Perspectives in Responsible Sourcing

The “New Banana Agreement:” a rotten deal for small-scale farmers?

The recent decision by the EU to cut tariffs on Latin American bananas ended “the longest trade dispute in history.” In the deal, the EU, which is the world’s largest importer of bananas, agreed to gradually eliminate the preferential treatment that it provides to growers in former colonies.  

 

The decision will allow Latin American exporting countries such as Ecuador, Costa Rica and Guatemala to increase banana sales to Europe; however, the decision also means stiffer competition for many smaller countries in Africa and the Caribbean.  In the past, banana producers in these former colonies have argued that they were unable to compete with the expansive plantations in Latin America managed by large US-corporations such as Dole, Chiquita and Del Monte, thus justifying their preferential status.

 

What the EU’s decision means for labor conditions at plantations throughout banana exporting countries remains unclear. On the one hand, as the EU Trade Commission explains, the deal can potentially make the global banana market more stable, which will in turn encourage investment and growth, and hopefully “increased attention to wider production condition issues in the banana supply chains.” The EU also expects certain labor and environmental conditions from its trade partners and “does not tolerate” labor practices that fall below international norms.

 

On the other hand, the potential effects of this deal for small-scale banana exporters in former colonies could be devastating.  As opposed to the large corporate-owned plantations in Latin America, many bananas from the EU’s former colonies are grown by independent farmers, who, some argue, without protection will be disadvantaged and will have a hard time being profitable.  If this is the case the implications for farmers and their families are bleak.

 

In recent years stakeholders in the banana industry have made efforts to improve labor and environmental conditions on plantations and farms. For example, several of the large corporations have made genuineefforts to improve labor conditions on plantations, and global movements for sustainable business practices within the industry are gaining interest. Also promising is that as part of the deal, the EU has committed €200 million and proposed the creation of a support program to aid the transition in the countries that enjoyed preferential treatment.

 

Economists regularly point out that in free trade there are winners and losers. Let’s hope that the parties involved in this deal make responsible decisions that result in positive changes in the working conditions for both the “winners” and the “losers.”

The New Sheriff in Town - Part 2

Since our first article on the Department of Labor (DOL) and Secretary of Labor Hilda L. Solis back in April there have been a few report-worthy developments: 1) the Wage and Hour Division (WHD) recruited 250 new investigators; 2) the DOL plans to roll out a new public service campaign “We Can Help” in early 2010; and 3)the Occupational Health and Safety Administration (OSHA) has stated that it will hire over 100 new investigators if Congress approves the DOL’s 2010 budget.

Furthermore, during a live Q&A session on Tuesday December 8, WHD Deputy Administrator Nancy Leppink stated that WHD staff is currently undergoing intensive customer service training and a web site is being built specifically to assist with filing complaints. Her focus is on responding to complaints “in a more timely manner” and increasing “enforcement in industries that employ vulnerable workers” such as those in “agriculture, restaurants, janitorial [services], construction and car washes”. Secretary Solis, in addition, emphasized a revised training program for the new 250 WHD investigators.

New staff, training, and public outreach and access – it looks like the new sheriff means business.

It will be interesting to see how the enforcement statistics of the WHD and OSHA will change in 2010. I also look forward to future governmental studies like the one back in March 2009 from the Government Accountability Office (GAO) on WHD’s failure to address complaints or OSHA’s inadequate process of auditing health and safety records from October 2009, as well as non-governmental studies on labor violations, like the one published in September 2009 on “Violations of Employment and Labor Laws in America's Cities”. Perhaps they will share more positive news with us. Or perhaps I am just too optimistic.

If the public service campaign is rolled out successfully and the investigators are prepared to adequately enforce labor legislation, we will most certainly be hearing about more cases of collected fines and penalties. However, I also hope this heightened effort by the DOL will lead managers to take a look at their enterprises before the sheriff knocks on their door.

Washing a dirty human rights record green

In the run-up to the summit in Copenhagen there has been much talk about climate change and the need for immediate concerted global action. A very recent report has decreased the time-line for corrective action considerably and pressure for a successful summit has increased even more. But, unsurprisingly, the US has already dampened hopes for any binding agreement whilst China, surprisingly, has emerged as a front-running eco warrior.

In the mean time, commentators have suggested that maybe we should be looking to companies, as opposed to states, for climate leadership (see, for example,
http://www.nytimes.com/2009/12/06/opinion/06diamond.html?pagewanted=1&_r=1 ).
This is an interesting perspective and, in terms of social responsibility and sustainability, a great leap forward. Nevertheless, it may be prudent to take all this with a pinch of salt.

