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Ambreen Supply chain 1998

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This document is a thesis submitted to the University of Cambridge Judge Business School examining ethical practices along supply chains in the athletic ball industry. It begins with an introduction outlining the globalized nature of supply chains in this industry and focuses on Sialkot, Pakistan, where many balls are hand-stitched. It discusses the "Sialkot Partnership" formed by brands and manufacturers to improve labor standards. The thesis will apply social auditing tools to evaluate how well five global brands and one fair-trade organization uphold their codes of conduct and commitments to social responsibility across their supply chains in Sialkot. It seeks to determine if public claims of ethical sourcing match realities on the ground where balls are produced

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UNIVERSITY OF CAMBRIDGE THE JUDGE INSTITUTE OF MANAGEMENT STUDIES BRAND IMAGE AND BUSINESS REALITY: ETHICAL PRACTICE STANDARDS ALONG SUPPLY CHAINS IN THE ATHLETIC BALL INDUSTRY by AMBREEN WAHEED SEPTEMBER 1998
2 Table of Contents I. ACKNOWLEDGEMENTS 3 II. LIST OF TABLES 4 III. LIST OF FIGURES 4 IV. ABSTRACT 5 V. WORKING DEFINITIONS 6 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 1.0 INTRODUCTION 1.1 Rationale 7 1.2 The Context 8 1.3 The Case of the Athletic Ball Industry 8 1.4 Sialkot, Hand-stitched Balls, and Social Audits 10 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 2.0 THEORETIC PERSPECTIVE 2.1 Ethics in Society 11 2.2 Ethics in Business 12 2.3 What is an Ethical Business Organisation? 15 2.4 Measuring Business Ethics and Social Responsibility 17 2.5 Social Auditing and Brand Image 19 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 3.0 RESEARCH METHODOLOGY 3.1 Research Questions 21 3.2 Approach 21 3.3 The Investigative Process 23 3.4 Data Collection and Tabulation 24 3.5 Outline of Research 26 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 4.0 DATA PRESENTATION 4.1 Social Accountability Standards 27 4.2 Codes of Conduct & Organisational Policies 27 4.3 Advertising and Claims 28 4.4 Interviews 28 4.5 Questionnaires & Telephone Discussions 29 4.6 Field Observations & Physical Verification 30 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 5.0 DATA ANALYSIS 5.1 The Supply Chain 32 5.2 The Stakeholders 33 5.3 Representation & Discussion of Findings 34 5.4 Where the Brands Stand on Social Responsibility 51 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 6.0 CONCLUSION 6.1 Summary of Findings 53 6.2 The Last Word 55 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. VI. ENDNOTES 57 VII. REFERENCES R1 VIII. APPENDIX A3
3 I. ACKNOWLEDGEMENTS
4 II. LIST OF TABLES Table 3 – a Outline of Research Information Requirements page 26 Table 5 – a Social Auditing Variables & Brand Codes of Conduct page 36 Table 5 – b Comparative Rating of Performance Variables page 37 Table 5 – c Aggregate Ratings of Performance Variables page 38 Table 5 – d Social Performance Through the supply chain page 52 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. III. LIST OF FIGURES Fig.2 – a Concentric Circles of Corporate Responsibility page 14 Fig.2 – b Why Businesses Choose Social Auditing page 20 Fig.5 – a The Athletic Ball Supply Chain page 32 Fig.5 – b Stakeholder Dynamics in the Ball Industry page 33
5 IV. ABSTRACT Responding to widespread consumer concern about exploitative working conditions along supply chains of some of the most recognised sports brands, the international sporting goods industry adopted a Code of Conduct designed to ensure socially responsive sourcing. Meanwhile, in Sialkot, Pakistan – source of 70% of the world’s hand-stitched athletic balls – individual brands introduced ethical practice guidelines for their respective sub-contractors. Brand marketing messages claim success of the Sialkot Partnership. Consumers are assured that sub-contractors must prove compliance of these policy guidelines, but there is insufficient direct evidence to inform public opinion. This research applied established social responsibility performance criteria to key points in the supply chain of five global brands and one fair-trade organisation who source in Sialkot. It found that each brand possesses well-articulated policies on corporate responsibility and labour practice for manufacturers. These policies are conveyed to the consumer as part of the brand’s image. However, a look at the manufacturing end of the supply chain reveals that the essence of these Codes of Conduct are not well understood at the level where artisans hand-stitch the balls. The brands need to work harder with their manufacturers to encourage the attitude of corporate citizenship necessary for implementing socially responsive policy.
6 V. WORKING DEFINITIONS - Athletic balls: Term applied to all inflatable balls used for competitive sports. - Beneficiaries: Local people standing to gain from development interventions. - Brand: Owners of brand names, who sub-contract manufacturing. - Business Ethics: Body of knowledge devoted to moral aspect of transactions. - Code of Conduct: Policy guidelines outlining best practices based on vision. - Community: In this case, a socio-culturally-homogenous group living in a place. - Corporate Citizenship: The extent of fulfilment of a company’s social contract. - “Maker”: The middleman responsible for dealing with home-based labour. - Manufacturer: Sub-contractor often producing for many brands at once. - Social Auditing: Evolving set of methods used to assess business responsibility. - Social Responsibility: The social contract between business and society. - Stakeholders: Anyone standing to gain or lose from a company’s performance. - “Stitcher”: Artisan who hand-stitches an athletic ball, often in a family setting. - Supply Chain: From raw material to the retail shelf – the journey of a product.
7 1.0 Introduction 1.1 RATIONALE Walk into a sports store in Britain. The soccer ball on the shelf, with the Brazilian team logo will most likely be made of Korean artificial leather laminated with Japanese textile and Malaysian rubber latex; stitched by a Pakistani artisan around an Indian bladder with a German design printed in American ink. Few sporting and leisure articles originate from a single source of materials or manufacture. They are usually commissioned from sub-contractors by marketing companies who own brand names familiar to the consumer. Brand company merchandisers must identify the most profitable sourcing arrangement for a particular article. Thus, an overwhelming proportion of athletic balls destined for retail in Europe or North America is assembled in South Asia with raw materials from the Pacific Rim. Tracking supply chains of leisure products has the potential to be studied at considerable depth, but can be an ambitious undertaking. Within the limitations of this research, therefore, it was necessary focus on a product that could serve an illustrative purpose without the need to unravel a complicated supply chain. The athletic ball was chosen, firstly, because no independent study of corporate responsibility in the athletic ball industry is available. Secondly, because the product received a lot of media attention especially in the months preceding the World Cup last summer. Thirdly, it is 18 months since major athletic ball brands joined their local sub- contractors to introduce ethical sourcing practices to the hand-stitched ball industry. Fourthly, in Sialkot, east central Pakistan lives the world’s largest cluster of ball stitching artisans, making fieldwork relatively convenient. Fifthly, being home to the Sialkot Partnership, which accounts for 70% of the international soccer-ball business1 a representative sample is available. And finally, because the well-defined supply chain, between the buyer at a retail outlet in the West and the artisan commissioned by a local manufacturer in a developing country, allows a thorough study. This study coincides with the entry of Social Auditing technique into a mature phase represented by the introduction of “standardised” assessment tools2 . The cross- applicability of some newly developed tools is still under debate. Criticised for
8 representing “Western values”, and being culturally unsuited to communities where they will most likely be employed, a field test in Pakistan provides an opportunity to further the dialogue on their value. 1.2 THE CONTEXT The social responsibility debate arrived in the soccer arena in 1994 when human rights groups and the media accused major sporting goods brands of exploitative labour practices in poor countries. One media expose after another criticised some of the most recognised sports brands for creating enormous profit margins out of the misery of poverty-stricken Asians and Latin Americans3 . The soccer-ball industry came in for some of the strongest criticism4 . The “Foul Ball” Campaign called on “soccer moms” to boycott balls made by children in unacceptable labour conditions. When the brands said they had limited control over sub-contracting manufacturers in China, India, Pakistan5 or Vietnam, they incriminated themselves even more. Parliamentary debates in the United States6 and in the European Parliament took notice and contemplated import embargoes7 on sporting goods produced by exploited labour. The picture was clouded by the reported denials of Pakistani officials8 and a visible defensiveness within its industry9 . The media attention spurred10 the World Federation of the Sporting Goods Industry (WFSGI) into adopting an Ethical Business Code of Conduct in July 1997 for its members11 . Most WFSGI-member soccer brands source their hand-stitched athletic balls from Sialkot, Pakistan12 . As a result, brands and their manufacturing partners in Sialkot launched the Sialkot Partnership in February 1997, which aims to shift all athletic ball production by March 1999, to manufacturing units monitored by the International Labour Organisation (ILO). The Sialkot manufacturers are jointly funding for the ILO monitoring programme. 1.2 THE CASE OF THE ATHLETIC BALL INDUSTRY Brands and manufacturers invariably refer to their role in the Sialkot Partnership13 , while some proclaim their success louder than others do14 . Its supporters claim the project is a revolution in socially responsible sourcing, bringing together diverse agencies from the UN system, government and the NGO sector in an intervention that leads to focused
9 local development. Recognised by the Council on Economic Priorities15 , and Business for Social Responsibility16 in 1997, it could be a test case for similar interventions in other developing countries, and may become a precursor for an industry-wide social responsibility trend17 . If we can confirm that the Sialkot project has appreciably improved the labour practice situation in the ball industry, prices of soccer balls have not increased18 , yet the local manufacturers still manage to remain profitable despite the added costs, there are lessons here for Social Audit practitioners. In the time it took to negotiate the Sialkot Partnership, the brands implemented their own sourcing guidelines for their manufacturers. Anticipating consumer concern, especially in a World Cup year they publicised their new sourcing policies19 and the business standards and working conditions they guaranteed20 in Sialkot. It is easy to appreciate the pressure this entire situation put on the Sialkot manufacturers to adopt21 brand guidelines and the WFSGI code unquestioningly. Membership of the Partnership expanded rapidly to almost 60% of the business community within the first three months. Ironically it is the rapid move away from the traditional ways of business that has kept the philosophy of corporate citizenship from permeating deeply. Only a handful of local manufacturers have demonstrated a verifiable commitment to ensure “clean” production processes and supplier arrangements. The rest do not appear completely convinced that “good practice is good business” over the long term. Amongst the 34 companies who have signed up for the Partnership, only one has established a separate corporate responsibility department, while fewer than 10 have designated social responsibility staff. Fortunately, because the few champions of the idea represent over half the exports from Sialkot, the idea has gained impressive momentum22 , compared to other labour-intensive industries found all over Asia and South America. The ILO’s intervention as the third party monitor has generally legitimised the industry’s efforts and their claims now have greater credibility. Other high profile UN agencies, international human rights organisations and national social development NGOs are setting up in Sialkot23 . With the number of ILO-registered centres multiplying on target and the future of business with American and European clients tied firmly to the Partnership, it seems social responsibility has come to stay in Sialkot’s athletic ball industry. Even if they cannot be credited with anything more than a timely response to a
10 business threat24 , Sialkot’s business leaders are quickly realising how difficult it will be for them to back away from the standards they have set for themselves. 1.3 SIALKOT, HAND-STITCHED BALLS AND SOCIAL AUDITS Whether this awareness has led to any meaningful attitude change among local businessmen is yet to be determined. Despite the apparent level of interest, they lack conceptual clarity about what social responsibility means for business. The capacity within the industry to promote such understanding is limited because the very manufacturers capable of disseminating social responsibility values learnt doing business in highly conscious consumer societies like Scandinavia and the USA are unwilling to share them with competitors. An accurate assessment of the attitudes and practices of local business leaders toward social responsibility can lead to a workable approach for building their awareness and understanding. A recognised yardstick is required. Consumer groups, trades unions, human rights advocates, development workers and stakeholders themselves, are all following developments in Sialkot for their own reasons. Especially so, when the brands claim elaborate controls on their product manufacturing arrangements, and guarantee the highest standards of ethical business. Thus, the athletic ball finds itself under scrutiny again: Are “foul-balls” still emerging from the depths of a brand’s supply chain? How true are claims of sourcing guidelines, codes of conduct and “clean” product? Again, an acceptable measuring tool is needed. In pace with the demand for socially acceptable products, recent strides in Social Auditing offer tools for assessing business leaders’ attitudes and practices regarding their social responsibility as well as sourcing for specific products. The Institute of Social and Ethical AccountAbility has created standard tools to help companies quantify their social performance25 . The Council on Economic Priorities’ SA8000 standard is for companies who want third party social audits26 . Business for Social Responsibility distributes a “Social Responsibility Starter Kit” for companies looking to set up an in-house audit capacity. The Ecumenical Council on Corporate Responsibility and its affiliates27 have their own benchmarks for business performance. This research seizes the opportunity to field-test a “standard” audit tool in Sialkot’s ball industry. It may help bring the corporate responsibility debate to Pakistan.
11 2.0 Theoretic Perspective 2.1 ETHICS IN SOCIETY Ethics is the standard of what society considers right and wrong in terms of acceptable behaviour (Serwinek, 1996). While ethics is more easily defined as a term, its interpretation continues to be debated. The yardsticks that determine the values for a code of ethics – for a society, for a culture, for a business – all remain fairly general and may vary from one society to another. There is no dispute, however, that Ethics lies at the very centre of social equilibrium. The Encyclopaedic Dictionary of Business Ethics (Werhane and Freeman, eds. 1997) defines it as a planned attempt to follow society’s norms, standards and expectations. Morality is the term that covers practices that may be considered “right” or “wrong”, the rules that govern those activities and the values that are followed in practice. Moral codes create a balance of power between segments of society, those that are influential and those comparatively vulnerable. By imposing restraint on one they empower the other. A society with no moral structure may seem attractive from the point of view of the individual. But without morality driving a legal system, and with the individual charged with adjudicating conflict, only the interest of the strongest would prevail. This environment of unrestrained self-interest with everyone pursuing their own interests would be no more than a state of war. Hobbes has called it the "state of nature" in which human nature tends to continuously test ethical limits. A society’s moral values encourage individuals to put off their natural tendencies (Christensen, 1997), and help to adjust for this human failing. It is, perhaps for this reason that religions exhort their followers to rise beyond “temptation” in the pursuit of “higher” inclinations. On the other hand, there are those who have much greater faith in the inherent goodness of the human character and feel that, barring a few exceptions, every one would prefer to operate in an ethical environment (Daigneault, 1997). Business is simply the extension of society (Evans, 1991), with the financial motive emphasised. Hence, the values of a society permeate the conduct of business within it. Societies are governed by a “give-and-take” ethic. The concepts of rights, privileges and duties construct the parameters of exchange, and the rules require that members of a society stay within them for it to retain a state of equilibrium. The “currency” of this
12 social exchange is a system of rewards and punishments that accrue in response to how successful or unsuccessful a member is in meeting the demands of the required social “trade-offs”. For every member, however, “right”, “privilege” or “duty” constitute value measurements that can be “graded” to assess conformity with the societal ethos. With “right” being the counterweight or equaliser, a higher “score” entitles a member to “more privilege”, but may also demand “greater duty”. On the other hand when a member threatens the equilibrium by scoring low, “privilege” is withdrawn to the point where it can turn into sanctions or exclusion. Therefore, a definition of business ethics cannot be far removed from a society’s articulation of its own values and principles. There is a strong tradition of business ethics throughout history (Werhane & Freeman, eds. 1998), though it has become a subject for academic debate only since the last quarter of a century. Plato’s famous saying about virtue being more profitable in the longer term shows how business ethics was a live issue at the time. Aristotle’s ‘ethics of virtue’ is a charter for fairness, calling for moderation, eschewing either excess or deficiency in conduct. Artha – or the pursuit of wealth – in Hinduism has its own rules (Sethi & Steidlmeier, 1997). The ancient Japanese concept of kyosei collectivises social goals and aspirations (Di Norcia, 1998). Islam echoes the value of balancing the positive and negative qualities of human character for the overall benefit of society or Masalahah (Sachedina, 1997). Common to the Judeo-Christian tradition are justice, morality and higher motives as the foundations for the “greater good” that extends to business to form the basis of fair trade and profitability (Tamari, 1997). Even staying independent of purely religious or philosophical perspectives, there are arguments for ethical business behaviour (Daigneault, 1997)28 . Business activity, therefore, solidly fits into a society’s moral fabric. In spite of the amount of discourse on the “amorality of business”, even the staunchest supporters of the point of view qualify their arguments with some moral justification. Adam Smith, oft quoted for his free-market thesis, nonetheless argued for balancing the free market with social institutions and personal relationships. 2.2 ETHICS IN BUSINESS The evolution of business ethics over the past centuries tends to coincide with the natural history of individual rights and empowerment, and more notably, the rise of
13 environmental activism (Cannon, 1994). Leading from a stage in the last century, where the only requirement of business transactions was to stay clear of legal statute (Friedman, 1963), the field has grown now to require that a "fair deal" be achieved for everyone on both sides of the bargain. The present debate is characterised by two principal positions, with a number of “middle-ground” points of view (Gray, Owen and Maunders, 1997. According to the “pristine capitalists” (Gray, Owens and Adams, 1996) such as Friedman and Hetherington business is amoral and seeks only to achieve the highest possible economic benefits in a market unhindered by excessive government regulation. However, even staunch proponents of this utilitarian approach concede that in a human society, every action must have ethical undertones and be judged by moral yardsticks. On the other side of the divide are those who point out flaws in the amoral business argument. They point out that ends cannot be justified by the means. Every business decision is a moral decision since the motive and the way one goes about making a profit is essential to the legitimacy of that profit. Other points of view that challenge the pristine capitalist stance represent political ideologies that are opposed to business as the repository of enormous power. This includes proponents of socialism, human rights, radical feminism, and social ecology, who all believe for various reasons that the ideology of amoral capitalism is fundamentally flawed. In the “middle ground” of this debate are to be found those who feel that by accepting a minimal level of social responsibility businesses can get on with making their profits with less interference. This “expedient” view, when taken up with greater conviction may transform into the “social contract” point of view, which considers the existence of business a favour from the society, and hence must “pay back” by sharing profits for wider social benefit (Samuelson, 1986; Beauchamp & Bowie, 1988; Gray, Owen & Adams, 1997). For two decades now, French has argued that corporations have the capacity to take moral responsibility for their actions much like adult human beings. Kerlin (1997), calls this “legal fiction”, pointing out that moral blame and punishment must ultimately go to the people who have influence on how members of a group behave. He asks if it is possible to “shame” an organisation? In short, while businesses may be amoral in the legal sense, they cannot remain untouched by society’s moral expectations. Hence,
14 although business cannot be termed as a “moral persona”, it is clearly a moral agent. Werhane (1984) differentiates the moral agency into primary and secondary categories. The individual retains the primary moral responsibility for decisions that affect those around, but when organisational decisions lead to policies or actions that have a wider impact, the individuals behind them tend to become indistinguishable from the corporate façade. Corporations are secondary moral agents unable to operate in a “moral vacuum” (Arkin, 1996). The collective responsibility of individual decision-makers cannot be confused with the organisation’s “persona”. Over the years businesses have increasingly begun to view ethical transactions as beneficial to the bottom-line (Matthews, 1988; IBM, 1992; Bolier, 1996; Logsdon and Burke, 1996; Hunter, 1996; Solomon, 1997; Pennington, 1997). It is easy to see how this is true in the information age, since a positive image for a business ensures customer loyalty it is a sure recipe for profitability. Whether consumer-driven (Kaler & Chryssides, 1996) or led by an intrinsic need for moral behaviour (Post, 1996; Daigneault, 1997), today’s business world is learning that individual values are less carefully separated from monetary gain. As a result there is an Education, Health Environment Protection Local Development Safe Working Conditions Quality, Product Profits Jobs, Services
