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Appendix H Submissions following the Workshop At the end of the workshop, presenters and participants were invited to submit further comments. One further submission was received from Donna Chung who indicated that the “views presented are my own and do not necessarily reflect the views of the ad hoc [planning] committee as a whole, or those of Sandler, Travis, and Rosenberg, P.A. Dr. Chung’s comments are included verbatim in this appendix. 121

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Criteria for Identifying Promising Business Practices to Eliminate Child & Forced Labor: Three Foundational Elements Donna E. Chung, Ph.D. Submitted to U.S. Department of Labor Office of Child Labor, Forced Labor & Human Trafficking July 7, 2009 During the May 11-12, 2009 National Academy of Sciences (NAS) Workshop, a diverse group of stakeholders provided comments on the framework under development for identifying and organizing business practices to eliminate forced or child labor in the production of goods. The “Draft Criteria,” intended to contribute toward the development of the framework, reflected a small portion of the Ad Hoc Committee’s1 earlier reflections on the topic. It was circulated prior to the Workshop and provided a starting point for the Workshop’s discussions. This document expands on the “Draft Criteria,” taking into account the Workshop discussions, as well as my own deliberations on the subject. For the purposes of this document, an important distinction is made between the terms “framework” and “criteria”.2 Consistent with the Department of Labor’s “Statement of Task” for the NAS, “framework” refers to the conceptual structure to be used for both (1) identifying and (2) organizing pertinent business practices. “Criteria,” in contrast, refers more narrowly to the evaluative tool that would be used, primarily, to achieve the first of the objectives of identifying eligible practices. Criteria are a set of standards (or indicators) that could be applied to distinguish “eligible” functional outputs from “ineligible” ones – in this case, “promising” business practices for reducing child/forced labor from not-so- promising practices. This document focuses on the first task, then, of commenting on the criteria to be used for identifying promising practices. Many good insights were shared at the two-day Workshop pertaining to the elements to be included in the criteria. For example, there was a general consensus reached around the need for the criteria to address such important issues as: • Effective problem analysis, including root-cause analysis; 1 Ad Hoc Committee on Approaches to Reducing the Use of Forced or Child Labor 2 I believe the use of these terms interchangeably at the Workshop created some level of confusion for the participants and deserves clarification. 123

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124 APPENDIX H • Community stakeholder engagement; • Contextualization of the practice to local milieu; • Institutional capacity building; • Robust evaluations & impact assessment; and • Sustainability. What was missing in the discussion, however, was a consensus on how these disparate and important issues might be grouped into categories that provide a structure for analysis and examination. I submit the following three categories as a structural foundation for the criteria. They are not meant as an exhaustive list of items to be included in the final criteria. Rather, they constitute a suggested means of organizing the long list of valuable ideas and concepts shared at the Workshop. I hope that they contribute toward building a solid conceptual foundation for the criteria that will be used to identify good practices in this area. (1) The first category of criteria has to do with the relationship between the particular practice and the business entity responsible for the practice. This category has to do with the question: For a practice to be considered “good”, what qualities should it exhibit with regard to its relationship with the business entity? What place should the particular practice have within the whole of the operations and ethos of the business entity in question? Here, my argument is that a set of criteria should point to practices that are holistic and integrated – practices that demonstrate that the objective of eliminating child/ forced labor is integrated into the decision-making processes of every stage of the business’ value chain, from product design and engineering, to raw material selection, manufacturing, to sales, marketing, and product decomposition. (2) The second category has to do with the relationship between the particular practice and the target beneficiaries. The question addressed here is: For a practice to be considered “good”, what qualities should it exhibit in the way it relates to the target beneficiaries? Here, the criteria are meant to point to practices that demonstrate in their problem analyses, intervention-design, implementation, and evaluation an emphasis on target community participation and the extent to which the root causes endemic to the community are being addressed by the practice intervention. (3) The third category has to do with a set of criteria that point to a robust system of internal and external evaluations and effective management of data and information. The question here is: For a practice to be considered “good”, what qualities should it exhibit in the way it utilizes external and internal evaluation methods? The diagram below depicts the relationship between the three categories.

