April 24, 2012
Authors
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Jessica Davis Pluess
Former Manager, BSR
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Racheal Meiers
Former Director, BSR
Consider two stories that illuminate challenges in the typical approach to supply chain compliance today:
The first takes place in Nairobi, where one working mother spends two thirds of her monthly income from her factory job on childcare. As a result of this spending allocation, she and her family are forced to live in Nairobi slums with inadequate sanitation, water, and electricity, and constant worries about their personal safety, instead of living in a structurally sound apartment in a safer neighborhood, like the peers at her factory who don't have children.
The other story takes place in the slums of Dhaka, Bangladesh, where many apparel workers live. After months of contentious negotiations finally resulted in an increase in the country's minimum wage for apparel workers, one factory worker told us her landlord and many others doubled the rent.
These examples—which we heard in our recent conversations with factory workers—underscore a common problem: Too often, typical supply chain compliance programs fall short of ensuring that worksite-based improvements have meaningful impacts on worker livelihoods beyond the workplace. In both of these cases, top-down requirements to raise wages in the factory, or even at the national level, cannot sufficiently address the myriad challenges workers face to raise their standard of living.
To change this, we must take into account the factors affecting workers' ability to manage their finances, save money, keep themselves and their families healthy and safe, and pursue opportunities for development and upward mobility.
There is also a business case to go beyond a "do no harm" approach to supply chain management. From the reputational risks associated with worker suicides in China to the productivity losses from mass faintings in Cambodia, the social needs of workers are affecting all aspects of business. In this context, leadership in sustainable supply chain management should shift from a narrow, risk-reduction model to an inclusive benefit-creation model, informed by local needs and implemented in collaboration with workers and communities.
Why Well-Being?
In working with companies on labor issues over the past 20 years through initiatives such as Beyond Monitoring and HERproject, BSR has pushed companies to look beyond compliance at issues such as supplier capacity-building and female factory workers' health. Like many of our members, we have seen the limitations of the "do no harm" approach to deliver sustainable benefits to worker well-being.
Around the same time BSR was founded, Levi Strauss & Co. (LS&Co.) became the first multinational apparel company to establish a comprehensive workplace code of conduct for its manufacturing suppliers. This code, the LS&Co. Terms of Engagement, was designed to ensure that basic labor rights and environmental standards were being upheld by the company's supplier facilities. BSR's President and CEO Aron Cramer called it the "code that flowered 1,000 codes" because of the industrywide changes that followed.
In the spring of 2011, 20 years after the launch of LS&Co.'s code, the company committed to building a new framework, aligned with the Millennium Development Goals (MDGs), to encourage suppliers to improve workers' well-being. The new framework aligns with seven of the MDGs:
- Eradicate extreme poverty and hunger
- Promote gender equality and empower women
- Reduce child mortality
- Improve maternal health
- Combat HIV/AIDs, malaria, and other diseases
- Ensure environmental sustainability
"Based on our experience, we know the current monitoring and compliance approach will not drive new progress for workers in the long run," said LS&Co.'s Chief Supply Chain Officer David Love. "We believe a focus on worker well-being will not only benefit individual workers and their families, but strengthen the factories in which they work, improving efficiency, productivity, and, ultimately, business' bottom line."
Our Strategy
To help translate LS&Co.'s commitment into a strategy with a clear set of priorities, objectives, and metrics, LS&Co. turned to BSR as a long-time partner. We divided the project into five phases:
Research: To build on best practice, we needed to first understand whether and how supply chain programs were already addressing worker well-being. We started by examining existing factory-based initiatives aligned with the MDGs in 12 countries, including more than 30 Levi Strauss Foundation (LSF) projects. We also reviewed recent surveys asking workers and communities about their needs.
Our research revealed that only a few factory- and community-based initiatives focused specifically on sustainably improving the well-being of workers and communities. Of the initiatives that did, success was often attributed to strong partnerships with stakeholders, including local organizations, development agencies, and factory management. We also learned that the most successful programs provided support that responded directly to workers' articulated needs (though, interestingly, there is a limited amount of survey data on their needs).