15 increasing tendency to apply morality to the conduct of business. Pope John Paul’s Centisimus Annus (Green, 1997; Sethi, 1997) significantly indicates how the Catholic Church superimposes business and its moral values, justifying the pursuit of “fair” profits balanced by equitable distribution of the wealth created as a result. This changed attitude is perhaps a principal reason for the acceptance of corporate responsibility among modern business. Figure 2-a, from the Council on Economic Development illustrates how a business is placed in its social role. The phenomenal growth of multinationals, in size and influence, and their accumulation of vast resources (Gray, Owen & Adams, 1996) fuels arguments for greater accountability, and hence, social responsibility, to an increasingly aware consumer. Together with a heightened sensitivity about human rights and the environment, and issues of trade globalisation such as dumping and preferential tariffs, business finds itself in a position where it must please a more diverse audience than ever before. The decreasing capacity of businesses to control outsiders’ access to its information complicates the situation further. Much like an evolving organism reacting to external stimuli (Goodpaster in Werhane, 1997/85), the flow of information is compelling business to change forever (Kerlin, 1997). A time has come when business must rely more on the image it creates in the consumer’s mind (Baird, 1997) and be prepared to change company behaviour as a result (Carmichael et al, 1995). No longer can corporations be let off he hook simply by labelling them amoral. This means that society’s expectations of a wider sharing of profits mount, and the vaguely articulated “social contract” between business and society gets more and more public attention (Samuelson, 1986). And, indeed, activists now have powerful arguments to oppose not individuals who run the businesses, but the organisations as a whole29 . The consumer argues that if business has privileges then it must have obligations to match. 2.3 WHAT IS AN ETHICAL BUSINESS ORGANISATION? In broad terms, an ethical business can be defined as one which inspires trust because it is responsible, law-abiding, fair-trading, socially responsive, charitable, and puts values before profits (Appendix-I). Trust, in turn, depends on credibility, character, competence and service (Pennington, 1997) communicated clearly and effectively to the consumer (Elkington, 1997). Being “human” characteristics (Zadek, 1997), these values help the consumer link them to their mental image of a socially responsible business. People
16 want to deal with a “human” organisation that treats its own well, is fair to deal with, and leaves a beneficial impact on its natural, social and commercial surroundings30 (Nolan, 1996; Elkington 1997). Fairness is the value that cuts across the conduct of business as a whole (Solomon, 1993). It applies to investors, owners, worker, suppliers, retailers, community, stakeholders31 , and all participants in the market system. Often businesses try to sell themselves as fair businesses, and are prepared to bear the costs that help present them as such (Augustine, 1997). No doubt that customers are more likely to buy from companies that act ethically and rise above pure economic interest, but there are many who have traditionally doubted the motives of such organisations. It is not unusual for a business to use ethics merely for making their business activity credible, and therefore, more profitable (Solomon, 1993; Kaler & Chryssides, 1996). Being fair means being ethical, sensitive and responsible. Hence, businesses that recognise their role as citizens and assume a responsibility to fulfil it can be termed 'ethical' or ‘socially responsible’ organisations32 (Werhane & Freeman, eds. 1997). A socially responsible business is more direct and proactive in anticipating its own role in its community, being alert to social change, and responding to society's new demands and concerns without deviating from its defined goal. Many successful models are now documented, where businesses have proven their social commitment to their stakeholders by allocating resources to charitable causes or initiating issue-specific programmes (Carmichael & Drummond, 1989; Makower 1994; Scott & Rothman 1994; Reder 1995; Korten, 1996; Bolier 1996; Daigneault, 1997; Wernhane & Freeman, eds. 1997; Zadek, Pruzan & Evans 1997). From the many available definitions and literature describing its desired qualities, the attributes of a good corporate citizen (Mahoney, 1996; Warner, 1996; Werhane & Freeman, 1997; Daigneault, 1997) can be narrowed down to: 1. Disclosure; 2. Respect for people; 3. Human Rights and Labour Rights; 4. Employee Rights; 5. Fair business practices;
17 6. Environment; 7. Community involvement; 8. Political involvement. These characteristics appear in a large number of company codes of conduct, social audit tools and reports, and appraisal formats for various assessment programmes now in vogue33 . They are important indicators for assessing an organisation’s understanding of its own role and how it strives to deliver tangible programmes. 2.4 MEASURING ETHICS IN BUSINESS AND SOCIAL RESPONSIBILITY Employing indicators to assess an organisation’s commitment to its social duties is moving towards becoming a more exact science, following the demand (Zadek, 1997) for assessing the phenomenon in more quantifiable terms. The most commonly used term for it is “Social Auditing” (Blake, Fredrick & Myers, 1976). Theodore Kreps first used the term in 1940, who referred to it in terms of an accountability tool for businesses. Subsequently, in the early 1950’s Howard Bowen used the same term implying it as a management tool. With the passage of time “Social Auditing” has come to mean something that is the barometer for assessing a business is in terms of its social responsibility. But there being still no agreement on the meaning of the term so far (Zadek, 1998), its basic concepts remain less tangibly articulated as opposed to the precision achieved by other management processes in general. The maturation of the definition of Social Auditing has also overlapped debate on which exactly the stakeholders are for a business. In the 1960’s George Goyder first added customers, suppliers and community into the general description of the term (Zadek, Pruzan & Evans, 1997). Today the stakeholders’ concern about corporate social responsibility is turning into a demand for monitoring companies’ performance (Blake, Fredrick & Myers, 1976). Zadek (1997) proposes the term “Social and Environmental Auditing Accounting and Reporting (SEAAR). He defines it as “360 degree picture of how an organisation is doing in social and ethical terms in relation to its own aims… Just like financial auditing looks at monetary transactions and environmental auditing looks at site-specific operations”34 . The most commonly referred to indicators for a measuring how a business fares in its social responsibility fall broadly into those that have to do with people, and those that
18 have to do with the environment. Seven conventions and recommendations of the International Labour Office (ILO) form the basis of international labour standards35 . Ratified by UN member states, these lay out guidelines for legislation and national policy. ILO labour standards have traditionally provided labour unions, human rights groups and NGOs with yardsticks to measure labour standards in industry. Among the tools already developed to measure a company’s level of social responsibility, those from the CEP36 , CERES, and ECCR/ICCR/TCCR – collaborating inter-faith agencies in Britain, the USA and Canada37 – appear to have already gained some acceptance among business. These tools are grounded in the international human rights convention and are frequently echoed in company codes of conduct. The nineties were the beginning of the trend towards codification of ethical business conduct38 . Meanwhile, the number of companies embracing socially responsible visions and values continue to register appreciable growth, and there are discernible links between their social performance, their impact on stakeholders, and their financial performance. Makower (1994) is convinced that as the example of these companies becomes more firmly established, the overriding question will not be whether companies should adopt these policies and practices, but rather when, and how quickly, they should do so. Like cost accounting, marketing research, or any other tool of modern management, ethical investigation is also becoming increasingly useful to further the commercial aims of business (Kaler & Chryssides, 1996). The science is relatively new and is still developing its language and practice, but still Social Auditing is becoming a useful tool. Proactive companies like The Body Shop or Reebok have enhanced their image, and their business, by presenting themselves for social audits. Other companies are all but scrambling to follow suit. A measure of this is the increasing number of companies who have adopted codes of conduct governing labour practices and acceptable business standards relating to health, safety and the environment. Figures from 1990 show 85 percent of major US firms have these codes of ethics (Berenbeim, 1987, 88, 91), followed by 51 percent companies in Germany, 41 percent in Britain, and 30 percent in France (Langlois & Schlegelmich, 1990 – in Kaufer and Robertson, 1990). Yet, businesses attempting to implement ethical policies and then trying to measure their impact face many challenges. More and more people agree on the terminology of social auditing, but unsolved questions still remain. Even when quality standards are defined,
19 who would lay them down best? Organisations like SGS and KPMG or those like Oxfam and Amnesty International? From where would they derive their legitimacy? Would an accountant do a better job than a social scientist? How much would a company pay for an acceptable social audit? And would it at all be practical for an organisation in business terms? (Zadek, 1997). It seems these and other similar questions face anyone contemplating a social audit. However, the case of ISO quality certification has promising parallels as far as documentation of standards is concerned. Numerous examples are now being shared, and can help companies decide on an appropriate social audit process and measuring instruments that will become more accepted over time. 2.5 SOCIAL AUDITING AND BRAND IMAGE Some internationally known businesses have invested significant time and resources into setting up social auditing and disclosure programmes. Among the most visible are The Body Shop, Ben & Jerry’s Homemade Inc. and Traidcraft plc. The New Economics Foundation has begun an "Ethical Trading Initiative" with government support, which aims to improve work conditions for employees along supply chains. Asda, British Telecom, B&Q, Littlewoods and Sainsbury’s have joined up. In the USA, Business for Social Responsibility and the Social Venture Network have programmes to promote civic values among companies. The Council of Economic Priorities is promoting its SA8000 auditing system for businesses to adopt a standardised way of implementing and documenting ethical practices, much like the ISO certification programmes. Avon Cosmetics, Otto-Versand and Toys’R’Us have already signed up (Supply Mgt, 1998). Why do businesses want badges of social responsibility? The immediate reason is because consumers are more aware, have higher expectations from business, and have access to more information they will buy from brands with a good image. In short, it does their bottom-line good. Another reason is that some businesses have adopted social responsibility as their special mark of identification and their business is tied to a “green” or a “clean” image. A select few are businesses run by idealistic individuals who feel running a socially responsible business is a better way of repaying society than private philanthropy. And yet others see this as a marketing opportunity too good to miss, in that they can identify with a current fad and benefit while it all lasts. And perhaps finally, there are “free-rider” (Sethi, 1989) business that reap dividends others’ investment in socially responsible programmes.
20 Figure 2-b, below, (from Gray, Owens & Maunders, 1997) presents well the various reasons why a business would want to present itself for a social audit. Fig Enhance the corporate image Discharge of accountability CSR as extension of financial reporting to investors Enhance Corporate Image to Investors Discharge of Accountability to Investors
21 3.0 Research Methodology 3.1 RESEARCH QUESTIONS Over 60 international brands source their hand-stitched balls in Sialkot, in addition to numerous “non-brands” 39 . At least thirteen of the world’s most recognised brands – soccer, handball, rugby, volleyball and beach-volleyball – have a significant part of their manufacturing sources in and around the city. As the project zone for the Sialkot Partnership’s International Child Labour Project, Sialkot is developing culture of dialogue in which the Chamber of Commerce & Industry has established a role for itself. Soccer balls are still handcrafted by artisans – “stitchers” – in small village workshops managed by middlemen called “makers”. Hence, Sialkot is the appropriate place for studying the brands at the remotest point of their supply chains. This study aims to compare the prevailing situation with brand and manufacturer claims. Six questions need answers for further analysis: i. Do acknowledged sporting goods brands recognise acceptable labour practice standards and do they have clearly articulated social responsibility policies? ii. Does these policies conform to an accepted social responsibility standard, and are they applied in a measurable way at specific points in a brand’s supply chain? iii. Is the application of these policies and standards relatively uniform at specific points along the supply chain? iv. Are these policies transmitted to the end-user as a marketing strategy? v. Are these policies transmitted to sub-contractors at the end of the supply chain? vi. Is there a measurable difference between a brand’s claims and reality, and does the perception of stakeholders conform to the declared application of these standards by the brands? 3.2 APPROACH The approach taken here:  A cohort of comparable retail brands from WFSGI member brands subscribing to the WFSGI Code of Conduct, sourcing a significant portion of their hand-stitched athletic balls from Sialkot, and members of the Sialkot Partnership, based on the following criteria: i. they enjoy widespread consumer recognition among a variety of markets;
22 ii. they represent the diversity of the global market in their origin and reach; iii. they are often found on retail shelves at the same outlet; iv. they lay a claim to ethical business practices in their public statements.  Choose a product for each identified brand that is similar in terms of characteristics, price and quality.  Develop a framework for assessing ethical business practices applicable to the same point in each product’s respective supply chain. Points in the supply chain: i. retail outlet in a developed country; ii. international brand’s management office in its home country; iii. local sub-contractor’s office in developing country; iv. artisan’s workplace or home-based workshop.  Create an appropriate yardstick using the SA8000, including key areas of interest to the brands and their local sub-contractors, as reflected in their own respective policy documents.  Use this yardstick to compare each chosen brand’s actual performance at each identified point in the supply chain, against its official claims appearing in advertising and policy documents, and grade performance using a weighted grading system.  Apply a yardstick gleaned from the brands’ own policy documents, but based on a recognised social auditing standard to control for biases that could arise out of using a standard that the brands themselves may not use themselves.  Analyse findings in the context of the Sporting Goods Industry’s Code of Conduct and the Sialkot Partnership, and consumer comment, and develop a realistic picture of how the brands and their local counterparts stand up to their own standards, as well as to their consumers’ expectations.
23 Finally, the research aims to quantify the difference, if any exists, between claims in the brands’ public statements and present their score in such a way that it does not criticise, or praise any brand or its sub-contractor. The purpose of a graded analysis is simply to point out gaps that the brands themselves or their Sialkot counterparts may not be aware of. This may help lay the basis for discussions along the supply chain and lead to an improved overall performance on codes of conduct. (Note: along the way, it was decided to include a fair-trade organisation to the cohort. Comparing an organisation that is decidedly tilted towards “giving a good deal” to disadvantaged producers to corporations whose declared mission is to make a profit for their shareholders was considered a useful way to add depth to the analysis.) 3.3 THE INVESTIGATIVE PROCESS Five internationally recognised brands who source their athletic balls in Pakistan were selected for this study. One fair-trade organisation was added to the list to enrich the analysis of value-driven business practice. Next, by conducting a parallel set of interviews and questionnaires for each of the chosen brands, six distinct portraits of social responsibility emerged from Sialkot. Since this is where each of the chosen brands source their product, this method is useful to draw conclusions regarding each brand’s ability to effectively transfer their respective corporate philosophy to their local sub-contractor. Data collected from the questionnaires and individual interviews was plotted under identified social responsibility indicators. Although this particular study stops short of it, the six portraits of brand/sub-contractor relationships in furthering claimed corporate responsibility ideals have the potential to be developed into independent case studies. Specific points along the supply chain of the chosen product – retailer, brand HQ, manufacturer HQ, manufacturing unit, and artisan – were subjected to the measurement tool. Supported by data from stakeholders, a graded score for each of the brands was used to generate a “social responsibility profile” for each brand at each identified level of its supply chain.
24 Comparing each profile to the brand’s own Code of Conduct and with any claims on record, an assessment of performance was made. A cross-comparison between brands and among their local counterparts is not the aim of this exercise, although it is possible at this stage. Tables and charts highlight comparative variations, within each brand, regarding adherence to their respective policy all through the supply chain. Statistical calculations, where used, serve to establish relationships between the various factors and variables. 3.4 DATA COLLECTION AND TABULATION Field methods were best suited for this investigative approach. Collecting of background information from available archival sources would support all fieldwork. Direct observation of the processes involved at the manufacturing end, combined with ascertaining the presence or absence of defined policies and awareness about them among staff were undertaken. Individual interviews with representatives of the various stakeholders, including factory workers, community representatives, stitching sub- contractors, plant supervisors, and head office staff of the various brands and their local manufacturers was the principal activity during the field work in Sialkot, Pakistan. Retailer representatives were contacted in Cambridge. In addition, questionnaires were sent to product managers and corporate responsibility personnel at the respective brand’s head offices, in Britain, Germany, and the USA, followed by telephone discussions. Prior to finalising the semi-structured interview instruments, a list of issues relevant to the industry were pre-tested at the international sports fair, ISPO 1998, in Munich. This methodology was chosen because, it balances field methods well with archival study40 . Laboratory techniques and statistical manipulation seemed superfluous to the outcome of the research. Being the first field data collected from Sialkot, it adds further to original content among the existing data. Combined with the literature review and reading policy documents and media materials, the remote interviews through telephone and e-mail communication add a greater degree of control. An effort was made to bring together the advantages of direct observation supported by secondary data so as to be able to represent the real situation accurately. In choosing the most appropriate data collection methods41 , it was felt that they help the researcher in handling complexity, and be sufficiently flexible to secure a variety of
25 interpretations. For this purpose it was decided to employee a wide range of interview tools, from structured and semi-structured to unstructured, in addition to the ongoing content analysis. The need to standardise this set of interviews and uncontrolled responses presented a challenge, countered to a large extent by keeping close to the SA8000 format and frequently using it as the touchstone during the open-ended interviews, organising interview notes and recording observations. Minimising bias proved the most difficult area to handle42 despite the standardisation of the questionnaire using the SA8000. This research, therefore, tries to present observations as objectively as possible, and defines terms with reference to the task itself. Moreover, it is impossible to eliminate bias in a situation where highly competitive brands are identified by name. Their respective policies and marketing communications reflect built-in biases that arise out of rationalisation and a “writing of history”. Issues of anonymity and coverage were not relevant since the cohort was selected on the basis of their brand identity, and involved only six companies located in about a 35- kilometre radius so that it was possible to schedule visits and interviews in the available time. In addition to its appropriateness to the approach adopted for this research, this method was also the most convenient in terms of the time and resources available. The decision to blend interview techniques also stemmed from the need to reflect the situation as accurately as possible. While head office people at the brands got semi- structured interview forms, the forms used in Sialkot with the local sub-contractors served only to set the context of open-ended unstructured interviews that often lasted through up to three sessions. Direct observation was made during several visits to production facilities and village workplaces, sometimes escorted by a company representative. Another advantage of using the above methodology is the reliability that the chosen standardised tool, interview methodology, and multiple levels of analysis impart to the study. Perhaps a less tangible but strategic benefit of this study is that the use of this methodology has helped sensitise the local industry stakeholders to future efforts of a similar nature.