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APPENDIX H 125 At the Intersection of the Business Practice & Target Community: Supported by Robust System of Internal & External Evaluations and Data Management BUSINESS ENTITY TARGET COMMUNITY In Relation to the In Relation to the Target Business: Holistic Community: & Integrated Contextualized, Root- Cause Focused & Community Participatory The Blue circle (on the left) represents the Business Entity, for whom the particular practice/intervention should be integrated into its entire business process. The Red circle (on the right) represents the Target Community, whose participation should shape and influence the design, implementation, and evaluation of the particular practice. The Green circle, which encompasses the overlapping portion of the other two circles, represents the evaluative work that should be carried out to measure the effectiveness of the intersection between the business’ practice and the community. The following sections elaborate on these categories of criteria for identifying good practices. I. Category 1: Integrated & Holistic in Relation to the Business Overarching Criterion: With regard to the practice’s relationship to the business, the practice (or intervention) should demonstrate that the objectives of eliminating child/forced labor are integrated into the whole of the business’ operational principles and practices. This includes the integration of the objective of eliminating child and/or forced labor into the decision-making processes of every stage of the business’ value chain, from product design and engineering, to raw material selection, in-bound logistics (e.g., procurement, sourcing, pricing, etc.), core operations (e.g., manufacturing and production), out-bound logistics (e.g., packaging, distributing, transporting, etc.), marketing and sales (e.g., pricing practices, consumer information, etc.), and product teardown (e.g., recycling, product decomposition). Significance of Such Holistic & Integrated Approach

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126 APPENDIX H Problems arise when business practice to eliminate the use of exploitative labor is not integrated into the whole of its business operations. When an intervention or practice (such as the development of codes, guidelines, and monitoring systems) is developed and implemented in isolation from the rest of the company’s operations, it is likely that it lacks: 1. Genuine Commitment: When a business cannot demonstrate that the practice is integrated into the whole of its operations, this is often a sign that there is not a genuine long-term commitment to the objectives of the practice. 2. Effectiveness: When the objectives of a practice are not integrated into all stages of business operations, conflicting internal practices may arise and reduce the likely effectiveness of the “good” practice. For example, even if sound codes and manuals are developed and distributed to suppliers, if such practice is not matched by appropriate purchasing rules that prohibit repetitive rush orders and pricing wars, there may be built-in incentives for non-compliance. Moreover, even with model codes and monitoring systems in the manufacturing/processing sites, if the company’s product design calls for use of raw material produced/mined exclusively in high risk parts of the world, no amount of “good” practice in the manufacturing stage could ensure the integrity of the business’ efforts to eliminate child/forced labor. 3. Sustainability: Only practices that are integral to the whole of a business’ operations can have built-in incentives for ongoing implementation. This criterion, therefore, pertains critically to the sustainability of the practice and its objectives for the business entity. Signs / Indicators of a Holistic & Integrated Approach The practice should be integrated into the company’s overarching commitment to all of the core labor standards of the ILO, in recognition of the interconnectedness of the fundamental principles and rights at work. Business should demonstrate that the “practice” or “intervention” is in harmony with the rest of the business’ philosophy, operational principles, and practices, and integrated into the operational guidelines and performance measurements of management and employees at every level. Business should demonstrate that the “practice” or “intervention” includes assessment of risks for the use of child / forced labor at every stage of its value-chain – from product design, material selection, procurement, manufacturing, marketing and sales, to product teardown. For example, from the product design and engineering phase, risk assessments should be conducted for the use of child/forced labor in the production of the raw materials being considered for use.