A perfect case study is the relationship between Indonesia and one of the world’s largest pulp and paper factories, Asia Pacific Resources International Limited (APRIL). On the one hand, Indonesia, the third-largest contributor to global warming (after the US and China), must desperately seek to limit its greenhouse gas emissions, much of which stem from the peat land in the Kampar Peninsula. However, to date, the only detailed plans for carbon-cutting action in the Peninsula have been submitted by APRIL who, as critics point out, is in fact a significant contributor to the problem in the first place and is desperately seeking further logging concessions.

Given the global crisis and the need for action sooner rather than later a proactive approach – for whatever reasons (see the New York Times for a discussion: http://www.nytimes.com/2009/11/30/science/earth/30climate.html?_r=2&ref=global-home ) – would appear to be the required step. And surely we should welcome any remedying action by contributors to the climate dilemma. But at what cost exactly is this pro-climate action being taken? A joint report by the NGOs Forest Peoples Programme (FPP) and Scale Up (http://www.forestpeoples.org/documents/asia_pacific/indonesia_rights_briefing_oct09_eng.pdf) explains that 33,000 people depend wholly or in part on the forests in Kampar Peninsula. However, APRIL’s proposed plans would “imply clearance of the degraded forests around the periphery of the Peninsula and, as presented, does not specify where local people would make their living or what rights they would have in the newly designated plantations, buffer zones or core conservation areas.”

Further enquiries by the NGOs revealed that APRIL had already secured 97,000 ha of plantation permits in the Peninsula. “None of the communities had been given clear information about the project, no efforts had been made by the company to assess communities’ land use systems or customary rights, no measures had been taken to identify their representative organizations, and no negotiations had been undertaken to secure their agreement to the proposed project.”

As commentators have pointed out, APRIL’s green plan appears to have finally gained them access to an area protected by permit requirements. There is no doubt that climate action must be taken now and that companies play an invaluable role, however, it would be tragic if we allowed ourselves to become blinded to rights abuses covered up by greenwashing campaigns. Although green efforts are welcome, they don’t paint the whole picture.

Daphne Guelker
Research Associate

8 hours of Q&A with the U.S. Department of Labor

The eight-hour Q&A session with the Department of Labor has just kicked off at 1:00pm EST on Monday, December 7.  Secretary of Labor Hilda L. Solis took live questions from the public for about an hour.  Next sessions running from today until Wednesday, December 9 include live Q&A with the Occupational Safety and Health Administration and the Wage and Hour Division.

For more information go to: http://www.dol.gov/regulations/index.htm#chats

100% scanning rule developments

GAO criticizes lack of analysis by DHS into roll out of rule, while Napolitano delays action until 2012

GAO recently issued a report on the progress made by DHS to prepare for the roll out of the 100% container scanning rule, part of the SAFE Ports Act of 2007. The study focused on the progress of the Secure Freight Initiative (SFI) as a sort of pilot project of the wider rule. The report found that the SFI program is being carried out with limited success in five international ports, three representing relatively low volume of total container traffic to the US, and two representing high volume ports. Even in the low volume ports 100% had not been achieved,  whereas in the high volume ports less than 5% is being scanned.

The 100% scanning rule has been the subject of controversy since it was approved by congress. Many business leaders, foreign government officials, logistics professionals and CBP itself have expressed strong concern about the viability of this project, its actual effectiveness, the cost of implementation, and the international policy implications of a program with heavy costs for foreign governments. According to an article in Logistics Management “’ "[The GAO} findings are absolutely not surprising at all,’ said Albert Saphir, president of international trade consultants ABS Consulting in Fort Lauderdale, Fla. ‘Any practical on the ground study, approach or discussion certainly all point in the same direction in that the mandate that was put out...cannot be met. We cannot impose U.S. law onto foreign soil…’” (See link to full article below)

The GAO report went on to find the following points:

• CBP has made limited progress in scanning containers at the initial ports participating in the SFI program, leaving the feasibility of 100 percent scanning largely unproven
• CBP has not developed a plan to scan 100 percent of U.S.-bound container cargo by 2012, but has a strategy to expand SFI to select ports where it will mitigate the greatest risk of WMD entering the United States.
• CBP, while identifying some SFI program costs, has not developed a complete estimate of U.S. program costs because of the lack of a decision on a clear path forward.
• CPB faces a number of potential challenges in integrating the 100 percent scanning requirement into its existing container security programs

In concluding, GAO recommends CBP “complete a feasibility analysis, cost estimates, and a cost-benefit analysis, and provide these results to Congress.”

