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Proactive Disclosure
Consultation on a Proposal to Verify Labour Standards in the Apparel Industry - Outcomes and Recommendations
Annex V
Discussion Paper
Background
In February 2001, the Ethical Trading Action Group (ETAG) - a broad coalition of church, labour, and non-government organizations (NGOs) concerned about “sweatshop” labour practices, or ethical sourcing, in the manufacture of apparel - launched a new initiative to support labour standards in the international apparel industry. The initiative proposes that the Canadian government amend the current Textile Labelling and Advertising Regulations of the Textile Labelling Act to require manufacturers to disclose the addresses of all manufacturing sites involved in the production of a garment on the labels of apparel sold in Canada. Through this proposal, the group is seeking to facilitate the verification of the international labour standards and practices in place at manufacturing sites that supply apparel to the Canadian market.
A study was commissioned by the Competition Bureau, on behalf of the Minister of Industry, to assess this proposal and to identify the implications of the implementation of these amendments for consumers, governments, the domestic apparel industry, international trade and trade agreements. In addition, the study, which was released by the Conference Board on May 30, 2003, tried to identify and assess a number of alternative policy options. As such, the Conference Board was seeking to clarify the policy objectives of the ETAG initiative, set evaluation criteria and test whether these criteria would be met, and to propose alternative policy measures that would effectively address the initiatives’ policy objectives.
See pages 7-8, 22-23, and 60-64 of the Conference Board Report for more information.
The Public Policy Forum Consultation Process
In May 2003, the Competition Bureau asked the Public Policy Forum to lead a national consultation on the outcomes of the Conference Board study and craft strategic recommendations as to how the government should address the issue of fair labour practices in the apparel industry.
The consultation process will include the following phases:
· This Discussion Paper summarizing the issues and the results of the Conference Board study is posted on the PPF web-site at stakeholderconsultations@ppforum.ca.
· Written submissions are being solicited from interested organizations and individuals. The submissions will be posted on the stakeholder consultation web-site unless confidentiality is specifically requested.
· A document summarizing the issues raised in the written submissions will be posted and will form the basis for discussions at a multi-stakeholder roundtable to be held in late Fall 2003. Participation at this roundtable will be by invitation only.
· A final report on the written submissions and roundtable discussions as well as strategic recommendations will be submitted to the Commissioner of Competition.
About the Public Policy Forum
The Public Policy Forum is a non-partisan, non-profit, research-based organization with a mandate to strengthen public policy and public sector management through multi-sectoral dialogue.
Established in 1987, the PPF has gained a reputation as a trusted, independent facilitator, capable of bringing together a wide range of stakeholders in productive dialogue. Its research program provides a neutral base to inform collective decision-making. By promoting more information sharing and greater linkages between government and other sectors, the PPF ensures that Canada’s future directions become more dynamic, co-ordinated, and responsive to the challenges or opportunities which lie before us.
Consultation Questions
The submissions phase of the Public Policy Forum consultation is your opportunity to comment on the findings and recommendations contained in the Conference Board report.
For the sake of comparability and clarity, it would be useful if you could structure your comments around the following questions:
1. Using the information provided by the Conference Board report and your own experience and observations, do you believe that regulated public disclosure of factory locations is critical to the success of voluntary or other initiatives designed to curb unfair labour practices in the apparel industry? Please explain.
2. In light of the Conference Board’s observations and given that unfair labour practices are an issue in sectors other than apparel manufacturing (footwear, toys, novelties, etc.), what would be the most appropriate means to achieve mandatory disclosure of factory locations if that were determined to be a desirable objective?
3. In the absence of the regulated disclosure of factory locations, what role should the federal government play in ensuring the success of initiatives designed to improve labour conditions in the apparel industry, over and above its current activity?
4. What role could and should non-governmental organizations (such as ISO and the ILO) play in promoting resolutions to the challenge of unfair labour practices in the apparel industry?
5. What role could and should the apparel industry play in promoting resolutions to the challenge of unfair labour practices in its supply chains?
Summary of the Conference Board Report
The Proposal
The goal of the proposal is to facilitate the verification of labour standards and practices at manufacturing sites that supply apparel to the Canadian market. The initiative is seeking the mandatory disclosure of the location of these manufacturing sites as a necessary first step towards gathering information on labour practices and, ultimately, informing Canadian consumers.
The belief is that public knowledge of the exact locations of manufacturing facilities will encourage companies to regulate their use of manufacturing facilities with sub-standard labour practices. The proposal stems from the conviction that Canadian consumers want to purchase products that are made under decent, legal, and humane working conditions. These conditions have been defined by most supporters as products that are produced in manufacturing sites that are in full compliance with International Labour Organization (ILO) standards.
