Appendix F
Illustrative Examples of Business Practices

by Kara Murphy and John Sislin

Introduction

The following are illustrative examples of business practices and partnerships that aim to reduce the use of forced or child labor in the production of goods. The practices included in this appendix have not been evaluated as part of the process for preparing this report so their inclusion does not convey any representation of their quality or effectiveness or the accuracy of company statements or statements from non-governmental organizations about company practices included in the text.

The illustrative examples have been adapted from reports by international organizations (such as the International Labour Organization, World Bank, and UNICEF), non-governmental organizations and labor associations, and from the companies themselves (social responsibility reports and websites) in order to illustrate the five categories of business practices described below. “Practice” is understood to include “policy, planning and research activities, legislation, programs and projects, as well as “on-the-ground” delivery of programs.”1

Definitions

1) Policy-making, code of conduct, guidelines

A company’s effort to reduce child or forced labor often begins with its code of conduct. The code of conduct is a formal statement of the policies that a company requires its employees—both on- and off-site—to adhere to. In other words, the code of conduct applies to the entire supply chain. For example, a code of conduct may include a minimum age requirement or a provision against prison labor. According to the International Labour Organization, “The concept ‘corporate code of conduct’ refers to companies' policy statements that define ethical standards for their conduct. There is a great variance in the ways these statements are drafted.”2 According to the World Bank, codes came about in the 1970s in response to declarations of the OECD and the ILO encouraging multinational companies to be more socially responsible. These codes set guidelines for a broad range of business practices. In the 1990s, corporations began to include a focus on forced and child labor.3

Policy-making refers to the process of developing policies to combat child or forced labor. Policies may reflect or comply with international labor standards, as well as national and local labor laws in the country. Companies also sign on to collective policy statements by a group of companies or employers’ organizations in order to strengthen their own practices.

1

 Combating Child Labour: Sample Good Practices Guidelines. Understanding Children’s Work (UCW). Workshop Report, October 2003.

2

ILO, http://actrav.itcilo.org/actrav-english/telearn/global/ilo/code/main.htm.

3

The World Bank, Labor Markets Codes of Conduct (online).



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Appendix F Illustrative Examples of Business Practices by Kara Murphy and John Sislin Introduction The following are illustrative examples of business practices and partnerships that aim to reduce the use of forced or child labor in the production of goods. The practices included in this appendix have not been evaluated as part of the process for preparing this report so their inclusion does not convey any representation of their quality or effectiveness or the accuracy of company statements or statements from non- governmental organizations about company practices included in the text. The illustrative examples have been adapted from reports by international organizations (such as the International Labour Organization, World Bank, and UNICEF), non-governmental organizations and labor associations, and from the companies themselves (social responsibility reports and websites) in order to illustrate the five categories of business practices described below. “Practice” is understood to include “policy, planning and research activities, legislation, programs and projects, as well as “on-the-ground” delivery of programs.”1 Definitions 1) Policy-making, code of conduct, guidelines A company’s effort to reduce child or forced labor often begins with its code of conduct. The code of conduct is a formal statement of the policies that a company requires its employees—both on- and off-site—to adhere to. In other words, the code of conduct applies to the entire supply chain. For example, a code of conduct may include a minimum age requirement or a provision against prison labor. According to the International Labour Organization, “The concept ‘corporate code of conduct’ refers to companies' policy statements that define ethical standards for their conduct. There is a great variance in the ways these statements are drafted.”2 According to the World Bank, codes came about in the 1970s in response to declarations of the OECD and the ILO encouraging multinational companies to be more socially responsible. These codes set guidelines for a broad range of business practices. In the 1990s, corporations began to include a focus on forced and child labor.3 Policy-making refers to the process of developing policies to combat child or forced labor. Policies may reflect or comply with international labor standards, as well as national and local labor laws in the country. Companies also sign on to collective policy statements by a group of companies or employers’ organizations in order to strengthen their own practices. 1 Combating Child Labour: Sample Good Practices Guidelines. Understanding Children’s Work (UCW). Workshop Report, October 2003. 2 ILO, http://actrav.itcilo.org/actrav-english/telearn/global/ilo/code/main.htm. 3 The World Bank, Labor Markets Codes of Conduct (online). 91