In a related news item, Janet Napolitano, Secretary of Homeland Security, announced that DHS will issue a two year extension for requiring the 100% cargo scanning rule to be implemented in all ports where US imports originate. As reported in an article in Sandler, Travis and Rosenberg,  “Napolitano said meeting this deadline with existing resources and technology is virtually impossible due to numerous challenges” and that “[a]according to reports, there was little opposition to Napolitano’s plan among senators attending the hearing.” This last point is interesting, as it indicates that among the congress members who are aware of the challenges, this delay tactic was anticipated and not entirely unwelcome. The fact that these possible extensions were built into the legislation from the beginning seems to point to a realization by Congress that this legislation would not be enforeceable for years to come.

Moreover, apart from the aforementioned concerns with the 100% scanning rule, CBP has speculated that it have the negative and somewhat perverse effect on supply chain security in that it will reduce the incentive for partners to participate in the SFI, CSI or C-TPAT program.  As mentioned in the ST&R article, the requirement of scanning all cargo in ports of origin essentially negates any incentive for companies to dedicate resources to implementing a minimum security standard throughout their company or their supply chain, as they will not receive noticeably fewer security inspections that non-C-TPAT members.
While this action by DHS essentially “kicks the can down the road”, the question remains what will need to take place in the long run: whether DHS must eventually enforce the rule, or whether Congress will have to reverse its decision regarding this contentious issue.

Sources:
1. SUPPLY CHAIN SECURITY: Feasibility and Cost-Benefit Analysis Would Assist DHS and Congress in Assessing and Implementing the Requirement to Scan 100 Percent of U.S.-Bound Containers
United States Government Accountability Office, Report to Congressional Requesters. October 2009.

2. Ocean shipping/cargo security: GAO report indicates 100 percent cargo scanning has a long way to go Jeff Berman, Group News Editor -- Logistics Management, 12/3/2009

http://www.logisticsmgmt.com/article/409024-Ocean_shipping_cargo_security_GAO_report_indicates_100_percent_cargo_scanning_has_a_long_way_to_go.php

3. DHS to Push Back Deadline for 100% Cargo Scanning
World Trade Interactive
Sandler, Travis and Rosenberg
http://www.strtrade.com/wti/wti.asp?pub=0&story=33416&date=12%2F4%2F2009&company=

 

Is It Time To Invest In Haiti?

Signs of Progress

In June, the State Department downgraded its travel warning for Haiti, which no longer advises Americans to avoid nonessential travel to the country. Whether that means Haiti is safe remains a matter of interpretation. Nonetheless, it is a good indication.

In October, Haiti raised its minimum wage from 70 to 125 gourdes per day. This comes in the wake of mid-September student protests over the government’s stasis on increasing the minimum wage. Although a small increase, it is a breakthrough that will help bring the wage in line with inflation as the last minimum wage raise was in 2003. 

On October 1, the most significant sign of progress in Haiti came in the form of a speech from former president Bill Clinton. At an investor conference sponsored by the Inter-American Development Bank (IDB) in Port-au-Prince, Haiti, Clinton explored Haiti’s investment potential through a pragmatic lens. He pointed to specific plans for improvements in infrastructure, anticipating the most technical questions of the 600 attendees.

Bill Clinton and the ILO

Using his time on the podium to frame the Haitian government’s commitment to attracting investment, the president explained the connection to the ILO’s Better Work Haiti project and the conference when he said, “for investment to succeed in Haiti, Garment industry manufacturers, the ILO, and the Haitian government need to work together to meet ILO guidelines and respect workers’ rights.”
 
It is no coincidence that the week before the conference the ILO held the Better Work Buyers Forum in Haiti, which was attended by more than 70 delegates representing the Haitian government, international garment buyers, Haitian garment suppliers, workers’ and employers’ organizations, the United States Department of Labor, the United States Trade Representative, and the CTMO-Hope Commission.

The forum discussed the Better Work Haiti project, which is expected to create jobs while promoting sustainable development and responsible labor practices in the country’s apparel industry. Better Work Haiti, funded by the US Department of Labor, is being implemented as part of HOPE II (Haitian Hemispheric Opportunity through Partnership Encouragement) legislation approved by the US Congress last year. HOPE II is expected to create thousands of jobs in Haiti by giving tariff-free entry to the US market. International buyers at both the Better Work Forum and the investor conference expressed their support and optimism that the Hope II and Better Work combination will bring sustainable economic benefits to Haiti.

