Sweatshops 101

Lessons in Monitoring Apparel Production Around the World

Dara O'Rourke

Navy blue sweatshirts bearing a single foreign word, Michigan, and a well-known logo, the Nike swoosh, were piled high in a small room off the main factory floor. After cutting, stitching, and embroidering by the 1,100 workers outside, the sweatshirts landed in the spot-cleaning room, where six young Indonesian women prepared the garments for shipment to student stores and NikeTowns across America. The women spent hour after hour using chemical solvents to rid the sweatshirts of smudges and stains. With poor ventilation, ill-fitting respiratory protection, no gloves, and no chemical hazard training, the women sprayed solvents and aerosol cleaners containing benzene, methylene chloride, and perchloroethylene, all carcinogens, on the garments.

It used to be that the only thing people wondered when you wore a Harvard or Michigan sweatshirt was whether you had actually gone there. More and more, though, people are wondering out loud where that sweatshirt was made, and whether any workers were exploited in making it. Students, labor activists, and human-rights groups have spearheaded a movement demanding to know what really lies beneath their university logos, and whether our public universities and private colleges are profiting from global sweatshop production.

WHERE WAS THAT SWEATSHIRT MADE?

So far, few universities have been able to answer these questions. Universities generally don't even know where their products are produced, let alone whether workers were endangered to produce them. Indeed, with global out-sourcing many brand name companies cannot trace the supply chains which lead to the student store, and are blissfully ignorant of conditions in these factories.

Under pressure from student activists across the country, a small group of university administrators decided it was time to find out more about the garments bearing their schools' names and logos. As part of a collaborative research project, called the "Independent University Initiative" (IUI), funded by Harvard University, the University of Notre Dame, Ohio State University, the University of California, and the University of Michigan, I joined a team investigating where and under what conditions university garments were being made. Its report is available at web.mit.edu/dorourke/www. The team included staff from the business association Business for Social Responsibility, the non-profit Investor Responsibility Research Center, and the accounting firm PricewaterhouseCoopers (PwC). PwC was responsible for auditing the labor conditions in each of the factories included in the study. At the request of student activists, I joined the team as an outside evaluator.

The IUI research team evaluated garment manufacturing for the top apparel companies licensing the logos of these five universities. It looked at factories subcontracted by nine companies, including adidas, Champion, and Nike. The nine alone outsource university apparel to over 180 factories in 26 countries. This may sound like a lot, but it is actually the tip of the global production iceberg. Americans bought about $2.5 billion worth of university-logo garments in 1999. Overall, however, U.S. apparel sales totaled over $180 billion. There are an estimated 80,000 factories around the world producing garments for the U.S. market. The university garment industry is important not so much for its size, but for the critical opening it provides onto the larger industry.

The research team visited factories in the top seven countries producing apparel for the nine companies: China, El Salvador, Korea, Mexico, Pakistan, Thailand, and the United States. It inspected 13 work sites in all. I personally inspected factories for the project in China and Korea, and then inspected factories in Indonesia on my own to see what things looked like outside the official process. Through this research I discovered not only exploitative and hazardous working conditions, but also an official monitoring process designed to gloss over the biggest problems of the apparel industry. PwC auditors found minor violations of labor laws and codes of conduct, but missed major labor problems including serious health and safety hazards, barriers to freedom of association, and violations of overtime and wage laws. This was a learning experience I call "Sweatshops 101."

Lesson #1
Global Outsourcing

The garment industry is extremely complicated and highly disaggregated. The industry has multiple layers of licensees, brokers, jobbers, importer-exporters, component suppliers, and subcontractors on top of subcontractors.

The University of Michigan does not manufacture any of the products bearing its name. Nor does Notre Dame nor Harvard nor any other university. These schools simply license their names to apparel makers and other companies for a percentage of the sale—generally around 7% of the retail price for each T-shirt, sweatshirt, or key chain. Until recently, the universities had little interest in even knowing who produced their goods. If they tracked this at all, it was to catch companies using their logos without paying the licensing fee.

Sometimes the companies that license university names and logos own the factories where the apparel is produced. But more often the licensees simply contract production out to factories in developing countries. Nike owns none of the hundreds of factories that produce its garments and athletic shoes.

A sweatshirt factory itself may have multiple subcontractors who produce the fabric, embroider the logo, or stitch sub-components. This global supply chain stretches from the university administration building, to the corporate office of the licensee companies, to large-scale factories in China and Mexico, to small scale sub-contractor factories everywhere in between, and in some cases, all the way to women stitching garments in their living rooms.

Lesson #2
The Global Shell Game

The global garment industry is highly mobile, with contracts continuously shifting from subcontractor to subcontractor within and between countries. Licensees can move production between subcontractors after one year, one month, or even as little as one week.

It took the university research team three months to get from the licensee companies a list of the factories producing university-logo garments. However, because the actual factories producing university goods at any one time change so fast, by the time I had planned a trip to China and Korea to visit factories, the lists were essentially obsolete. One licensee in Korea had replaced eight of its eleven factories with new factories by the time I arrived in town. Over a four month period, the company had contracted with twenty one different factories. A range of factors—including price competition between contractors, changes in fashions (and factories capable of filling orders), fluctuations in exchange rates, and changing import quotas for different countries—is responsible for this constant state of flux.

Even after double-checking with a licensee, in almost every country the project team would arrive at the factory gates only to be told that the factories we planned to inspect were no longer producing university goods. Of course, some of this may have been the licensees playing games. Faced with inspections, some may have decided to shift production out of the chosen factory, or at least to tell us that it had been shifted.

Some of the largest, most profitable apparel firms in the world, known for their management prowess, however, simply did not know where their products were being produced. When asked how many factories Disney had around the world, company execs guessed there were 1,500 to 1,800 factories producing their garments, toys, videos, and other goods. As it turns out, they were only off by an order of magnitude. So far the company has counted over 20,000 factories around the world producing Disney-branded goods. Only recent exposés by labor, human rights, and environmental activists have convinced these companies that they need better control over their supply chains.

Lesson #3
Normal Operating Conditions

The day an inspector visits a factory is not a normal day. Any factory that has prior knowledge of an inspection is very likely to make changes on the day of the visit.

In a Nike-contracted shoe factory in Indonesia I visited in June 2000, all of the workers in the hot press section of the plant (a particularly dangerous area) were wearing brand new black dress shoes on the day of our inspection. One of the workers explained they had been given the shoes that morning and were expected to return them at the end of the shift. Managers often give workers new protective equipment—such as gloves, respirators, and even shoes—on the day of an inspection. However, as the workers have no training in how to even use this equipment, it is common to see brand-new respirators being worn below workers' noses, around their necks, or even upside down.

At one factory the university team visited in Mexico, the factory manager wanted to guarantee that the inspectors would find his factory spotless. So he locked all of the bathrooms on the day of the inspection. Workers were not allowed to use the bathrooms until the project team showed up, hours into the work day.

Licensees and subcontractors often try to subvert monitoring. They block auditors from inspecting on certain days or from visiting certain parts of a plant, claim production has moved, feign ignorance of factory locations, keep multiple sets of books on wages and hours, coach workers on responses to interviews, and threaten workers against complaining to inspectors. The university research team was unable to get around many of these obstructions.

Lesson #4
Conditions in University Factories

Factories producing university apparel often violate local laws and university codes of conduct on maximum hours of work, minimum and overtime wages, freedom of association, and health and safety protections.

In a 300-worker apparel plant in Shanghai, the university team found that many of the workers were working far in excess of maximum overtime laws. A quick review of timecards found women working over 315 hours in a month and 20 consecutive days without a day off. The legal maximum in China is only 204 hours per month, with at least one day off in seven. A sample of 25 workers showed that the average overtime worked was 101 hours, while the legal limit is 36 hours per month. One manager explained these gross violations with a shrug, saying, "Timecards are just used to make sure workers show up on time. Workers are actually paid based on a piece rate system."

The factory also had a wide range of health and safety problems, including a lack of guarding on sewing and cutting machines, high levels of cotton dust in one section of the plant, several blocked aisles and fire exits, no running water in certain toilets, no information for workers on the hazardous chemicals they were using, and a lack of protective equipment for the workers.

Living conditions for the workers who lived in a dormitory on site were also poor. The dormitory had 12 women packed into each room on six bunk beds. Each floor had four rooms (48 women) and only one bathroom. These bathrooms had only two shower heads and four toilet stalls each, and no dividers between them.

And what of workers' rights to complain or demand better conditions? The union in this factory was openly being run by the management. While 70% of workers were "members" of the union, one manager explained, "We don't have U.S.-style unions here." No workers had ever tried to take control of this group or to form an independent union.

Lesson #5
The Challenges of Monitoring

Finding a dozen factories is relatively easy compared to the job of tracking the thousands of rapidly changing factories that produce university goods each year. Systematically monitoring and evaluating their practices on wages, hours, discrimination, and health and safety issues is an even bigger challenge.

Most universities don't have the capacity to individually monitor the conditions in "their" factories, so some are joining together to create cooperative monitoring programs. The concept behind "independent monitoring" is to have a consulting firm or non-governmental organization inspect and evaluate a factory's compliance with a code of conduct. There are now two major university monitoring systems. The Fair Labor Association (FLA) now has over 157 universities as members, and the Worker Rights Consortium (WRC) has over 80 affiliated universities. (The four smaller monitoring initiatives are Social Accountability International (SA8000), the Ethical Trading Initiative, the Clean Clothes Campaign, and the Worldwide Responsible Apparel Production (WRAP) program.)

The FLA emerged from the Clinton-convened "White House Apparel Industry Partnership" in 1998. It is supported by a small group of apparel companies including Nike, Reebok, adidas, Levi-Strauss, Liz Claiborne, and Philips Van Heusen. Students and labor-rights advocates have criticized the group for being industry-dominated and for allowing companies to monitor only 10% of their factories each year, to use monitors that the companies pay directly, to control when and where monitors inspect, and to restrict the information released to the public after the audits.

The United Students Against Sweatshops (USAS) and UNITE (the largest garment-workers' union in the United States) founded the WRC in 1999 as an alternative to the FLA. The WRC promotes systems for verifying factory conditions after workers have complained or after inspections have occurred, and to create greater public disclosure of conditions. The WRC differs from the FLA in that it refuses to certify that any company meets a code of conduct. The group argues that because of the problems of monitoring, it is simply not possible to systematically monitor or certify a company's compliance. Some universities and companies have criticized the WRC as being a haphazard "gotcha" monitoring system whose governing body excludes the very companies that must be part of solving these problems.

Both groups profess to support the International Labour Organization's core labor standards, including upholding workers' rights to freedom of association and collective bargaining, and prohibiting forced labor, child labor, and discrimination in the workplace. The WRC, however, goes further in advocating that workers be paid a "living wage," and that women's rights receive particular attention. Both programs assert a strong role for local NGOs, unions, and workers. However, the two have widely varying levels of transparency and public disclosure, and very different systems of sanctions and penalties.

Lesson #6
How Not To Monitor

Corporate-sponsored monitoring systems seem almost designed to miss the most critical issues in the factories they inspect. Auditors often act as if they are on the side of management rather than the workers.

PricewaterhouseCoopers (PwC) is the largest private monitor of codes of conduct and corporate labor practices in the world. The company performed over 6,000 factory audits in the year 2000, including monitoring for Nike, Disney, Walmart, and the Gap. (PwC recently announced that they were spinning off their labor monitoring services into a firm called Global Social Compliance.) PwC monitors for many of the top university licensees, and was hired as the monitor for the university project. Like other corporate monitors, the company has been criticized for covering up problems and assuaging the public conscience about sweatshop conditions that have not really been resolved.

PwC's monitoring systems epitomize current corporate monitoring efforts. The firm sends two auditors—who are actually financial accountants with minimal training on labor issues—into each factory for eight hours. The auditors use a checklist and a standard interview form to evaluate legal compliance, wages and benefits, working hours, freedom of association and collective bargaining, child labor, forced labor, disciplinary practices, and health and safety.

On the university project, PwC auditors failed to adequately examine any major issue in the factories I saw them inspect. In factories in Korea and Indonesia, PwC auditors completely missed exposure to toxic chemicals, something which could eventually cost workers their lives from cancer. In Korea, the auditors saw no problem in managers violating overtime wage laws. In China, the auditors went so far as to recommend ways for the managers to circumvent local laws on overtime hours, essentially providing advice on how to break university codes of conduct. And the auditors in Korea simply skipped the questions on workers' right to organize in their worker interviews, explaining, "They don't have a union in this factory, so those questions aren't relevant."

The PwC auditing method is biased towards managers. Before an inspection, PwC auditors send managers a questionnaire explaining what will be inspected. They prepare managers at an opening meeting before each inspection. In the Chinese factory, they asked managers to enter wages and hours data into the PwC spreadsheet. Even the worker interviews were biased towards the managers. PwC auditors asked the managers to help them select workers to be interviewed, had the managers bring their personnel files, and then had the managers bring the workers into the office used for the interviews. The managers knew who was being interviewed, for how long, and on what issues. Workers knew this as well, and answered questions accordingly.

The final reports that PwC delivered to its clients gave a largely sanitized picture of the factories inspected. This is unsurprising, considering PwC's business interest in providing companies with "acceptable" audits.

WHERE TO BEGIN?

Universities face increasing public pressure to guarantee that workers are not being injured or exploited to produce their insignia products. They have no system, however, to track apparel production around the world, and often no idea where their production is occurring. Monitoring systems are still in their fledgling stages, so universities are starting from a difficult position, albeit one they have profited from for years.

What can universities do about this? They should do what they are best at: produce information. They should take the lead in demanding that corporations—beginning with those they do business with—open themselves up to public inspection and evaluation. Universities have done this before, such as during the anti-apartheid campaign for South Africa. By doing this on the sweatshop issue, universities could spur a critical dialogue on labor issues around the world.

To start, the universities could establish a central coordinating office to collect and compare information on factory performance for member universities' licensees. (The WRC has proposed such a model.) This new office would be responsible for keeping records on licensee compliance, for making this information available over the internet, for registering local NGOs and worker organizations to conduct independent verifications of factory conditions, and for assessing sanctions.

Such a program would allow universities to evaluate different strategies for improving conditions in different parts of the world. This would avoid the danger of locking in one code of conduct or one certification system. In place of sporadic media exposés embarrassing one company at a time, we would have an international system of disclosure and learning—benchmarking good performers, identifying and targeting the worst performers, and motivating improvement.

It is clearly not enough to expose one company at a time, nor to count on industry-paid consulting firms to monitor labor conditions. The building blocks of a new system depend on information. This fits the mission of universities. Universities should focus on information gathering and dissemination, and most importantly, on learning. If the universities learn nothing else from "Sweatshops 101," it is that they still have a lot of homework to do—and their next test will be coming soon.

Dara O'Rourke is an assistant professor Urban Studies and Planning at the Massachusetts Institute of Technology