Monday evening the German TV (WDR) broadcasts a documentary about the German retailer Tchibo. Tchibo belongs to German’s top 10 garment importers and sells its very cheap products in over 900 shops and 40.000 “depots” in Europe (latter are basically shelfes in shops). Its turnover in 2009 was more than 3 Billion Euro, of which textiles amounts to an estimated third.
Tchibo is famous for its coffee, but every week the discounter propagates a whole range of new products within its “theme worlds” – and this way produces over 2.000 products a year. Basically, one week the discounter offers rainjackets and radio alarm clocks, while it sells men’s cotton pyjama in the next. Doing this, Tchibo seems to turn its back to any movement termed “slow” – it is the McDonalds of non-food items or the opposite of what Manufactum stands for. Besides representing fast consumption, Tchibo’s also offers discount prices.
This week, Tchibo offers business shirts for 30 CHF (30$), T-Shirts for 10 CHF and a watch (that deliberately tries to imitate German design classic NOMOS Tangente) for 100$. The low prices are surely also a result of economies of scale and Tchibo’s distribution system. However, I guess that many people run into a Tchibo shop and come out with products they never wanted to have, but couldn’t resist due to the low prices.
In 2005 the German CCC campaigned against Tchibo, showing that some of the discounter’s suppliers in Bangladesh violated basic working rights. In 2006 the company started dealing with CSR in non-food. Today, Tchibo participates in various initiatives, part of its products are labelled with well known social or ecological certificates and last year it became “foundation stage member” of the ETI. It’d be interesting to see how Tchibo manages to make their 950 suppliers pay living wages, as demanded by the ETI rules – if that ever happens. The company also undertook a PPP-project together with the GTZ to improve social standards in some factories – and many other CSR efforts. However, so far, there are no independend and detailed results of Tchibo’s CSR efforts.
Surely the company improved in its CSR policies – it would take at least some hours to read through all the CSR reporting you find on the corporate website. What I am missing in the reporting is a quick overview of the basic facts. Using organic cotton is surely positive. But I did not find any mentioning of environmental standards regarding the textiles production. Why does Tchibo use Organic Exchange instead of a more comprehensive certificate, like, e.g., the GOTS certificate? Also rather disappointing: In its sustainability report the company argues that in 2009 it used 316 tonnes organic exchange certified cotton (which might sound a lot), which only represented 1.6% of the raw cotton used for Tchibo products in 2009.
I am looking forward to the documentary, hoping to get new insights: Der Tchibo Check on Monday, 10th of January 2011 @ 21.00.
On Sunday, Gethin Chamberlain reported in The Observer / Guardian.co.uk that internal audits by the British ethical fashion pioneer Monsoon revealed the use of child labour and underpaid workers in their supply chains. Perhaps most striking was that child labour was found in various supply factories / subcontractors in India and that 64 suppliers do not pay minimum wages. Overall, Monsoon revealed that only 6% of its suppliers fully complied with the voluntary ETI code. Please read the article for more details.
Why is this noteworthy? As Samantha Maher argues, these findings should not really surprise us, but rather be expected in almost every clothing supply chain of big retailers. Simply because we might have thought this was different for Monsoon: The company is seen as a leading star regarding CSR among the British fashion retailers. The Ethical Consumer Magazine ranked it as the most ethical on the UK high street, and the company is seen as “a leading light” in the ETI.
Monsoon reacted to the article by arguing that it has a “long-lasting and passionate commitment to ethical trade” and that it has been trying hard to improve the situation deep in their supply chains:
According to the article, Monsoon also argues: “We accept that a number of homeworkers in India are not being paid minimum wages, yet significant improvements have been made.” … “We have never claimed to be perfect, but ethical values have been at the heart of the business since 1973″. The internal report lists 75% of Monsoon’s suppliers as “middle risk” companies “providing Monsoon with incomplete or out-of-date information, committing major breaches of the code of ‘showing a preponderance of non-compliance”. Monsoon also says that workers earning a minimum wage at least now do better than when the company started working with them.