The current Textile Labelling Act requires only the disclosure of one legal entity, i.e. “by or for whom” the consumer textile product was manufactured or made. The identity of this entity may be disclosed by providing the name and full postal address under which the dealer normally conducts business or, for a dealer in Canada, an identification number (CA Number) obtained by applying to the Competition Bureau. The amendments to the Textile Labelling and Advertising Regulations of the Textile Labelling Act would require dealers to provide the names and addresses of their manufacturing locations through the CA Number registration system.
The intent of the proposal is to have third parties, i.e. NGOs and organized labour institutions in countries hosting the manufacturing sites in question, undertake their own investigations and report their findings to the Canadian public. The proposal advanced that the manufacturing location information would be used for further information-gathering activities but does not specify how consumers would be informed about labour practices.
This proposal is unprecedented in that no other country has similar regulations in effect that would address both imported and domestically produced apparel.
See pages 22-24 of the Conference Board Report for more information.
The Conference Board Methodology
The Conference Board analysed the perspectives of stakeholders on the proposal and on potential alternative measures to achieve the same policy objectives.
To inform its analysis the Conference Board conducted extensive literature searches, interviewed more than 30 stakeholders directly, and held five focus group sessions to discuss emerging alternatives. The participants in the focus groups were:
·   ; & nbsp; ETAG members;
·   ; & nbsp; apparel industry stakeholders (all levels of trade); and
·   ; & nbsp; government stakeholders.
The report does not attempt to capture every possible divergent perspective. Rather, the report attempts to identify and find a way to achieve the ultimate objective of the policy initiative: the use and promotion of fair labour standards in respect of apparel sold in Canada.
See pages 9-10 of the Conference Board Report for more information.
Results
The Conference Board report indicates that stakeholders expressed many different and divergent views during the interview process. As a whole, ETAG stakeholders saw the disclosure of manufacturing sites as beneficial, while industry stakeholders concluded that the proposal was mostly unworkable. Government stakeholders expressed the desire to contribute to the use and promotion of fair labour standards, but were concerned about the complexity of the issue of fair labour standards in foreign countries and the difficulties in implementing factory location disclosure regulations. Below are some of the perceived challenges to the proposal as identified by the Conference Board.
1) Reliability of the information
Industry is concerned that misinformation or conflicting information would confuse, rather than inform, consumers. This suggests that if the proposed amendments were made, that the government would need to find ways to ensure that the information being released to consumers is reliable, accurate, timely and meaningful. Furthermore, industry stakeholders expressed the view that simply disclosing manufacturing sites does little to directly inform consumers about working conditions and, as such, does little to help improve labour standards.
2) Disclosure of proprietary information
Most industry stakeholders do not believe that the disclosure of the manufacturing addresses is necessary to improve working conditions in the apparel industry. Rather, they view the disclosure of these locations as a “fishing expedition” on the part of labour, tantamount to the “expropriation of supply chain information,” which they consider to be proprietary.
In general, industry believes that disclosing manufacturing locations to consumers would also make this information widely available to competitors, pressure groups, and retailers/clients, and would increase the risk of supply chain disruption, poaching, and industrial espionage. Industry also has concerns around:
- being misrepresented by not-for-profit organizations;
- being perceived to be exaggerating their own efforts towards improving global labour standards or the success of these efforts;
- becoming a target for specific and special interest groups; and/or
- being discredited as a result of the disclosure of a single negative event.
3) Manageability of the information
Although a disclosure process might be manageable for apparel manufacturers and retailers that carry a limited number of products and styles, it is far from clear that it would be feasible for larger industry stakeholders who manage tens of thousands of products made in hundreds of factories in dozens of countries around the world. This difficulty is further compounded by industry stakeholders who purchase through agents and/or supply chain intermediaries. As well, it is not unusual for larger industry stakeholders to be unable to identify the exact location of their apparel manufacturers. Indeed, supply chains in the apparel industry are so global, so fluid, and so complex that it is not feasible to know for sure, at all times, the exact supply chain paths taken by individual pieces of apparel.
4) International competitiveness
Industry Canada expressed concern about the implementation of any regulatory regime that will impede the development and competitiveness of the apparel industry or one that will be difficult or costly to enforce. The Department of Foreign Affairs and International Trade (DFAIT), on the other hand, is concerned that by focussing on labelling and disclosure instead of on international labour standards, that the ETAG initiative would exclude DFAIT from the development and oversight of potential regulatory changes which could have important implications for trade. Moreover, like many government stakeholders, Industry Canada is concerned that the implementation of the ETAG initiative would put Canada at a competitive disadvantage, given that we would be the only country in the world to have implemented this type of initiative.