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92 APPENDIX F Guidelines can refer to a variety of business practices. Companies may follow the guidelines of multi-stakeholder initiatives or industrial associations that they join. Guidelines can also be the recommendations that a company makes to its contractors and sub-contractors. Additionally, a company may develop guidelines with the goal of sharing them as “good practices” with others in the same industrial sector. 2) Data collection, research, risk-assessment, understanding and communicating information In order to implement a preventative practice effectively, a company should understand the on-the-ground realities where production is taking place. Each country, community, and production facility is unique. For this reason, research and data- collection are crucial to a company’s understanding of a potentially harmful situation. Companies that seek better understanding of local situations may conduct in-house research, perform root-cause analysis, administer surveys, or conduct interviews. A risk-assessment evaluates the risk that forced or child labor will occur. When entering a new market, setting up a production facility, or contracting with a new vendor, a company may seek to determine which workers are the most vulnerable. A risk- assessment is often carried out in conjunction with NGOs, trade unions and governments. The ILO identifies characteristics of vulnerable workers: ethnic or minority background, poverty, age, gender (female), irregular migrant status, lack of skills, illiteracy, and employment in the informal sector.4 A company may also need to assess the risk that employers or factory owners will not comply with its policies. Businesses should be aware of the risk to their own welfare if they do not take action. According to the ILO, “To be successful, companies must manage risk in an environment where risk is not static and can emerge through the actions of the company itself, its suppliers and other actors. Allegations of forced labour and trafficking present legal risks as well as serious threats to brand and company reputation.”5 Finally, communication involves raising awareness of labor rights and conditions among workers and their communities. In terms of child labor, companies may face the hurdle of convincing employers and families that child labor has serious harmful effects. In that case, one priority may be to transform the “culture of work” in that community.6 Other communication strategies include lobbying local or national governments, and communicating practices, both successful and not, to the wider global community. 3) Changing business practices Companies may change their business organization or operations to address child or forced labor. A variety of reasons can prompt a company to make systematic changes. These reasons may include pressure from the international community or labor rights organizations, negative publicity, or discovery of child labor where it was not known before. In addition, companies may encourage each other if they believe they have taken actions that are effective and can be replicated in other companies in the same or different sectors. 4 Combating Forced Labour: A Handbook for Employers and Business, International Labour Organization, 2008. 5 ILO Handbook for Employers, 2008. 6 Good Practice Note, IFC.

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APPENDIX F 93 With multiple stages of production and factories across the globe, companies look for ways to exert more control over their production. Changes to supply chain operations can include consolidating production, training business partners, creating incentives, and reducing hazardous risks in the workplace. In some cases, a company may even elect to boycott a certain product. Internal operations can be modified as well. A company can change its organizational structure by adding a new department of social responsibility, for example. Company annual reports may also reflect this by devoting more space to social responsibility reporting. As companies try to become more transparent, they may also publish data and findings from audits. 4) Monitoring, compliance, enforcement and certification Policies prohibiting child and forced labor are enhanced through enforcement efforts. Without enforcement, it is unlikely that a company’s policy would be translated into reality. Enforcement practices include monitoring, auditing, compliance, verification, and certification. According to the ILO, “an effective social audit can make an important contribution to the identification, prevention and eradication of forced labour”.7 Monitoring may be internal or external. The goal of external monitoring is to bring in an objective, outside person or group to see that contractors are complying with company standards. Companies may contract with the Fair Labor Association or Verite accredited monitors who follow the workplace codes of conduct. Companies also seek guidance from NGOs and associations such as the Ethical Trading Initiative to implement their enforcement practices. Partnerships with independent certification programs are becoming more common, but have produced mixed results in terms of effectiveness.8 5) Remediation Remediation refers to a variety of practices. It may be an action a company takes to remedy non-conformance of a contractor or factory. In relation to child labor, it refers to “all support and actions necessary to ensure the safety, health, education, and development of children who have been subjected to child labour...and have been subsequently dismissed.”9 Remediation is a complex and sensitive process. As UNICEF states: Early calls for the elimination of child labour sometimes resulted in large numbers of young workers being summarily dismissed with no recourse to an alternative income. Since then corporate strategies to deal with child labour have evolved from a “cut and run” response to more responsible engagement with the community where child labour is present.10 When child or forced labor is found, a company faces the choice of terminating a contract with the offending supplier, or taking action to improve the working conditions. Remediation has received new focus because of criticism of companies that terminate contracts without taking into consideration the potential negative effects on workers. Through remediation, companies can try to address the root causes of the 7 ILO Handbook for Employers, 2008 8 Good Practice Note, IFC 9 Social Accountability 8000:2008, Social Accountability International 10 UNICEF UK’s Child Labour Resource Guide, Executive Summary

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94 APPENDIX F harmful working conditions in a factory.11 In seeking remedial action, the ILO encourages businesses to work with NGOs and labor unions.12 When children or forced laborers are withdrawn from work, the next step is to provide them with a transition. The transition may be back to their family (if they were physically separated) and/or into a school environment. A variety of remedial actions can be taken. A business can implement educational programs, pay for transfer from work to school, tend to the person’s physical and mental health, fund programs that provide services to families and children, and address conditions that prompted child or forced labor in the first place. Companies are also encouraged not to ignore children of legal working age, and to ensure that they too have access to education.13 Whatever approach or approaches a company chooses, a key element is whether or not the practice is sustainable for the community and for the workers.14 Illustrative Examples 1) Policy-making, code of conduct, guidelines Levi Strauss & Co. In 1991, Levi Strauss became the first multi-national apparel company to establish a code of conduct. With Levi Strauss and others leading the way, the apparel industry made significant progress in the 1990s in terms of applying core labor standards to business practices.15 Levi’s code, Global Sourcing and Operating Guidelines (GSOG), is made up of two parts: Country Assessments and Business Partner Terms of Engagement. The code is based on the Universal Declaration of Human Rights and many of the International Labor Organization’s (ILO) Core Conventions.16 With approximately 600 external suppliers in more than 50 countries, Levis acknowledges the gap that can exist between the Code of Conduct and the actual practice of suppliers. Since 1991, Levi’s has modified its Code to incorporate lessons it learned from experience as well as feedback from NGOs. Freedom of Association is one area in which Levi’s has made changes. The company Code reads: Factories must respect employee rights to freedom of association; they must not impose any punitive actions against workers in supporting union such as threatening, fining, suspending or firing workers exercising those rights. Any action that suppresses freedom of association is prohibited, and may be an act deemed illegal in some countries’ labor codes.17 Despite this policy, Levi’s observed resistance from some managers in countries such as Bangladesh, Cambodia, the Dominican Republic, Haiti and Mexico. To 11 The World Bank, Labor Markets Codes of Conduct (online) 12 ILO Handbook for Employers, 2008 13 Good Practice Note, IFC. 14 Social Accountability International. 15 Monitoring International Labor Standards: Summary of Domestic Forums, National Research Council, 2003. 16 Levi Strauss Web site: http://www.levistrauss.com/Citizenship/ProductSourcing.aspx . 17 Levi Strauss & Co., Terms of Engagement Guidebook, 2007.