What does this tell us?
1. The human / working rights situation in clothing supply chains is overall still very bad, if even CSR top-runners have vast problems with human and working rights violations in their supply chains (6% compliant suppliers seems quite disappointing).
2. Monsoon, like most clothing companies, states that it has made a huge progress regarding working rights – and that ethics ranks high in the company and that it is commited to ethics. In my own research I have found only few companies, who do not claim this – so how can consumers distinguish between better and worse companies regarding CSR? Considering that only 6% of the suppliers are said to be fully compliant, Monsoon either did a pretty bad job in fulfilling their values, or this figure might also simply show the limits of voluntary responsibility (If Monsoon had the same difficulties in getting the quality of their clothes right, they would have been out of the market since 1974 …). In order to better evaluate CSR, we would need standardized measures publicly and independently benchmarking companies regarding the progress they make regarding CR.
3. Monsoon claims to be more progresssive than other companies regarding CSR, as it seems to talk about their audit reports, even if these make bad PR – while most companies refrain from doing this. But can anyone tell me where on the company or on the ETI website I find this latest audit reports?
This is just a quick post that ISO launched its ISO 26000 standard on November, 1st. Today, the ISO-website was offline half the day, but now is back online… The two figures give an schematic overview of the new ISO guideline.
Googling for ISO 26000 did not spit out many published viewpoints on ISO 26000. However, here is some of the critique: The Austrian “Network Social Responsibility” criticize it for being a guideline and not a norm. They argue that the guidelines are too broadly defined and can be interpreted in too many ways. Companies could still pick and choose their responsibility. In particular, it is feared that the ISO standard can be misused to legitimize poor CSR practices. On Glocalist you find another short report on the guideline. Here is an interview with Prof. Wieland, who participated in the development of the guidelines. Here you find the position of IISD, who participated a lot in the development of ISO 26000. More information surely follows…
I just popped into the study “A New Era of Sustainability” that was published in June 2010 and might provide support for CEOs who want to make their company more sustainable. The UN Global Compact together with Accenture surveyed 766 companies and additionally asked 50 CEOs and 50 other leaders about sustainability. Here are some key results from the study:
- Demonstrating a visible and authentic commitment to sustainability is especially important to CEOs because it is part of an urgent need to regain and build trust from the public and other key stakeholders, such as consumers and governments—trust that was shaken by the recent global financial crisis.
- CEOs address sustainability issues the following way: (1). The consumer is (or will be) king (“CEOs identify the consumer as the most important stakeholder in influencing the way in which they will manage societal expectations over the next five years.”) — (Governments are seen as less relevant than consumers – I guess that we must hope that the Myth of the ethical consumer is not true …). (2). Importance of technology and innovation. (3) Collaboration is critical (“while CEOs believe civil society is an essential partner in tackling these issues, they believe non-governmental organizations (NGOs) are declining in their influence on corporate sustainability agendas. Just 15 percent of CEOs identified NGOs as one
of the key stakeholders influencing their approach to sustainability, down 12 percent from 2007.”)
- “Currently, the burning issue is how to better incorporate sustainability into daily practice.”
- 88% of CEOs believe that they should be integrating sustainability through their supply chain. Only 54% believe that this has been achieved within their company. An almost identical performance gap is seen for subsidiaries.
- “Consumer uncertainty: The consumer may be king when it comes to driving profitable sustainability, but the CEOs surveyed are looking for clearer signals that sustainability actually drives buying behaviors. Similarly, they are unclear as to the extent to which sustainability concerns will drive purchasing decisions by businesses and governments.”
- “Regulatory uncertainty: Across the board, CEOs spoke of the need for greater clarity around the shape and scope of future regulation in response to regulatory challenges.”