Addressing Investment Risks

Manufacturers have explained that before they are able to take advantage of the trade benefits created by Hope II and Better Work, adequate infrastructure must be set up in Haiti. The lack of efficient harbor infrastructure and other port costs significantly increases the cost of the product and works against its competitiveness. For free zones and distribution bases to be attractive, at least three things are needed: a deep water port with container/handling facilities, electricity at a competitive price, and reasonable law and order.

Clinton addressed this issue by juxtaposing commitments that had been made by the government, business, and donors with those that need to be made by investors. First, he rested the credibility of the Haitian government on the building of infrastructure. He pointed to the construction of a new international airport in the north along with the expansion of the free trade zone to the north of the Dominican border. There was also mention of a new free trade zone in Port-au-Prince. But most essential was the discussion of roads. The IDB has pledged $2 million for infrastructure projects.

Second, Clinton spoke to international investment from businesses. He brought the attention to Miami-based Royal Caribbean Cruise Line’s plans for a nearly $55 million investment in Labadie on the northern coast. Feeling the fervor, George Soros' Open Society Institute told the Associated Press that it has plans for a $50 million partnership with Haitian shipper Gregory Mevs to build a free-trade zone of clothing factories.

Third, the former president brought attention to the Clinton Global Initiative (CGI), which announced nearly two dozen commitments with a $258 million price tag for projects for Haiti, such as a three-year, $2 million pledge by actor Matt Damon’s water.org organization to provide safe water and sanitation for 50,000 people.

Fourth, he used Better Work Cambodia as a case study for why Better Work Haiti would succeed. He importantly compared the similarities between Cambodia and Haiti and pointed to the success of the Cambodia project, which was responsible for doubling employment in the apparel industry.

For those engineering Haiti’s turnaround, Clinton’s speech was a perfect segue into the drive to attract investment. The industry specific sessions that took place after the main address gave an example of investors’ excitement. In the apparel room, journalists reported on conversations between manufacturers about how Haiti would allow for the production of brassieres at a low cost and high profit. The hot topic in the agriculture room was the potential to produce mangos. All over, investors insisted that money-making opportunities were everywhere in Haiti.

Alex Katz

Research Associate

Capturing Environmental Risk: Lesotho Scandal Highlights Need For New Environmental Strategies

A recent expose in the Sunday Times from August 1, 2009 (http://www.timesonline.co.uk/tol/news/world/africa/article6736290.ece) about a garment factory in Lesotho suggests that brands and retailers should rethink their environmental monitoring strategies. According to the article, a factory in Lesotho was allegedly responsible for dumping needles, razors and harmful chemicals such as caustic soda at the local landfill. In addition, the mill associated with supplying the fabric to the factory was also accused of dumping waste in the form of untreated wastewater from its dye facilities into the local river. Both of these infractions resulted in environmental contamination and had a negative impact on the human population. Unfortunately, such pollution is common in countries where enforcement of environmental legislation (if it even exists), is lacking and is often overlooked.

Social Assessments with an Environmental Twist   

To account for increasing stakeholder concern about environmental issues, many brands and retailers with social monitoring programs have added an environmental component to the standard social assessment in the attempt to create a more comprehensive ‘ethical’ audit. There are essentially two problems with this approach. The first is that environmental problems are usually complex and cannot be assessed in an hour with a checklist of questions. Although content of the environmental component varies, it generally focuses on compliance with permits and some basic waste management issues. Does verification that a facility recycles its waste and has a waste removal permit guarantee the facility is operating in an environmentally friendly way and represents a low risk to buyers? I don’t think so. We would not conclude that a facility is socially compliant based on an hour of document review, so why is it permissible to do so for an environmental assessment?

Social Risk Assessments Won’t Capture Environmental Risk  

The second problem with the ‘add-on’ of an environmental component is that social monitoring programs are designed to assess social risk and may not be appropriately structured to assess environmental risk. To assess social risk, monitoring is conducted where risk to the client is highest—usually factories where the garment or product is being manufactured and then shipped directly to the retailer or exporter. However, for many products such as cotton and leather goods, the final stages of the supply chain do not represent the highest environmental risk.