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APPENDIX F 95 strengthen freedom of association, the company drew from the Ethical Trading Initiative’s guidelines as well as advice from labor and human rights organizations. The new Terms of Engagement included language on lawful "parallel means" for independent free association and bargaining: Where the right to freedom of association and collective bargaining is restricted under law, the supplier should not hinder the development of lawful parallel means for independent free association and bargaining. To see that these changes are applied, Levis partnered with Cornell University's School of Industrial and Labor Relations. The school provides training to Levi’s managers. Levi’s also developed locally-tailored freedom of association training for external monitors and suppliers. Starbucks Coffee Company Starbucks developed the Cocoa Practices to “provide a set of comprehensive sustainability guidelines for cocoa.”18 With these guidelines, Starbucks hopes to promote socially responsible cocoa production throughout its supply chain as well as the supply chains of other companies. The Cocoa Practices include minimum participation requirements for producers as well as a highly-detailed evaluation checklist. Starbucks’ approach aims to “enhance buying companies’ ability to work with a diversity of suppliers to foster deeper sustainability throughout the cocoa supply chain from farm to factory to final product.” The guidelines resulted from discussions with a variety of stakeholders including Theo Chocolate staff, C.A.F.E. (Coffee and Farmer Equity), environmental and labor organizations, and cocoa suppliers. In 2007, Starbucks initiated a two-year pilot program to test the standards. In addition, the International Labor Rights Forum has approved of the Starbucks Cocoa Practices, which it says are in line with ILO standards on child and forced labor.19 The Starbucks guidelines set minimum requirements for participation in the program. The main tool of the program is the Cocoa Practices Scorecard, which has two tiers of required indicators: Zero Tolerance Indicators and Criteria Requirement Indicators. The indicators include product quality, economic accountability, internal control systems, organizational stability, and social responsibility. The indicators are scored as Comply, Not Comply or Not Applicable. An example of a Cocoa Practices guideline is hiring practices and employment policies in relation to child/forced labor: Objective: No direct contracting of any persons under the age of 14 (ILO Convention 138). (We prefer that our suppliers hire no one under the age of 15). If local regulations stipulate compulsory education up to an age greater than 15, those regulations will apply during school hours. Children of producer families can participate in activities which are not harmful to their health and do not conflict with local educational calendar and schedules. The use of any forced, involuntary or trafficked labor, either directly or indirectly, by our suppliers, 18 Starbucks Coffee Company, Cocoa Practices: Evaluation Guidelines (April 1, 2008) Version 1.1.2. 19 Chocolate Company Scorecard: The Sweet and the Bitter, February 14, 2009 http://www.laborrights.org/files/ChocolateScorecard09.pdf.

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96 APPENDIX F contractors or subcontractors, producer organizations, etc. will not be tolerated (ILO Convention 182 and 29). Wal-Mart Wal-Mart is the world’s largest retailer and corporation. In 1992, the company established Standards for Suppliers. Wal-Mart’s Code says that neither forced/prison labor nor child labor will be tolerated. On child labor, “Wal-Mart will not accept products from suppliers or subcontractors who use child labor. No person shall be employed at an age younger than the legal minimum age for working in any specific jurisdiction. In no event shall suppliers or their subcontractors employ workers less than 14 years of age.” In 2005, the International Labor Rights Forum (ILRF) filed a class-action lawsuit against Wal-Mart Stores. In the lawsuit, apparel workers in Bangladesh, China, Indonesia and elsewhere said that Wal-Mart did not enforce its code of conduct for overseas contractors: "Based on its vast economic power, Wal-Mart, based on its code of conduct, can and does control the working conditions of its supplier factories …. It could use its power and position to prevent its producers from profiting from the inhumane treatment of plaintiffs."20 Since 2005, Wal-Mart has taken steps to improve communication of its code of conduct to suppliers. The company engages its suppliers in training sessions on Wal- Mart’s Ethical Standards Program as well as industry-wide best practices. In 2007, more than 10,100 suppliers and factory management attended training sessions.21 However, ILRF maintains that Wal-Mart continues to cover up labor violations, including forced labor and the denial of the right to form independent unions.22 The Dress Barn The Dress Barn is a leading specialty apparel retailer that has developed a code that applies to vendors who sell directly or indirectly to them. While it is not a participant in the United Nations Global Compact, the Dress Barn Global Human Rights Policy outlines its policy on child and forced labor.23 Before doing business with a factory, the Dress Barn requires the factory to complete a questionnaire to ensure that the factory can abide by its code of conduct. The Dress Barn’s Vendor Code of Conduct reads:24 Vendors must operate in full compliance with the laws of their respective countries and with all other applicable laws, rules and regulations. A. Child Labor: Vendors shall only employ workers who meet the applicable minimum legal age requirements by local law or who are at least 15 years of age or who are older than the age for completing compulsory education in the country of manufacture, whichever is greater. 20 “Suit Says Wal-Mart Is Lax on Labor Abuses Overseas,” New York Times, September 14, 2005. 21 Ethical Standards Program Fact Sheet, Wal-Mart. 22 International Labor Rights Forum, Wal-Mart Campaign, http://www.laborrights.org. 23 http://www.business-humanrights.org/Categories/Individualcompanies/D/DressBarn. 24 The Dress Barn Vendor Code of Conduct, http://www.dressbarn.com/pdf/VendorCodeOfConduct.pdf.

