measure & improve your labor standards performance

8/9/2019 Measure & Improve Your Labor Standards Performance

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Measure & Improve YourLabor Standards Perormance

PERFORMANCE STANDARD 2 HANDBOOK

FOR LABOR AND WORKING CONDITIONS

SAISocial AccountabilityInternational


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IFC, a member o the World Bank

Group, creates opportunities or

people to escape poverty and improve

their lives. It osters sustainable

economic growth in developing

countries by supporting private sector

development, mobilizing private

capital, and providing advisory and

risk mitigation services to businesses

and governments.


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Contents

ontentsIntroduction .......................................................................................... ivBuilding the Business Case .....................................................................4

A Quick Look: Labor Standards Perormance Codes and Standards ................5

The Growing Importance O Labor Standards Perormance ...........................7

Reputational Risk ...........................................................................................8

Importance to Investors ..................................................................................9

Bottom-line Business Benets ......................................................................11

Enhancing Business Perormance ..................................................................11

The Elements o Labor Standards Perormance .....................................14

Background on Labor Standards Perormance & Labor Standards ................15

Introduction to the PS2 Standard .................................................................16

Labor Standards Perormance in Your Company ..................................44

Introduction .................................................................................................45

Understanding Management Systems............................................................47

Measure and Improve ...................................................................................48

Top-Management Leadership & Eective Communications .........................52

Worker Involvement & Communications .....................................................53

Involving External Stakeholders ....................................................................58

Forming an Eective Internal Labor Standards Perormance Team ....... 60

Whos on the Team .......................................................................................61

The Team Leader ..........................................................................................65

Training Requirements ..................................................................................66

Labor Standards Perormance in Your Supply Chain ............................68

Introduction .................................................................................................69

Mapping Your Supply Chain ........................................................................70

Supplier Risk Assessment ..............................................................................73

Using the SAI Process-based Rating System or Suppliers & Contractors ......75

Management System Tools with Step-by-Step Guide ............................78

Toolkit: Labor Standards Perormance In Your Company .............................81

Toolkit: Labor Standards Perormance In Your Supply Chain .......................83


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1

Introduction

1


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2

WelcomeThe purpose o this Handbook is to help you

understand the issues related to developing a

socially responsible company and to improve your

perormance in relation to the International Finance Corporations Perormance Standard 2: Labor

and Working Conditions.

The Handbook is intended to be a practical reerence book. It includes tools to help you

implement or improve your labor standards policies and perormance.

Our goal is to assist you in understanding and implementing the management systems that are

necessary or continual improvement in the labor standards perormance o your company and

your supply chain. This Handbook is applicable to companies in any industry. We have tried to

make it useul or senior management, as well as proessionals in the human resources, compliance

and sourcing departments.

We know that companies are under pressure to perorm, or even survive, especially in the current

economic climate. We know that workers are being asked to do more and more. We realize that

new initiatives are oten met with resistance as people struggle to keep up with their day-to-day

responsibilities.

Think back to the initial reaction to quality management systems. People complained. Why do

we need to document what we do? I dont have time or this. But now, or many companies,

quality management systems are completely integrated into their day-to-day operations. It has

become a undamental part o how they do things. And it is sae to say that the companies that

have really taken quality management to heart have gained a competitive advantage and improved

their perormance.

The same is true or labor standards management systems. As you will see in this book, labor

standards perormance is shiting rom a way to minimize risk to a competitive advantage.

Our hope is that we bring together perspectives and tools that will help you to implement thesystems needed to improve labor standards perormance in your company as measured against

the Perormance Standard 2 (PS2). Our hope is that this Handbook will accelerate your journey

o continual improvement; a journey that will beneft your company and every link o the global

supply chain rom the consumer to the worker.

1


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Quick Reference

for Using thisHandbookFeel ree to jump around. Wetried to make the sections sel-contained and the Handbookeasy to use.

I you see a Toolkit icon,it means there is a relevantdocument in the ManagementSystem Toolkit. The Toolkit ismeant to provide you with abig head start.

