Consultation on a Proposal to Verify Labour Standards in the Apparel Industry - Outcomes and Recommendations

Key Findings from the Multi-stakeholder Session

The multi-stakeholder session on November 28, 2003, began with a brief introduction and summary by Anita Mayer, Vice President, Public Policy Forum. The agenda for the session provided an opportunity for stakeholders to explore the principles, objectives and issues that were outlined in the Convening Paper (Annex III:  Agenda; Annex VI:  Convening Paper). Stakeholders at the session participated in an intense and lively discussion that covered a broad range of themes and concerns. This section does not attempt to provide a verbatim report of this conversation; rather, it is meant to illustrate the key themes and concerns that emerged over the course of the day. It is important to bear in mind that the views and examples that are captured in this section reflect the opinions and comments of the session participants.  The Public Policy Forum has not endeavored to ascertain the validity or technical feasibility of these claims, but rather to capture the views that were expressed in as succinct and concrete a manner as possible.

Overall, there was a general sense of agreement among participants that it is important that textiles are produced by manufacturers who support fair labour practices and standards and that action should be taken by importers, producers and retailers to encourage compliance with international standards. The salient question for all stakeholders, therefore, was how best to move forward in addressing this issue.

General Themes

Over the course of the day’s dialogue, several overarching themes emerged.

Trust and Confidence

Perhaps the dominant theme throughout the discussion was the lack of trust and confidence among the stakeholder groups, both in each other and in the consultation process. Representatives of the ETAG group opened the session by seeking assurance that if the group as a whole did not arrive at a consensus, that the Final Report would nonetheless put forward all the ideas that were expressed by all stakeholder groups. Much of the discussion at the session centred on the fundamental lack of trust that exists between the various stakeholder groups present at the session.

Stakeholders agreed that if the various sectors and stakeholder groups who were present at the session want to work together or to cooperate in addressing any of the issues that were identified through this process, they will first need to address this fundamental lack of trust. Although the stakeholders agreed that increased co-operation could help address many of the issues that were brought to the table, and many stakeholders made suggestions on how to build trust among the participants, there was no agreement at this roundtable as to what a first step might be to address this issue.

Scope of the Consultation and Recommendations

Another key theme that emerged was concern that the scope of the issue that was being addressed and its associated recommendations was too limited. Some stakeholders felt that it was important to look at the issue of labour rights and practices in a much broader context and not to limit the discussion to the apparel industry. These stakeholders expressed the view that the Textile Labeling Act would not be the appropriate legislative vehicle through which to implement broader provisions around labour practices and rights, since the Act applies only to consumer textile articles and not to other consumer goods that are sold in Canada.

Other stakeholders expressed the belief that the issue of fair labour practices extends beyond the Competition Bureau’s bailiwick and that of Industry Canada and, as such, any consultations around fair labour practices must be expanded to include stakeholders from other sectors of the economy, and representatives from other departments and Ministers. A third group of stakeholders, however, argued that the fact that the issue of fair labour standards extends beyond the apparel industry does not alter the importance or validity of looking at this issue in an industry-specific context.

 

Principles and Objectives

Throughout the multi-stakeholder session, stakeholders made a number of important observations and expressed concerns about the principles and objectives identified in the Convening Paper.

 

Equality

Some stakeholders were concerned about the differential impact of mandatory disclosure policies on smaller and larger retailers. They stated that the Canadian market is more fragmented and much smaller than that of the United States, and that therefore, many smaller companies do not have the individual resources needed to produce this information. As well, the point was raised that although some of the big companies in Canada already have codes of conduct in place, many small and medium-sized companies have not implemented such codes and are not taking action to address the issue of fair labour practices in the production of their goods.

A practical concern that was raised was the need to provide small and medium-sized importers, producers and retailers with a set of concrete actions they could undertake in support of fair labour practices. Representatives from the retail and apparel industry indicated that most of the smaller companies in Canada (who employ a majority of Canadians) do not have the resources to address the issue of fair labour practices on an individual basis.

Stakeholders expressed the view that the establishment of a set of common ground rules for all businesses would be useful, and that while a voluntary code has been developed by the Retail Council of Canada for Canadian retailers, there are no common monitoring standards or databases of compliant factories that are accessible to all Canadian companies. There was also a discussion of potential ways to address this issue. Suggestions included one-on-one discussions between NGOs and companies, and/or future multi-stakeholder forums to share ideas and information, and to develop common strategies.

 

Transparency and Accountability

Another extremely important theme was that of transparency and accountability. All stakeholders acknowledged the importance of accountability and that companies must take action on the issue of fair labour practices and standards. There was a divergence of views, however, around the appropriate vehicles through which to ensure transparency. All stakeholders expressed the need to present accurate information to consumers about how labour standards are being upheld in various contexts and to present this information in a form that would allow consumers to make real choices. Some stakeholders expressed the view that mandatory disclosure of factory locations is the key to informing consumers’ choices, while others expressed the belief that it would have very little direct benefit for consumers, but would have negative consequences for retailers and producers.