26 Based on a detailed assessment conducted, the following were chosen: 1. Adidas – Germany 2. Fair-Trade – Germany (NGO added for comparison) 3. Mitre – Britain 4. Nike – United States 5. Puma – Germany 6. Reebok – United States 3.5 OUTLINE OF RESEARCH I. Representative stakeholders to be contacted:= 1. Consumer 2. Retailer 3. Brand’s Marketing Office 4. Manufacturer/Exporter 5. Stitcher/artisan II. Points of comparison at specific points of the supply chain: Corporate policy and implementation mechanisms Specific stakeholders (as below) Government policy and legislation Competitors’ policy and brand image Market share and brand image Table 3-a Representative Stakeholders Focus Information needed CONSUMER  Brand image  Purchase decision  Consumer interviews  Retailers feedback RETAILER  shelf prices  advertising/ marketing  Physical verification/ price list  News paper/ media coverage examples BRAND  code of conduct  employee rights  integrity  market ethics  code of conduct (written document)  annual reports  media responses  employee policy  implementation plans  competitors views 
27 Representative Stakeholders Focus Information needed MANUFACTURER  manufacturer’s own code of conduct  availability and inclusion of brand codes of conduct  acceptable international standards (SA8000)  SA8000-based tool  Records of implementation of code of conduct STITCHER/ARTISAN  employee policy  human rights  community development initiatives  code of conduct  annual reports  reports of ethical initiatives  media reports/ media coverage  reports or views from ILO monitoring units, SCF, FIFA etc.  reports of education, health, or other philanthropic initiatives  reports on child labour, labour rights, health and safety  interviews with supervisors  interviews with artisans
28 4.0 Data Presentation 4.1 SOCIAL ACCOUNTABILITY STANDARDS A composite variable list developed from the literature review forms the basis for the data collection tools within the parameters of this study (Appendix-II). This list also served as the benchmark for selecting the formal assessment tool. The literature reveals a number of social accountability tools that various businesses have either developed on their own. Others have evolved through the dialogue between academia, non-governmental agencies and business. Examples of the former include those used by Ben and Jerry’s Homemade Inc. in the USA, The Body Shop plc. In Britain, and Sbn Bank in Denmark. The latter category includes the SA8000, and similar instruments created, or being developed by the ECCR/ICCR/TCCR and the Institute of Social and Ethical AccountAbility. Copies of the assessment tools used by The Body Shop and the Institute of Social and Ethical AccountAbility could not be made available. The CEP’s guidelines on SA8000 were readily acquired, as was the ECCR/ICCR/TCCR tool. Examples from tools used by a number of companies other than those mentioned above were found in “Accounting and Accountability” by Gray, Owen and Adams (1996). Going through examples and case studies cited by Di Norcia (1998), Bolier (1997), Solomon (1997), Zadek, Pruzan & Evans (1997), Korten (1995), Reder (1995), Scott & Rothman (1994), and Carmichael and Drummond (1989) helped choose the best one for this study. The SA8000 was finally selected as the standard around which to adapt the measuring instrument for this research. The reason for this was its relevance to the environment of the study, its reliance on the ILO’s internationally accepted labour practice standards, its relative comprehensiveness, and the ready availability of its detailed guidelines. Some elements from the ECCR benchmark were incorporated in the final version, along with relevant points from available brand Codes of Conduct (Table5-b). 4.2 CODES OF CONDUCT AND ORGANISATIONAL POLICIES A variety of printed materials on their labour practice policies were provided by the brands themselves or their manufacturing partners in Sialkot. This included copies of the
29 Code of Conduct adopted by the World Federation of the Sporting Goods Industry (WFSGI), and its yearly and quarterly publications. The ILO provided a summary of the international labour conventions and a listing of ratifying countries. Organisational Codes of Conduct were acquired from Nike, Reebok, and Puma. Fair Trade, Mitre, Nike and Puma made available policy documents describing their respective company labour practice standards, and their expectations from the supply chain. There was considerable uniformity in the issues outlined in each of the documents, and all conformed closely to the ILO standards (Table 5-a). 4.3 ADVERTISING AND CLAIMS Each of the WFSGI publications available, contains advertisements from international brands as well as local manufacturers. Among brand advertisements, Reebok’s is the most specific in mentioning the company’s social responsibility activities. Adidas, Mitre, Nike and Puma follow this marketing approach to a significantly lesser extent. This is also borne out by Reebok’s labelling of every ball. Copies of the December 1997 news bulletin from the U.S. Sporting Goods Manufacturing Association (SGMA), and a flyer released on behalf of its member brands, both declare a commitment to the efforts by the Sialkot manufacturers to work with the ILO, UNICEF and Save the Children. Over 50 international brands have participated in releasing this “pledge” that describes their commitment to source athletic balls only from manufacturers participating in the Sialkot Partnership. Advertisements by Sialkot manufacturers are loudest in their claims to eliminate child labour. Most appear in the WFSGI’s special newsletter editions – one each in 1997 and 1998 – devoted to child labour and labour practice issues. Some placed signs outside their stalls at the international sports exposition, ISPO, at Munich in August 1998. All the Pakistani manufacturers included in this research advertised in WFSGI publications. 4.4 INTERVIEWS Each of the local manufacturers in Sialkot co-operated to the fullest possible extent when asked for interviews. Being open-ended and unstructured, the interviews demanded long sessions. Chief Executives of every one of the seven manufacturing companies agreed to
30 be available. Four chief executives – from Capital, Leatherware, Moltex and Talon – took time out for an average of two sittings each. Three being away from Sialkot (AliTrading, Saga and Sublime) were represented by company directors. Each of these gentlemen also instructed senior production and quality assurance staff to be available for site visits and detailed discussions. Each CEO interview took at least two sessions, the longest lasting three hours. Visits of plants and village-based workshops took as much as half a day including travel time. During the visits, there was no discernible attempt to “manage” events, and workers were allowed unhindered access to the researcher. Interviews were arranged through the Sialkot Chamber of Commerce. The ILO, UNICEF and Save the Children, were included because of their membership of the Co- ordinating Committee of the Sialkot Partnership, and their implementation role in the “social protection” programme of the Sialkot Child Labour Project. Their views were used to countercheck the claims of the various brands and manufacturers and ensure a wider perspective. The co-operation extended during the visit reflected the pride that the local manufacturers have about what their industry is trying to achieve on a collective level. Appendix-III gives the list of interviewees. Questionnaires used appear in Appendix-IV. 4.5 QUESTIONNAIRES & TELEPHONE DISCUSSIONS Being dispersed all over Europe and the USA, it was not possible to individually interview representatives of each brand. It was disclosed that, with the exception of Nike, all brands would be present in Munich to attend ISPO 1998. While in Sialkot, preparing for interviews with local manufacturers, it became apparent that many of them would be there as well. With the help of a European contact, present in Munich at the time, it was arranged to elicit responses from Adidas, Mitre, Puma and Reebok. This approach was not successful, partially because ISPO being a trade event few brands had the appropriate staff available, and partially because the absence of the researcher meant queries from respondents could not be completely answered. Except for Adidas, no brand returned a completed questionnaire at ISPO.
31 However, because names and contact addresses for the appropriate brand representatives were obtained there, ISPO proved a useful opportunity for sensitising the respondents. The persons identified are directly responsible for corporate responsibility issues in their ball sourcing work. As a result, they provided reliable information and candidly shared their views during telephone discussions and on e-mail. An added a dvantage to this approach turned out to be that the structured questionnaire transformed itself into a semi- structured interview during the telephone interviews, becoming less rigid and allowing for a richer content. 4.6 FIELD OBSERVATION & PHYSICAL VERIFICATION Field visits at the production end in Sialkot included factory sites and village workshops. Pre-stitching and post-stitching phases of ball production were observed in the factories. Here manufacturers produce the artificial leather laminate, cut it into panels, print designs, and punch stitching holes into the panels. These panels are then delivered to artisans who stitch the ball casings around a rubber bladder. The stitched balls are then returned to the factory where they are checked against the brand’s quality standards, cleaned, packaged and shipped out. Each of these local companies participating in this research is a signatory to the Atlanta Agreement and has opened its centres to ILO inspection. At the same time, each of the participating brands has signed the SGMA pledge to restrict sourcing to ILO-monitored manufacturers in Sialkot. The village-based centres vary in their size, arrangements and management structure. Except for Saga, which now employs artisans in fully owned and managed community- based centres, all the others still work through the traditional sub-contracting system run by entrepreneurial middlemen who act as negotiators and agents for groups of independent artisans. The manufacturers arrive at an arrangement with the middlemen (called “makers”) who guarantees a steady stream of finished products through a network of village-based artisan “groups” in return for a negotiated piece-rate and a variable amount of cash as working advance to the workers – called “peshgi”. With the recent agreement with the ILO that demands the registering of verifiable workplaces for all local manufacturers, and moving 100% production to ILO-monitored centres by March 1999, there has been a move to formalise the manufacturer-“maker”-artisan relationship
32 in terms of workplace standards acceptable to the ILO. While the financial arrangements have remained more or less intact, the manufacturers have made arrangements with their respective “makers” aimed at fulfilling the demands of the Atlanta Agreement. Another aspect of the field observation included visiting a number of retail stores that sell soccer equipment as part of their range, and eliciting responses to a brief open-ended questionnaire from staff as well as consumers present there (Appendix-IV/4). This exercise was undertaken to ascertain how much the retail end of the supply chain knows about what the brands themselves proclaim about their sourcing practices, and how much the customer is prepared to listen when making buying decisions. A total of 8 retail outlets were visited, four of which opted to withhold their names. Places visited included a Debenhams department store that stocked all chosen brands except Reebok and Fair- Trade, Sports Soccer and JJB Sports, each part of a retail chain, and JSB Sports, a privately owned sports shop in Cambridge. Each of these stocked all the chosen brands. None stocked the Fair Trade ball, but it was possible to have a telephone interview with Traidcraft plc, which sells Fair-Trade balls through their catalogue. A copy of the catalogue advertising the ball was made available.
33 5.0 DATA ANALYSIS This research treats each brand and its manufacturer as one entity because they form different parts of the same supply chain. With the artisan at the end, they are inseparable from the point of view of the consumer. The local industry, raw material importers and suppliers, all identify the manufacturer with the brands it makes for. 5.1 THE SUPPLY CHAIN Fig.5-a, below, shows the product supply chain for the athletic ball. The various stakeholders appear in relation to each other. The consumer and the media are the farthest removed from the artisan who actually stitches the ball, but have the greatest impact on the brand’s business. Ambiguity or mis-perception surrounding sourcing practices affecting the bottom line can be removed through better communication. There is a greater possibility that the existing situation will be out of context if information about the supply chain does not flow through its main stem. Alternate channels despite appearing plausible may not be credible. For example, the competition may inject Fig.5-a Manufacturer - price cut - Wages/compensation - overhead - Worker/ welfare - CR initiative cost - Community welfare Brand - CR initiative cost + profit + brand image + competitive edge + big orders + competitive edge + reputation CompetitionMonitoring agencies ILO, SCF etc. Subcontractor Artisan NochildlaborRegisteredSC Wages/compensation/rights Local Com m unity Facilities/welfare Governm ent Laws/regulations Clean/quality product Lowprices Priceincrease Media Consumer CSR Quality/CSR M arket share/ Quality Retailer Quality/CSR Quality/CSR CSR Corporate Social Responsibility SC Stitching Centres Demand Directly Pressurized /Influenced by
34 rumors, news of government awards or punitive action may bypass facts, citations for violations noted by monitors might have been long corrected, and media snapshot stories may ignore the big picture. A standardized Social Audit and disclosure is an appropriate tool for making verifiable information available within its correct context, and relevant to issues close to the various stakeholders. 5.2 THE STAKEHOLDERS Fig.5-b, below, shows how major stakeholders influence a business in its social role. The arrows show the direction of influence and identify the stakeholder affected directly. The manufacturer’s position in the supply chain makes it highly vulnerable. On the one hand is pressure to keep prices low for the brand and on the other, to maintain an acceptable relationship with its workers and the community. This study focuses on the manufacturers from two distinct but entwined perspectives. One sees the manufacturer as a representative of the brand’s professed ethical practices, and therefore an extension of the brand’s image. The other sees the manufacturer as an independent corporate player with responsibilities to its own community, as well as obligations as a trading partner with access to global markets. Fig. 5-b presents how a Social Audit process and the resulting information flows can balance pressures among the various stakeholders and create a fairer environment for business transactions and community decisions. Consumer Brand Manufacturer Worker/community CompetitionMarket Media Human rights organizations cleanproduct Rightsandwages Influenced by Pressure from Consumer satisfaction Brand image Financial profit Customer satisfaction Quality Clean product Quality
35 5.3 REPRESENTATION & DISCUSSION OF FINDINGS Elements from the SA8000, the ECCR Benchmark, and brand codes of conduct yielded a list of variables appropriate to the research (Appendix-II). These form the core of this investigation, being used to develop questionnaires and interview outlines, organise data, run comparisons and present findings. Tables 5-a and 5-b present how qualitative data have been weighted and quantified. Table 5-c presents aggregate numerical scores for the variables. The tables are followed by a descriptive analysis of each variable. Table 5-d ranks respondents by placing aggregate scores in value categories. Measurement Tools and Data Interpretation COMPARISON OF SOCIAL RESPONSIBILITY VALUES Table 5-a compares the social responsibility values found in the two Social Audit (SA) tools and the Social Responsibility (SR) policy documents of five athletic ball marketing brands. SR variables are listed down the left column with the brand codes and SA tools across the top. All variables that are mentioned in a brand policy document is marked with a “” in the corresponding box. By revealing the range of SR activity a brand is prepared to undertake, this shows how proactive a company is towards SR issues. This comparison also presents the ability of a measuring tool to assess the activities of business. COMPARISON OF SOCIALLY RESPONSIBLE ACTION Table 5-b weights the SR variables according to the extent they are implemented by the brands and their manufacturing partners. The variables appear in the left column with the businesses across the top. Each variable is weighted according to the level of its implementation by a business. The scale measures increasing levels of practical implementation. Categories exists for those respondents who are opposed to implementing policy on a particular variable, those who are unaware or do not want to implement, and where there is insufficient information to determine a score. By showing how far ahead a company is on implementing activities on a particular variable, it is possible to ascertain its commitment to invest in practical SR initiatives.
36 SOCIAL RESPONSIBILITY SCORE CALCULATION Table 5-c presents an aggregate score calculated from the above findings. To minimise bias, all data have been triangulated from a variety of sources, including available documents, stakeholder feedback and personal observation (Appendix-IV). The score reflects a business’s proactive stance, and its level of commitment to specific SR actions. This way it is possible to assess the breadth and depth of socially responsible behaviour in terms of both policy and action. The aggregate score is calculated by combining the score for each variable from all sources. The numerical values are calculated by giving each positive finding a value of “+1”. No data is represented by a zero, and opposition to a value is expressed as “–1”. Where there are sub-variables, their mean represents the score for the particular variable, to the maximum value of “+3”. SCORE INTERPRETATION AND RANKING Table 5-d places a business in Di Norcia’s grid, according to its attained aggregate score. A business’s score reflects its attitude and practical initiatives towards socially responsible behaviour. This is evident from how proactive it is in choosing its sphere of SR activity, and how far ahead it is in practically implementing actions. Two characteristics determine where a business fits into the grid; voluntary participation and proactive attitude. Companies who are resistant to SR ideas fall in category I. Companies scoring higher on action fall in category II. Those with a higher score on the proactive attitude, fall in category III. Those scoring high on both fall in category IV. IMPORTANT NOTE: The scores or ratings are not intended to compare the various companies or pass judgement. The scores simply reflect a quantification of the numerous observations recorded from a wide variety of stakeholders, and despite efforts to limit bias, cannot control for individual interpretation of open-ended questions. The following statement is included at the request of a respondent company: “The participating companies have trusted the researcher with information not normally available beyond corporate boundaries. They retain their rights to their own corporate information and may consider it a breach of confidentiality if data or ratings from this research are quoted without the owner’s express consent.”
37 Table-5-a Social Responsibility Measurement Variables Found in Standard Assessment tools and Brand codes of Conduct Adidas ESSR/ TCCR FairTrade Mitre Nike Puma Reebok SA8000 Child labor Do not employ children     Do not engage in or support child labour        Redemption of child labor    Promotion of child education   Exposure to hazard, unsafe or unhealthy situations     Forced labor Prison labor        Bonded labor        Human Rights Discrimination Discrimination against Cast, race, origin, gender, etc.        Harassment and threats    Employee Rights Compensation Wages meet legal or industry minimum        Sustainable community wages to meet basic needs     Equal pay for work of equal value     Working conditions    Child care, elder care and community service    Benefits and insurance    Working hours Overtime according to law       Maximum 60 hours per week Freedom of association Labor force representative of community where located      Unions and right of collective bargaining    Disciplinary practices Physical, sexual, psychological or verbal harassment/abuse     Health and Safety Safe and healthy work environment      Preventive measures  First aid supplies  Management systems Review adequacy, suitability, and continuing effectiveness of company's policy  SA policy  Social accountability policy documented and publicly available  Internal compliance process of training onsite inspections and audits of suppliers  Violations are effectively addressed  SA preparation and conduction Accepts independent monitoring from NGOs, local communities, religious and HR, CR and labor groups.  Disclosure Transparent. Result of internal and external monitoring available to public   Ecosystem Company action do not damage global environment   Physical infrastructure impact  Social infrastructure impact Community involvement Contribute to improve community conditions    Customers and consumers rights International standards for products and services  Products meet customer requirement  Ethical Marketing practices  Fair trading practices  Fair advertisement and labelling. Products with clear , specific warnings
38 Table 5-b + Aware of/ agree to Social Responsibility variable ++ Planning to implement Social Responsibility variable +++ Already implemented/ actively support or participate x Unaware of or don't approve of SR variable - Initiative has a negative effect on the SR variable NI Insufficient information to judge NA Not applicable Scoring system adapted from the tool developed by Levi Strauss & Company (Makower,1994) Level of Action/Practical Implementation on Selected Social Responsibility Variables Adidas Capital Sublime FairT Talon Mitre LW Nike Saga Puma Alitrad Reebok Moltex Vision mission Statement + X x x + ++ x +++ ++ + ++ ++ x Code of conduct ++ + + +++ ++ + + +++ +++ ++ ++ +++ + Variable SA 8000 Child Labour Involve in elimination of child labor + +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Engage in or support child education + ++ +++ x ++ x + +++ ++ ++ + ++ ++ Remediation/rehabilitation of child labor x X ++ ++ x + x x ++ + x ++ x Promotion of child education x X ++ + ++ x x ++ ++ + ++ ++ + Exposure to hazardous and unhealthy situations + + + ++ + + x + ++ ++ ++ ++ ++ Forced labor Prison labor +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Bonded labor +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Health and Safety Safe and healthy work environment + ++ ++ ++ ++ ++ ++ +++ +++ +++ ++ ++ ++ Health and safety manager x X x x x x x +++ x +++ x + x Clean Air, water, ++ ++ ++ ++ + ++ ++ +++ +++ +++ ++ +++ ++ No exposure to hazardous, unsafe or unhealthy situations in or outside workplace +++ ++ ++ ++ ++ +++ x +++ ++ +++ ++ +++ ++ Health and safety laws and systems to detect and respond to potential threats NI X x + + ++ x +++ ++ +++ x +++ ++ Freedom of association Labor force representative of communities in which operation is located x + x x + ++ + ++ + + + x ++ Discrimination/ Human Rights Discrimination against Cast, race, national origin, gender, disability, political affiliation, union membership ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ Disciplinary practices Declared position on equal opportunity x + + + + x + +++ + ++ x ++ + No employee subject to physical, sexual, psychological or verbal harassment or x +++ ++ ++ ++ x ++ ++ ++ ++ x ++ ++ Working hours Overtime according to law +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Maximum 60 hours per week +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Compensation Wages meet legal or industry minimum +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Pays sustainable community wages to meet basic needs ++ ++ ++ +++ ++ ++ ++ +++ ++ +++ ++ ++ + Equal pay for work of equal value NI NI NI NI NI NI NI NI NI NI NI NI Benefits and insurance + + x + ++ + + +++ +++ ++ x ++ ++ Working conditions + + ++ ++ ++ + ++ +++ +++ +++ +++ ++ ++ Child, elder care and community service + x x x + x x +++ +++ x X + x
39 Table 5-b continued Adidas Capital Sublime FairT Talon Mitre Leatherware Nike Saga Puma Alitrad Reebok Moltex Management systems Regular meetings x + + + ++ +++ + +++ ++ NI + +++ ++ Review Sources of information feedback mechanism ++ x x ++ x ++ + ++ x NI ++ +++ x Computerized Information system x x x x + ++ x +++ +++ x ++ +++ x Social Auditing Own Social Auditing policy ++ x x ++ x ++ x +++ +++ ++ x +++ x Onsite inspections internal ++ ++ ++ + ++ x ++ +++ ++ ++ ++ ++ +++ Onsite inspections external x +++ +++ x +++ x +++ +++ +++ ++ +++ x +++ Internal compliance NI x + NA + NI + ++ + NI + ++ + Process of training and audits of suppliers + ++ + + ++ ++ + +++ ++ x x +++ ++ Violations are effectively addressed x + NI ++ NI x NI NI NI x x ++ ++ Accepts independent monitoring from NGOs, local communities, religious and HR, CR and labor groups. x NI NI + + x + ++ ++ ++ + x + Accepts independent monitoring from international agencies + ++ ++ + ++ x ++ ++ ++ ++ ++ x ++ Familiarity with/implementation of social Auditing Standards x x x ++ x + x ++ +++ x x +++ x Disclosure Transparent. Result of internal and external monitoring available to public x x x ++ + x + ++ + + + ++ + Independent Company SA variables Leader ethical attitude Action for unethical behavior x ++ + ++ x x x x NI x x - Feel obligation for workers + + + +++ ++ x + ++ +++ + + ++ ++ Feel obligation for community x x ++ ++ ++ x x +++ ++ x + +++ x Ecosystem Company action do not damage global environment ++ ++ +++ ++ ++ ++ ++ ++ +++ +++ ++ +++ +++ Physical infrastructure impact x ++ ++ ++ + + + +++ +++ ++ + ++ + Social infrastructure impact - -x -+ -++ -+ -+ --++ --++ -+ -x -+ -++ -+ Community involvement ++ x + + ++ x x + + x + ++ + Contribute to improve community Conditions ++ X + + ++ x x + + x + ++ + Employer/worker support programs Free meals, child care centres, sports + x x x x x x +++ +++ x x x + Safety procedures x x x + ++ x ++ ++ ++ x ++ ++ Credits, Insurance + + x ++ x x x ++ +++ x x + + Education , sports, + ++ x x x x x +++ +++ + x ++ ++ Customers and consumers International standards for products and services +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Products meet customer requirement +++ +++ +++ + +++ +++ +++ +++ +++ +++ x +++ +++ Ethical Marketing practices NI ++ ++ +++ ++ + + ++ +++ ++ x ++ ++ fair trading practices NI ++ ++ +++ ++ + + ++ ++ ++ x ++ ++ Fair advertisement and labeling. NI ++ ++ +++ ++ + NI ++ ++ ++ x ++ ++ Products with clear , specific warnings ++ NI NI NI NI ++ + +++ +++ +++ x ++ NI
40 Table 5-c Aggregate Score on Cumulative Performance* on SA Variables Adidas Capital Sublime Fairtrade Talon Mitre Leather Ware Nike Saga Puma AliTrad Reebok Moltex Code of conduct 2 2.0 1 1.0 1 1.0 3 3.0 2 2.0 1 1.0 1 1.0 3 3.0 3 3.0 3 3.0 2 2.0 3 3.0 1 1.0 Child Labour 3 0.6 6 1.0 11 2.2 8 1.6 8 1.6 5 1.0 5 1.0 8 1.8 11 2.2 9 1.8 8 1.6 11 2.2 8 1.6 Forced labor 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 Health and Safety 7 1.4 6 1.2 5 1.0 7 1.4 6 1.2 9 1.8 4 0.8 15 3.0 10 2.0 15 3.0 6 1.2 12 2.4 8 1.6 Freedom of association 0 0.0 1 1.0 0 0.0 0 0.0 1 1.0 2 2.0 1 1.0 2 2.0 1 1.0 1 1.0 1 1.0 0 0.0 2 2.0 Discrimination/ Human Rights 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 Disciplinary practices 0 0.0 4 2.0 3 1.5 3 1.5 3 1.5 0 0.0 3 1.5 5 2.5 3 1.5 4 2.0 0 0.0 4 2.0 3 1.5 Working hours 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 Compensation 7 1.2 7 1.2 7 1.2 10 1.7 10 1.7 7 1.3 8 1.3 15 2.5 14 2.3 11 1.8 8 1.3 10 1.7 8 1.2 Management systems 2 0.5 1 0.3 1 0.3 3 0.8 1 0.8 7 1.8 2 0.5 8 2.0 5 1.3 0 0.0 5 1.3 9 2.3 2 0.5 Social Auditing 6 0.8 10 1.3 9 1.0 11 1.3 11 1.3 5 0.6 10 1.1 20 2.5 18 2.3 10 1.3 9 1.1 15 1.9 14 1.8 Disclosure 0 0.0 0 0.0 0 0.0 2 2.0 1 1.0 0 0.0 1 1.0 2 2.0 1 1.0 1 1.0 1 1.0 2 2.0 1 1.0 Leader ethical attitude 1 0.3 3 1.0 4 1.3 7 2.3 4 1.3 0 0.0 1 0.3 5 1.7 5 1.7 1 0.3 2 0.7 5 1.7 2 0.7 Ecosystem 1 0.3 4 1.3 5 1.7 3 1.0 3 1 3 1.0 3 1.0 5 1.7 6 2.0 4 1.3 3 1.0 6 2.0 4 1.3 Community Involvement 2 2.0 0 0.0 1 1.0 1 1.0 2 2.0 0 0.0 0 0.0 1 1.0 1 1.0 0 0.0 1 1.0 2 2.0 1 1.0 Employer/Worker Support program 3 0.8 3 0.8 0 0.0 3 0.8 0 0.0 2 0.5 0 0.0 10 2.5 11 2.8 3 0.8 0 0.0 5 1.3 6 1.5 Customer and Consumer 8 1.3 12 2.0 12 2.0 15 2.5 12 2.0 11 1.8 9 1.5 15 2.5 16 2.7 15 2.5 6 1.0 14 2.3 12 2.0 NOTE: The first column under each company name represents the raw score on a particular variable. The second column gives the score which is the average of sub-variable scores. Discussion of Performance Variables CODE OF CONDUCT Nike and Puma were the brands whose local counterparts were aware of their vision of trust and quality respectively. Among local manufacturers Saga promoted its vision of "share, care, dare", and Talon and Ali Trading emphasised their unwritten vision of quality.