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APPENDIX F 97 Vendors must also comply with all other applicable child labor laws, including those related to hiring, wages, hours worked, overtime and working conditions. Vendors shall maintain official documentation for every worker that verifies the worker’s date of birth. In those countries where official documents are not available to confirm exact date of birth, the vendor shall confirm the age using appropriate and reliable assessment methods. Vendors are encouraged to develop lawful workplace apprenticeship programs for the educational benefit of their workers. B. Forced Labor: Vendors shall not use any prison, slave, indentured, bonded or forced labor in the production of any product, including labor required as a means of political coercion or punishment for expression of political views in its production or manufacture. Vendors who recruit foreign contract workers must pay agency recruitment commissions and must not require any worker to remain in employment for any period of time against his or her will. 2) Data collection, research, risk-assessment, understanding and communicating information Patagonia, Inc. Patagonia is a privately owned designer, marketer, and retail seller of apparel and climbing equipment. It does not own any of the over 100 manufacturing facilities that make its products. “The key area where Patagonia can influence its supply chain is by determining who we are doing business with. Recently we have adopted a fourfold approach to all of our sourcing and factory decisions – one that gives equal weight to business requirements, quality assurance, social responsibility and our environmental footprint.”25 Because Patagonia outsources its entire production, a first challenge is to decide which plants to use. Patagonia avoids “transitional” plants—those that have had problems, even minor, in the past. The company usually will source only from a factory that is currently being monitored.26 In addition, Patagonia considers the factors that increase the probability of code violations. These factors include the country the factory operates in, the products they make and the age of the factory.27 When analyzing a plant, Patagonia also calculates the reputational risk involved in sourcing from a plant that may be outstanding in all but one area. In contrast to larger companies, Patagonia’s small production runs do not give it the same degree of leverage with factories as that of larger apparel and retail companies. With this limited leverage, the company cannot force a factory’s management to address international labor standards violations because the cost of losing Patagonia’s business is insignificant for any large manufacturing facility. 25 Patagonia and Corporate Social Responsibility, November 2007 26 Monitoring International Labor Standards: Summary of Domestic Forums, National Research Council, 2003. 27 Patagonia and Corporate Social Responsibility, November 2007

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98 APPENDIX F Ford Motor Company Ford works to understand the conditions in the communities where it operates. The company believes that this understanding is essential to a good human rights policy. As UNICEF recommends, “Businesses pursuing this goal have to take the background conditions in the areas in which they operate as a given, and work within these constraints”.28 In order to understand the conditions, the company engages members of the local communities during site visits, interviews facility management, and works closely with a variety of stakeholders. Ford found that an interactive, collaborative approach to working with suppliers helped the company better understand the working conditions. At the same time, Ford is aware of the systemic factors underlying child and forced labor. The company promotes root cause analysis as key to understanding the system that allows or contributes child and forced labor: Reduction of these labor abuses is not easy to measure and should not be a single point in time measurement. Also included should be a rate of recurrence over x amount of time to account for cyclical behaviors. Take the example of forced labor in Brazil. One out of every 10 temporary work opportunities may result in a forced labor situation but due to the need for employment and income, lack of education as well as lack of interest in more permanent employment, laborers are willing to take that chance. And this cycle plays out over a period of months to years.29 To communicate its findings, Ford reports to human rights groups and then publishes its findings on its website for the public. In addition, Ford asks neutral third parties to review its assessment process. Some of the third-party reviewers have first-hand experience at Ford’s plants. Ford stresses that the consensus from third-party review affirms that Ford’s process “is robust and has integrity”.30 Merck & Co, Inc. According to its website, “Merck & Co., Inc., is a global research-driven pharmaceutical company dedicated to putting patients first. Established in 1891, Merck discovers, develops, manufactures and markets vaccines and medicines to address unmet medical needs.” Merck is committed to human rights, and has not found major violations in its operations. The company maintains that it is not at significant risk of forced or compulsory labor, incidents of child labor, or violations of the right to exercise freedom of association and collective bargaining. Still, Merck is taking steps to research, understand, and foster communication about child and forced labor. Merck collaborates with other pharmaceutical companies in two key initiatives. First, Merck works with the Danish Institute for Human Rights to define its health-related human rights obligations. The Danish Institute is assisting Merck and 28 UNICEF UK’s Child Labour Resource Guide, Executive Summary 29 Monique Oxender, Global Manager, Supply Chain Sustainability Ford Motor Company, email correspondence 30 For A More Sustainable Future, Ford Motor Company Sustainability Report 2006/7