Rather, most of the environmental damage occurs at the beginning of the supply chain where the raw materials are produced or initially processed, like fabric mills, dye houses and tanneries. High levels of pollution are also emitted during the manufacturing process, as waste and other scrap material must be disposed of, usually at an off-site landfill. The Lesotho Case exemplifies such a situation where the pollution occurred off-site of the facility grounds. Would these violations have been found by social auditors or similar third parties conducting standard social compliance audits inside the factory itself? I doubt it. The landfill site and dye facility would have been outside the scope of the standard social assessment and would not have been visited by the auditors. Therefore, if social and environmental risk manifest differently, and the audits are not being conducted where environmental risk is highest, shouldn’t an audit program intent on capturing environmental issues reflect this difference be restructured to look at the entire supply chain?

Moving Forward: Examples of Environmental Strategies that Work    

In reaction to the Lesotho Case, GAP and Levi Strauss—the brands mentioned in the report—responded by stating they would conduct a supply chain investigation to fully investigate the situation (http://www.gapinc.com/GapIncSubSites/csr/documents/Gap_Inc._statement.pdf; http://eu.levi.com/en_GB/information-center.html). Although this will perhaps uncover further issues in Lesotho, if supply chain investigations are not conducted systematically, what violations and risks will be left uncovered in the hundreds of other supply chains in other supplier countries?

To better identify and address environmental risk, brands and retailers need to be much more proactive from the outset. Timberland is an example of a brand that is leading the way by going above and beyond basic environmental compliance. The company has a comprehensive set of environmental programs and policies in place to reduce environmental impact throughout the supply chain (http://www.timberland.com/corp/index.jsp?page=env_steward). Consumers are also provided with information about the environmental footprint of a product (nutritional label), along with a rating system (green index) to help them make informed and responsible choices. Other initiatives such as the BSR Apparel, Mills and Sundries Working Group highlight opportunities for brands and retailers to collaborate with suppliers and to develop and move towards sustainable goals across the supply chain (http://www.bsr.org/consulting/working-groups/apparel-sundries.cfm). These are just two examples of programs and initiatives that have been developed to directly address environmental issues in an innovative and proactive way. The question remains whether the rest of the pack of brands and retailers are up to the challenge and willing to work together to catch up. 

Reporting on the Implementation of the Equator Principles

As part of my internship at STR-RS this summer, I conducted a survey of the reporting undertaken by Equator Principle Financial Institutions (EPFIs) for FYs 2007 and 2008. My research revealed that the majority of EPFIs have been complying with the bare minimum for implementation reporting.

The Equator Principles are a set of benchmarks for managing social and environmental issues in project finance.  In terms of numbers the initiative has been successful. Nearly 70 financial institutions have adopted them since they were launched in 2003, and the IFC estimates that the Principles currently cover approximately 90% of global, cross-border project finance.  But the picture is not so clear in terms of true implementation, mainly because reporting is limited at best.

In response to criticism from NGOs and other civil society organizations, the most recent revision of the Principles in 2006 introduced a new Principle on reporting. It states: “Each EPFI adopting the Equator Principles commits to report publicly at least annually about its Equator Principles implementation processes and experience, taking into account appropriate confidentiality considerations.” The new Principle’s language is blatantly vague. For example, what are “appropriate confidentiality considerations”? Perhaps that is why it’s accompanied by a Guidance Note entitled “Guidance to EPFIs on Equator Principles Implementation Reporting.” This document makes suggestions as to how signatory institutions should report on their implementation methodology. It also discusses some good practice approaches for those “seeking to go beyond the requirements of Principle 10.”

Even though EPFIs now have access to detailed recommendations for reporting, most institutions simply state that they have signed onto the Equator Principles. They choose not to enter into detail regarding their implementation processes and experience. This is a shame, especially because the minimum requirement for discussion on implementation doesn’t ask for much to begin with. The Guidance Note says that EPFIs should describe how the Principles have been incorporated into policies and procedures, discuss who is responsible for overseeing their implementation, and describe how the Principles have been adopted internally in terms of training. In my opinion these requirements are superficial, especially when it comes to reporting on “experience.” The requirements on reporting do not stipulate the inclusion of case studies, for example. Including case studies is considered going beyond the requirements.

The EPFIs that do disclose a bit more have strictly adhered to the template suggested by the Guidance Note. This includes a table indicating the number of projects that were reviewed under the Principles as well as which category (A, B or C) these projects fell into. Level A is for projects with significant environmental and social impacts, level B for projects with limited impacts, and C for projects with minimal or no impacts. A handful of institutions have also reported “beyond the minimum” because they have disaggregated the projects by sector or region. Why disclosure of what sector or region a project pertains to is considered reporting beyond the minimum evades me. It seems like this should be considered basic information.