41 None of the manufacturers has its own code of conduct, except Saga that claims to be working on one through an ongoing participatory process. Each manufacturer, however, is required to follow a code of conduct handed down by their contracting brand. This varies from bullet point, one-page versions as in the case of Nike and Puma, to more detailed policy statements for Adidas, Mitre, and Reebok. Fair-Trade have a detailed set of operational criteria that, according to them, form the code of conduct. Each of the codes of conduct, and the Fair-Trade criteria, emphasises nearly the same set of labour practice principles as found under the various ILO conventions. These areas include elimination of child- or forced labour, labour and employee rights, and responsibilities to the environment and the community. All brands have communicated their formal codes of conduct to their manufacturer in writing. Leatherware disclosed that although Mitre has not provided any written code of conduct, it has been conveyed verbally and through various business documents. In the case of Nike and Reebok, the codes are translated into Urdu and are accessible to literate workers. (Table 5-b) Regarding the implementation of the codes of conduct in a way that is visible, the results are highly variable. Saga/Nike appear farther ahead in establishing demonstrable systems that show that the code of conduct is being implemented. This may be so because they are relatively more willing to open up their modern plant and monitoring programme to outside scrutiny. There is a separate department to run a programme called SHAPE43 that is open to third party monitoring by a chartered accounting firm in addition to the ILO. This programme is implemented through groups of elected employees who document the quality of benefits and ensure a working environment standards. The two companies have health and education community projects with equal resource contributions. There is evidence of physical infrastructure and a management information system being created to match a set of written objectives. The Saga/Nike relationship may be taken as an example of how two companies of disparate size and focus can come together because of a shared view of business practice. Saga applies uniform standards to all client brands. Reebok has created significant physical infrastructure, backed by independent monitoring mechanisms to ensure that its code of conduct is followed to a verifiable level. As Moltex manufactures for a number of brands, its sets of arrangements for
42 Reebok are different for those that it has for other brands and make a useful comparison. Reebok balls are produced in an exclusive plant adjacent to the main factory that employs superior labour standards. Monitors hired by Reebok operate independently of Moltex management and ensure that the required standards are maintained. For the other brands Moltex relies on the traditional "maker" network and sources from village workshops registered with the ILO. While both arrangements are "clean" according to the evidence available, the difference may be illustrative of how a manufacturer will change its practices for a client brand keen to invest in promoting its labour practice standard, but retain existing practices where there is no pressure to change them. Of the contractors for Adidas, Mitre and Puma, none has advanced to the level of the two mentioned above. Each plan to gradually build up systems and invest in infrastructure better capable of fulfilling the claims made by their respective brand, but seem content with being members of the Sialkot Partnership. Adidas and Puma both have locally based quality inspectors, who are required to monitor labour practices by their respective sub-contractors also. Adidas is also establishing a permanent office in Sialkot. Sublime plans to construct purpose-built centres for ball production, offering better employee benefits. Others are opting for less expensive infrastructure. Capital provides resources to sub-contractors for upgrading existing production facilities. Leatherware has a phased programme under Mitre's ongoing supervision to bring production in line with guidelines. Ali Trading shows interest but cited resource constraints for not moving as rapidly as the other manufactures who have a larger turnover. Talon is working with Fair-Trade to standardise its labour practice mechanisms to the minimal requirements. This is perhaps the only case in Sialkot where the client pays a direct financial subsidy to the manufacturer over in addition to prevailing market prices. Fair-Trade has contracted a local NGO to support community credit and education initiatives, with the Pakistan office of Rugmark providing technical guidance. All local manufacturers are overwhelmingly preoccupied with child labour, as opposed to broader labour practice and ethical business standards. Apparently because of the controversy stirred by the "Foul Ball Campaign" in the USA and television coverage portraying the Pakistani industry as the villain. Manufacturers’ responses to questions about labour standards and business ethics show that these concepts are equated with child labour. The codes of conduct, on the other hand, focus on general principles that
43 included child labour as one among them. Moreover, except for Mitre who were accused of exploiting child workers in India, the others brands have faced criticism on labour issues others than child labour. Adidas is in litigation for exploiting prison labour in China, while Nike has faced strong criticism for poor labour conditions in it's Vietnam manufacturing arrangements. Except for Nike and Reebok, no brand has made any direct or indirect investments into mechanisms or infrastructure for “cleaner” sourcing. None of the brands or Fair-Trade have communicated their respective codes of conduct to the retailers asked. Store managers interviewed said they knew of the media's criticism of the brands' sourcing. However, the brands themselves had made no effort to reach the retailers or provide any information to help them with customer queries. The only exception was Nike who provided written materials on the company's labour practices in developing countries, possibly in anticipation of consumer concern. The consumers interviewed were also unaware of any labour practice or ethical business document made public by the brands. None had heard of any of the Pakistani manufacturers – or Sialkot. Only one was aware of Pakistan as a source of balls, recalling a BBC television story around the World Cup. CHILD LABOUR All brands and their contracting manufacturers claim not to employ or engage child labour in their manufacturing units. The Sialkot Partnership is presented as evidence of this commitment. Puma and Reebok claim special care and assistance to children. None of the codes of conduct specifically focus on the rehabilitation of child workers who face loss of livelihoods as a consequence of the Sialkot project. Mitre claims credit for providing the impetus for work leading to the Atlanta Agreement, but is of the view that the rehabilitation and social aspects of child labour elimination should be dealt by welfare agencies. Reebok claims giving importance to children's education and rehabilitation, presenting its NGO-run school as proof. Local opinion leaders dispute this claim, saying the one school that does exist is far away from areas where children are likely to be exploited. It has no specific activity that can plausibly serve a rehabilitative function.
44 Capital and Sublime both claim that although there is no pressure from Adidas regarding education or any community focused programme, they are engaged in supporting basic education on their own because they feel it is their civic duty. Their education work does not target working children specifically. Sublime is directly involved in managing 21 primary schools and one girls’ high school under a family trust. Each of the local manufacturers claims to promote education by funding deserving students for college and university. Capital, Saga and Sublime have joined a number of other businesses in resourcing Sialkot's first "public school". Except for Nike and Reebok, no brand has expressed interest in local education projects. Saga and Nike claim to be finalising a community services programme to be run by an NGO. At present, however, this is limited to weekly mobile health clinics for women and children. Child care centres in each of the Saga facilities provide pre-school care and basic literacy to children of workers making Puma and Nike balls. Puma and Leatherware are interested to help local schools in future in a "fitting way". On the whole, the brands and their local partners appear serious about removing child labour from their production processes. The manufacturers have pooled about US$300,000 to pay ILO for managing an independent monitoring programme. FORCED LABOUR The available evidence excludes forced labour from Sialkot's ball industry. This may be why Adidas is said to be relocating significant business from China after facing criticism for using prison labour. Except for Mitre, the other brands source only in Pakistan. Field research over the past two years by Save the Children, ILO, the Human Rights Commission of Pakistan, and others has not substantiated use of working advances to force artisans to work for manufacturers. A 1997 Save the Children report suggests that the working advance, "peshgi", serves to strengthen the local cash economy, providing poor people who cannot put up collateral, access to capital. Regulated and made equitable this system could contribute to a sustainable local economic solution. HEALTH AND SAFETY Adidas, Fair-Trade, Nike, Mitre, Puma and Reebok each has written policies on health and safety in the work environment that complement Pakistan’s workplace laws, except
45 legal employment age. Despite the law allowing employment to 14 year-olds, the brands have set their own limit at 16 years. The most visible health and safety issues are: 1. Fire protection. All factory sites visited have fire extinguishers as required by law, but there is a marked variation in the level of awareness and preparedness for an emergency. Only the new purpose-built plants have adequate fire exits. Among the stitching centres, only Saga and Moltex have fire equipment. All the others have neither equipment nor an adequate number of labelled exit routes. Saga has an in-house fire-fighting unit with a fire-truck and trained crew, who are said to conduct periodic fire drills under their SHAPE programme. No one else has designated fire wardens or awareness programmes or drills. 2. Exposure to fumes and toxic chemicals. Of the processes involved, only two bring workers in contact with potentially hazardous chemicals or fumes. One is during lamination where artificial leather is bonded with fabric using natural latex. The high ammonia content of the solvent exposes workers to fumes over the entire shift. The other is during printing where ball panels are individually hand-screened, exposing the skin to carcinogenic dyes and inks, especially when being mixed without protective equipment. None of the factories visited has verifiable checks on safe handling of toxic chemicals. Safety instructions are limited to sporadic labelling, often in English, which is unintelligible to the workers. Mitre claims it has begun a phased process of upgrading health and safety conditions of it manufacturing partners. The manual on chemical handling it has provided to Leatherware and Saga, in addition to other workplace guidelines, has remained with managers so far. Saga displayed an Urdu translation that it plans to distribute among workers and supervisors. Though every manufacturer expressed frustration with efforts to motivate workers to use masks and gloves, supposedly due the hot climate, there is no evidence of effective awareness building among the manufacturers. The brand guidelines are either non-specific or not followed up consistently. 3. Ergonomics and Posture during work: Each of the factories visited has workstations at waist height. Routine work neither involves lifting heavy weights nor prolonged exposure to noise, particles or glare. In the stitching centres, however, artisans still sit on the floor or low stools, holding ball panels in
46 wooden vices held between their knees. Complaints of back pain and strain on neck muscles are common due to the crouched position artisans retain for up to an hour at a time. Managers claim that the artisans are resistant to changing the workstation design, and did not accept benches in exchange for floor mats. This is understandable considering the "floor" culture of rural Pakistan. The ventilation and lighting is adequate, possibly because the centres shown were the best the manufacturers have. Again, there are stark differences among the conditions present in the various centres. Saga’s nine purpose-built “community centres” and Sublime’s “soccer village” facility are expansive in scale and their design has taken in account the requirements of the work. Reebok's monitors have had Moltex carry out structural changes to its new facility in response to workers complaints about inadequate light and ventilation. The other village- based centres are either existing buildings or built in the local scale and tradition, although they do aim to fulfil the ILO's requirements and the brands' expectations. 4. Use of safety equipment: in addition to handling chemicals and working with ammonia fumes, workers in the factories face another hazard that requires preventive measures. Ball panels are cut using hand-operated cutting presses without adequate safety features. Workers have been known to lose fingers while operating these presses, although it was not possible to meet anyone who had suffered as a result of working on these machines. Management representatives agreed that the threat is real, and there is an industry-wide move towards automated cutting presses that have safety features build in. Saga claims to have phased out all except a few of its hand-operated cutting presses. Even apart from the cutting presses, attention to safety equipment is not clearly visible. Management tend to blame workers for resisting attempts to introduce use of safety equipment, but it appears to be a low priority for them. 5. Air-quality and ventilation: The manufacturers claim to have made considerable improvements in the air quality of their lamination and printing areas as a result of brand intervention. Every one of the factories visited has installed mechanical ventilation systems. Supervisors and managers all agree on the importance of air
47 quality. However, none of them are familiar with any air quality standard or possess any instruments to measure air quality in their facilities. 6. Emergency medical care: Ball production processes can be divided into three; panel production, stitching and finishing. Medical emergencies that can potentially arise in the first include chemical ingestion or injurious contact with the skin or eyes, hand injury from cutting presses, or accidents involving electrical or moving machinery. In the second category, the most common are needle-pricks to fingers, or rarely, to the eye. The third category may present machine operation-related injuries while lifting or moving loads. In addition, accidents from slippery floors, falls from stairs or trauma resulting from transport-related injuries or fire hazards can potentially cause medical emergencies. Reportedly, the incidence of any of these is significantly low. However, each of the factories claim that workers have access to emergency medical care when needed. The artisans have no such arrangements, except at the Saga centres, which have full-time doctors and paramedics, Sublime, which has a mobile doctor service for workers, and Reebok, which provides workers medical cover through the government's Social Security department. Like other areas, the health and safety measures also vary significantly. Factories are better equipped than are village-based centres. The workplaces are generally clean but air quality is a significant issue. To a lesser degree are natural ventilation, sanitary toilets. None of the manufacturers has a designated health and safety manager. There is a need to bring village stitching centres up to acceptable standards, and the ILO’s proposal to include health, safety and working environment conditions in their monitoring guidelines may be beneficial. FREEDOM OF ASSOCIATION All brands recognise the right for workers to form unions, and to collective bargaining. They accept the idea of involving labour force representatives into decision-making. Puma chose not to respond. There are no organised labour unions in any of the manufacturer's factories. With regard to the stitching centres, managers claim that since artisans are piece-rate sub-contractors they don not qualify as "employees" and hence do not fall under the freedom of association clause in Pakistani law. Reebok believes their group managers work as representatives, Adidas refers to the independent "maker" as a
48 representative of the artisans, while Nike/Saga claims that its elected SHAPE representatives fall within the definition of labour force representatives. The Puma representative spends one hour every month meeting with artisans and workers to handle complaints through an established mechanism. Pakistani labour law empowers the artisans to organise and bargain collectively even when they are piece-rate sub-contractors. The "makers" who negotiate piece rates based on the seasonal market may well be playing this role. Though not a result of collective bargaining, the "makers" have been able to exploit the heightened sensitivity of the brands towards "clean" sourcing. The piece-rate has doubled over the past 18 months as a direct consequence of the attention that the industry has received from outside agencies. In addition, non-salary benefits such as free meals, transport and medical services have also increased appreciably during this time. DISCRIMINATION The brands all proclaim non-discriminatory policies. Nike, Puma and Reebok have a written stance on threats and harassment. There is no evidence of the manufacturers disregarding this policy. However, from the data available it is impossible to either dismiss or accept this claim. COMPENSATION The Pakistan government periodically fixes minimum wage levels44 . Every brand and their manufacturer claim to pay accordingly, and workers agree. Fair-Trade, Nike, and Reebok expect their contractors to pay sustainable or “living”. It is important to note that a majority of the artisans are on contract, don’t work for a continuous period of time, and may have other sources of income. Hence, it is not easy to determine whether wages declared are "living" wages. Ali Trading, Capital, Leatherware, and Sublime pay a cash piece rate to their artisans and claim that it is sufficiently high to cover costs of any benefits. Moltex and Talon pay a cash piece-rate and add some benefits such as social security contributions and free or subsidised meals. Saga pays a monthly salary, bonuses and performance pay along with benefits that are the same for full-time and part-time employees, including child-care, healthcare, leisure facilities, commodity credit and community outreach services. Fair-Trade and Saga provide insurance and credit. Fair- trade has established a Trust managed by Talon into which a fixed amount per ball is
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
Ambreen Supply chain 1998
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Ambreen Supply chain 1998

  • 1. UNIVERSITY OF CAMBRIDGE THE JUDGE INSTITUTE OF MANAGEMENT STUDIES BRAND IMAGE AND BUSINESS REALITY: ETHICAL PRACTICE STANDARDS ALONG SUPPLY CHAINS IN THE ATHLETIC BALL INDUSTRY by AMBREEN WAHEED SEPTEMBER 1998
  • 2. 2 Table of Contents I. ACKNOWLEDGEMENTS 3 II. LIST OF TABLES 4 III. LIST OF FIGURES 4 IV. ABSTRACT 5 V. WORKING DEFINITIONS 6 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 1.0 INTRODUCTION 1.1 Rationale 7 1.2 The Context 8 1.3 The Case of the Athletic Ball Industry 8 1.4 Sialkot, Hand-stitched Balls, and Social Audits 10 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 2.0 THEORETIC PERSPECTIVE 2.1 Ethics in Society 11 2.2 Ethics in Business 12 2.3 What is an Ethical Business Organisation? 15 2.4 Measuring Business Ethics and Social Responsibility 17 2.5 Social Auditing and Brand Image 19 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 3.0 RESEARCH METHODOLOGY 3.1 Research Questions 21 3.2 Approach 21 3.3 The Investigative Process 23 3.4 Data Collection and Tabulation 24 3.5 Outline of Research 26 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 4.0 DATA PRESENTATION 4.1 Social Accountability Standards 27 4.2 Codes of Conduct & Organisational Policies 27 4.3 Advertising and Claims 28 4.4 Interviews 28 4.5 Questionnaires & Telephone Discussions 29 4.6 Field Observations & Physical Verification 30 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 5.0 DATA ANALYSIS 5.1 The Supply Chain 32 5.2 The Stakeholders 33 5.3 Representation & Discussion of Findings 34 5.4 Where the Brands Stand on Social Responsibility 51 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. 6.0 CONCLUSION 6.1 Summary of Findings 53 6.2 The Last Word 55 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. VI. ENDNOTES 57 VII. REFERENCES R1 VIII. APPENDIX A3
  • 4. 4 II. LIST OF TABLES Table 3 – a Outline of Research Information Requirements page 26 Table 5 – a Social Auditing Variables & Brand Codes of Conduct page 36 Table 5 – b Comparative Rating of Performance Variables page 37 Table 5 – c Aggregate Ratings of Performance Variables page 38 Table 5 – d Social Performance Through the supply chain page 52 …………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………. III. LIST OF FIGURES Fig.2 – a Concentric Circles of Corporate Responsibility page 14 Fig.2 – b Why Businesses Choose Social Auditing page 20 Fig.5 – a The Athletic Ball Supply Chain page 32 Fig.5 – b Stakeholder Dynamics in the Ball Industry page 33
  • 5. 5 IV. ABSTRACT Responding to widespread consumer concern about exploitative working conditions along supply chains of some of the most recognised sports brands, the international sporting goods industry adopted a Code of Conduct designed to ensure socially responsive sourcing. Meanwhile, in Sialkot, Pakistan – source of 70% of the world’s hand-stitched athletic balls – individual brands introduced ethical practice guidelines for their respective sub-contractors. Brand marketing messages claim success of the Sialkot Partnership. Consumers are assured that sub-contractors must prove compliance of these policy guidelines, but there is insufficient direct evidence to inform public opinion. This research applied established social responsibility performance criteria to key points in the supply chain of five global brands and one fair-trade organisation who source in Sialkot. It found that each brand possesses well-articulated policies on corporate responsibility and labour practice for manufacturers. These policies are conveyed to the consumer as part of the brand’s image. However, a look at the manufacturing end of the supply chain reveals that the essence of these Codes of Conduct are not well understood at the level where artisans hand-stitch the balls. The brands need to work harder with their manufacturers to encourage the attitude of corporate citizenship necessary for implementing socially responsive policy.
