Perspectives in Responsible Sourcing

The Gap Sweatshop Story: Child Labor in India. What happened?

By now you’ve seen it: newspapers all over the world are carrying the headline about Gap’s link to bonded child labor in an India sweatshop. The U.K.’s Sunday Observer broke the story on the child workers producing for Gap after a journalist captured video footage of the New Delhi slum.

So, what’s the deal?

Children, sold to the factory by their parents, were found laboring in squalid conditions to produce a line of Gap kids clothing intended for the Christmas season. The children were tattooed with the number of the sweatshop to which they were bonded. They have been told they must work off the debt of the payment made to their parents to provide them jobs but they earn no wages while they are still “learning.” They work 15-20 hours a day and are beaten regularly. They are hit with rubber pipes if they cry. The workplace is reportedly hot, filled with flies, and with raw sewage leaking from toilets into aisle ways.

One boy says he wants to work there so he has a place to sleep at night. He wants to earn money to buy a house for his mother. But he is not being paid for his work and his sleeping quarters are on the roof.

The reporter’s first hand accounts and video footage, available in the video feeds from the BBC and ABC News, are as depressing and appalling as the text descriptions.

How did this happen?

It appears that the Gap supplier in India subcontracted the work order to this unnamed operator without notifying the Gap. According to one article, the sweatshop manager “gloated as he explained to us how the child labour deal was arranged. He claimed one of the multi-national firm's Indian suppliers sub-contracted it to his bosses with a handshake, promising cash on delivery. ‘It's how we do business here in India," he told us. "You westerners are too quick to judge life here.’”

What was Gap’s response?

Gap responded by canceling the order, committing to destroy the goods that were produced by children, launching an investigation, and calling an emergency meeting with all regional suppliers.

Dan McDougall, the journalist that broke the story, said, “I’m satisfied with that response. I think they’re doing everything they can, but in terms of the broader issue, perhaps more money could be invested in auditing their suppliers and more monitoring on the ground. That’s the key because clearly the systems they have in place failed.”

What now?

This story has galvanized anti-poverty campaign group War on Want to push Prime Minister Gordon Brown for independent regulation of the clothing sector. According to War On Want spokesman Paul Collins, “This is the latest of a series of scandals that have emerged over almost a year … So long as retailers like Gap are allowed to regulate themselves, rather than have an independent regulator look at their factories and their subcontractors - then these scandals will continue to emerge."

Interestingly enough, the timing of this corresponds with a similar debate in the U.S. Just last week, a U.S. Senate panel heard testimony on sweatshops in the toy industry. U.S. Senator Byron Dorgan is “pushing legislation that would make it illegal to import or sell goods in the United States that are made abroad in sweatshops or by prisoners…” [see a related article for more details.] More on this testimony to follow in a later blog.

Don’t forget the subcontractors

Gap has a larger social compliance program than most companies. They employ 90 internal social compliance staff to work with their supply chain, including suppliers in India. They report having ceased relationships with 23 suppliers last year due to labor standards concerns.

If they have dedicated so many resources to this area, how can they still face such grave challenges in the supply chain? What about those companies concerned about labor conditions but have less resources available than the Gap?

I think one lesson for companies looking at this event is: don’t forget the subcontractors. [see a related article on this topic.] I don’t mean to suggest that Gap has forgotten them. I imagine that they have purchase order requirements that forbid unauthorized subcontractors and that this Indian supplier simply ignored the contractual agreements. However, many companies are not even considering the second and third tiers in their supply chain. As Dan McDougall notes, “This isn’t a problem for Gap; this is a problem for every High Street retailer. They all subcontract to the developing world.”

Spheres of Influence

John Ruggie, a Harvard professor, has been exploring the relationship between human rights and business for just over a year as the UN Secretary General’s special representative for Business and Human Rights.  In a recent interview with the Financial Express, Ruggie spoke about the latest focus of his work – what is the duty of the state to protect against corporate abuse?

From a business perspective, this focus on state obligation in upholding human rights is most likely a relief.  One of the main corporate criticisms of the now failed UN Norms for Transnational Corporations was that the Norms found too large a role in international law for businesses to ensure human rights are being upheld. 

More specifically, Ruggie points out in his report, The Evolving International Agenda, that the role defined for corporations under the Norms was essentially the same as that defined for States, an overlap that leads to much confusion, among other things.  He goes on to conclude in the Financial Express interview that it is “hard to contend that corporations have direct legal obligations under international human rights law.”

However, he also found “a growing potential for companies to be held liable for international crimes… under domestic law but reflecting international standards of individual responsibility.”  A current example of this latter case is Chiquita's liability not under international law but under Colombian law for contracting with a right-wing militia that committed internationally-recognized human rights abuses.

Part of the goal for Ruggie’s now extended mandate is to more clearly define the idea of a corporate sphere of influence in international law.  He believes that one means to achieving this goal is to “further clarify and progressively codify the duties of states to protect human rights against corporate violations” on both an individual state and multi-state level.

In a White Paper issued in April of this year, the American Bar Association (ABA) took a stab at roughly defining the corporate sphere of influence in corporate social responsibility (CSR) by saying that businesses should integrate “broader societal concerns into business strategy and business operations in ways that enhance reputation and sustainable business prospects.”  The ABA suggests that some ideas for embracing this approach include adopting relevant international conventions and industry best practices.

With regard to state responsibility, it says laws should be a minimum jumping off point for CSR but that, “local laws should not regulate corporate social behavior or impose exactions or taxes to enforce policies rooted more in political considerations and pet economic theories, than in the protection of social welfare and individual rights.”  The ABA proposes that the judiciary will play a role in resolving the jurisdictional no-man’s- land between corporate and governmental obligations in the area of CSR.

The ABA is coming at the dilemma more from the perspective of how it (as a group of lawyers rather than nation-states) can help to delineate the respective roles of corporations and governments, and with a focus on CSR in particular rather than human rights more generally.  Still, there is a fair amount of overlap between the ABA’s orientation and Ruggie’s.  Both are attempting to clarify the roles of states and corporations with regard to upholding social goals.  However, as a broad policy statement the ABA position leaves lots of gaps in the specifics of the sphere of influence framework.  For example, it does not elaborate on which corporate human rights practices should be legalized and which ones should remain voluntary.  It will be interesting to see if Ruggie can meet his goal and fill in some of those specifics.

If you have questions or comments on this blog, please contact me at: lblecher@intlcompliance.com