Tuesday, January 17, 2012

Apple, Inc, the FLA and the Governance of Supplier Labor Standards Beyond the State

 (From Apple discloses suppliers for the first time, KLEWTV.com, Jan. 13, 2012 ("Apple for the first time is disclosing the list of suppliers that produce the iPhone, iPad and other popular gadgets amid criticism of labor and environmental practices, especially in China."))

In 2006, in the wake of action by Apple, Inc., I suggested the value of voluntary codes of corporate social responsibility in the governance of the behavior of entities throughout the supply chain of the operations of a large multinational enterprise.

The last 30 years or so have seen a growing interest in voluntary corporate codes. These codes have been advanced as a means of regulating the behaviour of economic collectives—and especially multinational corporations—and those with whom these corporations interact in the global market. Voluntary codes have been crafted to regulate both internal corporate governance and corporate business ethics with a variety of stakeholders, including labour, suppliers, customers and nation-states.
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voluntary codes work best when they produce standards that can be monitored, when they are embraced by companies willing to investigate stakeholder claims of violation, and when stakeholders can affect the consumer markets for companies irrespective of the existence of the codes. Thus, ironically enough, the codes are merely a means through which stakeholder power is most effectively asserted—by affecting consumer markets. For proponents of free market globalization, this works very well indeed, even if it is uncomfortable for the affected companies; that is only business. For the stakeholders, including NGOs, this works well, too. They are able to skip the governmental middleman, so-to-speak, and directly affect corporate behaviour in a precise and targeted way. For NGOs weaned on the need for government intervention, this should serve as an assurance that the state is not a necessary predicate for effective action, even by those with no state power. Free market globalization was opened a great new market for consumer information; it is up to NGOs and other elements of civil society, as well as corporations and other economic actors, to get into the game.

Voluntary codes can work in the market, without formal bureaucratic structures or direct government intervention. All it seems to require are consumers, producers and taste-makers. Here is a very productive confluence of democracy and capitalism. But one in which there is very little room for the active participation of the state. (Larry Catá Backer, Corporate Social Responsibility and Voluntary Codes: Apple, its Stakeholders, and its Chinese Laborers, Law at the End of the Day, June 16, 2006)

By the middle of the first decade of the 21st century, it was possible to posit the existence of a self-contained and fully functional governance system, centered on the multinational enterprise and its supply chain, and dependent for its operation on the investor/consumer communities, non-governmental organizations (as monitors and norm suppliers) and the press.  Larry Catá Backer,  Multinational Corporations as Objects and Sources of Transnational Regulation. ILSA Journal of International & Comparative Law, Vol. 14, No. 2, 2008; Economic Globalization and the Rise of Efficient Systems of Global Private Lawmaking: Wal-Mart as Global Legislator. University of Connecticut Law Review, Vol. 39, No. 4, 2007.

(From WORLDCOB - CSR, World Confederation of Business ("WORLDCOB-CSR:2011.1 is an international standard and certification in Corporate Social Responsibility developed by World Confederation of Businesses (WORLDCOB). Compliance with this standard requires the organization to adhere to a culture of ethical values, maintain and comply with a Corporate Social Responsibility Policy, and sustain a process of continuous improvement in the topics defined by the standard."))

The last six years has seen a dramatic growth in the depth and sophistication of governance systems beyond law that focus on the regulation of the labor policy of downstream enterprises in multinational supply chains. One of the markers of that growth is  the rise of enterprises the objects of which are to both develop normative governance frameworks and to provide a space for monitoring compliance.  Many of these are product or process certification programs managed by civil society elements.  
Third party certification can insure that green power products are meeting widely accepted consumer and environmental standards set through collaborative transparent stakeholder processes. Third party certification usually requires electricity providers and renewable energy certificate marketers to disclose information about their products in a standardized format. This disclosure helps customers make apples-to-apples comparisons of like products, informs purchasing decisions, supports providers’ marketing activities and builds consumer confidence in green power products. (From Information and Guidelines on Certification and Verification of Green Power Products: Resource for NGOs Considering a Green Power Purchase Prepared by the Green Power Working Group)

Related to product certification programs, these standards evaluators have become powerful mechanisms to enforce the private ordering governance derived from the adoption of voluntary codes of behavior by multinational enterprises.
In the not-for-profit field both accreditation and certification have been undertaken by self- regulatory organizations, which have promulgated standards and developed certification or accreditation mechanisms to evaluate compliance by other organizations with the standards. The standards are frequently developed through a participatory process in which many stakeholders are consulted. (Catherine Shea and Sandra Sitar, "Accreditation and Certification:  The Way Forward? An Evaluation of the Development Community's Experience," International Center for Not-For-Profit Law, Washington, D.C.)
Beyond product certification, process certification has provided NGOs with a new and more institutionalized role in the application of governance standards among communities of enterprises that have adopted them.  


One of these is the Fair Labor Association (FLA), which describes itself as:
a nonprofit organization dedicated to ending sweatshop conditions in factories worldwide. Since 1999, the FLA has helped improve the lives of thousands of workers around the globe. By bringing together multiple stakeholders, calling for greater accountability and transparency from manufacturers, factories and others involved in global supply chains, and creating lasting solutions to exploitative labor practices, we are making steady progress toward fulfilling our mission: protecting workers’ rights and improving working conditions worldwide.  With the active involvement of universities, civil society organizations and socially responsible corporations, the FLA has formed a unique and powerful alliance that is effecting positive change around the globe. We encourage you to read through our Web site to get a better understanding of how the FLA is working to achieve its goals. View the composition of the FLA Board and our constituent groups. Review our present and evolving methodology. Read our news releases and contribute to our blog. And get involved in one of the most challenging and complex issues of today. (Fair Labor Association, Home).
Key to the work of FLA is the collaborative development of standards and the enforcement of a system of monitoring and reporting (transparency) of compliance. "When joining the FLA, Participating Companies commit to promoting and complying with international labor standards throughout their supply chains, both in the U.S. and overseas. " (Ibid., Accreditation). 

Transparency and reporting is the key.
Companies that join the FLA commit to establishing internal systems for monitoring workplace conditions and maintaining Code standards, being part of a rigorous system of Independent External Monitoring (IEM), and public reporting on the conditions in their supplier factories. To ensure transparency, the results of the IEM audits are published on the FLA Web site in the form of tracking charts. (FLA. What We Do, Monitoring, Transparency and Public Reporting).