  • 6. 6 V. WORKING DEFINITIONS - Athletic balls: Term applied to all inflatable balls used for competitive sports. - Beneficiaries: Local people standing to gain from development interventions. - Brand: Owners of brand names, who sub-contract manufacturing. - Business Ethics: Body of knowledge devoted to moral aspect of transactions. - Code of Conduct: Policy guidelines outlining best practices based on vision. - Community: In this case, a socio-culturally-homogenous group living in a place. - Corporate Citizenship: The extent of fulfilment of a company’s social contract. - “Maker”: The middleman responsible for dealing with home-based labour. - Manufacturer: Sub-contractor often producing for many brands at once. - Social Auditing: Evolving set of methods used to assess business responsibility. - Social Responsibility: The social contract between business and society. - Stakeholders: Anyone standing to gain or lose from a company’s performance. - “Stitcher”: Artisan who hand-stitches an athletic ball, often in a family setting. - Supply Chain: From raw material to the retail shelf – the journey of a product.
  • 7. 7 1.0 Introduction 1.1 RATIONALE Walk into a sports store in Britain. The soccer ball on the shelf, with the Brazilian team logo will most likely be made of Korean artificial leather laminated with Japanese textile and Malaysian rubber latex; stitched by a Pakistani artisan around an Indian bladder with a German design printed in American ink. Few sporting and leisure articles originate from a single source of materials or manufacture. They are usually commissioned from sub-contractors by marketing companies who own brand names familiar to the consumer. Brand company merchandisers must identify the most profitable sourcing arrangement for a particular article. Thus, an overwhelming proportion of athletic balls destined for retail in Europe or North America is assembled in South Asia with raw materials from the Pacific Rim. Tracking supply chains of leisure products has the potential to be studied at considerable depth, but can be an ambitious undertaking. Within the limitations of this research, therefore, it was necessary focus on a product that could serve an illustrative purpose without the need to unravel a complicated supply chain. The athletic ball was chosen, firstly, because no independent study of corporate responsibility in the athletic ball industry is available. Secondly, because the product received a lot of media attention especially in the months preceding the World Cup last summer. Thirdly, it is 18 months since major athletic ball brands joined their local sub- contractors to introduce ethical sourcing practices to the hand-stitched ball industry. Fourthly, in Sialkot, east central Pakistan lives the world’s largest cluster of ball stitching artisans, making fieldwork relatively convenient. Fifthly, being home to the Sialkot Partnership, which accounts for 70% of the international soccer-ball business1 a representative sample is available. And finally, because the well-defined supply chain, between the buyer at a retail outlet in the West and the artisan commissioned by a local manufacturer in a developing country, allows a thorough study. This study coincides with the entry of Social Auditing technique into a mature phase represented by the introduction of “standardised” assessment tools2 . The cross- applicability of some newly developed tools is still under debate. Criticised for
  • 8. 8 representing “Western values”, and being culturally unsuited to communities where they will most likely be employed, a field test in Pakistan provides an opportunity to further the dialogue on their value. 1.2 THE CONTEXT The social responsibility debate arrived in the soccer arena in 1994 when human rights groups and the media accused major sporting goods brands of exploitative labour practices in poor countries. One media expose after another criticised some of the most recognised sports brands for creating enormous profit margins out of the misery of poverty-stricken Asians and Latin Americans3 . The soccer-ball industry came in for some of the strongest criticism4 . The “Foul Ball” Campaign called on “soccer moms” to boycott balls made by children in unacceptable labour conditions. When the brands said they had limited control over sub-contracting manufacturers in China, India, Pakistan5 or Vietnam, they incriminated themselves even more. Parliamentary debates in the United States6 and in the European Parliament took notice and contemplated import embargoes7 on sporting goods produced by exploited labour. The picture was clouded by the reported denials of Pakistani officials8 and a visible defensiveness within its industry9 . The media attention spurred10 the World Federation of the Sporting Goods Industry (WFSGI) into adopting an Ethical Business Code of Conduct in July 1997 for its members11 . Most WFSGI-member soccer brands source their hand-stitched athletic balls from Sialkot, Pakistan12 . As a result, brands and their manufacturing partners in Sialkot launched the Sialkot Partnership in February 1997, which aims to shift all athletic ball production by March 1999, to manufacturing units monitored by the International Labour Organisation (ILO). The Sialkot manufacturers are jointly funding for the ILO monitoring programme. 1.2 THE CASE OF THE ATHLETIC BALL INDUSTRY Brands and manufacturers invariably refer to their role in the Sialkot Partnership13 , while some proclaim their success louder than others do14 . Its supporters claim the project is a revolution in socially responsible sourcing, bringing together diverse agencies from the UN system, government and the NGO sector in an intervention that leads to focused
  • 9. 9 local development. Recognised by the Council on Economic Priorities15 , and Business for Social Responsibility16 in 1997, it could be a test case for similar interventions in other developing countries, and may become a precursor for an industry-wide social responsibility trend17 . If we can confirm that the Sialkot project has appreciably improved the labour practice situation in the ball industry, prices of soccer balls have not increased18 , yet the local manufacturers still manage to remain profitable despite the added costs, there are lessons here for Social Audit practitioners. In the time it took to negotiate the Sialkot Partnership, the brands implemented their own sourcing guidelines for their manufacturers. Anticipating consumer concern, especially in a World Cup year they publicised their new sourcing policies19 and the business standards and working conditions they guaranteed20 in Sialkot. It is easy to appreciate the pressure this entire situation put on the Sialkot manufacturers to adopt21 brand guidelines and the WFSGI code unquestioningly. Membership of the Partnership expanded rapidly to almost 60% of the business community within the first three months. Ironically it is the rapid move away from the traditional ways of business that has kept the philosophy of corporate citizenship from permeating deeply. Only a handful of local manufacturers have demonstrated a verifiable commitment to ensure “clean” production processes and supplier arrangements. The rest do not appear completely convinced that “good practice is good business” over the long term. Amongst the 34 companies who have signed up for the Partnership, only one has established a separate corporate responsibility department, while fewer than 10 have designated social responsibility staff. Fortunately, because the few champions of the idea represent over half the exports from Sialkot, the idea has gained impressive momentum22 , compared to other labour-intensive industries found all over Asia and South America. The ILO’s intervention as the third party monitor has generally legitimised the industry’s efforts and their claims now have greater credibility. Other high profile UN agencies, international human rights organisations and national social development NGOs are setting up in Sialkot23 . With the number of ILO-registered centres multiplying on target and the future of business with American and European clients tied firmly to the Partnership, it seems social responsibility has come to stay in Sialkot’s athletic ball industry. Even if they cannot be credited with anything more than a timely response to a
  • 10. 10 business threat24 , Sialkot’s business leaders are quickly realising how difficult it will be for them to back away from the standards they have set for themselves. 1.3 SIALKOT, HAND-STITCHED BALLS AND SOCIAL AUDITS Whether this awareness has led to any meaningful attitude change among local businessmen is yet to be determined. Despite the apparent level of interest, they lack conceptual clarity about what social responsibility means for business. The capacity within the industry to promote such understanding is limited because the very manufacturers capable of disseminating social responsibility values learnt doing business in highly conscious consumer societies like Scandinavia and the USA are unwilling to share them with competitors. An accurate assessment of the attitudes and practices of local business leaders toward social responsibility can lead to a workable approach for building their awareness and understanding. A recognised yardstick is required. Consumer groups, trades unions, human rights advocates, development workers and stakeholders themselves, are all following developments in Sialkot for their own reasons. Especially so, when the brands claim elaborate controls on their product manufacturing arrangements, and guarantee the highest standards of ethical business. Thus, the athletic ball finds itself under scrutiny again: Are “foul-balls” still emerging from the depths of a brand’s supply chain? How true are claims of sourcing guidelines, codes of conduct and “clean” product? Again, an acceptable measuring tool is needed. In pace with the demand for socially acceptable products, recent strides in Social Auditing offer tools for assessing business leaders’ attitudes and practices regarding their social responsibility as well as sourcing for specific products. The Institute of Social and Ethical AccountAbility has created standard tools to help companies quantify their social performance25 . The Council on Economic Priorities’ SA8000 standard is for companies who want third party social audits26 . Business for Social Responsibility distributes a “Social Responsibility Starter Kit” for companies looking to set up an in-house audit capacity. The Ecumenical Council on Corporate Responsibility and its affiliates27 have their own benchmarks for business performance. This research seizes the opportunity to field-test a “standard” audit tool in Sialkot’s ball industry. It may help bring the corporate responsibility debate to Pakistan.
  • 11. 11 2.0 Theoretic Perspective 2.1 ETHICS IN SOCIETY Ethics is the standard of what society considers right and wrong in terms of acceptable behaviour (Serwinek, 1996). While ethics is more easily defined as a term, its interpretation continues to be debated. The yardsticks that determine the values for a code of ethics – for a society, for a culture, for a business – all remain fairly general and may vary from one society to another. There is no dispute, however, that Ethics lies at the very centre of social equilibrium. The Encyclopaedic Dictionary of Business Ethics (Werhane and Freeman, eds. 1997) defines it as a planned attempt to follow society’s norms, standards and expectations. Morality is the term that covers practices that may be considered “right” or “wrong”, the rules that govern those activities and the values that are followed in practice. Moral codes create a balance of power between segments of society, those that are influential and those comparatively vulnerable. By imposing restraint on one they empower the other. A society with no moral structure may seem attractive from the point of view of the individual. But without morality driving a legal system, and with the individual charged with adjudicating conflict, only the interest of the strongest would prevail. This environment of unrestrained self-interest with everyone pursuing their own interests would be no more than a state of war. Hobbes has called it the "state of nature" in which human nature tends to continuously test ethical limits. A society’s moral values encourage individuals to put off their natural tendencies (Christensen, 1997), and help to adjust for this human failing. It is, perhaps for this reason that religions exhort their followers to rise beyond “temptation” in the pursuit of “higher” inclinations. On the other hand, there are those who have much greater faith in the inherent goodness of the human character and feel that, barring a few exceptions, every one would prefer to operate in an ethical environment (Daigneault, 1997). Business is simply the extension of society (Evans, 1991), with the financial motive emphasised. Hence, the values of a society permeate the conduct of business within it. Societies are governed by a “give-and-take” ethic. The concepts of rights, privileges and duties construct the parameters of exchange, and the rules require that members of a society stay within them for it to retain a state of equilibrium. The “currency” of this
  • 12. 12 social exchange is a system of rewards and punishments that accrue in response to how successful or unsuccessful a member is in meeting the demands of the required social “trade-offs”. For every member, however, “right”, “privilege” or “duty” constitute value measurements that can be “graded” to assess conformity with the societal ethos. With “right” being the counterweight or equaliser, a higher “score” entitles a member to “more privilege”, but may also demand “greater duty”. On the other hand when a member threatens the equilibrium by scoring low, “privilege” is withdrawn to the point where it can turn into sanctions or exclusion. Therefore, a definition of business ethics cannot be far removed from a society’s articulation of its own values and principles. There is a strong tradition of business ethics throughout history (Werhane & Freeman, eds. 1998), though it has become a subject for academic debate only since the last quarter of a century. Plato’s famous saying about virtue being more profitable in the longer term shows how business ethics was a live issue at the time. Aristotle’s ‘ethics of virtue’ is a charter for fairness, calling for moderation, eschewing either excess or deficiency in conduct. Artha – or the pursuit of wealth – in Hinduism has its own rules (Sethi & Steidlmeier, 1997). The ancient Japanese concept of kyosei collectivises social goals and aspirations (Di Norcia, 1998). Islam echoes the value of balancing the positive and negative qualities of human character for the overall benefit of society or Masalahah (Sachedina, 1997). Common to the Judeo-Christian tradition are justice, morality and higher motives as the foundations for the “greater good” that extends to business to form the basis of fair trade and profitability (Tamari, 1997). Even staying independent of purely religious or philosophical perspectives, there are arguments for ethical business behaviour (Daigneault, 1997)28 . Business activity, therefore, solidly fits into a society’s moral fabric. In spite of the amount of discourse on the “amorality of business”, even the staunchest supporters of the point of view qualify their arguments with some moral justification. Adam Smith, oft quoted for his free-market thesis, nonetheless argued for balancing the free market with social institutions and personal relationships. 2.2 ETHICS IN BUSINESS The evolution of business ethics over the past centuries tends to coincide with the natural history of individual rights and empowerment, and more notably, the rise of
  • 13. 13 environmental activism (Cannon, 1994). Leading from a stage in the last century, where the only requirement of business transactions was to stay clear of legal statute (Friedman, 1963), the field has grown now to require that a "fair deal" be achieved for everyone on both sides of the bargain. The present debate is characterised by two principal positions, with a number of “middle-ground” points of view (Gray, Owen and Maunders, 1997. According to the “pristine capitalists” (Gray, Owens and Adams, 1996) such as Friedman and Hetherington business is amoral and seeks only to achieve the highest possible economic benefits in a market unhindered by excessive government regulation. However, even staunch proponents of this utilitarian approach concede that in a human society, every action must have ethical undertones and be judged by moral yardsticks. On the other side of the divide are those who point out flaws in the amoral business argument. They point out that ends cannot be justified by the means. Every business decision is a moral decision since the motive and the way one goes about making a profit is essential to the legitimacy of that profit. Other points of view that challenge the pristine capitalist stance represent political ideologies that are opposed to business as the repository of enormous power. This includes proponents of socialism, human rights, radical feminism, and social ecology, who all believe for various reasons that the ideology of amoral capitalism is fundamentally flawed. In the “middle ground” of this debate are to be found those who feel that by accepting a minimal level of social responsibility businesses can get on with making their profits with less interference. This “expedient” view, when taken up with greater conviction may transform into the “social contract” point of view, which considers the existence of business a favour from the society, and hence must “pay back” by sharing profits for wider social benefit (Samuelson, 1986; Beauchamp & Bowie, 1988; Gray, Owen & Adams, 1997). For two decades now, French has argued that corporations have the capacity to take moral responsibility for their actions much like adult human beings. Kerlin (1997), calls this “legal fiction”, pointing out that moral blame and punishment must ultimately go to the people who have influence on how members of a group behave. He asks if it is possible to “shame” an organisation? In short, while businesses may be amoral in the legal sense, they cannot remain untouched by society’s moral expectations. Hence,
  • 14. 14 although business cannot be termed as a “moral persona”, it is clearly a moral agent. Werhane (1984) differentiates the moral agency into primary and secondary categories. The individual retains the primary moral responsibility for decisions that affect those around, but when organisational decisions lead to policies or actions that have a wider impact, the individuals behind them tend to become indistinguishable from the corporate façade. Corporations are secondary moral agents unable to operate in a “moral vacuum” (Arkin, 1996). The collective responsibility of individual decision-makers cannot be confused with the organisation’s “persona”. Over the years businesses have increasingly begun to view ethical transactions as beneficial to the bottom-line (Matthews, 1988; IBM, 1992; Bolier, 1996; Logsdon and Burke, 1996; Hunter, 1996; Solomon, 1997; Pennington, 1997). It is easy to see how this is true in the information age, since a positive image for a business ensures customer loyalty it is a sure recipe for profitability. Whether consumer-driven (Kaler & Chryssides, 1996) or led by an intrinsic need for moral behaviour (Post, 1996; Daigneault, 1997), today’s business world is learning that individual values are less carefully separated from monetary gain. As a result there is an Education, Health Environment Protection Local Development Safe Working Conditions Quality, Product Profits Jobs, Services
  • 15. 15 increasing tendency to apply morality to the conduct of business. Pope John Paul’s Centisimus Annus (Green, 1997; Sethi, 1997) significantly indicates how the Catholic Church superimposes business and its moral values, justifying the pursuit of “fair” profits balanced by equitable distribution of the wealth created as a result. This changed attitude is perhaps a principal reason for the acceptance of corporate responsibility among modern business. Figure 2-a, from the Council on Economic Development illustrates how a business is placed in its social role. The phenomenal growth of multinationals, in size and influence, and their accumulation of vast resources (Gray, Owen & Adams, 1996) fuels arguments for greater accountability, and hence, social responsibility, to an increasingly aware consumer. Together with a heightened sensitivity about human rights and the environment, and issues of trade globalisation such as dumping and preferential tariffs, business finds itself in a position where it must please a more diverse audience than ever before. The decreasing capacity of businesses to control outsiders’ access to its information complicates the situation further. Much like an evolving organism reacting to external stimuli (Goodpaster in Werhane, 1997/85), the flow of information is compelling business to change forever (Kerlin, 1997). A time has come when business must rely more on the image it creates in the consumer’s mind (Baird, 1997) and be prepared to change company behaviour as a result (Carmichael et al, 1995). No longer can corporations be let off he hook simply by labelling them amoral. This means that society’s expectations of a wider sharing of profits mount, and the vaguely articulated “social contract” between business and society gets more and more public attention (Samuelson, 1986). And, indeed, activists now have powerful arguments to oppose not individuals who run the businesses, but the organisations as a whole29 . The consumer argues that if business has privileges then it must have obligations to match. 2.3 WHAT IS AN ETHICAL BUSINESS ORGANISATION? In broad terms, an ethical business can be defined as one which inspires trust because it is responsible, law-abiding, fair-trading, socially responsive, charitable, and puts values before profits (Appendix-I). Trust, in turn, depends on credibility, character, competence and service (Pennington, 1997) communicated clearly and effectively to the consumer (Elkington, 1997). Being “human” characteristics (Zadek, 1997), these values help the consumer link them to their mental image of a socially responsible business. People