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APPENDIX F 99 other pharmaceutical companies to explore the possibility of a sector-specific human rights assessment tool.31 In addition, Merck is a founding member of Pharmaceutical Supply Chain Initiative, a group of major pharmaceutical companies that aim to “help ensure that working conditions in the pharmaceutical supply chain are safe and that workers are treated with respect and dignity.”32 In addition to better conditions for workers, PSCI promotes economic development and a cleaner environment for local communities. PSCI explicitly states, “Suppliers shall not use child labor. The employment of young workers below the age of 18 shall only occur in non hazardous work and when young workers are above a country’s legal age for employment or the age established for completing compulsory education”. 3) Changing Business Practices Reebok In 1996, the International Labor Rights Forum (ILRF) led a campaign to shed light on the thousands of children ages 5 and 14 who were stitching soccer balls in Pakistan. Children were observed working as many as 10 to 11 hours per day.33 Reebok responded by setting a goal to eliminate child labor in its soccer ball supply chain. Because children were doing the stitching at home, Reebok required its supplier to move soccer ball production to a central facility that could be regularly monitored: “We devised a unique plan to end this practice by consolidating all ball stitching in a newly constructed factory dedicated to Reebok ball production that guaranteed manufacturing without child labor. This initiative, another first of its kind in the industry, included a program to raise funds for the educational and vocational needs of children in Pakistan through the sale of Reebok soccer balls.”34 With better oversight of the manufacturing facility, Reebok’s “No Child Labor” program was able to implement labeling certification. Soccer balls produced without child labor bear the label “Guaranteed: Manufactured Without Child Labor.” Reebok’s program earned it the 1996 Business Ethics Award for Corporate Social Responsibility. Reebok continues to require full disclosure of its business partners involved in production. Monsanto Corporation Monsanto Corporation is an agricultural company that is involved in efforts to address child labor within the cotton seed industry. With the urging of groups such as the International Labor Rights Forum, Monsanto undertook a global risk assessment and child labor monitoring program in India. The Monsanto Human Rights Policy, established in 2006, is based on Universal Declaration of Human Rights and ILO Declaration on Fundamental Principles and Rights at Work. The Employee Guidebook 31 Merck & Co, Inc., Corporate Social Responsibility 2006-2007 Report, http://www.merck.com/corporate- responsibility/docs/cr2006-2007.pdf 32 http://www.pharmaceuticalsupplychain.org/ 33 International Labor Rights Forum, http://www.laborrights.org/stop-child-labor/foulball- campaign/pakistan 34 Reebok Human Rights Report 2005. http://www.reebok.com/Static/global/initiatives/rights/pdf/Reebok_HRReport2005.pdf

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100 APPENDIX F identifies nine areas of its human rights efforts, two of which are child labor and forced labor.35 One of the primary ways that Monsanto addresses child labor is through first- phase producer training (suppliers of direct goods). In 2005, the company made sure that all of its partner contracts prohibit child labor. Monsanto distributed training materials to all hybrid cotton business partners and about 2,500 farmers. The training includes emphasis on Monsanto’s policies that forbid the use of child labor. To start, Monsanto had to teach contractors about the negative effects of child labor, which many contractors did not understand, according to the company. In conjunction with the training, Monsanto created an incentive structure that helps the farmers to afford adult labor. Monsanto cites a decrease in child labor: among the company’s direct-goods suppliers, the percentage of children that make up the workforce dropped from 20 percent in 2004 to five percent in 2006. However, some NGOs such as Stop Child Labour point out that the fight against child labor in the cotton seed industry still needs improvement. Stop Child Labour’s Out of work and Into School report states, “prices paid to farmers are far too low, youngsters over the age of 14 (and adults) are made to work very long days and are exposed to pesticides, adults receive less than the minimum wage, labour unions are not involved in the Bayer/Monsanto initiative, and the schooling offered is at present (end 2007) insufficient. In addition full transparency about the implementation and impact of anti- child labour measures is lacking.”36 Hewlett Packard In 2001, Hewlett Packard issued its first Social and Environmental responsibility report. In 2003 it also formally adopted a human rights and labor policy. The 2003 report outlined HP’s policy on child and forced labor as follows: • Freely-chosen employment. Ensure no forced, bonded or involuntary prison labor is used in the production of HP products or services. Ensure that the overall terms of employment are voluntary. • No child labor. Comply with local minimum age laws and requirements and do not employ child labor. • Freedom of association. Respect the rights of workers to organize in labor unions in accordance with local laws and established practice. Since 2003, Hewlett Packard has been actively involved with the United Nations Global Compact. HP used the Global Compact’s nine principles to model its own human rights policies. The company states, “We will continue to review our policies and make adjustments as necessary to clearly communicate our support in these areas.”37 In addition, HP has taken the initiative to promote dialogue among other companies. In 2003, Hewlett Packard and Pfizer worked together to launch the Global Compact’s North 35 Monsanto website, “Issue Discussion: Child Labor in Agriculture”, http://www.monsanto.com/responsibility/our_pledge/stronger_society/child_labor.asp 36 Out of Work and Into School: Action Plan for Companies to Combat Child Labour, May 2008 37 Hewlett Packard Global Citizenship Report for FY02, http://www.hp.com/hpinfo/globalcitizenship/gcreport/downloads.html