Some stakeholders suggested that it is not as important to talk about the ‘ yes’ or ‘no’ of mandatory disclosure, or it is to talk about disclosure to whom and for what purpose. In their view, the real challenge for Canadians is that, unlike Europe, there is no agreement on a multi-stakeholder code of conduct. It was suggested that if the question of “disclosure to whom” could be addressed - an independent third party, for instance - it might be possible to design a proposal that would reassure both business and consumers.

The example was raised of the Fair Labor Association (FLA) in the United States, which currently publishes the results of its factory audits on its Web site without disclosing the names and locations of the factories. Some stakeholders suggested that this initiative is important both for the information it provides on the companies themselves and on the quality of the audits they undertake. For these stakeholders, their primary concern was that it is practically impossible to determine the quality and accuracy of a company’s auditing practices without having access to the audits themselves.

Another example given was that of a number of companies in the United States that have published the location of their supply chains at the request of major institutional buyers such as universities. To date, this level of disclosure has not been seen to harm the competitive position of these companies. However, it was also pointed out that these disclosures are related to a very limited number of apparel products and may not be applicable to a more general context.

Some stakeholders indicated a belief that fair labour standards will never be achieved without a real commitment on the part of all stakeholders. They stated that transparency and accountability are critical to ensuring the use of fair labour standards and that in the absence of a complete set of information detailing which companies have produced what products and in which locations, it is fair to use the occasional ‘bad actors’ (companies who produce goods in factories that do not support appropriate labour standards) as examples in the media, particularly if the information about these companies’ actions is the only information which is publicly available. These participants stated their belief that measures should be implemented to ensure a baseline of accountability and transparency, and that the ILO standards on fair labour practices could either form, or be used to inform, these measures.

All stakeholders agreed that verification systems must be in place with respect to codes of conduct. Representatives from the retail industry indicated that they created the Canadian Retailers Advancing Responsible Trade in order to share information, develop best practices, and create monitoring standards to support the Responsible Trading Guidelines and an aggregate data base of compliant factories to which all Canadian companies can have access. They emphasized that the purpose of monitoring should not be to ensure that companies are adhering perfectly to these codes, but rather to try to make the working conditions in factories associated with compliant companies better. In effect, they argued that monitoring should be realistic and that changes which come about as a result of monitoring should be incremental.

There was interest on the part of all participants to at least discuss the constitution of a set of generally accepted transparency measures. Many participants associated with ETAG, however, expressed the belief that existing auditing and monitoring practices must also be made more transparent so that the public and stakeholders have a clear idea of:

·    What practices are in place;

·    How these practices are being enforced; and

·    What remedial actions have been taken to address areas of concern.

One issue raised with regard to accountability and transparency, was the need from the point of view of investors for certainty concerning potential risks related to the ethical sourcing of a company products. Emphasis was placed on the need for public reporting to allow investors to accurately assess the risks associated with a company’s supply chain.

 

Informed Choice

For many stakeholders, the issue of informed choice for consumers was extremely important. They expressed the concern that given the potential cost of implementing the ETAG proposal, it would be important to know that its implementation would be of substantial benefit to consumers. The key issue, in their view, was the degree of perceived difficulty for consumers in accessing the types of information that would be important in allowing for an informed purchasing decision.

Many stakeholders thought it unlikely that a consumer would take the time to shop for an item, record its bar code or product number, access the Competition Bureau database online, and decide on the basis of the information contained therein whether or not to purchase the item. Further, there were questions around the accuracy and validity of information contained in such a database, and the need for the Competition Bureau to be able to guarantee the quality of information contained therein in order to mitigate against the risk of liability in the case of actions undertaken on the basis of incorrect information. In short, in order for such a database system to be viable, consumers would have to be able to access accurate, timely and up-to-date information on the labour practices associated with the production of the garments they wish to purchase - a proposition which seemed somewhat doubtful to many participants.

Stakeholders from the retail and apparel industries identified the lack of a market pull as an important issue in determining the viability of disclosure legislation. Notwithstanding this perspective, members of the Retail Council of Canada - including Sears, Wal-Mart and HBC - indicated that they consider responsible trade to be a top priority and that they are currently spending millions of dollars annually on programs to improve labour standards. They stated that this is one area where the not-for-profit sector could work with industry in terms of building the capacity of Canadians to deal with issues like ethical sourcing. They also indicated that there could be an important role for an organization like the FLA to be developed in Canada to help educate the public and to provide useful and fair information on what actions are being taken by government and by industry to improve and encourage fair labour practices internationally and domestically.

 

Other Related Issues

Although the discussion focused primarily on the principles and objectives identified in the convening paper, participants raised a number of other, related issues which they also felt were important to address.