The University of Edingburgh (Daniel Augenstein) prepared a study for the EU Commission (“Enterprise and industry”) called “Study of the Legal Framework on Human Rights and the Environment Applicable to European Enterprises Operating Outside the EU“. Its purpose is defined as follows:
“to ‘analyse the legal framework on human rights and the environment applicable to European enterprises operating outside the European Union’. The study aims at complementing the UN Framework (by Ruggie) by providing an overview of European and EU Member State law relevant to human rights and environmental protection in relation to European corporations operating outside the European Union, including pertinent international agreements and general international law. The study’s focus on the European legal framework implies that it is predominantly concerned with the 1st and the 3rd pillar of the UN Framework.”
The study identifies three patters of corporate human rights or enviornmental abuse outside the EU:
- Abuses committed by subsidiaries or contractors of European corporations. One consequence is that “some European companies may benefit from the operations of their third-party subsidiaries and contractors, while not being held directly responsible”.
- “Third-country victims can encounter significant obstacles in obtaining effective redress both in the third country and in the European Union”.
- “The States in which subsidiaries and contractors of European corporations operate and/or EU Member States from which European corporations operate are often at least indirectly involved in corporate abuses of human rights and the environment.”
It identifies two challenges to legal reform:
- “… international human rights law and international environmental law generally do not directly impose obligations on MNCs to protect human rights and the environment”.
- “… under an international legal regime that attributes jurisdiction primarily on the basis of territory, the exercise of extraterritorial jurisdiction to protect human rights and the environment often encounters legal and political obstacles”.
The following quotes just highlight some findings from the executive summary that seemed most relevant for this blog:
- The European Union and the EU Member States do not always make full use of existing legal opportunities to protect human rights and the environment in relation to European corporations operating outside the European Union.
- because State measures in these areas are primarily geared towards liberalising trade and promoting investment, States often do not (fully) realise or utilise their potential to protect human rights and the environment through trade law, investment rules, and related legal measures. This can lead to substantial legal and policy incoherence and gaps in protecting human rights and the environment, which often entails significant negative consequences for victims, corporations and States themselves.
- two main ways in which the European Union and the EU Member States can protect human rights and the environment against extraterritorial corporate through trade law: first, trade restrictions that prevent corporations from exporting or importing goods harmful to human rights and the environment; and second, free trade agreements and conditions imposed upon preferential trade under preference regimes that aim at ensuring human rights and environmental protection in third countries in which European corporations operate.
- Labelling schemes, such as the EU voluntary ecolabel award scheme, can encourage European corporations to control and prevent negative human rights and environmental impacts of their third-country subsidiaries and suppliers. One way to sanction corporate non-compliance with requirements of labelling schemes in which they participate … is through the medium of existing rules dealing with commercial practices and misleading advertising.
- Public procurement provides another opportunity for the European Union and its Member States to protect human rights and the environment in relation to European corporations operating outside the European Union. In particular, public procurement can set standards that apply also to third country subsidiaries and suppliers, thus penetrating the whole production chain.
- Encouraging or requiring corporations to report on their human rights and environmental policies and impacts would help to establish human rights and environmental protection as core business concerns.
The CCC in Switzerland just finished their campaign on living wages and collected more than 30.000 signatures. From November, 2nd until 18th, a representative from the German CCC together with two workers from Bangladesh and representatives of the Asian Floor Wage Campaign from Bangladesh and Indonesia are touring through Germany until November to discuss the issue of a living wage. They will be in Bonn, Stuttgart, Munich, Hannover, Leipzig, Berlin, Hamburg, Rellingen, Bremen, Münster, Oberhausen, Koblenz (here is a plan of the tour).
- Is the demand for a transnational living wage helpful?
- Whom shall it address?
- What shall German companies do?
- What shall governments and civil society do?