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APPENDIX F 101 American Learning Forum, which brings together companies to discuss good practices for implementing the Global Compact’s nine principles. Another HP project, the Central Europe Supplier Responsibility Project, targets multi-national companies that have small and medium-sized enterprises. The report, “Small Suppliers in Global Supply Chains” was the result of collaboration with the Danish Commerce and Companies Agency. Tesco In 2004, local activists in Uzbekistan started a campaign to urge countries to boycott Uzbek cotton that is harvested by children and exported all over the world. A few years later, several international companies responded. Among the companies that banned the cotton in their supply chain was Tesco, Wal-Mart, Target, Levi Strauss, Gap, Limited Brands and Marks and Spencer. Facing heightened and highly-critical international attention, the Uzbek government signed two ILO conventions against child labor.38 Steve Trent, Executive Director of the Environmental Justice Foundation, praised Tesco’s decision to ban Uzbek cotton: “This ground-breaking move by Tesco – unprecedented from a major UK retailer – has the potential to change a multi-billion dollar industry.”39 Tesco is based in the United Kingdom and is the world's third largest retailer. In a communication to its suppliers, Tesco wrote, “the use of organised and forced child labour is completely unacceptable and leads us to conclude that whilst these practices persist in Uzbekistan we cannot support the use of cotton from Uzbekistan in our textiles.”40 Bon Appétit Bon Appétit is a food service company that operates 400 university and corporate cafeterias in 29 states in the United States. The company prides itself on being sustainable and socially-responsible. However, in January 2009, Bon Appétit discovered that tomatoes it purchased were being picked by workers subjected to forced labor. 41 The Coalition of Immokalee Workers (CIW), a farm workers organization in Florida, alerted Bon Appétit to the fact that its tomatoes were grown in South Florida, an area with a history of migrant worker abuse. Since 1997, there were seven slavery convictions involving 1,000 workers in Florida.42 Bon Appétit executives then met with the CIW to discuss the company response. Fedele Bauccio, Bon Appétit’s chief executive, insisted that “if no [grower] steps up, then I have to respond to my customers and not serve tomatoes.”43 Essentially, Bauccio proposed a boycott. However, CIW worried that a boycott would primarily just hurt the workers themselves. Although Bon Appétit buys almost 5 million pounds of tomatoes a 38 ILRF, “We Live Subject to their Orders”: A Three Province Survey of Forced Child Labor in Uzbekistan’s 2008 Cotton Harvest, 2009. 39 http://www.ejfoundation.org/page483.html 40 http://www.ejfoundation.org/pdf/Uzbekistan_Cotton%20Tesco_letter_to_%20suppliers.pdf 41 The Washington Post, “A Squeeze for Tomato Growers: Boycott vs. Higher Wages,” Jane Black, April 29, 2009 42 Bamco, “Game Changing Labor Standards” 43 The Washington Post, “A Squeeze for Tomato Growers: Boycott vs. Higher Wages,” Jane Black, April 29, 2009

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102 APPENDIX F year, other major companies buy many times more. Thus, CIW made the point that the company’s boycott would not put a large grower out of business. Bon Appétit and CIW reached an agreement that lays out acceptable working conditions and a code of conduct that forbids forced labor and physical violence or harassment. Bauccio agreed to increase wages, as CIW recommended, but also wanted to be sure that working conditions were improved. Though the agreement is considered a rough draft, both parties consider it a productive step toward furthering worker rights. In addition, Bon Appétit will reward growers that go beyond the minimum standards to improve working conditions even more. 4) Monitoring, Compliance and Certification Gap (in partnership with Verité) Gap’s partnership with the non-governmental organization Verité was widely viewed as a success in improving Gap’s social accountability. Verité provided Gap with monitoring services as well as helping to strengthen their Code of Conduct.44 Verité, an independent, non-profit social auditing and research organization, has the mission to ensure “safe, fair and legal working conditions” for people around the world. To accomplish this, the organization promotes a multi-stakeholder collaboration and offers services that include monitoring, remediation, training, and research. As a result of this collaboration, Gap won the Social Reporting Award for its 2003 Social Responsibility Report. The 2003 report revealed the setbacks that Gap had experienced in trying to ensure compliance with its Vendor Code of Conduct. In particular, Gap cited areas in which, despite its efforts, monitoring did not actually capture all of the labor violations that probably had occurred. In one year, Gap revoked 136 factory approvals. “Perhaps the most refreshingly honest aspect of the report is its admission that discrimination and freedom of association violations are likely more widespread than the data suggest. However, this is also one of the distressing aspects of the report, as it reveals how much work remains to lift the veil hiding these problems.”45 Macy’s (in partnership with Rugmark) Macy’s has partnered with Rugmark, an international non-profit that aims to end child labor in rug and carpet industry. Rugmark considers Macy’s to be a “target company,” one that it hopes will lead the way for other companies. With its Child- Labor-Free-Certification program, Rugmark uses certification to help consumers know if a rug was made using child labor and also funds educational programs for kids. The way it works is that each label has a serial number that traces the carpet back to the loom where it was produced. If the carpet manufacturer complies with Rugmark standards, they receive the Rugmark label.46 44 Deborah Hirt, “Verite: Auditing Labor Standards”, University of California San Diego. 2007. 45 “Gap- Verité Collaboration Exemplifies Award-Winning Practice on Social Responsibility”. SocialFunds.com. December 2004. http://www.socialfunds.com/news/article.cgi/1581.html. 46 2008 White Paper: Learning from the Rugmark Model to End Child Labor http://www.rugmark.org/uploads/WhitePaper0409.pdf.

