Annual Public Report - Fair Labor Association

CTING WO10RKERTS1999–20H9S’ RIG PROTEFLA Celebratesa Decade of AchievementAT A RECENT OPENMEETING OF THEBOARD OF DIRECTORSOF THE FAIR LABORASSOCIATION,0Acting Chair BobDurkee looked around the roomand was struck by what he saw. “Wehave managed to sit ourselves in anintegrated way, and I like the symbolismof that,” he said. With potentiallydivisive topics on the agenda comingbefore the Board that day, Durkeeappreciated that Board members choseto sit not according to constituenciesbut as members of an integrated board.As Princeton University’s longstandingrepresentative to the FLA and a memberof the Board since 1999, Durkee notedthat the FLA had come a long way fromthe first confrontational meetings ofleading apparel and footwear companiesand representatives of labor, consumerand human rights groups set intomotion by a direct challenge fromPresident Clinton in 1996. This grouphad been called to the White House tofind a way to work together to monitorlabor conditions worldwide and to raisethe standards of factories supplyingproducts to U.S. companies.Few would have thought so much couldbe accomplished in such a short spanof time, but the group, then knownas the Apparel Industry Partnership(AIP), took up Clinton’s challenge. OnNovember 3, 1998, the AIP presentedits agreement on a Workplace Code ofConduct and Principles of Monitoringto the President. Shortly thereafter,the AIP announced the formationof the Fair Labor Association (FLA)as the independent body that wouldmonitor conditions and hold companiesaccountable.Incorporated ten years ago in May1999, the nonprofit FLA would requireaffiliated companies to abide by the FLACode and monitoring requirements,establish an accreditation program todetermine whether companies mettheir obligations, develop proceduresto accredit factory monitors around theworld, and institute a public reportingmechanism to inform consumers aboutcompany participation and compliance.Colleges and universities joined thecoalition, and the FLA began its journeyto improve working conditions andworkers’ lives worldwide throughtripartite collaboration.As the FLA enters its second decade, werevisit some points along that journey,what makes the FLA unique and someof its biggest achievements, as well asthe roles its constituents have played inthe success of the organization.The Multi-Stakeholder ApproachGlobalization revealed governancegaps in state systems, and labor lawviolations surfacing in supplier factoriesaround the globe were evidence ofgovernments’ failure to implementand enforce worker protection andlabor rights—especially in developingcountries. With many countriesseeking to promote exports by takinga lax attitude toward worker rights,international attention shifted towardexpanding the responsibility andProtecting Workers’ Rights 1999–2009FLA TIMELINE: 1999–20092000 The Fair Labor Association is formallyincorporated Justice Department issues favorablebusiness review letter supporting the FLAmonitoring approach Over 100 colleges and universities joinand establish the University AdvisoryCouncil (UAC) NGO Advisory Council is created with 15representatives from human rights, laborrights and religious organizations 2007 UNIVERSITY OF DELAWARE SOCIAL RESPONSIBILITY PROJECT1999 UAC adopts resolution calling on allschool affiliates to require their licenceesto disclose factories producing collegiateproducts Collegiate Licensee Program launches Implementation Benchmarks supportingthe FLA Code and the FLA MonitoringGuidance and Audit Instrument are adopted FLA reviews first applications for monitorsFAIR LABOR ASS O C I AT I O N n 2 0 0 9 A N N U A L R E P O RT6

2007 UNIVERSITY OF DELAWARE SOCIAL RESPONSIBILITY PROJECTresponsible companies, NGOs and civilsociety, and universities and colleges—that come to the table with differentperspectives and agendas. While thiscan create tension, this tension ismost often constructive and respectis given to the different perspectives.Representatives of these groups mustwork cooperatively to ensure thatthe actions taken by the FLA and itsaffiliates are responsive to constituentneeds, while also being practical toimplement and credible to the public.Universities Key to FLA Growthrole of multinational corporationsin solving many social, economicand environmental concerns in thecountries where they operated.Many companies had been goingit alone and developing their owncodes of conduct, but their effortslacked credibility with consumersand civil society because there wasno standardization in codes fromone company to another and noaccountability. The FLA emerged inthis context to define the roles andresponsibilities of affiliate companieswith regard to working conditions intheir supply chains, and to promoteand implement international standardsin the absence of state laws andenforcement. The multi-stakeholderapproach was conceived to ensurelegitimacy in the work of the FLA.The organization’s policies, proceduresand programs are thus governed bythree constituent groups—sociallyUniversities had a big hand in thegrowth of the FLA. They were invited tocontribute to the process soon after theFLA was formed. Engaging universitiesand colleges in the process enhancedthe credibility of the FLA and had manyupsides.With student activism burgeoningon campuses all around the countryover a variety of concerns related tocorporate investment and operations inforeign countries, universities were veryinterested in how they could take up theconcerns of the students and use theirinfluence to hold companies accountable.Labor issues had become a focal pointfollowing a string of exposés of minorsworking in factories and generally of verypoor working conditions.Protecting Workers’ Rights 1999–2009FLA TIMELINE: 1999–200920012002 University representation on the Boardincreases from one to three persons FLA mediates a case in a DominicanRepublic factory that led to the formationof a union and negotiation of a collectivebargaining agreement through its firstThird Party Complaint University licensees begin to submitapplications Monitor Accreditation is established Third Party Complaint (TPC) process isimplemented Board approves the FLA IndependentExternal Monitoring process Eleven accredited monitors conducted 24auditing visitsFAIR LABOR ASS O C I AT I O N n 2 0 0 9 A N N U A L R E P O RT7