>Vision: The next step was to translate the MDGs—a set of commitments mainly intended for policymakers and donors—into a meaningful blueprint for an apparel company. One of the challenges, for example, was that the apparel factory workers targeted by LS&Co. typically earn higher wages than the population targeted by the MDGs and so may have slightly different needs.
BSR facilitated a workshop with LS&Co. and LSF to develop five pillars for improving workers' lives: economic empowerment, good health and family well-being, equality and acceptance, education and professional development, and access to a safe and healthy environment.
We also helped the company refine seven principles emphasizing LS&Co.'s commitment to improving workers' lives, including the importance of listening to workers' voices, publicly reporting and sharing lessons learned and impact, and partnering with key stakeholders.
Approach framework: Next, we helped LS&Co. create a framework for investing in the five pillars. At the heart of the approach was an "improvement continuum," which allowed for investment levels and focus areas to change depending on the unique needs of workers in different countries and different factories. For example, in one country, workers may want better access to clean water, while in another, factory workers may prefer to have investments in English language training and career opportunities. Our approach framework addressed this by creating three main investment levels:
- Meeting workers' basic needs by using the factory floor as an access point
- Helping extend benefits to workers' families
- Investing in strategic, community-level needs to improve well-being of the local population
Measurement: Next, we guided LS&Co. through the development of corporate- and supplier-level objectives, outputs, and impact metrics. We also recommended as a first step that LSF and LS&Co. design and implement a comprehensive worker needs assessment in five key supplier sites. BSR worked separately with LSF to design that assessment in collaboration with local and global civil society stakeholders. The results of the survey, which will be administered next month, will likely lead to refinement of the output and impact metrics for the program, consistent with LS&Co.'s commitment to respond to the needs that workers themselves define.
Alignment: The final step was to insure alignment between anticipated program investments and LS&Co.'s business objectives and procurement decision-making processes. In a two-day workshop, BSR worked with LS&Co.'s global, cross-functional team to determine departmental ownership for program components and progress, how to ensure corporate accountability for the entire program, and how to approach supplier engagement given the global diversity of suppliers.
LS&Co. agreed that creating the right incentives both internally and with suppliers will be required to support successful alignment, and workshop participants committed to working together to create those incentives. This final workshop led to revisions in the strategy and goals, which was then presented to a group of external stakeholders for review and feedback. LS&Co. plans to start the program later this year, starting with five strategic suppliers in Bangladesh, Cambodia, Egypt, Haiti, and Pakistan.
Better Companies for a Better World
The leading companies of tomorrow will continue to promote and monitor compliance but will expand their influence beyond the workplace. LS&Co. can't and shouldn't take these steps alone. Other companies and civil society should join this effort to move beyond "do no harm" to more holistic approaches that combine top-down monitoring with worker empowerment to promote more inclusive economies and communities along global supply chains.
What could a positive outcome look like? One LS&Co. supplier in Pakistan that has been participating in BSR's HERproject for several years has seen dramatic improvements in worker well-being. There, factory management has supported comprehensive health trainings for both female and male workers. Managers purchased sanitary napkins for female workers to buy from the factory clinic at a subsidized rate. Managers also let the factory nurse attend government training on how to dispense family-planning products. On a monthly basis, the nurse now dispenses three packets of oral contraceptives, 50 condoms, and one hormonal injection. As of result of these investments, factory managers have seen fewer requests for sick days, lower turnover rates, and improved employee recruitment. This is the supplier of tomorrow.
As LS&Co.'s Love put it, "It is time to evolve social compliance not just to look at the letter of the law, but to look more broadly at the workers and their community. Help convince our industry and other industries that improving the quality of life ought to be the real touchstones for the next stage of activism and engagement. We need your help. It will create better companies and a better world."
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