressing human rights and labor rights in their supply chain. My only hope is that you come to your conclusion based on evidence rather than inflammatory headlines.

Sweatshop, "Defined"

Another issue I have is the use of the word "sweatshop". Factory conditions overseas vary considerably, some are deplorable, others are disagreeable, and the rest fall somewhere in-between. To call them all "sweatshops" ignores the variation in conditions and the efforts made by companies, NGOs, trade organizations, and governments. The underlying truth is companies are cleaning up messes they made 25-30 years ago, when nobody cared about sweatshops or labor rights. Progress is slow, too slow, but progress is being made due largely to corporate sustainability initiatives, stakeholder focus on transparency, corporate-NGO-government partnerships/alliances, and responsible media reporting. If the goal is to fight for continuous improvement of labor conditions (and to move toward a human rights platform), we must also acknowledge that economic conditions in developing countries would be much worse if these factories disappeared. I don't expect people to stop using the word "sweatshop," but it should be used more responsibly.

Practitioner Concerns

The twitter conversation above also illustrates so many of the concerns I heard at the recent BSR Conference. Among them:

• What do our stakeholders value more: transparency or results? 
• What is the point of being transparent if it opens us up to attacks? 
• Should we only publish our successes and keep our failures and lessons learned to ourselves to avoid attack and exploitation?
• If we keep failures and lessons learned to ourselves, how do we then share them with competitors (and they with us)?
• If we only publish our successes, then will our initiatives only be viewed through a PR lens? (specifically noted in one of @AntDeRosa's tweet above)
• Doesn't this mean we need to also publish our failures and lessons learned - so we aren't accused of only seeking positive PR?

These are just a few of the questions asked and they illustrate the disconnect between the "world" of CSR and sustainability practitioners and the "outside world".  There is much work to be done here, by practitioners (to start, by better explaining their mission) and by the outside world (to start, by listening with a less cynical ear). Focus should be directed upon the companies that refuse to be transparent, refuse to acknowledge mistakes, refuse to commit to improvements. Also, when a company commits to transparency, to fixing mistakes, to improving conditions, they should be held to account. Name and shame the companies that cut and run, leaving others to clean up their messes.

"in the sweatshop business"

"If your products are made in a sweatshop, you are in the sweatshop business" as Anthony DeRosa tweeted to me... is this true? To be "in the sweatshop business" implies a company intentionally seeks factories with poor labor conditions, purposely keeps conditions at that level so to profit, and ignores any pleas for improvements. It also implies that this is a part of the company business model. If this were the case for Disney, perhaps I would not object. There are certainly companies out there that deserve this designation. Disney is not one of them.

As always, if you have any questions, concerns, or corrections to the above, please let me know.

What I Learned About Supply Chain Sourcing

As I noted in earlier blog posts, I attended the BSR Conference in October. My primary intent was to determine what organizations are doing to improve labor conditions in their supply chains. I was, to say the least, inspired by the progress. Thanks in large part to the UN Guiding Principles on Business and Human Rights (the GPs), developed by Special Representative John Ruggie, many organizations are looking beyond improving labor rights to protecting and respecting human rights for a larger contingent of stakeholders directly impacted by domestic and international operations.

If you pay attention to international news, as I do (you may notice from my twitter feed), you cannot escape the all-too-frequent reports about hazardous conditions and tragic accidents in factories, fields, and mines around the world. A significant portion of the goods produced end up in the U.S. or other "developed" nations. I find, when discussing supply chain sourcing or international labor rights with people unfamiliar with the sustainability movement, several questions come up, including:

• How can we, as consumers, ensure our purchases do not support these activities? 
• What power do western-based corporations realistically have over the working conditions overseas? (without a doubt, we have our own domestic labor issues but my focus is on international development)
• Is it within our rights or responsibilities to interfere in activities taking place in other sovereign nations? 
• Should a capitalist society concern itself with these issues, which distract from the profit motive frequently thought to be the primary purpose of business?

I can't promise to answer these questions to the satisfaction of every person, but I have put together some blog posts to summarize corporate responsibility and sustainability initiatives in an effort to show what is currently being done and the direction we are headed.

Supplier Codes of Conduct

Over the past 20 years, corporations have been developing and implementing supplier codes of conduct (here’s an example currently in use by my former employer, The Walt Disney Company), an agreement with direct suppliers requiring adherence to a minimum level of labor standards, usually based on the ILO Core Labor Conventions. If a supplier is unable to meet these minimum standards, the organization can direct remediation or, if unsuccessful or resisted, terminate the business relationship. Although these codes clearly represent a positive development toward recognizing and protecting labor rights, they have inherent weaknesses, including:

• realistically, corporations are incapable of auditing all their supplier factories, let alone ensuring conditions are consistent year-round,
• implementation and enforcement are often limited by local laws and regulations,
• agreements typically reach only one level down the supply chain, meaning they don’t have any real impact on raw material sourcing, and
• unless the corporations produce detailed Social Responsibility reports, it is difficult for consumers to ascertain or evaluate how effective the agreements are or use that information to influence their purchasing decisions.

I’m not suggesting companies abandon their supplier codes of conduct, but it is useful to understand the limitations in a practical sense.

With the above in mind, I have put together posts summarizing information I gathered related to the following:

• Supplier Codes of Conduct vs. Human Rights Policies
• Stakeholder Engagement for Developing Sustainability Initiatives
• Tackling Human Trafficking in the Supply Network
• New Developments in the Chocolate Industry
• Leadership Competencies [to come]
• Tackling Bribery and Corruption

I hope these are helpful or, at least, interesting. As always, if you have any questions or comments, please let me know.

Supply Chain Sourcing and Human Rights

In my "introduction" post, I described the key elements and drawbacks of Supplier Codes of Conduct. Based on that information, you may understandably wonder why developing and implementing an even more ambitious human rights policy makes sense, especially given already stretched resources. I hope below I can provide a convincing rationale as well as provide some hints and resources.

Developing a Human Rights Policy

Philosophically, a human rights policy is all encompassing and applies to all stakeholders, beyond employees and suppliers, including parties and communities directly impacted by operations. Some elements may already exist within your organization, such as an anti-discrimination policy and the supplier code of conduct. Some items might seem obvious, and we do tend to take certain rights for granted (especially those ensconced in our own founding documents). These are rights that must be protected, developed, sometimes even explained to government officials and citizens in developing (and some developed) nations. Consider that groups oppressed by their government for decades (for example, Myanmar's Rohigya) likely have limited access to the Universal Declaration on Human Rights and GPs. As much as we struggle with defining and defending our rights in the U.S. (interpretation and application to new technology, for example), imagine how difficult it is to enforce them in operations in foreign countries, especially those run by corrupt governments.

Practical Guidance

The GPs are not binding, but voluntary based on ability to operationalize by industry and country. The corporate responsibility under the GPs is to respect human rights and to provide remedy for failures, as appropriate. In contrast, it is the state’s responsibility to protect the human rights of its citizens and establish a system by which they can obtain remedy for shortfalls. These organizations are actively involved in translating the GPs to best practices for industries and organizations:

• UN Global Compact Guide for Business - How to develop a human rights policy
• Business & Human Rights Resource Centre - On the Horizon
• International Corporate Accountability Roundtable - Human Rights Due Diligence
• BSR - Human Rights Strategy & Implementation

Domestic laws (in the country of operations) are often not sufficient to meet above guidelines. It’s no secret western companies are attracted to developing nations with the intent of gaining access to raw materials and labor at lower expense due to lack of infrastructure and government regulations.

HR Impact Assessment

Before developing a human rights policy, the company should complete a human rights impact assessment in order to identify and prioritize areas of concern. The basic steps are:

1. Identify the most relevant issues
2. Identify gaps in current management system
3. Proactively shape the agenda (look for opportunities)
4. Find balance between addressing risks and finding opportunities
5. Get expert views and hear concerns of “rights holders”
6. Impact/evaluate at product or segment level (micro) and at corporate (macro) – thinking about actual results, as well as value of transparency (in a report to the public or perhaps working with competitors to find solutions to bigger problems)

Important to realize this is not an “all or nothing” proposition – should be aspirational and incremental. You can't solve all the problems in a day. Think about the most obvious HR risks. Chances are you are not the only one to notice and there are people on the ground trying to address it or other companies that have tried and can share successes, failures, and lessons learned. However, don’t neglect a rare worst-case scenario that could have a huge HR impact. These are the events rights holders might be concerned about and that NGOs and governments have no idea or capability to address (e.g., BP oil spill or Bhopal gas leak). This will require creative crisis planning that could pay-off in the long run – at the site of design, at other sites, or even for competitors. Imagine if you have planned for a leak or equipment failure and the actual cause is sabotage. At least you have a plan to work from. Weigh the probability of occurrence against the estimated impact but realize these are moving targets, especially when dealing with developing nations and the potential of government turmoil.

Examples - Human Rights Policies

• Chevron [pdf]
• GE
• Johnson & Johnson
• Microsoft [pdf]

Implementing a Human Rights Policy

You can copy and revise HR policies as seems appropriate for your organization. However, the trick will be in implementation and integration within your business processes. Here are some key questions that need to be answered:

• Who will be responsible for implementing? If it is to be a team, who are the right people for that team and why?
• How will responsibilities be divided? by country/region or by issue or by function/segment? 
• How will they share information?
• How will they make decisions?
• What is their organizational structure? Who do they report to? Why is that appropriate?
• How will their policies be integrated into continuing operations?
• How will their progress be tracked and evaluated?