“Universities have interests in common withbusiness and with advocacy and humanitarianoutreach.” —Karen Daubert, FLA Board Member since 2007In 1999, over 100 universities andcolleges joined the FLA and created theUniversity Advisory Council (UAC).Within the FLA governance structure,the UAC initially had one representativeon the FLA Board.At first, the NGOs and companies weresuspicious about the role of universitiesand colleges in the governance of theorganization. According to Durkee andothers present at the time, companieswere convinced that the universityrepresentative would always side withthe NGOs and NGOs were convincedthat the universities would side withthe companies. “We were initiallysuspicious that the universities wouldbe more like marketers and notupholders of human rights,” confirmedPharis Harvey of the InternationalLabor Rights Fund. Harvey was presentat the early meetings at the WhiteHouse and of the AIP. These concernsproved to be unfounded.“Universities have interestsin common with business andwith advocacy and humanitarianoutreach,” said Karen Daubert, aUAC representative from WashingtonUniversity in St. Louis since 2000 andon the Board since 2007. “In a uniqueway, we sit in a position that can beactive on both sides of those equations.”At the same time, Daubert noted,universities have more of a connectionto the outside perspective through thestudents. “Universities bring a morenaïve perspective, which is really moreof a consumer perspective. We’ve had tonavigate this terrain with students whoare activists and consumers as well.”The FLA provided a program ofmonitoring and compliance thatuniversities could not carry out on theirown. “No matter how much we caredabout the working conditions, we didn’thave the expertise to figure out howto hold the companies accountable,”said Durkee. “The FLA works withcompanies on a regular basis to developcompliance programs that bringthem closer to compliance. It is reallyimportant to the schools that the FLAplay that role.”As representatives of a large segment ofconsumers and licensors of collegiatebrands, a pivotal role of universitieswas to apply pressure to companiesproducing apparel and other productsbearing their logos to join the FLA andenforce the FLA Workplace Code ofConduct in their supply chains.The FLA launched the CollegiateLicensee Program in 2001. At the endof 2009, over 2,600 licensees wereregistered with the FLA. Representationby universities and colleges on theFLA Board expanded to three seats in2001 and to six seats in 2007. Variousconstituents agree that this was one ofthe most important actions taken bythe FLA Board and may have been thetipping point in creating greater balancein the organization and a more fullyintegrated FLA.Mechanisms of AccountabilityThe FLA governance structureitself created an environment inwhich constituents hold each otherProtecting Workers’ Rights 1999–2009FLA TIMELINE: 1999–20092004 FLA releases its first Annual Public Report Reebok International Ltd’s complianceprogram for footwear is the first to beaccredited by the FLA Auret van Heerden is named Presidentand CEO FLA establishes European office inGeneva 2007 UNIVERSITY OF DELAWARE SOCIAL RESPONSIBILITY PROJECT2003 FLA launches pilot program withSyngenta Seeds to test FLA methodologyin agricultural sector FLA Board places Gildan on specialreview for failure to implementremediation plan FLA Board reinstates Gildan aftersignificant improvementFAIR LABOR ASS O C I AT I O N n 2 0 0 9 A N N U A L R E P O RT8