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APPENDIX H 127 In the case of an isolated pilot practice, there should be a clear and demonstrated commitment to scale up the practice (modified, as necessary) to be applied to other comparable business processes. o Demonstrate justifiable rationale for the choice of the particular location (or site) for the pilot. o Demonstrate analysis of factors that would limit replicability. o Demonstrate analysis of factors that enable replicability. o Demonstrate analysis of a “business case” for the practice, as a means to encourage replication in other comparable contexts. As part of the business’ commitment to the sustainability of the intervention’s objectives and activities (where appropriate), the practice should have integrated into its design ongoing incentives for desired behavior and decisions, and disincentives for reverting back to undesirable practices. I. Category 2: Rooted in Community Participation & Contextual Analysis in Relation to the Target Beneficiary Overarching Criterion: The practice should demonstrate in its problem-analysis, design, implementation, and evaluation an emphasis on (1) the root causes of the exploitative labor; (2) contextual analysis; and (3) target community stakeholder participation. Among other things, this criterion has to do with the effectiveness and the sustainability of the outcomes of the practice. It is only when the particular practice adequately addresses the root causes of the problem and takes into account the particular socio-economic and political contexts and needs of the community, that the immediate benefits and outcomes of the practice can be sustained over time for the individual beneficiaries and the community at large. This also would contribute to prevention of further exploitative conditions for others (e.g., younger siblings and other vulnerable populations) in the community. Signs / Indicators of Contextualized & Community-Focused Approach The business policies and practices in question should be in harmony with the national and local laws and policies, in so far as these standards are consistent with international standards. Given that forced labor and child labor occur in particular contexts with unique mix of historical, socio-economic, political, and cultural factors that enable such exploitation, the design and implementation of the practice should make evident how the particular business intervention contributes to tackling these systemic factors, addressing the root causes of the problem.

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APPENDIX H 128 At a minimum, the following contextual aspects should be included in the problem- analysis and intervention-design: Level of Government’s Political Will o Whether the country has ratified relevant ILO conventions. o Whether the country Labor Code adequately addresses child labor and forced labor issues. o Level of government capacity for legal enforcement in the sector. Socio-Economic Contributors to Child/Forced Labor o Existence of economic (or educational) alternatives for the forced / child laborer and families. o Nature of the relationship between the families (and the community) and the industry sector (e.g., dependence, family tradition, etc.). o Community’s cultural and social attitude toward child/forced labor in the sector. Industry Capacity & Engagement o Size and scope of the sector. o Role, engagement and level of vertical integration of industry. Where the root causes have been adequately analyzed and prioritized by the business, the particular practice or intervention should aim to tackle the root causes, and where appropriate, coordinate efforts with local entities, including: o local authorities, where appropriate o other businesses, where appropriate and possible o community leaders and members of civil society Where possible, the practice should include from its design the input of the intended beneficiaries, such as the local business entities, community leaders, child/forced laborers, and families of the workers. Where the “practice” is intended to change the behavior of other business entities along the supply chain, it should build the capacity of the local entities (e.g., small-scale farmers, local producers, etc.) for compliance. To the extent possible, the practice should set up adequate incentive structure for continued long-term behavioral change in the local context. II. Category 3: Supported by Robust System of Internal & External Evaluations and Management of Data & Information Overarching Criterion: The practice should be supported by a robust system of evaluations that assesses the effective intersection between the business’ operations and the impact on the community.