 

Canada’s International Obligations

All stakeholders recognized the importance of developing and enforcing international standards such as those developed by the International Labour Organization (ILO). Some stakeholders also identified the need for more government-to-government interaction around the enforcement of labour standards. It was suggested that it would be possible to insist that companies maintain minimum international standards in order to obtain an export license to Canada. The real question in the minds of some stakeholders was what the Canadian government can do to encourage the implementation and enforcement of basic labour standards. One approach proposed was that the Canadian government could trade market access for compliance to labour standards.

Some concern was expressed that Canada has not ratified three of the eight key articles of the ILO labour standards. Concern was also expressed about the need for countries, including Canada, to report on their progress in implementing these articles. Finally, participants recognized the importance of finding ways to help countries to implement these standards and practices in ways that are both appropriate and effective in the domestic context.

Freedom of Association

It was recognized that there are divergent views between stakeholder groups on the ability or importance of enforcing freedom of association as part of a code of conduct (either voluntary or mandatory). For some stakeholders, this issue was the key to any undertakings with regard to fair labour practices, while other stakeholders insisted on taking a more flexible view, particularly when looking at the role of garment and textile exports from China where freedom of association is not a legal right. Given the quantity of garment and textile production already in China or relocating there, ETAG representatives suggested that rather than abandoning freedom of association as a principle, industry needs to use alternate means of facilitating freedom of association in Chinese production factories.

 

The Changing International Environment

The impending changes to the international quota system for textiles was a primary preoccupation for some participants. They stated that in 2005, there will be major changes and disruptions to international apparel markets as a result of the reduction of quotas by the World Trade Organization. These disruptions will supersede concerns around fair labour practices, as entire industries in some developing countries could be fundamentally altered or destroyed.

 

The Capacity of Canadian Companies to Enact Change

An important concern for many of the stakeholders in the apparel and retail industries was that most Canadian companies use only one or two percent of the production in individual factories. As such, many of these factories and their labour practices are controlled by firms in other countries who account for a much larger proportion of their production. Other stakeholders suggested that although firms in the apparel industries in Canada are smaller in size than their counterparts in the United States, they should at least be willing to contact, if not to work with, their U.S. counterparts to find solutions to labour issues in the factories in which they both produce goods.

One of the challenges identified from the perspective of the retail industry was the range of sizes of firms in the sector in Canada. Stakeholders from this industry also indicated that they are trying to develop cost-effective compliance monitoring standards to support the voluntary code of conduct and achieve a maximum level of penetration in both larger and smaller firms.

 

Governance, Enforcement and Promotion

An important issue for many stakeholders was the difficulty of implementing or monitoring information on labour practices in the global context. The point was made that the government of Canada currently has a very expensive process in place to monitor and guard against the trans-shipping of goods, but this process has been remarkably ineffective. Instead of pursuing enforcement methods, it was proposed that incentives or other provisions could be put in place to encourage companies to report on their initiatives to achieve corporate social responsibility.

 

The Need to Consider other Options

ETAG was concerned that their proposal for mandatory disclosure of factory locations not be analyzed in isolation from other policy options. (See Annex IV for a partial list of these related options which was distributed by the ETAG group at the multi-stakeholder session.) They emphasized their interest in looking at and discussing the entire suite of policy options, and not limiting the discussion to mandatory disclosure. Although there was a unanimous rejection of the notion of mandatory disclosure by representatives from the retail and apparel industries, there was a great deal of interest in the other related proposals put forward by ETAG which include (policy options 2 through 5 in Annex IV):

 

o Social reporting regulations

o Incentives

o Labour standards provisions in bilateral and regional trade agreements

o Support for capacity-building projects

 

Many of the retail and apparel stakeholders suggested that too much emphasis has been placed on the issue of mandatory disclosure of factory locations, and not enough attention has been paid to other related solutions. Other stakeholders wondered why there is an emphasis on the apparel industry and not on other industries as well. Once again, stakeholders suggested that it is also important to look at labour standards in other industries, although some stakeholders maintained that this did not preclude a more specific discussion about the apparel industry itself.

 

Ongoing Inter-sectoral Dialogue

Stakeholders from all constituencies expressed interest in trying to address the issues that have been identified, such as labour practices at a specific factory or location, in a way that is mutually acceptable and that does not involve public battles in the media. Some felt that some large American retailers and producers are more responsive to issues raised by civil society organizations than their Canadian counterparts, and that this must be remedied.

Stakeholders from ETAG suggested that under the right conditions (dialogue that is useful and progressive), it would be useful to agree upon a methodology that would allow industry and NGOs to work together to address mutual concerns. Such a situation might include a union that has a specific concern around the conditions in a particular factory working with the company involved. As well, stakeholders from the retail industry indicated a willingness to work together, perhaps with the participation of certain NGOs, to address the key non-competitive issues.

 

Table of Contents I Recommendation and Alternatives