It is important to be pragmatic, aspirational, and flexible. As world events occur, risks and opportunities will also change.

Other Lessons

Focus on the process - when designing and implementing a human rights policy, the key is to be process-focused rather than outcome-focused. A focus on outcomes often ignores what went right or wrong along the way and ignores room for improvement. We need to realize, and be able to communicate coherently to stakeholders, we are dealing with complex environments with a multitude of unique situations that must be approached as such and, preferably, not abandoned at first perceived failure.

Look for success stories - as much as the above is true, not every situation is so unique that other opinions, experiences, and best practices can be ignored. Even a thread of similarity might be useful to address current challenges.

Utilize local resources - don’t be afraid to rely on (a wide variety of) locals to contextualize. You may be missing an essential piece of the puzzle if you don’t understand all the cultural dynamics. This is especially true if, at meetings and negotiations, you notice a particular demographic (perhaps, women) is missing. You may have stumbled upon a component of the informal power structure within the community and an indication of who is operating behind the scenes. It is also valuable to identify the observers and historians within communities as they can tell you who actually makes important decisions.

Look for opportunities, cautiously - The GPs focus on eliminating risks but do not build on to enhancing or promoting human rights opportunities. An important, but risky, opportunity would be developing basic social services not provided by the government. An organization considering such a venture needs to also develop a viable exit plan in case the operation ends, for whatever reason. Perhaps partnering with a local NGO and obtaining independent funding sources would help to ensure continuation of services.

Defend transparency - A common question asked by practitioners, executives, and boards is what actions open the organization up to more risk, particularly legal or reputation? Unfortunately, we are still dealing in the reality where results are valued over transparency. Western corporations are often forced to make and defend a business case (ROI and legal protections) to investors and lenders, but are rarely called to account on the ethical imperative of human rights unless the damage has been done. There is a shift in consumer and investor behavior, but not sufficient to cause a sea change. A paradigm shift is needed here in both the investor and NGO communities.

Use leverage - what if the government is unwilling or unable to protect the human rights of its citizens, let alone create a legal system? How far can (should) a corporation go to fill the role of the state? One suggestion is using the leverage of the business relationship and U.S. regulations to provide incentives to the government officials for protecting human rights principles directly related to smooth operation of facilities. If necessary, the company may be able to devise penalties for failure to protect, especially in particularly egregious events that could negatively impact the company’s ability to operate in the country and reputation at home. For example, the conflict mineral provision of the new Dodd-Frank legislation may have good and bad aspects in implementation; however the existence of the law now provides U.S. corporations with leverage to use when dealing with the DRC and other countries of concern.

Establish a grievance mechanism - the mechanism should be available to address small issues that arise directly related to the operations and their impact on employees and the surrounding communities. The mechanism should aim to find solutions before small problems become big problems (e.g., Lonmin). A government unwilling or incapable of protecting the rights of its own citizens is also not likely to establish an effective legal system, and it is currently unresolved as to where such citizens of a foreign nation might have their complaints heard, if a corporation response is inadequate (see Kiobel Supreme Court case).

Integrate human rights practices into existing processes - and include progress in job evaluations. Again, for evaluations, it is important to focus not just on the results, but also on incremental progress, ability to trouble-shoot and work with other outside entities, engagement with human rights experts and rights holders, and appropriate transparency. Focus on identifying the challenge, developing and implementing a strategy, evaluating the impact, and identifying the lessons learned so that an industry standard might be developed. Keep in mind the corporate obligation to “respect” versus the state obligation to “protect” and be aware that, in some cases, rights holders may not be aware of or understand their rights.

As always, if you have any comments or questions related to the above, please let me know.

A New Approach to Stakeholder Engagement

Below I have summarized my notes taken during a workshop about stakeholder engagement.

I have also included some clarifying and contextual information, based on my academic and practical experience with stakeholder identification and engagement.

(links provided within are not endorsements but, rather, examples for explanatory of contextual purposes)

Who are your stakeholders?

Traditional stakeholder groups include investors, lenders, customers, employees, and suppliers. Businesses have a direct financial relationship with these groups. Profits and regulations, supply and demand, dictate the rules of engagement. These groups are still relevant within new stakeholder engagement strategies; however the scope of engagement with these groups should expand to align with goals related to social responsibility and sustainability initiatives. In addition, new stakeholder groups (e.g., socially responsible investor “SRI” groups, environmental and human rights NGOs, local affected populations) should be considered, as they can both influence corporate reputations and provide valuable information about goal development, best practices, and lessons learned.

Why engage these groups?