  • 16. 16 want to deal with a “human” organisation that treats its own well, is fair to deal with, and leaves a beneficial impact on its natural, social and commercial surroundings30 (Nolan, 1996; Elkington 1997). Fairness is the value that cuts across the conduct of business as a whole (Solomon, 1993). It applies to investors, owners, worker, suppliers, retailers, community, stakeholders31 , and all participants in the market system. Often businesses try to sell themselves as fair businesses, and are prepared to bear the costs that help present them as such (Augustine, 1997). No doubt that customers are more likely to buy from companies that act ethically and rise above pure economic interest, but there are many who have traditionally doubted the motives of such organisations. It is not unusual for a business to use ethics merely for making their business activity credible, and therefore, more profitable (Solomon, 1993; Kaler & Chryssides, 1996). Being fair means being ethical, sensitive and responsible. Hence, businesses that recognise their role as citizens and assume a responsibility to fulfil it can be termed 'ethical' or ‘socially responsible’ organisations32 (Werhane & Freeman, eds. 1997). A socially responsible business is more direct and proactive in anticipating its own role in its community, being alert to social change, and responding to society's new demands and concerns without deviating from its defined goal. Many successful models are now documented, where businesses have proven their social commitment to their stakeholders by allocating resources to charitable causes or initiating issue-specific programmes (Carmichael & Drummond, 1989; Makower 1994; Scott & Rothman 1994; Reder 1995; Korten, 1996; Bolier 1996; Daigneault, 1997; Wernhane & Freeman, eds. 1997; Zadek, Pruzan & Evans 1997). From the many available definitions and literature describing its desired qualities, the attributes of a good corporate citizen (Mahoney, 1996; Warner, 1996; Werhane & Freeman, 1997; Daigneault, 1997) can be narrowed down to: 1. Disclosure; 2. Respect for people; 3. Human Rights and Labour Rights; 4. Employee Rights; 5. Fair business practices;
  • 17. 17 6. Environment; 7. Community involvement; 8. Political involvement. These characteristics appear in a large number of company codes of conduct, social audit tools and reports, and appraisal formats for various assessment programmes now in vogue33 . They are important indicators for assessing an organisation’s understanding of its own role and how it strives to deliver tangible programmes. 2.4 MEASURING ETHICS IN BUSINESS AND SOCIAL RESPONSIBILITY Employing indicators to assess an organisation’s commitment to its social duties is moving towards becoming a more exact science, following the demand (Zadek, 1997) for assessing the phenomenon in more quantifiable terms. The most commonly used term for it is “Social Auditing” (Blake, Fredrick & Myers, 1976). Theodore Kreps first used the term in 1940, who referred to it in terms of an accountability tool for businesses. Subsequently, in the early 1950’s Howard Bowen used the same term implying it as a management tool. With the passage of time “Social Auditing” has come to mean something that is the barometer for assessing a business is in terms of its social responsibility. But there being still no agreement on the meaning of the term so far (Zadek, 1998), its basic concepts remain less tangibly articulated as opposed to the precision achieved by other management processes in general. The maturation of the definition of Social Auditing has also overlapped debate on which exactly the stakeholders are for a business. In the 1960’s George Goyder first added customers, suppliers and community into the general description of the term (Zadek, Pruzan & Evans, 1997). Today the stakeholders’ concern about corporate social responsibility is turning into a demand for monitoring companies’ performance (Blake, Fredrick & Myers, 1976). Zadek (1997) proposes the term “Social and Environmental Auditing Accounting and Reporting (SEAAR). He defines it as “360 degree picture of how an organisation is doing in social and ethical terms in relation to its own aims… Just like financial auditing looks at monetary transactions and environmental auditing looks at site-specific operations”34 . The most commonly referred to indicators for a measuring how a business fares in its social responsibility fall broadly into those that have to do with people, and those that
  • 18. 18 have to do with the environment. Seven conventions and recommendations of the International Labour Office (ILO) form the basis of international labour standards35 . Ratified by UN member states, these lay out guidelines for legislation and national policy. ILO labour standards have traditionally provided labour unions, human rights groups and NGOs with yardsticks to measure labour standards in industry. Among the tools already developed to measure a company’s level of social responsibility, those from the CEP36 , CERES, and ECCR/ICCR/TCCR – collaborating inter-faith agencies in Britain, the USA and Canada37 – appear to have already gained some acceptance among business. These tools are grounded in the international human rights convention and are frequently echoed in company codes of conduct. The nineties were the beginning of the trend towards codification of ethical business conduct38 . Meanwhile, the number of companies embracing socially responsible visions and values continue to register appreciable growth, and there are discernible links between their social performance, their impact on stakeholders, and their financial performance. Makower (1994) is convinced that as the example of these companies becomes more firmly established, the overriding question will not be whether companies should adopt these policies and practices, but rather when, and how quickly, they should do so. Like cost accounting, marketing research, or any other tool of modern management, ethical investigation is also becoming increasingly useful to further the commercial aims of business (Kaler & Chryssides, 1996). The science is relatively new and is still developing its language and practice, but still Social Auditing is becoming a useful tool. Proactive companies like The Body Shop or Reebok have enhanced their image, and their business, by presenting themselves for social audits. Other companies are all but scrambling to follow suit. A measure of this is the increasing number of companies who have adopted codes of conduct governing labour practices and acceptable business standards relating to health, safety and the environment. Figures from 1990 show 85 percent of major US firms have these codes of ethics (Berenbeim, 1987, 88, 91), followed by 51 percent companies in Germany, 41 percent in Britain, and 30 percent in France (Langlois & Schlegelmich, 1990 – in Kaufer and Robertson, 1990). Yet, businesses attempting to implement ethical policies and then trying to measure their impact face many challenges. More and more people agree on the terminology of social auditing, but unsolved questions still remain. Even when quality standards are defined,
  • 19. 19 who would lay them down best? Organisations like SGS and KPMG or those like Oxfam and Amnesty International? From where would they derive their legitimacy? Would an accountant do a better job than a social scientist? How much would a company pay for an acceptable social audit? And would it at all be practical for an organisation in business terms? (Zadek, 1997). It seems these and other similar questions face anyone contemplating a social audit. However, the case of ISO quality certification has promising parallels as far as documentation of standards is concerned. Numerous examples are now being shared, and can help companies decide on an appropriate social audit process and measuring instruments that will become more accepted over time. 2.5 SOCIAL AUDITING AND BRAND IMAGE Some internationally known businesses have invested significant time and resources into setting up social auditing and disclosure programmes. Among the most visible are The Body Shop, Ben & Jerry’s Homemade Inc. and Traidcraft plc. The New Economics Foundation has begun an "Ethical Trading Initiative" with government support, which aims to improve work conditions for employees along supply chains. Asda, British Telecom, B&Q, Littlewoods and Sainsbury’s have joined up. In the USA, Business for Social Responsibility and the Social Venture Network have programmes to promote civic values among companies. The Council of Economic Priorities is promoting its SA8000 auditing system for businesses to adopt a standardised way of implementing and documenting ethical practices, much like the ISO certification programmes. Avon Cosmetics, Otto-Versand and Toys’R’Us have already signed up (Supply Mgt, 1998). Why do businesses want badges of social responsibility? The immediate reason is because consumers are more aware, have higher expectations from business, and have access to more information they will buy from brands with a good image. In short, it does their bottom-line good. Another reason is that some businesses have adopted social responsibility as their special mark of identification and their business is tied to a “green” or a “clean” image. A select few are businesses run by idealistic individuals who feel running a socially responsible business is a better way of repaying society than private philanthropy. And yet others see this as a marketing opportunity too good to miss, in that they can identify with a current fad and benefit while it all lasts. And perhaps finally, there are “free-rider” (Sethi, 1989) business that reap dividends others’ investment in socially responsible programmes.
  • 20. 20 Figure 2-b, below, (from Gray, Owens & Maunders, 1997) presents well the various reasons why a business would want to present itself for a social audit. Fig Enhance the corporate image Discharge of accountability CSR as extension of financial reporting to investors Enhance Corporate Image to Investors Discharge of Accountability to Investors
  • 21. 21 3.0 Research Methodology 3.1 RESEARCH QUESTIONS Over 60 international brands source their hand-stitched balls in Sialkot, in addition to numerous “non-brands” 39 . At least thirteen of the world’s most recognised brands – soccer, handball, rugby, volleyball and beach-volleyball – have a significant part of their manufacturing sources in and around the city. As the project zone for the Sialkot Partnership’s International Child Labour Project, Sialkot is developing culture of dialogue in which the Chamber of Commerce & Industry has established a role for itself. Soccer balls are still handcrafted by artisans – “stitchers” – in small village workshops managed by middlemen called “makers”. Hence, Sialkot is the appropriate place for studying the brands at the remotest point of their supply chains. This study aims to compare the prevailing situation with brand and manufacturer claims. Six questions need answers for further analysis: i. Do acknowledged sporting goods brands recognise acceptable labour practice standards and do they have clearly articulated social responsibility policies? ii. Does these policies conform to an accepted social responsibility standard, and are they applied in a measurable way at specific points in a brand’s supply chain? iii. Is the application of these policies and standards relatively uniform at specific points along the supply chain? iv. Are these policies transmitted to the end-user as a marketing strategy? v. Are these policies transmitted to sub-contractors at the end of the supply chain? vi. Is there a measurable difference between a brand’s claims and reality, and does the perception of stakeholders conform to the declared application of these standards by the brands? 3.2 APPROACH The approach taken here:  A cohort of comparable retail brands from WFSGI member brands subscribing to the WFSGI Code of Conduct, sourcing a significant portion of their hand-stitched athletic balls from Sialkot, and members of the Sialkot Partnership, based on the following criteria: i. they enjoy widespread consumer recognition among a variety of markets;
  • 22. 22 ii. they represent the diversity of the global market in their origin and reach; iii. they are often found on retail shelves at the same outlet; iv. they lay a claim to ethical business practices in their public statements.  Choose a product for each identified brand that is similar in terms of characteristics, price and quality.  Develop a framework for assessing ethical business practices applicable to the same point in each product’s respective supply chain. Points in the supply chain: i. retail outlet in a developed country; ii. international brand’s management office in its home country; iii. local sub-contractor’s office in developing country; iv. artisan’s workplace or home-based workshop.  Create an appropriate yardstick using the SA8000, including key areas of interest to the brands and their local sub-contractors, as reflected in their own respective policy documents.  Use this yardstick to compare each chosen brand’s actual performance at each identified point in the supply chain, against its official claims appearing in advertising and policy documents, and grade performance using a weighted grading system.  Apply a yardstick gleaned from the brands’ own policy documents, but based on a recognised social auditing standard to control for biases that could arise out of using a standard that the brands themselves may not use themselves.  Analyse findings in the context of the Sporting Goods Industry’s Code of Conduct and the Sialkot Partnership, and consumer comment, and develop a realistic picture of how the brands and their local counterparts stand up to their own standards, as well as to their consumers’ expectations.
  • 23. 23 Finally, the research aims to quantify the difference, if any exists, between claims in the brands’ public statements and present their score in such a way that it does not criticise, or praise any brand or its sub-contractor. The purpose of a graded analysis is simply to point out gaps that the brands themselves or their Sialkot counterparts may not be aware of. This may help lay the basis for discussions along the supply chain and lead to an improved overall performance on codes of conduct. (Note: along the way, it was decided to include a fair-trade organisation to the cohort. Comparing an organisation that is decidedly tilted towards “giving a good deal” to disadvantaged producers to corporations whose declared mission is to make a profit for their shareholders was considered a useful way to add depth to the analysis.) 3.3 THE INVESTIGATIVE PROCESS Five internationally recognised brands who source their athletic balls in Pakistan were selected for this study. One fair-trade organisation was added to the list to enrich the analysis of value-driven business practice. Next, by conducting a parallel set of interviews and questionnaires for each of the chosen brands, six distinct portraits of social responsibility emerged from Sialkot. Since this is where each of the chosen brands source their product, this method is useful to draw conclusions regarding each brand’s ability to effectively transfer their respective corporate philosophy to their local sub-contractor. Data collected from the questionnaires and individual interviews was plotted under identified social responsibility indicators. Although this particular study stops short of it, the six portraits of brand/sub-contractor relationships in furthering claimed corporate responsibility ideals have the potential to be developed into independent case studies. Specific points along the supply chain of the chosen product – retailer, brand HQ, manufacturer HQ, manufacturing unit, and artisan – were subjected to the measurement tool. Supported by data from stakeholders, a graded score for each of the brands was used to generate a “social responsibility profile” for each brand at each identified level of its supply chain.
  • 24. 24 Comparing each profile to the brand’s own Code of Conduct and with any claims on record, an assessment of performance was made. A cross-comparison between brands and among their local counterparts is not the aim of this exercise, although it is possible at this stage. Tables and charts highlight comparative variations, within each brand, regarding adherence to their respective policy all through the supply chain. Statistical calculations, where used, serve to establish relationships between the various factors and variables. 3.4 DATA COLLECTION AND TABULATION Field methods were best suited for this investigative approach. Collecting of background information from available archival sources would support all fieldwork. Direct observation of the processes involved at the manufacturing end, combined with ascertaining the presence or absence of defined policies and awareness about them among staff were undertaken. Individual interviews with representatives of the various stakeholders, including factory workers, community representatives, stitching sub- contractors, plant supervisors, and head office staff of the various brands and their local manufacturers was the principal activity during the field work in Sialkot, Pakistan. Retailer representatives were contacted in Cambridge. In addition, questionnaires were sent to product managers and corporate responsibility personnel at the respective brand’s head offices, in Britain, Germany, and the USA, followed by telephone discussions. Prior to finalising the semi-structured interview instruments, a list of issues relevant to the industry were pre-tested at the international sports fair, ISPO 1998, in Munich. This methodology was chosen because, it balances field methods well with archival study40 . Laboratory techniques and statistical manipulation seemed superfluous to the outcome of the research. Being the first field data collected from Sialkot, it adds further to original content among the existing data. Combined with the literature review and reading policy documents and media materials, the remote interviews through telephone and e-mail communication add a greater degree of control. An effort was made to bring together the advantages of direct observation supported by secondary data so as to be able to represent the real situation accurately. In choosing the most appropriate data collection methods41 , it was felt that they help the researcher in handling complexity, and be sufficiently flexible to secure a variety of
  • 25. 25 interpretations. For this purpose it was decided to employee a wide range of interview tools, from structured and semi-structured to unstructured, in addition to the ongoing content analysis. The need to standardise this set of interviews and uncontrolled responses presented a challenge, countered to a large extent by keeping close to the SA8000 format and frequently using it as the touchstone during the open-ended interviews, organising interview notes and recording observations. Minimising bias proved the most difficult area to handle42 despite the standardisation of the questionnaire using the SA8000. This research, therefore, tries to present observations as objectively as possible, and defines terms with reference to the task itself. Moreover, it is impossible to eliminate bias in a situation where highly competitive brands are identified by name. Their respective policies and marketing communications reflect built-in biases that arise out of rationalisation and a “writing of history”. Issues of anonymity and coverage were not relevant since the cohort was selected on the basis of their brand identity, and involved only six companies located in about a 35- kilometre radius so that it was possible to schedule visits and interviews in the available time. In addition to its appropriateness to the approach adopted for this research, this method was also the most convenient in terms of the time and resources available. The decision to blend interview techniques also stemmed from the need to reflect the situation as accurately as possible. While head office people at the brands got semi- structured interview forms, the forms used in Sialkot with the local sub-contractors served only to set the context of open-ended unstructured interviews that often lasted through up to three sessions. Direct observation was made during several visits to production facilities and village workplaces, sometimes escorted by a company representative. Another advantage of using the above methodology is the reliability that the chosen standardised tool, interview methodology, and multiple levels of analysis impart to the study. Perhaps a less tangible but strategic benefit of this study is that the use of this methodology has helped sensitise the local industry stakeholders to future efforts of a similar nature.
  • 26. 26 Based on a detailed assessment conducted, the following were chosen: 1. Adidas – Germany 2. Fair-Trade – Germany (NGO added for comparison) 3. Mitre – Britain 4. Nike – United States 5. Puma – Germany 6. Reebok – United States 3.5 OUTLINE OF RESEARCH I. Representative stakeholders to be contacted:= 1. Consumer 2. Retailer 3. Brand’s Marketing Office 4. Manufacturer/Exporter 5. Stitcher/artisan II. Points of comparison at specific points of the supply chain: Corporate policy and implementation mechanisms Specific stakeholders (as below) Government policy and legislation Competitors’ policy and brand image Market share and brand image Table 3-a Representative Stakeholders Focus Information needed CONSUMER  Brand image  Purchase decision  Consumer interviews  Retailers feedback RETAILER  shelf prices  advertising/ marketing  Physical verification/ price list  News paper/ media coverage examples BRAND  code of conduct  employee rights  integrity  market ethics  code of conduct (written document)  annual reports  media responses  employee policy  implementation plans  competitors views 
  • 27. 27 Representative Stakeholders Focus Information needed MANUFACTURER  manufacturer’s own code of conduct  availability and inclusion of brand codes of conduct  acceptable international standards (SA8000)  SA8000-based tool  Records of implementation of code of conduct STITCHER/ARTISAN  employee policy  human rights  community development initiatives  code of conduct  annual reports  reports of ethical initiatives  media reports/ media coverage  reports or views from ILO monitoring units, SCF, FIFA etc.  reports of education, health, or other philanthropic initiatives  reports on child labour, labour rights, health and safety  interviews with supervisors  interviews with artisans
  • 28. 28 4.0 Data Presentation 4.1 SOCIAL ACCOUNTABILITY STANDARDS A composite variable list developed from the literature review forms the basis for the data collection tools within the parameters of this study (Appendix-II). This list also served as the benchmark for selecting the formal assessment tool. The literature reveals a number of social accountability tools that various businesses have either developed on their own. Others have evolved through the dialogue between academia, non-governmental agencies and business. Examples of the former include those used by Ben and Jerry’s Homemade Inc. in the USA, The Body Shop plc. In Britain, and Sbn Bank in Denmark. The latter category includes the SA8000, and similar instruments created, or being developed by the ECCR/ICCR/TCCR and the Institute of Social and Ethical AccountAbility. Copies of the assessment tools used by The Body Shop and the Institute of Social and Ethical AccountAbility could not be made available. The CEP’s guidelines on SA8000 were readily acquired, as was the ECCR/ICCR/TCCR tool. Examples from tools used by a number of companies other than those mentioned above were found in “Accounting and Accountability” by Gray, Owen and Adams (1996). Going through examples and case studies cited by Di Norcia (1998), Bolier (1997), Solomon (1997), Zadek, Pruzan & Evans (1997), Korten (1995), Reder (1995), Scott & Rothman (1994), and Carmichael and Drummond (1989) helped choose the best one for this study. The SA8000 was finally selected as the standard around which to adapt the measuring instrument for this research. The reason for this was its relevance to the environment of the study, its reliance on the ILO’s internationally accepted labour practice standards, its relative comprehensiveness, and the ready availability of its detailed guidelines. Some elements from the ECCR benchmark were incorporated in the final version, along with relevant points from available brand Codes of Conduct (Table5-b). 4.2 CODES OF CONDUCT AND ORGANISATIONAL POLICIES A variety of printed materials on their labour practice policies were provided by the brands themselves or their manufacturing partners in Sialkot. This included copies of the
  • 29. 29 Code of Conduct adopted by the World Federation of the Sporting Goods Industry (WFSGI), and its yearly and quarterly publications. The ILO provided a summary of the international labour conventions and a listing of ratifying countries. Organisational Codes of Conduct were acquired from Nike, Reebok, and Puma. Fair Trade, Mitre, Nike and Puma made available policy documents describing their respective company labour practice standards, and their expectations from the supply chain. There was considerable uniformity in the issues outlined in each of the documents, and all conformed closely to the ILO standards (Table 5-a). 4.3 ADVERTISING AND CLAIMS Each of the WFSGI publications available, contains advertisements from international brands as well as local manufacturers. Among brand advertisements, Reebok’s is the most specific in mentioning the company’s social responsibility activities. Adidas, Mitre, Nike and Puma follow this marketing approach to a significantly lesser extent. This is also borne out by Reebok’s labelling of every ball. Copies of the December 1997 news bulletin from the U.S. Sporting Goods Manufacturing Association (SGMA), and a flyer released on behalf of its member brands, both declare a commitment to the efforts by the Sialkot manufacturers to work with the ILO, UNICEF and Save the Children. Over 50 international brands have participated in releasing this “pledge” that describes their commitment to source athletic balls only from manufacturers participating in the Sialkot Partnership. Advertisements by Sialkot manufacturers are loudest in their claims to eliminate child labour. Most appear in the WFSGI’s special newsletter editions – one each in 1997 and 1998 – devoted to child labour and labour practice issues. Some placed signs outside their stalls at the international sports exposition, ISPO, at Munich in August 1998. All the Pakistani manufacturers included in this research advertised in WFSGI publications. 4.4 INTERVIEWS Each of the local manufacturers in Sialkot co-operated to the fullest possible extent when asked for interviews. Being open-ended and unstructured, the interviews demanded long sessions. Chief Executives of every one of the seven manufacturing companies agreed to
  • 30. 30 be available. Four chief executives – from Capital, Leatherware, Moltex and Talon – took time out for an average of two sittings each. Three being away from Sialkot (AliTrading, Saga and Sublime) were represented by company directors. Each of these gentlemen also instructed senior production and quality assurance staff to be available for site visits and detailed discussions. Each CEO interview took at least two sessions, the longest lasting three hours. Visits of plants and village-based workshops took as much as half a day including travel time. During the visits, there was no discernible attempt to “manage” events, and workers were allowed unhindered access to the researcher. Interviews were arranged through the Sialkot Chamber of Commerce. The ILO, UNICEF and Save the Children, were included because of their membership of the Co- ordinating Committee of the Sialkot Partnership, and their implementation role in the “social protection” programme of the Sialkot Child Labour Project. Their views were used to countercheck the claims of the various brands and manufacturers and ensure a wider perspective. The co-operation extended during the visit reflected the pride that the local manufacturers have about what their industry is trying to achieve on a collective level. Appendix-III gives the list of interviewees. Questionnaires used appear in Appendix-IV. 4.5 QUESTIONNAIRES & TELEPHONE DISCUSSIONS Being dispersed all over Europe and the USA, it was not possible to individually interview representatives of each brand. It was disclosed that, with the exception of Nike, all brands would be present in Munich to attend ISPO 1998. While in Sialkot, preparing for interviews with local manufacturers, it became apparent that many of them would be there as well. With the help of a European contact, present in Munich at the time, it was arranged to elicit responses from Adidas, Mitre, Puma and Reebok. This approach was not successful, partially because ISPO being a trade event few brands had the appropriate staff available, and partially because the absence of the researcher meant queries from respondents could not be completely answered. Except for Adidas, no brand returned a completed questionnaire at ISPO.
  • 31. 31 However, because names and contact addresses for the appropriate brand representatives were obtained there, ISPO proved a useful opportunity for sensitising the respondents. The persons identified are directly responsible for corporate responsibility issues in their ball sourcing work. As a result, they provided reliable information and candidly shared their views during telephone discussions and on e-mail. An added a dvantage to this approach turned out to be that the structured questionnaire transformed itself into a semi- structured interview during the telephone interviews, becoming less rigid and allowing for a richer content. 4.6 FIELD OBSERVATION & PHYSICAL VERIFICATION Field visits at the production end in Sialkot included factory sites and village workshops. Pre-stitching and post-stitching phases of ball production were observed in the factories. Here manufacturers produce the artificial leather laminate, cut it into panels, print designs, and punch stitching holes into the panels. These panels are then delivered to artisans who stitch the ball casings around a rubber bladder. The stitched balls are then returned to the factory where they are checked against the brand’s quality standards, cleaned, packaged and shipped out. Each of these local companies participating in this research is a signatory to the Atlanta Agreement and has opened its centres to ILO inspection. At the same time, each of the participating brands has signed the SGMA pledge to restrict sourcing to ILO-monitored manufacturers in Sialkot. The village-based centres vary in their size, arrangements and management structure. Except for Saga, which now employs artisans in fully owned and managed community- based centres, all the others still work through the traditional sub-contracting system run by entrepreneurial middlemen who act as negotiators and agents for groups of independent artisans. The manufacturers arrive at an arrangement with the middlemen (called “makers”) who guarantees a steady stream of finished products through a network of village-based artisan “groups” in return for a negotiated piece-rate and a variable amount of cash as working advance to the workers – called “peshgi”. With the recent agreement with the ILO that demands the registering of verifiable workplaces for all local manufacturers, and moving 100% production to ILO-monitored centres by March 1999, there has been a move to formalise the manufacturer-“maker”-artisan relationship
  • 32. 32 in terms of workplace standards acceptable to the ILO. While the financial arrangements have remained more or less intact, the manufacturers have made arrangements with their respective “makers” aimed at fulfilling the demands of the Atlanta Agreement. Another aspect of the field observation included visiting a number of retail stores that sell soccer equipment as part of their range, and eliciting responses to a brief open-ended questionnaire from staff as well as consumers present there (Appendix-IV/4). This exercise was undertaken to ascertain how much the retail end of the supply chain knows about what the brands themselves proclaim about their sourcing practices, and how much the customer is prepared to listen when making buying decisions. A total of 8 retail outlets were visited, four of which opted to withhold their names. Places visited included a Debenhams department store that stocked all chosen brands except Reebok and Fair- Trade, Sports Soccer and JJB Sports, each part of a retail chain, and JSB Sports, a privately owned sports shop in Cambridge. Each of these stocked all the chosen brands. None stocked the Fair Trade ball, but it was possible to have a telephone interview with Traidcraft plc, which sells Fair-Trade balls through their catalogue. A copy of the catalogue advertising the ball was made available.
  • 33. 33 5.0 DATA ANALYSIS This research treats each brand and its manufacturer as one entity because they form different parts of the same supply chain. With the artisan at the end, they are inseparable from the point of view of the consumer. The local industry, raw material importers and suppliers, all identify the manufacturer with the brands it makes for. 5.1 THE SUPPLY CHAIN Fig.5-a, below, shows the product supply chain for the athletic ball. The various stakeholders appear in relation to each other. The consumer and the media are the farthest removed from the artisan who actually stitches the ball, but have the greatest impact on the brand’s business. Ambiguity or mis-perception surrounding sourcing practices affecting the bottom line can be removed through better communication. There is a greater possibility that the existing situation will be out of context if information about the supply chain does not flow through its main stem. Alternate channels despite appearing plausible may not be credible. For example, the competition may inject Fig.5-a Manufacturer - price cut - Wages/compensation - overhead - Worker/ welfare - CR initiative cost - Community welfare Brand - CR initiative cost + profit + brand image + competitive edge + big orders + competitive edge + reputation CompetitionMonitoring agencies ILO, SCF etc. Subcontractor Artisan NochildlaborRegisteredSC Wages/compensation/rights Local Com m unity Facilities/welfare Governm ent Laws/regulations Clean/quality product Lowprices Priceincrease Media Consumer CSR Quality/CSR M arket share/ Quality Retailer Quality/CSR Quality/CSR CSR Corporate Social Responsibility SC Stitching Centres Demand Directly Pressurized /Influenced by
  • 34. 34 rumors, news of government awards or punitive action may bypass facts, citations for violations noted by monitors might have been long corrected, and media snapshot stories may ignore the big picture. A standardized Social Audit and disclosure is an appropriate tool for making verifiable information available within its correct context, and relevant to issues close to the various stakeholders. 5.2 THE STAKEHOLDERS Fig.5-b, below, shows how major stakeholders influence a business in its social role. The arrows show the direction of influence and identify the stakeholder affected directly. The manufacturer’s position in the supply chain makes it highly vulnerable. On the one hand is pressure to keep prices low for the brand and on the other, to maintain an acceptable relationship with its workers and the community. This study focuses on the manufacturers from two distinct but entwined perspectives. One sees the manufacturer as a representative of the brand’s professed ethical practices, and therefore an extension of the brand’s image. The other sees the manufacturer as an independent corporate player with responsibilities to its own community, as well as obligations as a trading partner with access to global markets. Fig. 5-b presents how a Social Audit process and the resulting information flows can balance pressures among the various stakeholders and create a fairer environment for business transactions and community decisions. Consumer Brand Manufacturer Worker/community CompetitionMarket Media Human rights organizations cleanproduct Rightsandwages Influenced by Pressure from Consumer satisfaction Brand image Financial profit Customer satisfaction Quality Clean product Quality
  • 35. 35 5.3 REPRESENTATION & DISCUSSION OF FINDINGS Elements from the SA8000, the ECCR Benchmark, and brand codes of conduct yielded a list of variables appropriate to the research (Appendix-II). These form the core of this investigation, being used to develop questionnaires and interview outlines, organise data, run comparisons and present findings. Tables 5-a and 5-b present how qualitative data have been weighted and quantified. Table 5-c presents aggregate numerical scores for the variables. The tables are followed by a descriptive analysis of each variable. Table 5-d ranks respondents by placing aggregate scores in value categories. Measurement Tools and Data Interpretation COMPARISON OF SOCIAL RESPONSIBILITY VALUES Table 5-a compares the social responsibility values found in the two Social Audit (SA) tools and the Social Responsibility (SR) policy documents of five athletic ball marketing brands. SR variables are listed down the left column with the brand codes and SA tools across the top. All variables that are mentioned in a brand policy document is marked with a “” in the corresponding box. By revealing the range of SR activity a brand is prepared to undertake, this shows how proactive a company is towards SR issues. This comparison also presents the ability of a measuring tool to assess the activities of business. COMPARISON OF SOCIALLY RESPONSIBLE ACTION Table 5-b weights the SR variables according to the extent they are implemented by the brands and their manufacturing partners. The variables appear in the left column with the businesses across the top. Each variable is weighted according to the level of its implementation by a business. The scale measures increasing levels of practical implementation. Categories exists for those respondents who are opposed to implementing policy on a particular variable, those who are unaware or do not want to implement, and where there is insufficient information to determine a score. By showing how far ahead a company is on implementing activities on a particular variable, it is possible to ascertain its commitment to invest in practical SR initiatives.
  • 36. 36 SOCIAL RESPONSIBILITY SCORE CALCULATION Table 5-c presents an aggregate score calculated from the above findings. To minimise bias, all data have been triangulated from a variety of sources, including available documents, stakeholder feedback and personal observation (Appendix-IV). The score reflects a business’s proactive stance, and its level of commitment to specific SR actions. This way it is possible to assess the breadth and depth of socially responsible behaviour in terms of both policy and action. The aggregate score is calculated by combining the score for each variable from all sources. The numerical values are calculated by giving each positive finding a value of “+1”. No data is represented by a zero, and opposition to a value is expressed as “–1”. Where there are sub-variables, their mean represents the score for the particular variable, to the maximum value of “+3”. SCORE INTERPRETATION AND RANKING Table 5-d places a business in Di Norcia’s grid, according to its attained aggregate score. A business’s score reflects its attitude and practical initiatives towards socially responsible behaviour. This is evident from how proactive it is in choosing its sphere of SR activity, and how far ahead it is in practically implementing actions. Two characteristics determine where a business fits into the grid; voluntary participation and proactive attitude. Companies who are resistant to SR ideas fall in category I. Companies scoring higher on action fall in category II. Those with a higher score on the proactive attitude, fall in category III. Those scoring high on both fall in category IV. IMPORTANT NOTE: The scores or ratings are not intended to compare the various companies or pass judgement. The scores simply reflect a quantification of the numerous observations recorded from a wide variety of stakeholders, and despite efforts to limit bias, cannot control for individual interpretation of open-ended questions. The following statement is included at the request of a respondent company: “The participating companies have trusted the researcher with information not normally available beyond corporate boundaries. They retain their rights to their own corporate information and may consider it a breach of confidentiality if data or ratings from this research are quoted without the owner’s express consent.”
  • 37. 37 Table-5-a Social Responsibility Measurement Variables Found in Standard Assessment tools and Brand codes of Conduct Adidas ESSR/ TCCR FairTrade Mitre Nike Puma Reebok SA8000 Child labor Do not employ children     Do not engage in or support child labour        Redemption of child labor    Promotion of child education   Exposure to hazard, unsafe or unhealthy situations     Forced labor Prison labor        Bonded labor        Human Rights Discrimination Discrimination against Cast, race, origin, gender, etc.        Harassment and threats    Employee Rights Compensation Wages meet legal or industry minimum        Sustainable community wages to meet basic needs     Equal pay for work of equal value     Working conditions    Child care, elder care and community service    Benefits and insurance    Working hours Overtime according to law       Maximum 60 hours per week Freedom of association Labor force representative of community where located      Unions and right of collective bargaining    Disciplinary practices Physical, sexual, psychological or verbal harassment/abuse     Health and Safety Safe and healthy work environment      Preventive measures  First aid supplies  Management systems Review adequacy, suitability, and continuing effectiveness of company's policy  SA policy  Social accountability policy documented and publicly available  Internal compliance process of training onsite inspections and audits of suppliers  Violations are effectively addressed  SA preparation and conduction Accepts independent monitoring from NGOs, local communities, religious and HR, CR and labor groups.  Disclosure Transparent. Result of internal and external monitoring available to public   Ecosystem Company action do not damage global environment   Physical infrastructure impact  Social infrastructure impact Community involvement Contribute to improve community conditions    Customers and consumers rights International standards for products and services  Products meet customer requirement  Ethical Marketing practices  Fair trading practices  Fair advertisement and labelling. Products with clear , specific warnings
  • 38. 38 Table 5-b + Aware of/ agree to Social Responsibility variable ++ Planning to implement Social Responsibility variable +++ Already implemented/ actively support or participate x Unaware of or don't approve of SR variable - Initiative has a negative effect on the SR variable NI Insufficient information to judge NA Not applicable Scoring system adapted from the tool developed by Levi Strauss & Company (Makower,1994) Level of Action/Practical Implementation on Selected Social Responsibility Variables Adidas Capital Sublime FairT Talon Mitre LW Nike Saga Puma Alitrad Reebok Moltex Vision mission Statement + X x x + ++ x +++ ++ + ++ ++ x Code of conduct ++ + + +++ ++ + + +++ +++ ++ ++ +++ + Variable SA 8000 Child Labour Involve in elimination of child labor + +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Engage in or support child education + ++ +++ x ++ x + +++ ++ ++ + ++ ++ Remediation/rehabilitation of child labor x X ++ ++ x + x x ++ + x ++ x Promotion of child education x X ++ + ++ x x ++ ++ + ++ ++ + Exposure to hazardous and unhealthy situations + + + ++ + + x + ++ ++ ++ ++ ++ Forced labor Prison labor +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Bonded labor +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Health and Safety Safe and healthy work environment + ++ ++ ++ ++ ++ ++ +++ +++ +++ ++ ++ ++ Health and safety manager x X x x x x x +++ x +++ x + x Clean Air, water, ++ ++ ++ ++ + ++ ++ +++ +++ +++ ++ +++ ++ No exposure to hazardous, unsafe or unhealthy situations in or outside workplace +++ ++ ++ ++ ++ +++ x +++ ++ +++ ++ +++ ++ Health and safety laws and systems to detect and respond to potential threats NI X x + + ++ x +++ ++ +++ x +++ ++ Freedom of association Labor force representative of communities in which operation is located x + x x + ++ + ++ + + + x ++ Discrimination/ Human Rights Discrimination against Cast, race, national origin, gender, disability, political affiliation, union membership ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ ++ Disciplinary practices Declared position on equal opportunity x + + + + x + +++ + ++ x ++ + No employee subject to physical, sexual, psychological or verbal harassment or x +++ ++ ++ ++ x ++ ++ ++ ++ x ++ ++ Working hours Overtime according to law +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Maximum 60 hours per week +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Compensation Wages meet legal or industry minimum +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Pays sustainable community wages to meet basic needs ++ ++ ++ +++ ++ ++ ++ +++ ++ +++ ++ ++ + Equal pay for work of equal value NI NI NI NI NI NI NI NI NI NI NI NI Benefits and insurance + + x + ++ + + +++ +++ ++ x ++ ++ Working conditions + + ++ ++ ++ + ++ +++ +++ +++ +++ ++ ++ Child, elder care and community service + x x x + x x +++ +++ x X + x
  • 39. 39 Table 5-b continued Adidas Capital Sublime FairT Talon Mitre Leatherware Nike Saga Puma Alitrad Reebok Moltex Management systems Regular meetings x + + + ++ +++ + +++ ++ NI + +++ ++ Review Sources of information feedback mechanism ++ x x ++ x ++ + ++ x NI ++ +++ x Computerized Information system x x x x + ++ x +++ +++ x ++ +++ x Social Auditing Own Social Auditing policy ++ x x ++ x ++ x +++ +++ ++ x +++ x Onsite inspections internal ++ ++ ++ + ++ x ++ +++ ++ ++ ++ ++ +++ Onsite inspections external x +++ +++ x +++ x +++ +++ +++ ++ +++ x +++ Internal compliance NI x + NA + NI + ++ + NI + ++ + Process of training and audits of suppliers + ++ + + ++ ++ + +++ ++ x x +++ ++ Violations are effectively addressed x + NI ++ NI x NI NI NI x x ++ ++ Accepts independent monitoring from NGOs, local communities, religious and HR, CR and labor groups. x NI NI + + x + ++ ++ ++ + x + Accepts independent monitoring from international agencies + ++ ++ + ++ x ++ ++ ++ ++ ++ x ++ Familiarity with/implementation of social Auditing Standards x x x ++ x + x ++ +++ x x +++ x Disclosure Transparent. Result of internal and external monitoring available to public x x x ++ + x + ++ + + + ++ + Independent Company SA variables Leader ethical attitude Action for unethical behavior x ++ + ++ x x x x NI x x - Feel obligation for workers + + + +++ ++ x + ++ +++ + + ++ ++ Feel obligation for community x x ++ ++ ++ x x +++ ++ x + +++ x Ecosystem Company action do not damage global environment ++ ++ +++ ++ ++ ++ ++ ++ +++ +++ ++ +++ +++ Physical infrastructure impact x ++ ++ ++ + + + +++ +++ ++ + ++ + Social infrastructure impact - -x -+ -++ -+ -+ --++ --++ -+ -x -+ -++ -+ Community involvement ++ x + + ++ x x + + x + ++ + Contribute to improve community Conditions ++ X + + ++ x x + + x + ++ + Employer/worker support programs Free meals, child care centres, sports + x x x x x x +++ +++ x x x + Safety procedures x x x + ++ x ++ ++ ++ x ++ ++ Credits, Insurance + + x ++ x x x ++ +++ x x + + Education , sports, + ++ x x x x x +++ +++ + x ++ ++ Customers and consumers International standards for products and services +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ +++ Products meet customer requirement +++ +++ +++ + +++ +++ +++ +++ +++ +++ x +++ +++ Ethical Marketing practices NI ++ ++ +++ ++ + + ++ +++ ++ x ++ ++ fair trading practices NI ++ ++ +++ ++ + + ++ ++ ++ x ++ ++ Fair advertisement and labeling. NI ++ ++ +++ ++ + NI ++ ++ ++ x ++ ++ Products with clear , specific warnings ++ NI NI NI NI ++ + +++ +++ +++ x ++ NI
  • 40. 40 Table 5-c Aggregate Score on Cumulative Performance* on SA Variables Adidas Capital Sublime Fairtrade Talon Mitre Leather Ware Nike Saga Puma AliTrad Reebok Moltex Code of conduct 2 2.0 1 1.0 1 1.0 3 3.0 2 2.0 1 1.0 1 1.0 3 3.0 3 3.0 3 3.0 2 2.0 3 3.0 1 1.0 Child Labour 3 0.6 6 1.0 11 2.2 8 1.6 8 1.6 5 1.0 5 1.0 8 1.8 11 2.2 9 1.8 8 1.6 11 2.2 8 1.6 Forced labor 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 6 3.0 Health and Safety 7 1.4 6 1.2 5 1.0 7 1.4 6 1.2 9 1.8 4 0.8 15 3.0 10 2.0 15 3.0 6 1.2 12 2.4 8 1.6 Freedom of association 0 0.0 1 1.0 0 0.0 0 0.0 1 1.0 2 2.0 1 1.0 2 2.0 1 1.0 1 1.0 1 1.0 0 0.0 2 2.0 Discrimination/ Human Rights 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 2 2.0 Disciplinary practices 0 0.0 4 2.0 3 1.5 3 1.5 3 1.5 0 0.0 3 1.5 5 2.5 3 1.5 4 2.0 0 0.0 4 2.0 3 1.5 Working hours 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 3 3.0 Compensation 7 1.2 7 1.2 7 1.2 10 1.7 10 1.7 7 1.3 8 1.3 15 2.5 14 2.3 11 1.8 8 1.3 10 1.7 8 1.2 Management systems 2 0.5 1 0.3 1 0.3 3 0.8 1 0.8 7 1.8 2 0.5 8 2.0 5 1.3 0 0.0 5 1.3 9 2.3 2 0.5 Social Auditing 6 0.8 10 1.3 9 1.0 11 1.3 11 1.3 5 0.6 10 1.1 20 2.5 18 2.3 10 1.3 9 1.1 15 1.9 14 1.8 Disclosure 0 0.0 0 0.0 0 0.0 2 2.0 1 1.0 0 0.0 1 1.0 2 2.0 1 1.0 1 1.0 1 1.0 2 2.0 1 1.0 Leader ethical attitude 1 0.3 3 1.0 4 1.3 7 2.3 4 1.3 0 0.0 1 0.3 5 1.7 5 1.7 1 0.3 2 0.7 5 1.7 2 0.7 Ecosystem 1 0.3 4 1.3 5 1.7 3 1.0 3 1 3 1.0 3 1.0 5 1.7 6 2.0 4 1.3 3 1.0 6 2.0 4 1.3 Community Involvement 2 2.0 0 0.0 1 1.0 1 1.0 2 2.0 0 0.0 0 0.0 1 1.0 1 1.0 0 0.0 1 1.0 2 2.0 1 1.0 Employer/Worker Support program 3 0.8 3 0.8 0 0.0 3 0.8 0 0.0 2 0.5 0 0.0 10 2.5 11 2.8 3 0.8 0 0.0 5 1.3 6 1.5 Customer and Consumer 8 1.3 12 2.0 12 2.0 15 2.5 12 2.0 11 1.8 9 1.5 15 2.5 16 2.7 15 2.5 6 1.0 14 2.3 12 2.0 NOTE: The first column under each company name represents the raw score on a particular variable. The second column gives the score which is the average of sub-variable scores. Discussion of Performance Variables CODE OF CONDUCT Nike and Puma were the brands whose local counterparts were aware of their vision of trust and quality respectively. Among local manufacturers Saga promoted its vision of "share, care, dare", and Talon and Ali Trading emphasised their unwritten vision of quality.
  • 41. 41 None of the manufacturers has its own code of conduct, except Saga that claims to be working on one through an ongoing participatory process. Each manufacturer, however, is required to follow a code of conduct handed down by their contracting brand. This varies from bullet point, one-page versions as in the case of Nike and Puma, to more detailed policy statements for Adidas, Mitre, and Reebok. Fair-Trade have a detailed set of operational criteria that, according to them, form the code of conduct. Each of the codes of conduct, and the Fair-Trade criteria, emphasises nearly the same set of labour practice principles as found under the various ILO conventions. These areas include elimination of child- or forced labour, labour and employee rights, and responsibilities to the environment and the community. All brands have communicated their formal codes of conduct to their manufacturer in writing. Leatherware disclosed that although Mitre has not provided any written code of conduct, it has been conveyed verbally and through various business documents. In the case of Nike and Reebok, the codes are translated into Urdu and are accessible to literate workers. (Table 5-b) Regarding the implementation of the codes of conduct in a way that is visible, the results are highly variable. Saga/Nike appear farther ahead in establishing demonstrable systems that show that the code of conduct is being implemented. This may be so because they are relatively more willing to open up their modern plant and monitoring programme to outside scrutiny. There is a separate department to run a programme called SHAPE43 that is open to third party monitoring by a chartered accounting firm in addition to the ILO. This programme is implemented through groups of elected employees who document the quality of benefits and ensure a working environment standards. The two companies have health and education community projects with equal resource contributions. There is evidence of physical infrastructure and a management information system being created to match a set of written objectives. The Saga/Nike relationship may be taken as an example of how two companies of disparate size and focus can come together because of a shared view of business practice. Saga applies uniform standards to all client brands. Reebok has created significant physical infrastructure, backed by independent monitoring mechanisms to ensure that its code of conduct is followed to a verifiable level. As Moltex manufactures for a number of brands, its sets of arrangements for
  • 42. 42 Reebok are different for those that it has for other brands and make a useful comparison. Reebok balls are produced in an exclusive plant adjacent to the main factory that employs superior labour standards. Monitors hired by Reebok operate independently of Moltex management and ensure that the required standards are maintained. For the other brands Moltex relies on the traditional "maker" network and sources from village workshops registered with the ILO. While both arrangements are "clean" according to the evidence available, the difference may be illustrative of how a manufacturer will change its practices for a client brand keen to invest in promoting its labour practice standard, but retain existing practices where there is no pressure to change them. Of the contractors for Adidas, Mitre and Puma, none has advanced to the level of the two mentioned above. Each plan to gradually build up systems and invest in infrastructure better capable of fulfilling the claims made by their respective brand, but seem content with being members of the Sialkot Partnership. Adidas and Puma both have locally based quality inspectors, who are required to monitor labour practices by their respective sub-contractors also. Adidas is also establishing a permanent office in Sialkot. Sublime plans to construct purpose-built centres for ball production, offering better employee benefits. Others are opting for less expensive infrastructure. Capital provides resources to sub-contractors for upgrading existing production facilities. Leatherware has a phased programme under Mitre's ongoing supervision to bring production in line with guidelines. Ali Trading shows interest but cited resource constraints for not moving as rapidly as the other manufactures who have a larger turnover. Talon is working with Fair-Trade to standardise its labour practice mechanisms to the minimal requirements. This is perhaps the only case in Sialkot where the client pays a direct financial subsidy to the manufacturer over in addition to prevailing market prices. Fair-Trade has contracted a local NGO to support community credit and education initiatives, with the Pakistan office of Rugmark providing technical guidance. All local manufacturers are overwhelmingly preoccupied with child labour, as opposed to broader labour practice and ethical business standards. Apparently because of the controversy stirred by the "Foul Ball Campaign" in the USA and television coverage portraying the Pakistani industry as the villain. Manufacturers’ responses to questions about labour standards and business ethics show that these concepts are equated with child labour. The codes of conduct, on the other hand, focus on general principles that
  • 43. 43 included child labour as one among them. Moreover, except for Mitre who were accused of exploiting child workers in India, the others brands have faced criticism on labour issues others than child labour. Adidas is in litigation for exploiting prison labour in China, while Nike has faced strong criticism for poor labour conditions in it's Vietnam manufacturing arrangements. Except for Nike and Reebok, no brand has made any direct or indirect investments into mechanisms or infrastructure for “cleaner” sourcing. None of the brands or Fair-Trade have communicated their respective codes of conduct to the retailers asked. Store managers interviewed said they knew of the media's criticism of the brands' sourcing. However, the brands themselves had made no effort to reach the retailers or provide any information to help them with customer queries. The only exception was Nike who provided written materials on the company's labour practices in developing countries, possibly in anticipation of consumer concern. The consumers interviewed were also unaware of any labour practice or ethical business document made public by the brands. None had heard of any of the Pakistani manufacturers – or Sialkot. Only one was aware of Pakistan as a source of balls, recalling a BBC television story around the World Cup. CHILD LABOUR All brands and their contracting manufacturers claim not to employ or engage child labour in their manufacturing units. The Sialkot Partnership is presented as evidence of this commitment. Puma and Reebok claim special care and assistance to children. None of the codes of conduct specifically focus on the rehabilitation of child workers who face loss of livelihoods as a consequence of the Sialkot project. Mitre claims credit for providing the impetus for work leading to the Atlanta Agreement, but is of the view that the rehabilitation and social aspects of child labour elimination should be dealt by welfare agencies. Reebok claims giving importance to children's education and rehabilitation, presenting its NGO-run school as proof. Local opinion leaders dispute this claim, saying the one school that does exist is far away from areas where children are likely to be exploited. It has no specific activity that can plausibly serve a rehabilitative function.
  • 44. 44 Capital and Sublime both claim that although there is no pressure from Adidas regarding education or any community focused programme, they are engaged in supporting basic education on their own because they feel it is their civic duty. Their education work does not target working children specifically. Sublime is directly involved in managing 21 primary schools and one girls’ high school under a family trust. Each of the local manufacturers claims to promote education by funding deserving students for college and university. Capital, Saga and Sublime have joined a number of other businesses in resourcing Sialkot's first "public school". Except for Nike and Reebok, no brand has expressed interest in local education projects. Saga and Nike claim to be finalising a community services programme to be run by an NGO. At present, however, this is limited to weekly mobile health clinics for women and children. Child care centres in each of the Saga facilities provide pre-school care and basic literacy to children of workers making Puma and Nike balls. Puma and Leatherware are interested to help local schools in future in a "fitting way". On the whole, the brands and their local partners appear serious about removing child labour from their production processes. The manufacturers have pooled about US$300,000 to pay ILO for managing an independent monitoring programme. FORCED LABOUR The available evidence excludes forced labour from Sialkot's ball industry. This may be why Adidas is said to be relocating significant business from China after facing criticism for using prison labour. Except for Mitre, the other brands source only in Pakistan. Field research over the past two years by Save the Children, ILO, the Human Rights Commission of Pakistan, and others has not substantiated use of working advances to force artisans to work for manufacturers. A 1997 Save the Children report suggests that the working advance, "peshgi", serves to strengthen the local cash economy, providing poor people who cannot put up collateral, access to capital. Regulated and made equitable this system could contribute to a sustainable local economic solution. HEALTH AND SAFETY Adidas, Fair-Trade, Nike, Mitre, Puma and Reebok each has written policies on health and safety in the work environment that complement Pakistan’s workplace laws, except
  • 45. 45 legal employment age. Despite the law allowing employment to 14 year-olds, the brands have set their own limit at 16 years. The most visible health and safety issues are: 1. Fire protection. All factory sites visited have fire extinguishers as required by law, but there is a marked variation in the level of awareness and preparedness for an emergency. Only the new purpose-built plants have adequate fire exits. Among the stitching centres, only Saga and Moltex have fire equipment. All the others have neither equipment nor an adequate number of labelled exit routes. Saga has an in-house fire-fighting unit with a fire-truck and trained crew, who are said to conduct periodic fire drills under their SHAPE programme. No one else has designated fire wardens or awareness programmes or drills. 2. Exposure to fumes and toxic chemicals. Of the processes involved, only two bring workers in contact with potentially hazardous chemicals or fumes. One is during lamination where artificial leather is bonded with fabric using natural latex. The high ammonia content of the solvent exposes workers to fumes over the entire shift. The other is during printing where ball panels are individually hand-screened, exposing the skin to carcinogenic dyes and inks, especially when being mixed without protective equipment. None of the factories visited has verifiable checks on safe handling of toxic chemicals. Safety instructions are limited to sporadic labelling, often in English, which is unintelligible to the workers. Mitre claims it has begun a phased process of upgrading health and safety conditions of it manufacturing partners. The manual on chemical handling it has provided to Leatherware and Saga, in addition to other workplace guidelines, has remained with managers so far. Saga displayed an Urdu translation that it plans to distribute among workers and supervisors. Though every manufacturer expressed frustration with efforts to motivate workers to use masks and gloves, supposedly due the hot climate, there is no evidence of effective awareness building among the manufacturers. The brand guidelines are either non-specific or not followed up consistently. 3. Ergonomics and Posture during work: Each of the factories visited has workstations at waist height. Routine work neither involves lifting heavy weights nor prolonged exposure to noise, particles or glare. In the stitching centres, however, artisans still sit on the floor or low stools, holding ball panels in
  • 46. 46 wooden vices held between their knees. Complaints of back pain and strain on neck muscles are common due to the crouched position artisans retain for up to an hour at a time. Managers claim that the artisans are resistant to changing the workstation design, and did not accept benches in exchange for floor mats. This is understandable considering the "floor" culture of rural Pakistan. The ventilation and lighting is adequate, possibly because the centres shown were the best the manufacturers have. Again, there are stark differences among the conditions present in the various centres. Saga’s nine purpose-built “community centres” and Sublime’s “soccer village” facility are expansive in scale and their design has taken in account the requirements of the work. Reebok's monitors have had Moltex carry out structural changes to its new facility in response to workers complaints about inadequate light and ventilation. The other village- based centres are either existing buildings or built in the local scale and tradition, although they do aim to fulfil the ILO's requirements and the brands' expectations. 4. Use of safety equipment: in addition to handling chemicals and working with ammonia fumes, workers in the factories face another hazard that requires preventive measures. Ball panels are cut using hand-operated cutting presses without adequate safety features. Workers have been known to lose fingers while operating these presses, although it was not possible to meet anyone who had suffered as a result of working on these machines. Management representatives agreed that the threat is real, and there is an industry-wide move towards automated cutting presses that have safety features build in. Saga claims to have phased out all except a few of its hand-operated cutting presses. Even apart from the cutting presses, attention to safety equipment is not clearly visible. Management tend to blame workers for resisting attempts to introduce use of safety equipment, but it appears to be a low priority for them. 5. Air-quality and ventilation: The manufacturers claim to have made considerable improvements in the air quality of their lamination and printing areas as a result of brand intervention. Every one of the factories visited has installed mechanical ventilation systems. Supervisors and managers all agree on the importance of air
  • 47. 47 quality. However, none of them are familiar with any air quality standard or possess any instruments to measure air quality in their facilities. 6. Emergency medical care: Ball production processes can be divided into three; panel production, stitching and finishing. Medical emergencies that can potentially arise in the first include chemical ingestion or injurious contact with the skin or eyes, hand injury from cutting presses, or accidents involving electrical or moving machinery. In the second category, the most common are needle-pricks to fingers, or rarely, to the eye. The third category may present machine operation-related injuries while lifting or moving loads. In addition, accidents from slippery floors, falls from stairs or trauma resulting from transport-related injuries or fire hazards can potentially cause medical emergencies. Reportedly, the incidence of any of these is significantly low. However, each of the factories claim that workers have access to emergency medical care when needed. The artisans have no such arrangements, except at the Saga centres, which have full-time doctors and paramedics, Sublime, which has a mobile doctor service for workers, and Reebok, which provides workers medical cover through the government's Social Security department. Like other areas, the health and safety measures also vary significantly. Factories are better equipped than are village-based centres. The workplaces are generally clean but air quality is a significant issue. To a lesser degree are natural ventilation, sanitary toilets. None of the manufacturers has a designated health and safety manager. There is a need to bring village stitching centres up to acceptable standards, and the ILO’s proposal to include health, safety and working environment conditions in their monitoring guidelines may be beneficial. FREEDOM OF ASSOCIATION All brands recognise the right for workers to form unions, and to collective bargaining. They accept the idea of involving labour force representatives into decision-making. Puma chose not to respond. There are no organised labour unions in any of the manufacturer's factories. With regard to the stitching centres, managers claim that since artisans are piece-rate sub-contractors they don not qualify as "employees" and hence do not fall under the freedom of association clause in Pakistani law. Reebok believes their group managers work as representatives, Adidas refers to the independent "maker" as a
  • 48. 48 representative of the artisans, while Nike/Saga claims that its elected SHAPE representatives fall within the definition of labour force representatives. The Puma representative spends one hour every month meeting with artisans and workers to handle complaints through an established mechanism. Pakistani labour law empowers the artisans to organise and bargain collectively even when they are piece-rate sub-contractors. The "makers" who negotiate piece rates based on the seasonal market may well be playing this role. Though not a result of collective bargaining, the "makers" have been able to exploit the heightened sensitivity of the brands towards "clean" sourcing. The piece-rate has doubled over the past 18 months as a direct consequence of the attention that the industry has received from outside agencies. In addition, non-salary benefits such as free meals, transport and medical services have also increased appreciably during this time. DISCRIMINATION The brands all proclaim non-discriminatory policies. Nike, Puma and Reebok have a written stance on threats and harassment. There is no evidence of the manufacturers disregarding this policy. However, from the data available it is impossible to either dismiss or accept this claim. COMPENSATION The Pakistan government periodically fixes minimum wage levels44 . Every brand and their manufacturer claim to pay accordingly, and workers agree. Fair-Trade, Nike, and Reebok expect their contractors to pay sustainable or “living”. It is important to note that a majority of the artisans are on contract, don’t work for a continuous period of time, and may have other sources of income. Hence, it is not easy to determine whether wages declared are "living" wages. Ali Trading, Capital, Leatherware, and Sublime pay a cash piece rate to their artisans and claim that it is sufficiently high to cover costs of any benefits. Moltex and Talon pay a cash piece-rate and add some benefits such as social security contributions and free or subsidised meals. Saga pays a monthly salary, bonuses and performance pay along with benefits that are the same for full-time and part-time employees, including child-care, healthcare, leisure facilities, commodity credit and community outreach services. Fair-Trade and Saga provide insurance and credit. Fair- trade has established a Trust managed by Talon into which a fixed amount per ball is