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APPENDIX H 129 Without a credible and informative system of evaluations, it would be impossible to (1) assess whether the intended outcomes are being reached, (2) assess what unintended outcomes may be associated with the practice, (3) make continual improvements on the practice for ongoing relevance, and (4) obtain information necessary for replication or scaled-up application in the sector at large. Signs / Indicators of a Robust System of Evaluations Evaluation Methodology The practice should have in its design adequate means of internal evaluations, which, on regular intervals: o Measure whether the goals are being met. o Assess any unintended consequences. o Provide a mechanism of adjusting and improving on the practices based on evaluation results. The practice should be supported by a set of ongoing external evaluations that: o Are conducted by entities with specialized training in international labor standards and in-depth knowledge of the specific commodity / product / industry. It is important that the evaluation is not a generic, cookie-cutter approach, but tailored to address the challenges specific to that sector, country, and region. o Prioritize the input of local community stakeholders, who demonstrate on-going, continuous presence. o As much as possible, include confidential interviews with those the “good practice” is intended to benefit / protect. o Demonstrate cultural and political sensitivities, including the use of the language used by the beneficiaries. o Move away from “pass or fail” system to creation of systemic incentives for good behavior and capacity building. o Utilize sampling techniques that are designed to produce high level of certainty. Evaluations should demonstrate capacity for effective data management: o Establish baseline information. o Give attention to establishing the reliability of the baseline data. o Ensure that data collection is ongoing and up-to-date. Evaluation Components Evaluations should include assessment of the logical links in the design of the practice, including evaluation of: o Quality of analysis of root causes of the problem and the relationship between the intervention and the causes. o The logical connection between the inputs, activities, and expected outcomes.

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APPENDIX H 130 o Assumptions underlying how the particular intervention is to lead to the desired outcomes. Evaluations should include impact measurements, which address the following questions: o Is the practice reducing child labor? o Is the practice reducing forced labor? o Is the practice benefiting child laborers? o Is the practice benefiting forced laborers? o What are the specific benefits? o How are the benefits documented? o How are the benefits measured? • Evaluation should give attention to the sustainability of the outcomes and the practice (where necessary to continue prevention): o Demonstrate that the practice is likely to continue (as needed). o Demonstrate that the benefits are likely to continue for the beneficiaries. o Assess whether necessary institutional capacities have been built to sustain the desired outcomes. o Assess the degree of will that exists to ensure sustainability of the desired outcomes. o Assess whether there is local ownership of the practices. At first glance, the question may arise: should all the above elements be considered necessary for a practice to be considered “good,” could any corporate practice pass the test? Aren’t the above criteria too onerous? For a practice to be considered exemplary, I believe it is not only possible but necessary for a business practice to meet at least the vast majority of the three sets of criteria outlined above – if not in the letter of the criteria, at least in their spirit. It is critical that the practice be integrated into the whole of the business’ operations, from design to the end of the product’s life-cycle. Otherwise, whatever “good” that is intended by the particular practice may easily be countered by the forces operating in other segments of the business’ value chain. Likewise, if the practice is not designed, implemented and evaluated to address the particular needs, root-causes, risks, and capacities of the local context (usually best derived at through the participation of the local community members), the practice is likely to be ineffective and unsustainable. Finally, without a robust system of evaluating the impact of the practice based on credible data management, it would be impossible for the business entity to be able to posit that the practice was effective in achieving its goals, let alone look out for the potential unintended consequences of the intervention. There is no doubt that the Compendium that results from the application of the criteria will be watched carefully by the business community – from U.S. importers, to producers operating abroad. Whether intended or not, the practices presented in the

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APPENDIX H 131 Compendium will be used by relevant businesses as the benchmark – the standard by which businesses will measure their own practices. As such, it is critical that the Compendium include only those practices that demonstrate not only reliable good results, but also good processes by which the practices were designed. I believe the three sets of criteria presented above will help point to such practices. “Corporate social responsibility” efforts have reached a critical point in time. While much learning and improvement have taken place over the past two decades, there also have been many setbacks. The setbacks include the current prevalent system of audits and monitoring (the “policing model”), which is largely perceived as flawed and ineffective in preventing or eliminating exploitative labor conditions in major supply chains. While companies have invested considerable energy and resources to shoring up their CSR efforts, criticisms and frustrations continue, as demonstrable results are difficult to come by. In this context, it is likely that business communities will look to the U.S. Department of Labor’s Compendium for guidelines on how they might shape their next round of CSR efforts. The potential role and impact of the Compendium is, in this sense, far-reaching and significant. I hope that the ideas presented in this document contribute toward building Criteria that result in a stellar set of practices that will both challenge businesses and provide useful guidelines to help shape the next phase of developments in CSR.