How coherent must corporate practices be to not run danger of greewashing? Recently, I saw two press releases concerning the brand McGregor, which did not seem to fit together. One news posting reported that McGregor becomes the official partner of the automobile club of Monaco. Another agency reported that McGregor – introducing an organic fashion line – was an example that high-class fashion and eco-fashion do not exclude each other. In addition, on its own website McGregor (very poorly) presents its engagement for the environment, and it is also member of the FWF (which is very positive). In their CSR agenda one issue seemed particularly paradoxical to the car business:
When it comes to transport, we require all our shippers to guarantee that gas-free (free of toxic substances) transport is used for our products. At the McGregor distribution centre a container is not unloaded if it does not have a gas-free certificate. We require all shipments that enter Europe by container to comply with the rules. In practice this means that all containers carrying our products must be accompanied by a gas-free certificate.
This might be a good practice. But car racing is the maybe most senseless way of polluting the environment with CO2 and other toxics (surely, others value car racing higher). However, what we have here is that a company argues that it is committed to protecting the environment, while it promotes car racing just to boost its brand. This does not make sense.
Certainly McGregor does not say itself that it is a eco fashion company. My question is: Should we praise McGregor for helping protect the environment, for instance by introducing an organic line and using green energy, or do we have to evaluate the environmental efforts as greenwashing in a more comprehensive way – in light of the explained hypocricy?! Or: How coherent must a company be in their overall policy in order to not run danger of greewashing with their CSR policy?
As I mentioned earlier, the October 2010 issue of the Harvard Business Review has a spotlight on supply chain sustainability. Most of the content is not really new, but interesting is that most authors argue that companies should take a holistic approach to sustainability in their supply chains.
Hau L. Lee from Stanford Business School gives some recommendations from his extensive research on supply chain sustainability of various large companies (e.g. Esquel (the author is in the board), Mattel, Starbucks, Posco, H&M). Companies should not take a “piecemeal” approaches to supply chain sustainability (e.g. swapping one location for another), because such an approach can generate unanticipated consequences and can thus get your company into trouble. Instead, companies “should take a holistic approach to sustainability and pursue broader structural changes” … “much earlier than most currently do” (p.64f). He illustrates his recommendations with examples from his research. Here are some of his central conclusions/recommendations:
- “Sustainability is no longer a secondary issue. It has become a competitive concern and should be handled accordingly.” Treat sustainability as an integral to operations!
- “Connect the dots between your own operations”. Understand better your (extended) supply chain and identify where social and environmental problems could occur. Regard your suppliers as partners.
- “Work with your suppliers’ suppliers” and your customers’ customers. Tell them why transparency is needed and how the information will be used – and also support them.
- “Reinvent your manufacturing process”. Think bigger and different and try to innovate processes or structures.
- “Look beyond your enterprise’s networks”. Collaborate with your competitors – and also NGOs – on sustainability issues. You do not make your company sustainable without them, particularly, if you cannot achieve scale on your own.
The article is followed by an interview with Peter Senge from MIT. He argues that three challenges must be overcome to make a business more holistic from end to end: (1) To understand the larger system they’re in. (2) To learn to work with people you haven’t worked with before (e.g. NGOs). (3) Regard sustainability as a more ambitious vision and not only as being less bad.
There is an interesting discussion ongoing between the German CCC (particularly CIR) and Tatonka, a German family-owned outdoor company. In July, CIR published the results of a study on CSR of outdoor companies (see also Abendzeitung). With regard to Tatonka the study comes to the result that the company cannot prove that internationally agreed working standards are implemented in the supply chain. Tatonka is producing 100% of its items in one self-owned factory in Vietnam – in terms of CSR this opens huge opportunities. However, Tatonka selected the following strategy that might look transparent at first sight, but more resembles a non-moving.