accountable. Participation of civilsociety was critical to this mix becauserepresentatives of this group overtime have helped to embed in the FLAsystem the expectations civil society hasof corporations.“The role of the NGOs was to makecertain there was some reality inthe way that the FLA went aboutits business,” said Harvey, a chartermember of the NGO caucus who wasinstrumental in developing the FLAcode and chaired the FLA MonitoringCommittee. “This was especiallyimportant during crucially difficultyears when tensions with stakeholdersoutside of the FLA were high.”Several measures were built intothe FLA system early on to ensuregreater accountability and credibilityin its processes. “Joining the FLA isa voluntary action, but from then onparticipation is anything but voluntary,”said Auret van Heerden, President andCEO of the FLA. When a company joinsthe FLA as a Participating Company, itagrees to comply with ten obligations,which are structured to help companiescreate a culture of compliancecompany-wide and throughout theirsupply chain.One of these obligations is to provideup-to-date factory lists; the FLA samplesthat list and sends monitors unannouncedto selected factories to assess workingconditions. The unannounced auditensures that we know real conditions onthe ground. The results of the audits andremediation plans are then made public.The FLA Third Party ComplaintProcess was of particular importanceto the NGOs, according to Harvey. Thecomplaint mechanism was put into thestructure in order to provide a grievancechannel for workers in factoriesproducing for FLA companies that hadnot been visited by an FLA monitor orto call attention to issues that mightnot have surfaced in the FLA auditingprocess. When a complaint triggers anindependent investigation by the FLA,any reports and corrective action plansalso are made public.In a multi-stakeholder organization,transparency is important for buildingtrust among FLA constituents andwith stakeholders outside of theorganization. Public reporting of FLAfactory audits, verifications and thirdparty complaint investigations is afoundation of the FLA’s commitmentto transparency. For a company to jointhe FLA and commit to this level oftransparency is not a small step becausethe issues in its factories are laid bare tothe public as are the remediation plansto address these issues.Some FLA company affiliates andcollegiate licensees freely admit thatat first they were concerned that theFLA’s transparency requirementscould prove harmful to their interests,but companies like Asgard Press andSyngenta Seed Inc. found them to be apositive.“The FLA forces us down this path oftransparency and accountability thatallows us to tell our story,” said PeterShin of Asgard Press. “Being part ofthe FLA is now part of our companyidentity; we’re proud of our sourcingand manufacturing and it’s a good storyto tell.”Transparency was an attractivecomponent from the start, said JuanGonzález-Valero, Syngenta’s Headof Public Policy and Partnerships.Syngenta wanted to be moreforthcoming with its stakeholdersabout its work with the FLA and itsefforts to monitor and prevent childlabor on its seed farms, as well as itsefforts to ensure fair labor standardsfor farm workers. “We have receivedvery positive feedback about ourtransparency.”Meeting Companies Where TheyAreEarly company affiliates—adidas, EddieBauer, Liz Claiborne, Reebok (now anadidas Group brand), Nike, Nordstrom,Protecting Workers’ Rights 1999–2009FLA TIMELINE: 1999–200920052006 FLA launches pilot of new sustainablecompliance methodology (FLA 3.0) insoccer equipment factories in China andThailand Chen Feng becomes the firstParticipating Supplier to join the FLA The labor compliance programs ofadidas, Eddie Bauer, Liz Claiborne, Nike,Phillips-Van Heusen and Reebok (apparel)are accredited Nordstrom’s is first retail labor complianceprogram to be accredited by the FLA Board increased UAC representation fromthree to six persons FLA creates emergency fund to benefitworkers at the Hermosa Manufacturingplant when the owner unilaterally closedits doors without providing compensationto workersFAIR LABOR ASS O C I AT I O N n 2 0 0 9 A N N U A L R E P O RT9

