Perspectives in Responsible Sourcing

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.