Look or the Tips.These give you pointers andshortcuts.

Call-out boxes highlight akey part o the text.

Whats in Each Section

Heres a quick brieng on what you will nd in each section.

Building the Business CaseWe present some recent research and cases looking at the production and

marketing benets o improved labor standards perormance.

Te Elements o Labor Standards PerormanceWe go through each element o PS2 in a consistent way. We look at the

guiding principles behind the element, what an auditor would look or to

veriy your perormance, the common problems and potential solutions.

Labor Standards Perormance in Your CompanyWe ocus on helping you understand management systems or labor standards

perormance, and the drive or continual improvement. This is important

background or using the Toolkit to build your own system. We also look

at the importance o involving workers and external stakeholders.

Forming an Efective Internal Labor StandardsPerormance eamWe provide a practical guide to orming and training the team responsible or

managing labor standards perormance in your company.

Labor Standards Perormance in Your Supply ChainWe look at how to eectively extend your management systems to your supply

chain. We also introduce a supplier rating system to help you get started.

Management System ools with Step-by-Step GuideThis is the section to turn to when youre ready to start building your system.

Weve divided it into two sub-sections:

For Labor Standards Perormance in Your Company

For Labor Standards Perormance in Your Supply Chain

In both cases, there is a step-by-step map that guides you through the process

and shows you what tools to use. The tools are sample documents and orms that

will help you toward meeting the requirements o PS2. We also provide easy-

to-use instructions on how to use each tool to build your own labor standards

management system.

2

@Toolkit


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Introduction 3

Acknowledgements

This Handbook was written by Craig Moss, Director, and Jane Hwang, SeniorManager, Corporate Programs & Training, Social Accountability International

(SAI) with the able assistance o the entire SAI team. Key contributors were

Alice Tepper Marlin, Eileen Kauman and Doug DeRuisseau.

This Handbook was made possible through the support o the International

Finance Corporation (IFC). Key contributors were Larissa Luy, Piotr

Mazurkiewicz, Anna Hidalgo, Soe Michaelsen and Eric Shayer.

Graphic design services provided by Pam Henry.

About Social Accountability International (SAI)SAI is a multi-stakeholder, non-prot organization dedicated to improving

workplaces and communities by developing and implementing social

responsibility standards and assisting brands, retailers and suppliers in meeting

labor and human rights objectives. Focused on the human elements o the

workplace and the supply chain, SAI developed the worlds preeminent social

standard SA8000, which is rmly grounded in ILO and UN conventions.

SAI convenes stakeholders companies, non-governmental organizations

(NGOs), trade unions and governments to conduct research, training and

technical assistance programs ocused on developing the management systemsrequired to adequately address social compliance issues in a sustainable manner.

SAI works with corporations to use management systems or the continual

improvement o social compliance in their companies and in their supply chains.

SAIs global training program has trained thousands o people in labor standards

perormance, including corporate managers, actory managers, workers, auditors,

investors and government ocials.


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54

Building the

Business Case

2


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5

A Quick Look:

Labor Standards PerormanceCodes and Standards

Did growing this banana expose workers and their community to harmul

pesticides? Was this apartment built using orced migrant labor? Were workers

at this mine exposed to excessive working hours?

Stakeholders are more demanding than ever. Consumers have high expectations or price, quality, and

convenience. And today consumers care just as much about working conditions and the environment.Investors are increasingly looking or similar assurance, knowing that news about child labor or worker

mistreatment can be disastrous or a company and the value o its reputation. Investors look at non-

nancial and reputational risk. As they evaluate a companys perormance, they are asking more and

more questions: Are all workers covered or medical insurance? Do workers receive a pension when

they retire? Does management respect reedom o association and the right to collective bargaining?

The expansion o global trade and investment has meant growth or companies, new opportunities

or workers, and a growing range o high-quality, aordable products or consumers. But globalization

also brings new risks. Responsible companies risk unknowingly doing business with rms that violate

the rights o workers, damage the environment and undermine national labor laws. The global media

web means that todays remote actory scandal can instantly become tomorrows worldwide headline.

