Transcript Key elements of `CSR` strategy

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The Limitations of Private Compliance.
The Promise of an alternative, “collaborative,”
approach.
Beware of “technocratic” solutions; factoryfocused solutions.
Bringing Distributional Issues & “Upstream”
Business Practices Back into the Conversation.
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Globalization has created all sorts of
opportunities for growth and development. But
also…
Child labor, excessive work hours, hazardous
working conditions, poor wages rampant in
developing world factories
In absence of functioning international
organizations capable of promoting global
justice and/or nation-states willing or able to
enforce domestic labor codes, codes of conduct
and other forms of private compliance programs
have become dominant method MNCs and NGOs
address problems with labor standards
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Does Private Compliance Work? If so, how?
Under what conditions?
If not, what other private and/or public
interventions improve labor standards?
Under what conditions can a new, more
“collaborative” approach be constructed and
diffused?
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Study of Global Buyers and their Suppliers in
Different Industries (Footwear, Apparel,
Agriculture, Electronics)
Analysis of Thousands of Company Audit Reports
and Sourcing Data
Field Research (Matched Paired Analysis) in Brazil,
China, India, Bangladesh, Turkey, Dominican
Republic, Honduras, Vietnam, Mexico, U.S.
Over 700 interviews; over 100 factory visits
Case 1: Nike
Factory Conditions Vary Across Sectors & Countries
First M-Audit Scores across all factories (Nov. 2002 to Jan. 2005)
Histogram:
0
1
Density
2
3
First Maudit score
.2
.4
.6
Maudit score
Density
.8
kdensity maudit
Number of Observations: 575
Average M-Audit Score: 65%
Similar patterns of variation within sectors (footwear,
apparel, equipment) and within countries.
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Case 1: Nike
Are Things Getting Better? CR rating
The Limitations of Private Monitoring
(Auditing)
Are Things Getting Better?
B) Change in Compliance Rating Inspections
Change in CR Rating
Freq.
Percent
-3 (Down by 3 degrees)
20
2.62
-2 (Down by 2 degrees)
74
9.70
-1 (Down by 1 degree)
181
23.72
0 (No change)
323
42.33
1 (Up by 1 degree)
116
15.20
2 (Up by 2 degrees)
42
5.50
3 (Up by 3 degrees)
7
0.92
763
100
Total
Note: A is 4, B is 3, C is 2, and D is 1, and the change in CR rating is the score in the most recent
audit minus the score from the earliest audit, ranging from –3 to 3. For example, if a factory has a
score C in the earliest audit and a score A in the most recent audit, then it has a change of +2.
The Limitations of Private Monitoring
(Auditing)
Case 2: HP
Compliance summary for HP suppliers (as of most recent audit)
The Limitations of Private Monitoring
(Auditing)
Case 2: HP
Compliance summary for HP suppliers (as of most recent audit)
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How to Explain Mismatch Between Company
Rhetoric / Reputation & Reality of It’s Supply
Base?
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Not Lack of Will, Moral Fiber, Interests,
Resources
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Problems are Inherent in Traditional Compliance
Model
Traditional Compliance Model
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Asymmetric Power Relations Between Global
Buyers & Suppliers
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Importance of Audit-Based Data
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Incentives
Lots of debate over the Model. How to make it
more transparent, accountable, rigorous
Theoretical & Empirical Weaknesses
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Ambiguous Power Relations
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Unclear (Perverse) Incentives
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Impossible to Generate Accurate Information
As a Result, “Ritual” of Compliance
Factories Moving In & Out of Compliance
Not Tackling “Root” Causes of Labor Issues
Workplace Characteristics
Plant A
Plant B
$ 86.00 USD
$ 67.80 USD
Yes
No
Multi-Tasks
Single Task
Job Rotation
Yes
No
Worker Participation in
Work-Related Decisions
Yes
No
Managers
Mexican
Chinese
Supervisors
Mexican
Chinese
Production Workers
Mexican
Mostly Mexican
Voluntary and
Within Limit
Mandatory and
Over Limit
Average Weekly Wage
Team Work
Job Description
Nationality
Overtime
An Alternate, More “Collaborative”
Model: Nike Plants Revisited
Comparison of Production Systems
Total # of Workers
in one line or cell
T-Shirts per Day
per line or cell
Daily Wage per Worker
(Fixed Salary + Bonuses)
T-Shirts per Worker
Cost per T-Shirt
Plant A
Plant B
6
10
900
800
$ 17.20 USD
$ 13.60 USD
150
80
$ 0.11 USD
$ 0.18 USD
An Alternate, More “Collaborative”
Model: Nike Plants Revisited
Comparison between Old and New
System of Production in Plant A
Old System
(module)
New System
(cell)
Total # of Workers
10
6
T-Shirts per Day
per module or cell
1200
900
Productivity per Worker
120
150
Average Weekly Salary
$ 67.80 USD
$ 86.00 USD
Compliance
Collaboration
Approach:
Rules/Standards Focus
“Meeting” Standards
Uncovering, Analyzing and
Correcting “Root Causes” of
Current Issues
Mechanisms:
Policing, Detailed Audit
Protocols (checklists),
Inspections, Documentation
Joint Problem Solving,
Information-Sharing, Repeated
Interactions, Reciprocity
Dynamics:
“Us vs. Them”
Functional Division of Labor
Mixed Signals
Mentoring, Coaching, Diffusion of
Best Practices, Integration of
Standards with Operational
Excellence, Sharing Risks &
Benefits
Drivers of
Change:
Repeated Audits, Pressures
from Above, (Negative)
Incentives
Learning, Capacity-Building,
(Positive) Incentives, Mutual
Respect, Mutual Gains
Stylized Demand Volatility along Supply Chain
300
200
Mean Capacity
100
Variation
In
Percent
Retail
Component/Module Build
Final Assembly
Demand Signal
Source: Locke Samel WP 2011
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Successful compliance/capability building not
just technical issue but also a
political/distributional process
Requires collaboration among key actors
within and across firms
Collaboration built through repeated
interactions and mutual understanding that
all parties must share benefits and costs
Institutions can help shape/reinforce patterns
of collaboration