Investors and SRI groups have financial benchmarks and analyses that provide guidance related to market and long-term expectations. Sustainability initiatives will likely cause a significant initial investment; however, if properly managed, the initial investment should produce both quantitative and qualitative returns. SRI groups are likely to have a more long-term perspective beyond the quarterly and annual earnings focus of markets and lenders. Expect SRI groups to be more demanding with regards to sustainability initiative results and transparency.

Customers may initially reject cost increases directly resulting from sustainability initiatives. This may be partially remediated through transparency, especially if initiatives can be shown to positively impact customer lives (e.g., reduced packaging or environmentally safe cleaning products). Consumers may reach out with concerns about raw material sourcing, especially when news reports alert them about specific issues (e.g., factory conditions, child labor, conflict minerals). These should be seen as opportunities to establish new sustainability initiatives responsive to customer concerns.

Suppliers may not initially see the benefit of investing in sustainability initiatives (related to supplier codes of conduct and social audits, for example), especially if only one of their customers is pressing for improvements. However, if competitors can form an alliance with similar goals, cost of implementation may be shared in exchange for purchase commitments and transparency obligations to improve ethical reputations of all parties. Not all companies have the purchasing power of Wal-Mart, but this may be an opportunity for competitors to work together when costs and benefits can be shared.

Competitors are useful for forming alliances to tackle large (see my recent chocolate post) and small issues, as well as for comparing successes and failures. This requires trust and relationship-building, not seen often enough in corporate culture. Sustainability and transparency should be viewed as two sides of the same coin. Sustainability concerns may not be shared across an industry. Sharing ideas, information, and responsibility will require a shift in thinking about corporate secrecy.

Local and international NGOs, including those focused on environmental or human rights, are valuable resources. Once seen as rivals, these groups are increasingly taking on partnership and advisory roles for sustainability initiatives and strategic development. NGOs can also be helpful with stakeholder identification and negotiations, especially local groups with ties to affected communities. Based on their experiences, they may also be able to identify companies that have successfully (or unsuccessfully) tackled similar issues and can share best practices (or lessons learned). Information sharing requires a commitment to transparency and two-way dialogue, often out of the comfort zone. (I have more information about human rights-focused initiatives in a separate post)

How to engage with stakeholders?

Create an engagement strategy. Begin by asking questions about the goals of engagement and how it fits with the organizational mission, goals, and sustainability initiatives. The goals of engagement should provide some guidance as to which internal groups and individuals should be involved, as well as which stakeholders should be included, in discussion about each sustainability initiative. The company needs to find a proper balance between engaging a wide variety of stakeholders and avoiding information overload.

Research, evaluate, and prioritize stakeholder groups. Be aware, prior to engagement, there will be conflicts and difficult decisions must be made. Not every group can or will be 100% satisfied with the initiative or the outcome. Evaluating groups ensures those with higher priority have a greater chance of having their needs heard and met.

Plan engagement(s). There are consulting groups that can help coordinate creative, structured, and strategically appropriate stakeholder engagement activities. Although there are obviously costs involved, the benefits of investing in this type of assistance early in the process include ensuring the criteria of engagements are sound and the goals are achieved.

Engage! This is your opportunity to listen, to identify concerns, and to discover new ideas. Again, the benefit of having a trained consultant present is assistance keeping the conversation on track and productive. It is also important to remember that you do not need to act upon 100% of the information gathered in these engagements.

Prioritize and integrate key points gathered during stakeholder engagements in to strategic planning and development. Identify the important lessons learned from the process so they can be worked in to future engagement opportunities.

When to engage?

• When you want to take a proactive stance related to an emerging or recently discovered issue
• When you are exploring innovative sustainability initiatives and want input from directly affected groups, experts, and parties that have previously worked on this issue or in the region
• When the organization has both the power and the will to make positive and sustainable change
• When the project is still in the planning phase – these types of engagements are not designed to tell stakeholders what will be done but, rather, to gather information needed to make decisions. If the key decisions have been made, if the strategy has been formulated, the type of engagement discussed above is a waste of time and resources. What you want is buy-in

Lessons:

My takeaways from the workshop:

• Consider using a stakeholder engagement consulting group to plan and engage on first time or complex engagements
• You do not need to act upon 100% of what you hear
• Be proactive and transparent
• Integrate with corporate strategy at all stages of engagement planning and implementation
• Compare issues important for business success with issues important to society
• Be prepared to address dynamics and conflicts between stakeholder groups and needs
• Get stakeholders out of reactive mode by making them a partner in a shared vision of the future
• Keep in mind the initially established goals and desired benefits – strategic and reputation – while developing relationships with stakeholder groups
• Follow-through, either through action or transparency

Above all, stakeholder engagement is a learning and organic process, not an event.

As always, if you have any comments or questions related to the above, please let me know.