July, 28th: Tatonka presents its “Open Factory Programme“, which allows every consumer of a Tatonka product to visit their factory in Vietnam. The aim is to “document the long-term and sustainable engagement in the factory”. Tatonka argues that most factory audits are only a checkbook exercise, which do not show the many efforts the company takes to improve working standards. Criticizing audit techniques is definitely right, even if we need to differentiate a little. And it might be a nice holiday highlight for a European consumer traveling in Vietnam to visit a garment factory. But the idea that a factory visit by customers might improve or “document” working standards in any way seems either extremely naive or like an attempt to produce some quick positive PR to oppose the criticism. As Tatonka rightly says, audit professionals are criticized for not identifying the major problems in a factory: so how should a consumer “document” working standards in a factory?! This is particularly problematic regarding standards that are more difficult to identify (e.g. freedom of association, discrimination, wage payments).
August, 13th: Tatonka publishes a press release in which they argue that the report by the CCC (CIR/INTOKA) is biased and partly wrong. To provide evidence for their argument, they publish the questionnaire that was sent to the CCC on their website. Looking at these, I start to believe that there is little competence regarding social standards on the side of Tatonka. A few examples:
- Tatonka answers in the questionnaire (9.8) that it is member in the BSCI, which it is not. However, they even themselves argue elsewhere that they are momentarily screening and discussing different standards in the European Outdoor Group – in order to decide together, which standard they should all take. This might be a little late: The early movers have already joined the FWF, the ETI or the FLA.
- Tatonka argues in the 13/8 press release that the BSCI built up the “Better Work” Programm (“das von der BSCI in Vietnam vor Ort aufgebaute ‘Better Work’ Programm”). This is new information to me, and may also be to the ILO- and IFC-funded “Better Work” program.
- Tatonka argues that they want to combine the “open factory” programme with some standard audits. However, elsewhere they generally criticize audits…
- Instead of thanking their stakeholders to indicate that the outdoor industry has insufficiently addressed social problems in the global production (as most companies do today) and integrate these groups into finding a solution, they actively starts to fight the CCC. In a press release they ask their customers to take part at the discussions about the outdoor industry that are hosted by the CCC in Germany and ask detailed questions about Tatonka.
This case gives me three ideas: (a) Some companies still think (or at least argue0) that the labour laws in developing countries are sufficient for a decent life of workers. Maybe they should be, but there is surely enough evidence that they are not. (b) Some companies (such as Tatonka) do not understand that campaigning organizations like the CCC have an important role in society – and instead of using their critique constructively, they keep on criticizing NGOs. (c) Using methods like questionnaires to evaluate companies has its limitations. It does not measure the actual working conditions in the supply chains but can only evaluate the tools companies use to improve the working conditions. However, the results can certainly be misread. But as NGOs need evidence in their campaigns, it might be a better strategy to look at certain factories. This, however, requires transparency by the companies.
Neil Smith, managing partner of SmithOBrien, a management consulting firm that specializes in corporate responsibility strategy development asks: “Does a commitment to corporate responsibility provide cover for bad corporate behavior”? He argues that a CSR strategy must be backed up with the right corporate culture (i.e. “the underlying values and norms that tell employees and managers ‘the way we do things around here’”) and uses the cases of BP, Apple and GlaxoSmithKline to illustrate the importance of the CEO and the board of directors in getting the corporate culture right. He concludes:
These three stories are common in the corporate world. Anyone who has worked for a large company can quickly recognize the mixed messages that come from those above. While people at the top, with their sights set on becoming the CEO, will mimic their boss’ behavior, those at the bottom, where most of the best operational solutions come from, grow disillusioned and cynical, and start looking elsewhere for an employer whose values more closely match their own. … Yet the role of the CEO as a leader and model for others in building and sustaining a truly responsible and transparent organization should take center stage. Equally important: a board of directors that insists the company doesn’t just pay occasional lip service to integrity and ethical behavior. The board should hold itself and the company’s top executives, to the highest standards of corporate responsibility.
Where is the connection to clothing? Yves Chouinhard, CEO of Patagonia, might illustrate well the role of a CEO in getting the corporate culture right.