While there are some exceptions (like HSBC, which has published an entirely separate document detailing the way in which it applies and reports on the Principles), it is clear that the majority of signatory institutions are reluctant to fully disclose how they have applied the Principles. This is because reporting is a delicate matter for banks. The large number of stakeholders involved in complex infrastructure projects makes it difficult for financial institutions to legally disclose details of the projects they finance, and legal obligations to their clients inevitably take precedence over a voluntary agreement.

But publicly reporting on implementation is an essential part of the EP process because it holds the signatory institutions accountable.  It also lends credibility to the initiative. Moreover, civil society needs to have access to information on specific cases in order to assess the validity and success of the Principles. Information on loans being suspended or projects being rejected on the grounds of environmental or social concerns should be uniformly disclosed.  

Finally, determining exactly what socially responsible behavior is and what it isn’t is a tricky task. As a result it’s normally defined by best practices. Since most financial institutions are only willing to do what other institutions are doing and nothing more, it’s imperative for large banks to set high standards for themselves so that other banks will feel obligated to follow suit.

The Equator Principles have had a positive impact on international project finance, but more stringent reporting requirements are necessary if they are to maintain their credibility and effectiveness. Without improved reporting, the Principles run the risk of being perceived as yet another ineffective voluntary initiative. That’s a risk that the international community shouldn’t be willing to run.

By Davina Wood, Master of International Affairs Candidate at Columbia University

The New Sheriff in Town

The Government Accountability Office (GAO) recently concluded a nine month investigation into the complaint processes of the Wage and Hour Division of the Labor Department. The investigation, sponsored by the House Education and Labor Committee, conducted fictitious undercover calls to Wage and Hour Division employees. The study concluded that complaints were inadequately handled in various ways, including failure to follow-up on employee complaints, failure to be persistent with unresponsive employers, closing cases after employers stated inability to pay back wages, and advising callers to seek legal assistance.

Of the 10 fictitious complaints posed to the Labor Department, two cases concluded with Division employees falsely recording the successful payment of back wages in the Division database.  Five cases were completely left out of the database, one of which was a child labor complaint involving heavy machinery work at a meat packing plant. The remaining three cases failed to be investigated.

The investigation also included an examination of various real complaints handled by the Division in the last nine months. One such complaint, issued by a group of restaurant workers, involved $230,000 in off-clock labor and misappropriated tips. After taking 22 months to initiate an investigation into the complaint, the Division closed the case once the restaurant agreed to pay back wages, not including tips.

What does this mean to the social responsibility professional? An immediate response might be one of indignation: without scrupulous enforceability from the powers that be, why utilize resources to ensure that high levels of labor standards exist within your supply chain? Government enforceability of labor standards always acted, along with brand protection, consumer confidence and pure ethics, as an impetus for proactively assessing supply chain labor standards. Thus, if enforceability is apparently falling short, what should be done?

If you find yourself treading down this thought path, stay calm.  Remember, the GAO investigation focused on the last nine months of Wage and Hour Division complaints. Rather than highlighting the lack of performance of the current Labor Department, the investigation is a “shame on you” to the previous department. In other words, the investigation will set precedence for the “new sheriff in town”, Secretary of Labor Hilda L. Solis, who was confirmed by the Senate just a few weeks ago. Solis already plans on increasing the Labor Department workforce by 30%, hiring 150 more wage and child labor law investigators, as well as 100 additional wage and hour investigators to focus solely on stimulus project contractors.

Thus, government enforceability of labor standards will not only remain an impetus for proactive supply chain labor standard assessments, but will play an even more important role in the next few years.

 

Furthermore, the GAO investigation highlights the value of checks and balances. One mechanism alone should not be assumed to be sufficient. It is essential to “check the checker” to ensure effective enforcement, and to identify weaknesses as opportunities for improvement. Although the Wage and Hour Division fell short in its mission, the GAO investigation acted as a balance by checking the checker. Using the shortcomings identified by the investigation, the new Department under Solis can implement any changes needed to improve processes. 

This case shows that a system of checks and balances is essential to any monitoring effort, whether internal, external, governmental or non-governmental. Companies that rely solely on one monitoring mechanism should implement a check the checker system, or diversify their program to include additional components to act as a balance. When it comes to storing eggs, we all know the dangers of only one basket.

 

Rishi Arora

Research Associate

Beyond Monitoring's Missing Link

Check out my latest blog post on the Global Strategic Management Institute's Community site.

I'll also be speaking at the GSMI's upcoming conference in New York City next month.