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APPENDIX F 103 With Macy’s as a partner, Rugmark plans to document “a positive bottom line result for these trend-setters.” The Macy’s-Rugmark partnership is in line with Macy’s effort since 1995 to enforce its Vendor/Supplier Code of Conduct. The Code of Conduct sets standards and requires all vendors to sign written affirmations, agreeing to comply with the Code of Conduct.47 Nike, Inc. Data reporting in auditing and monitoring is becoming more common among apparel and footwear brands.48 Nike is an example of a company that seeks to continually improve its monitoring and data reporting practices. In 2005, Nike was the first in its industry to voluntarily disclose the names and locations of the more than 700 contract factories that make Nike products.49 The company believed the new disclosure and transparency would help promote compliance. According to the 2004 Report Review Committee for Nike’s report, While noting that monitoring is not a sufficient or long-term solution to raising labor standards, the report presents Nike's extensive and evolving efforts to manage monitoring, integrate compliance into its business strategy through the Balanced Scorecard, and pursue multi-stakeholder initiatives that could lead to more systemic industry-wide improvements. Nike contractors are required to have on file all documentation required for compliance with the Nike Code of Conduct, which covers child and forced labor. The contractors must make the documents accessible, and must agree to inspections whether or not they are given prior notice.50 In addition, like many other companies, Nike uses the Global Reporting Initiative (GRI) guidelines. GRI has produced a set of reporting standards called the Sustainability Reporting Guidelines, which are used on a voluntary basis and include environmental, social and financial issues. The section on child labor refers to the ILO's Minimum Age Convention (C. 138) and addresses issues of monitoring.51 Still, some organizations like the Maquila Solidarity Network point out the limitations of data collection. In a 2007 report, the Network called for more improvement in the apparel industry: The collection, analysis and publication of hard data in company reports had the effect of concentrating management’s attention on the problem and allowing for some measurement of progress. As that approach has become more widespread, the limitations of the methodology have also become clearer. The fact that updated data showed little or no progress in eliminating persistent abuses raised 47 Macy’s Web site, http://www.macysinc.com/aboutus/sustainability/sweatshops.aspx. 48 Maquila Solidarity Network. The Next Generation of CSR Reporting: Will better reporting result in better working conditions? December 2007. 49 The Corporate Social Responsibility Newswire, “Nike Issues FY04 Corporate Responsibility Report Highlighting Multi-Stakeholder Engagement and New Levels of Transparency”, April 13, 2005. 50 2007 Nike Code of Conduct, http://www.nikebiz.com/responsibility/documents/Nike_Code_of_Conduct.pdf. 51 ILO, Eliminating Child Labour: Guides for Employers: Guide Two: How Employers can Eliminate Child Labor, 2007.

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104 APPENDIX F serious questions about whether factory monitoring systems were effectively addressing the underlying causes of worker rights violations.52 Liz Claiborne Liz Claiborne educates factory owners to emphasize that violations of labor standards is not economically beneficial in the long-run.53 To ensure compliance, the company employs both internal and external monitoring. Liz Claiborne auditors carry out “spot inspections,” for which contractors may or may not be given notice. For each supplier, internal auditors complete a human rights questionnaire, which requires detailed information on factory compliance with the Code of Conduct. The Liz Claiborne Workplace Code of Conduct is a set of standards that “prohibits child labor, forced labor and all forms of harassment or abuse, in addition to ensuring workers are paid the minimum wage, setting limits on overtime hours and requiring employers to honor workers' rights to freedom of association and collective bargaining.” The company’s external monitoring is done by the Fair Labor Association. Two countries in particular where Liz Claiborne has independent monitoring are Guatemala and El Salvador. “We learned things from these two programs which has helped us improve our own internal monitoring programs… by participating in the FLA monitoring program, we are able to expand the independent monitoring concept to more countries, sometimes combining efforts with other participating companies.”54 Target Corporation Target clearly states that it “will not knowingly work with any company that does not comply with our ethical standards.”55 The company policy on child and forced labor is laid out in its Standards of Vendor Engagement: “No forced or compulsory labor. No child labor, which we define as being below the local minimum working age or age 14, whichever is greater. We make an exception for legitimate apprenticeship programs.” Since 1998, Target’s Global Compliance team has worked to verify that Target’s vendors comply with the company’s Standards. These standards are laid out in the company’s Vendor Conduct Guide, which include U.S. Customs and Border Protection laws and country-of-origin labor laws. One way that Target exerts control over its supply chain is by prohibiting vendors from subcontracting without Target approval. All subcontractors must be identified by Target: “Vendors are required to register all factories used in the production of our merchandise (including subcontractors), maintain accurate and up-to-date information about each factory and authorize unannounced audits by Target team members or our accredited third-party auditors.” Furthermore, Target is a signatory of the National Retail Federation’s “Statement of Principles on Supplier Legal Compliance,” which it says is incorporated into its own standards and practices.56 52 Maquila Solidarity Network. The Next Generation of CSR Reporting: Will better reporting result in better working conditions? December 2007 53 Monitoring International Labor Standards: Summary of Domestic Forums, National Research Council, 2003. 54 http://www.lizclaiborneinc.com/rights/faqs.htm 55 Target Corporation Corporate Responsibility Report (2008) 56 Target Corporation Corporate Responsibility Report (2006)

