Tuesday, April 29, 2014

Social standards for companies: an effective medicine or just a placebo?

In the last decade, many social standards have been created in order to help companies to act in a socially responsible way. These standards often differ quite a lot in terms of specificity, ranging from a minimal point of orientation up to a detailed, process-oriented support for the implementation. Examples for rather general standards are the OECD guidelines, for the more specific standards e.g. the Social Accountability 8000 but also the more detailed Global Reporting Initiative (GRI).

The big question after more than ten years is, what are the benefits? What is the impact and effectiveness of social standards with regard to their own goals? I have examined these questions by conducting a study in the clothing industry regarding labor rights.

More specifically, I have examined two social standards with a lot of members also in Switzerland: The Fair Wear Foundation (FWF) and the Business Social Compliance Initiative (BSCI). My data consisted of confidential audit reports and interviews with representatives of companies and NGOs in Switzerland and in the producing country China. I have developed a system (including a comparison over time), which is able to analyze the data and provide answers to the question of effectiveness.

My analysis shows that FWF and BSCI have indeed contributed to the improved labor rights situation in China, at least in certain areas. Especially in areas that are easily measurable (e.g. minimum wage, health and safety) as well as in areas supplementary to the actual labor rights (e.g. awareness of the existence of labor rights). The results are worse in areas that are not that easily accessible by the means of factory audits (the main tool for evaluating the success of implementation), e.g. the freedom of assembly, the right to collective bargaining or the living wage, which should enable social and cultural participation. There were some improvements in those areas as well, but in absolute terms, the level has remained low.

The main problem with the living wage, which the FWF (but not BSCI) requires is the lack of a clear definition. In principle, the legal equation should probably be minimum wage = living wage.

With regard to the freedom of assembly and the right to collective bargaining, the consequent call for these rights by the FWF had at least a partially positive impact. An additional positive factor is probably the strong involvement of the member companies during the implementation, as required by the FWF.

This stronger involvement has led to more frequent interactions between factories and members, which helped reducing the problem of the snapshot nature of audits. In addition, it made the implementation seem less imposed from the outside as purely external audits would.

In general, my study suggests that different forms of cooperation and exchange between stakeholders are beneficial to an effective implementation. Thus, member companies can exchange their views among each other and with NGOs at arranged meetings. This not only increases the relevant skills for the implementation, but also their mutual acceptance (especially companies – NGOs). FWF and BSCI already have been active in this area but there still is a lot of potential.

Overall, the study has demonstrated that it is possible to create an evaluation system for the effectiveness of social standards. However, its significance strongly depends on the quality of the data, which usually wasn’t created for the purpose of such an analysis.

These insights lead us to the following conclusion: The standards FWF and BSCI are not a placebo but a medicine – an effective medicine, but still (and by far) not for all ills.

Claude Meier

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