Patagonia, Phillips-Van Heusen, amongothers—have done a lot to pave the wayfor other companies that have joinedthe FLA.Many FLA companies are what MarshaDickson, FLA Monitoring CommitteeChair, described at a stakeholdermeeting in June 2009 as socialresponsibility leaders (“SR leaders”)—those that have buy-in of their topmanagement, join organizations and areaccountable to external parties, engagewith stakeholders, and perhaps mostimportantly have SR decision makerson the ground with veto power over thesourcing departments. These companiesare doing far more than others in theirindustry.Within the FLA, affiliated companieshave actively participated in pilotprojects to test new methodologies toimprove monitoring and remediationin factories, engaged in training theirsuppliers’ staff about labor compliance,and shared best practices withcolleagues. They have opened theirlabor compliance programs up forscrutiny, and taken responsibility forissues in their supply chains.For many of these companies, thelearning curve was steep but throughtheir participation, the FLA has beenable to improve its approach to laborcompliance and improve its services sothat the learning curve for newcomersto CSR and labor compliance isn’t assteep. “Based on the experience of otherbusinesses and the ability of the FLA toadapt the tools to the agribusiness, wewere in a position to learn faster andmake fewer mistakes than others mayhave,” said González-Valero, Syngenta.While the FLA’s ParticipatingCompanies are often the most visiblerepresentatives of the organization,the FLA works with thousands of smalland medium-sized licensees (SMEs)striving for better labor complianceprograms. The FLA has taken many ofthe tools and training developed andpiloted in projects with ParticipatingCompanies to provide SMEs services—such as online tools, training, factoryassessments and checklists for assessingnew suppliers—that make achievingtheir goals possible even with fewerresources. “The FLA has been willingto work with people where they areand find solutions to the issues,” saidDaubert. “They don’t want to leaveanyone behind.”Collegiate licensees agree that any earlyfears about whether they would beable to fulfill the expectations of theirlicensors and of the FLA dissipatedquickly once they started learning moreabout the FLA and consulting with theFLA’s program managers. “We werebarely crawling in labor compliancewhen we started,” said Ben Turner ofColosseum Athletics. “We realized thatwe needed a lot of training and supportand the FLA has been a great help inproviding those . The FLA is verystructured and continues to expandwhat they offer to companies and todefine the steps companies need to taketo put together a compliance program.”“Each year that I have belonged they aretrying to making it easier for companiesto participate and to make thingsincreasingly electronic,” said HollyStrohm, Herff-Jones Inc. “The hard partis getting started but once you get onboard, it’s rewarding. We’re here andwe’re going to stay here.”“You need not fear the FLA or thework involved; it’s a process and not‘a judgment from people on high’ withmandates beyond your control,” saidShin. “The FLA encourages us to be partof the conversation.about transparencyand continuous improvement, witha program where we feel like we areworking toward a common goal, ratherthan complying with a strict set ofrules.”These SMEs say that participation hashelped them open a new dialogue withtheir suppliers, make better decisionsProtecting Workers’ Rights 1999–2009FLA TIMELINE: 1999–20092008 FLA launches the Enhanced LicenseeProgram and web-based assessment andtraining tools FLA holds first Board meeting inAsia (Kunshan City, China) and holdsstakeholder forum on China’s new LaborLaw Reform The June FLA Board meeting andstakeholder forum is held in theDominican Republic to focus attentionon labor challenges in that region 2007 UNIVERSITY OF DELAWARE SOCIAL RESPONSIBILITY PROJECT2007 FLA launches web-based Licensee Profileand Self-Assessment tool The labor compliance programs of PumaAG, Gildan Activewear and New Era Capare accreditedFAIR LABOR ASS O C I AT I O N n 2 0 0 9 A N N U A L R E P O RT10

“. we find our membership increasingly meaningfulas a differentiator in the market.” —Peter Shin, Asgard Pressabout their partners, and thus havea bigger impact on their factories orsuppliers.“A few years ago our participation withthe FLA may have resonated more withniche groups, but as fair labor standardsbecome a more mainstream concern,we find our membership increasinglymeaningful as a differentiator in themarket,” added Shin of Asgard Press.A Confederation ofConstituencies UnitedAs the FLA has matured, it hascontinued to strengthen itsrequirements and procedures,broaden its oversight, and increaseits reach. Today, the FLA’s policymaking Board of Directors includesequal representation (six members)from its three core constituencies(companies, civil society organizations,and colleges and universities). Thereis increased accountability for FLAaffiliated companies and oversight ofproduct areas that reach well beyondthe apparel and footwear industries, toagriculture, non-profits and technologysectors to name a few. The FLA has hadsubstantial impact on the ground inChina, Central America and many otherexporting countries addressing systemiclabor law challenges.“One of the greatest accomplishmentsis that we have in place a viablerespected, functioning organizationthat has evolved from a confederationof constituencies to an integratedorganization that is having a positiveimpact on companies,” said Durkee.“There has been recognition that abroader number of companies havebeen taking the process seriously,” saidHarvey. “There hasn’t been the needfor frequently coalescing to developcounter arguments against the otherconstituent groups.”As it enters its second decade, theFLA is working to fulfill its mission inmore innovative and comprehensiveways, putting even greater e

FAIR LABOR ASSOCIATION n 2009 ANNUAL REPORT 2 Board of Directors 2009 Our board of directors includes six representatives of universities, six representatives of NGOs, six company representatives and an independent chair. Independent Chair Carol Bellamy, World Learning, served from August 2007 until