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APPENDIX F 105 5) Remediation Adidas-Salomon When Adidas found underage workers in a factory in Vietnam, the company worked to address the problem and provide alternatives for the children in question. The problem in the factory was not just one or two cases: out of 2,000 workers, 200 were shown to be below the age required in the terms of employment (15 years old). Working with Vérité and an educational coordinator, Adidas developed a program that aimed to respond to the needs of the children and community. Not only was the factory required to pay the school fees of the children (under the age of 16), it had to continue to pay their working wages and guarantee a job once the children were out of school. Although it did not finance the program, Adidas did pay a quarterly advance for the factory’s output, thereby relieving some financial constraints. 57 “Young” workers (ages 16 and 17) could continue work but with fewer hours and the average wage of the year prior. Education programs were set up on the factory premises. Obeetee Ltd. Obeetee is a leading carpet-exporting company that was founded in India in 1920. Today, it considers itself “a pioneer” in its approach to combating child labor. Obeetee’s production occurs on more than 4,000 looms in about 1,000 Indian villages. The company states on its website: “Obeetee maintains the highest standards of workplace conditions and accountability. Our weavers and supporting manufacturers are amongst the best paid in the industry and receive superior benefits.”58 During the 1980s, Obeetee implemented a “no child labor policy” in response to negative publicity and to new legislation from the Indian Government prohibiting the employment of children under 14 in carpet weaving.59 Despite extensive monitoring, Obeetee is “aware that there are never any shortcuts, or instant solutions to solving such a massive problem such as existed with child labour in the Carpet Industry.” The company says it is committed to ensuring that children are not working for Obeetee or any other company. For this reason, Obeetee is involved with two key initiatives that provide services to children and their families. It helps to fund two organizations, the Carpet Export Promotion Council of India (CEPC)’s child welfare fund and to the Children Emancipation Society. Both organizations run child welfare programs, including schools that provide free education, monthly stipends, mid-day meals, vocational training, and health care to children.60 A quarter percent from the sale value of each Obeetee carpet is donated to this CEPC Child Welfare Fund.61 CEPC states on its web site that the “Carpet Export Promotional Council of India is an autonomous body established to promote the export of Indian made carpets. CEPC 57 ILO, Eliminating Child Labour: Guides for Employers: Guide Two: How Employers can Eliminate Child Labor, 2007. 58 www.obeetee.com 59 ILO, Eliminating Child Labour: Guides for Employers: Guide Two: How Employers can Eliminate Child Labor, 2007. 60 “Child Labour Problem in the Unorganised Sector – The Obeetee Solution”, International Finance Corporation, Labour Roundtable, October 9, 2001. www.obeetee.com 61 Good Practice Note

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106 APPENDIX F is sponsored by the Ministry of Textiles, Government of India, but its services are funded primarily by its members. Compliance with the CEPC's Child Labour Code of Conduct, is Mandatory for all Carpet Exporters.”62 Cadbury Cadbury began the Cadbury Cocoa Partnership in January 2008 with the goal to have “thriving rural communities that support a sustainable cocoa supply chain”.63 In just one year, the program spread to 100 communities in Ghana. Cadbury reports: “The 100 communities who have now joined the partnership have been identifying their main development needs, including the construction of new school buildings or forming Cocoa Youth Clubs to encourage the next generation to remain with agriculture, particularly cocoa farming.” Cadbury’s focus is education and training. The company partnered with Digital Links International to train teachers in technology. Farmers themselves also receive education through programs that help to improve the quality and quantity of farmer yields. In addition, Cadbury encourages young people to start businesses or learn other skills. Young people can receive enterprise loans or apprentice with a tradesperson with the financial support provided by Cadbury. Bonita In 2002, international pressure prompted the banana industry to try to improve working conditions on Ecuadorian plantations. Human rights advocates criticized the suppression of workers unions on the plantations. Advocates also called for the eradication of child labor. That year, it was estimated that at least 6,000 children were working on large plantations in Ecuador.64 That number did not include the many small plantations across the country. The Banana Social Forum was implemented in 2003. Bonita, the fourth largest global banana exporter, is highly involved in the Forum. Sponsored by the Ecuadorian government, the Forum has the goal to develop and implement initiatives that aim to eradicate child labor in the banana sector. For children between the ages of 15 and 18 legally working on the farms, the Forum aims to improve their living conditions and educational opportunities. The Forum’s representatives are from the Ministries of Labor and Agriculture, CORPEI, INNFA, producers, exporters and workers in the banana sector, and UNICEF. The ILO became involved with the Forum to develop a “tripartite initiative based on social dialogue with effective trade union participation.”65 62 Carpet Export Promotional Council of India, http://indiancarpets.com/welfare.htm. 63 http://www.cadbury.com/ourresponsibilities/cadburycocoapartnership/Pages/cadburycocoapartnership.as px. 64 The New York Times, “In Ecuador’s Banana Fields, Child Labor is Key to Profits” http://www.nytimes.com/2002/07/13/world/in-ecuador-s-banana-fields-child-labor-is-key-to-profits.html. 65 International Business Forum on Engaging Business- Addressing Child Labor Case Studies, February 25, 2009, Atlanta, GA.

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APPENDIX F 107 Since 2003, Bonita has established 8 schools, 345 houses with basic services for workers, 6 health care units, and 6 commissaries. The Forum works to raise awareness on child labor amongst the trade unions, entrepreneurs, and the families and children themselves. Other Forum activities include a child labor inspection and monitoring system and encouraging banana companies to agree to labor inspections on their farms and plantations.