The journey in this generation towards improvement in working conditions really began as a risk

mitigation strategy by the amous brands and retailers. It started as a means o protecting brand

reputation in response to activist and media attention on poor labor conditions in emerging market

actories. US and European consumer-goods companies started to really take a look at what was

happening in the actories making their products. In many cases, it was ugly. Clearly, they did not

want to tarnish their brand image by being associated with images o gross labor violations. So to

reduce the risk to their image, the companies that were under attack established and published

corporate codes o conduct. Corporate codes vary widely in their rigor and their credibility.

At this point, many US and European companies have a corporate code o conduct. In act,

companies that are suppliers to the large buyers are rustrated with the number o corporate codes theyhave to deal with, and their diering requirements. A big exporter can have dozens o corporate code

audits per year a wasteul duplication o resources. The resources could be better spent on making

improvements on the actory foor that will benet the workers and the operation o the acility.

Partially in response to the prolieration o corporate codes, industry codes were born. Logical step.

Get the big buyers in a given industry to agree on a labor standards perormance code and audit

suppliers against the industry code. Industry codes have emerged to seek to minimize the duplication

o corporate codes. Examples are the International Council o Toy Industries (ICTI) CARE program,

the Electronic Industry Code o conduct (EICC), Worldwide Responsible Apparel Production

(WRAP) and the Council or Responsible Jewelry Practices. Despite these steps, one actory in India

had 98 corporate and industry code compliance visits in one year. This situation is ar rom unique.Although an extreme case, the situation is pervasive. Many actories undergo dozens o audits a year.

A step in the right direction. Right? Partially right.


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Building the Business Case

6 A Quick Look: Labor Standards Perormance Codes and Standards

There are a couple o key problems. First, rom a retailers perspective it is actually a step backwards.

Look at a mass merchandiser that sells apparel, toys, sport ing goods, electronics and ood. The

corporate code was easy or them. It was theirs and they gave it to all o their suppliers to ollow. Now

they have to deal with ve producer industry codes.

The other issue is that industry codes sometimes overlook the areas o labor standards perormance

that are most dicult or the particular industry to meet. For example, overtime hours at peak

production season. So the toy industry code may allow long hours or the Christmas production

season. Agricultural codes may similarly allow long hours during planting or harvest season.

In addition to the evolution o corporate and industry codes o conduct, there is a parallel track

promoting the use o standards. Whats the dierence between a code and a standard? Good question.

Basically, a code is generated by the entity itsel, whether it is a company, in the case o corporate

codes, or an association, in the case o industry codes. A standard is issued by an independent party.

There are published requirements that standard-setting agencies must ollow in developing the standard,such as the ISEAL Alliances Code o Good Practice or Social and Environmental Standards.

Social Accountability International developed the Social Accountability 8000 (SA8000) labor standard

and certication system in 1997. The SA8000 standard is based on international conventions o the

United Nations and the International Labor Organization (ILO). It uses an underlying management

systems approach, similar to that used by the ISO9000 or ISO14000 systems o the International

Organization or Standardization (ISO).

The World Banks International Finance Corporation (IFC) developed a series o Perormance

Standards with the goal o creating a comprehensive set o guidelines or the environmental and labor

standards o IFC- invested companies. PS2, Labor and Working Conditions, is also based on the ILO

conventions, as are most o the credible corporate and industry codes.

Now there is a lot o talk in the corporate responsibility eld about the convergence o codes.

Everyone is looking to reduce the duplication o audits and ocus resources on helping their suppliers

to improve their labor standards perormance. Retailer-led code initiatives include the Business or

Social Compliance Initiative (BSCI) and the Global Social Compliance Program (GSCP).

For you, the most important thing to remember is that management systems are the key to improving

labor standards perormance. This is true to meet PS2. This is true to meet the requirements o the

various corporate and industry codes.

The policies and procedures o the management system help ensure that labor standards perormance

will be ongoing and that there are systems in place to address problems when they arise. It acilitates

auditing by requiring records.