5) Complexity of the labour standards issue
Government stakeholders view the improvement of labour standards as an international issue requiring a global solution. They feel that Canada already contributes to the solution by ensuring that labour standards agreements exist in parallel with its trade initiatives. Complicating the issue in the Canadian context, as well as the possible implementation of the ETAG proposal, is the fact that labour standards are an area of provincial responsibility in Canada and of sovereign government responsibility outside of Canada.
See pages 11-21 of the Conference Board Report for more information.
Conference Board Conclusions
In general, the Conference Board found the mechanics of disclosure mechanisms as proposed by ETAG to be ill-defined and/or impractical in many respects.
· Current labels lack the space needed to carry information on manufacturing location(s) and labour standards.
· The method of disclosure proposed by ETAG is awkward for consumers, as it would require a great deal of effort to reference a database of manufacturers and their respective labour practices.
· The ETAG proposal does not suggest a mechanism to ensure that the information provided on labels would reflect a balanced view of labour standards.
· The proposal subjects the Canadian apparel industry to increased scrutiny and uncertainty at a time when the global apparel industry is in turmoil and the part of Canadian companies within it are uncertain.
· The disclosure of addresses alone does not inform consumers of labour standards.
The Conference Board Report concludes therefore that the ETAG proposal is an inadequate step forward beyond the status quo as it fails to provide any additional useful information to consumers about labour standards. It also concludes that a combination of information, verification, and reporting initiatives on the issue of fair labour standards, combined with appropriate consequences when improper labour practices are uncovered, would be much more likely to attain meaningful results than either the proposal or other initiatives being pursued in Canada or abroad.
See pages 23-26 and 52-54 of the Conference Board Report for more information.
Brief Review of Alternatives
Note: The alternatives explored by the Conference Board were based on initiatives implemented in other countries or suggested by stakeholders.
Procurement initiatives
New initiatives, such as those implemented by universities and cities, are being used to encourage ethical business practices in the apparel industry across Canada. Some organizations have created their own standards, which have been formalized in internal or shareholder documents. Also, many governments, including municipal governments, are insuring that clauses are inserted into their contract documents or tender documents requiring suppliers to maintain ethical standards.
Institutional practices initiatives
Although a fairly recent innovation, codes of conduct have become quite popular with producers, manufacturers and distributors. They are seen by many as an effective way to inform consumers on the types of efforts being made to ensure fair labour standards in the apparel industry. Indeed, company or industry codes of conduct enjoy a remarkable degree of alignment around core labour standards, whether initiated independently in Canada or around the world by individual apparel retailers and manufacturers. Because some stakeholders believe, however, that the codes are not stringent enough or are not being managed closely enough by the industry, the perceived value of such codes has been reduced.
Certification initiatives for apparel suppliers
The manufacturing plants used by apparel customers can be certified as using fair labour standards by independent review organizations. The assumption is that retailers would want to use such manufacturing sites in the production of apparel more so than manufacturers who have not been certified. Voluntary certification is viewed as being a first step towards some form of universal certification.
Laws and Other Legislative Requirements
Most laws to ensure fair labour standards in the apparel industry are enacted by governments to regulate apparel production facilities that exist in their jurisdiction and apply to all industries equally. Although such initiatives generally have narrower objectives, they do provide new ideas to be considered as Canada looks for ways to show leadership through legislative change.
Bilateral labour agreements
Canada is undertaking bilateral trade agreements in order to strengthen economic growth through trade. The federal government’s Less Developed Countries Market Access Initiative, for example, is similar to efforts being undertaken by other developed nations to help alleviate poverty by encouraging increased links through trade. Issues such as changes to the rules of origin and the regulation of transhipments are also being studied and discussed, as well as the possible effect these initiatives may have on domestic textile apparel manufacturers.
Regular reporting on practices
Specific companies are using regular reporting on labour standards and practices in their supply chains. As such, these companies are of the opinion that they are already voluntarily disclosing labour practices and hence that there is no need for further legislation.
See pages 27-36 and 85-89 of the Conference Board Report for more information.
Invitation to Refer
For more information on the Conference Board of Canada please refer to the following web-site:
For the text of the Conference Board Report, please refer to the Competition Bureau web-site at:
http://www.competitionbureau.gc.ca/epic/site/index.cfm?itemID=363&l g=e
For more information on the Public Policy Forum Consultation, please see the Public Policy Forum web-site at:
