There's no easy way to police supply chains in Asia. But one US high-tech firm and its Taiwan supplier are taking a creative approach that might just work.Global Post, November 17, 2009 (fifth in a 5-part series)
With Kathleen E. McLaughlin
DONGGUAN, China — If fixing labor conditions in the high-tech supply chain seems hopeless, consider the case of Xiao Yang.
Xiao, a young migrant worker from Henan Province, works at a factory in Dongguan, this one a 5,000-employee high-tech firm owned by Taiwan's Chicony. The firm supplies keyboards, computer mice and other peripherals to the world's top PC firm, HP, and other major brands.
The factory looks like any other in this part of China, and doesn't have state-of-the-art facilities. But it feels like a different world.
"At this factory, we get paid for annual leave and other conditions, according to the law," said Xiao, while showing a GlobalPost reporter around tidy dorm rooms. "It's well-known among other workers as a good factory."
Workers have access to KTV (karaoke) and a basketball court. They get free annual medical checks. And every once in a while they dine on chicken feet – considered a big delicacy for Chinese kids from the countryside, and unheard of at other factories.
Most importantly, though, they say they know their rights, and management listens to them. A telephone hotline allows them to make anonymous complaints. Every Friday, managers post a list of the complaints they've received and how they're being resolved.
All this didn't happen on its own. In what is thought to be the first project of its kind in the industry, HP collaborated with several Hong Kong nonprofit groups to improve conditions at its supplier factories.
Starting in the summer of 2007, the nonprofits worked with Chicony to educate workers about their rights. One group, the Chinese Working Women Network, set up and ran the workers' complaint hotline, and then trained workers themselves to run it.
HP covered the Chinese Working Women Network's costs for the training, but declined to reveal the total amount. Chicony pitched in its own funds to improve the factory's food and other working conditions.
"The cost is affordable to any company — even small suppliers could handle the amount," said Ernest Wong, a Hong Kong-based supply chain responsibility official for HP. "But the cost isn't the critical point. The key is how you engage with the supplier company."
At first, convincing skeptical Chicony managers to work with an NGO wasn't easy, said Jenny Chan, formerly with the Hong Kong-based group Students and Scholars against Corporate Misbehavior (SACOM), which coordinated the project at Chicony (SACOM says it receives no direct funding from HP).
"It's like a marathon," said Chan. "It's so tough to convince factory managers that these are new expectations, not only from your customers, but from global citizens and how they think of a good and competitive factory."
But to listen to one Chicony manager, the firm has found the corporate responsibility religion. Chen Jianqiao said that the program has created a "win-win situation" for both management and workers. Workers are more efficient because they feel their voices are heard and respected; management wins points and new business with Western customers and has fewer conflicts with employees.
"The benefit to the workers is a benefit to the company," said Chen. "Because of this program, our customers have noticed, and our business is going well despite the economic crisis. We haven't experienced any downturn."
Involving workers and rights groups
In a globalized world, where Taiwanese bosses run factories using Filipino and Chinese workers to produce gadgets for American consumers, there's no easy fix to the problem of rampant labor rights abuses.
The best solution would be found in Asia itself. In Taiwan, that means better legal protections for foreign migrant workers, and major reform or scrapping of the exploitative labor brokerage system. For Taiwanese workers, labor-management communication needs to be improved, and unions may help. In China, basic labor regulations need to be better enforced.
Getting such change is likely to be a long, slow process. And activists say it will depend in part on Filipinos, Taiwanese and Chinese themselves demanding better labor rights.
In the meantime, activists say big brands should follow the lead of HP, by enlisting outside NGOs and factory workers in improving conditions at their suppliers. Such an approach, they say, is a big improvement on toothless "codes of conduct" and spot audits, which too often turn into dog-and-pony shows. Some in the industry agree that audits have only limited usefulness.
"The natural reaction for the audited party is to try to pass the audit and therefore not to show eventual issues to the auditor," wrote Sony Ericsson corporate responsibility official Mats Pellback-Scharp, according to a report last year from one rights group. "Audits can never be more than, at best, a snapshot of the situation."
Labor rights activists make a few other suggestions. One is that big brands be more transparent by making public their list of suppliers. This makes it easier for NGOs to identify who's making what for whom, and therefore which firms need to take responsibility.
"Consumers have the right to demand that companies be transparent about the work they conduct," said Sara Nordbrand, a researcher at the Stockholm-based NGO Swedwatch. "Most electronics brands still do not acknowledge customers' right to information about the circumstances under which the products they buy are produced," she said. "Many companies still, for example, regard the names of their suppliers as being 'business secrets' and do not comment on findings of journalists and organizations."
Apple, for example, has refused to publicize its supplier list. Per company policy, it doesn't usually confirm or deny its supplier relationships. (It made an exception by denying any current relationship with the specific Dongguan Masstop factory mentioned in this series.) "We respect confidentiality, which is one of the reasons why we don't go into details about our suppliers and who they are," said Apple spokesperson Jill Tan.
Activists say big brands should also provide more financial support for programs like the HP and Chicony project. "Pushing prices down while at the same time demanding better working conditions is an equation that's hard to solve for suppliers down the chain," said Annika Torstensson, project leader of the Stockholm-based Fair Trade Center.
Apple, for example, was making record profits at the time of allegations described in this series — while Wintek was being hammered by months of losses. The brands can afford corrective measures much more than their low-margin contractors.
“Baby steps”
Chicony's factory isn't perfect, of course, and neither was HP's pilot project. "These are only baby steps," said Chan, the activist. But it shows what can happen when a big U.S. brand takes a creative, open-minded approach to corporate responsibility, collaborates with NGOs and, importantly, ponies up the cash.
Chicony also deserves credit for opening its doors to an outside NGO — the stuff of nightmares for many a factory boss — and committing itself to improving communication with its workers.
HP isn't immune from criticism. Critics point to one gripe: While it publishes a list of its suppliers, it doesn't give information on specific factory locations, making it difficult for outsiders to monitor.
But of the big high-tech firms, labor rights groups consistently give HP the highest marks. "Hewlett Packard is setting the pace for social responsibility in China," rights groups wrote in a 2008 report.
A more recent report by the Dutch group SOMO this past May remarked, "For a code [of conduct] to be implemented in such a way that it will have effect on the workplace, companies have to work with local organizations and trade unions. So far only HP works, in some cases, with civil society organizations ... only HP has worked with NGOs in China on implementation and worker trainings."
At least one other company, Dell, has shown interest in following HP's example. "Dell is open to working with NGOs that are willing to collaborate in building capability with suppliers," said Dell in an emailed statement.
Meanwhile, rights groups give Apple some credit for bulking up its social responsibility team in recent years — but low marks for a lack of transparency. Fujitsu-Siemens Computers got the booby prize, for what rights groups said was its reluctance to accept responsibility for its supply chain. "The company is neither committed nor transparent," two groups said in the 2008 report. Fujitsu spokesman Archie Mochizuki said in an emailed response that the firm "has and continues to carefully evaluate working conditions at its suppliers," and that it had made clear to suppliers that "cooperation would be suspended" with firms that do not meet its code of conduct.
Critics, though, remain firm in their belief that more can be done.
"We have to know more about how a product is made, and about the people who are really creating value for society," said Chan. "Workers deserve basic respect. I hope we can treat them as human beings, not just as working machines.”
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