The companies that are considered leaders in corporate social responsibility are coming to a shared

conclusion: management systems are the key to continual improvement and ongoing labor standards

perormance in the supply chain. It is also management systems that serve as the oundation or

integrating corporate social responsibility with a companys core business activities.

Clearly, the increasing awareness will lead to an improvement in social policy among corporations over

the next ve years. However, the challenge will be in implementation. Awareness and good intentions are

only the beginning. Policies are an important second step. But ultimately it is eective implementation

that will make a dierence. The key to eective implementation will be the use o management systemsthat link social and environmental perormance with a companys core business activities. The goal is

or all parties to understand the importance o each job and strive to recognize the equal dignity o each

person involved in the supply chain rom the worker to the manager to the consumer.


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The Growing Importance o Labor Standards Perormance 7

The Growing Importance

O Labor Standards PerormanceThe importance to consumers, investors and other stakeholders is growing. Recent surveys show that

a large and growing number o people in all areas o business and civil society are infuenced in their

decisions by a companys social, labor and environmental perormance.

Further, there is growing evidence that there is a link between a companys social, labor and

environmental perormance and its protability.

As consumers and the media became aware o horrible labor conditions at emerging market

actories, amous brands and retailers started to push their suppliers to improve their labor standards

perormance. Primarily the move was driven to minimize the risk to their brands reputation. The

tool they used with their suppliers was to threaten to withdraw orders. To date, labor standards

perormance has been largely imposed on suppliers through the use o the stick.

This is starting to change.

The next decade will see a shit towards the use o the carrot or all types o companies to improve

their labor standards perormance. As companies integrate labor standards perormance into their

identities, and as consumers, investors and civil society increasingly incorporate CSR into their

decisions, companies will see opportunities to generate more revenue through improved labor

standards perormance. So although the impetus to meet PS2 may have been in response to the

encouragement (or demands) o IFC, we believe that you can use it as a competitive advantage.

Over the past decade, companies have ocused on corporate social responsibility as a risk-management

tool. They wanted to avoid the pain and damage o an incident. Companies tended to view labor

standards perormance as a cost, not an investment.

The next decade will see more mainstream companies start to proactively use their corporate social

responsibility as a core element o their value and as a competitive advantage in the marketplace.

We will see companies view labor standards perormance as an investment. It will be an investment

that generates a measurable return, both through preventing damage to a companys reputation or

through improving productivity and sales.


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8 Reputational Risk

Reputational RiskReputational risk is broadly dened as events that undermine public trust in your company, project

or product/service. More ormally, the United States Federal Reserve issued the ollowing denition:

Reputation risk is the potential loss that negative publicity regarding an institutions business

practices, whether true or not, will cause a decline in the customer base, costly litigation, or revenue

reductions (nancial loss).

Companies and investors are becoming more aware o the critical importance a companys reputation

has on its perormance. One large investment und measures and tracks our types o risk as part o its

investment strategy:

nancial risk compliance risk

operations risk reputation risk

In part, the increased awareness o reputational risk it because the last decade has seen many cases o

companies being destroyed by damage to their reputation.

In one o the more extreme cases, the accounting rm Arthur Anderson ell apart almost entirely due

to its destroyed reputation rom the Enron scandal in 2002. Arthur Anderson, whos customer was

Enron, had been in business since 1913 and had revenue o $9.3 billion in the prior year. They were

never able to recover rom the damage to their reputation.

In the same way, a companys reputation can be harmed by its suppliers.

Weve already looked at that in relation to the development o corporateand industry codes.

Labor rights and working conditions are important elements in your

companys reputation. Using management systems to meet PS2 will

signicantly reduce the risk to your reputation rom labor problems in

your workplace.

Clearly the labor standards in your company and your supply chain

is a critical part o managing your reputational risk. Just to reinorce

the point, according to Edelman's 10th Trust Barometer, 77% o

respondents in the global survey reuse to buy rom companies they

distrust.

Just as there are clear dangers to having a bad reputation, there are clear

benets to having a good reputation. According to the Reputation

Institute's 2009 Global Reputation Pulse, Firms with strong positive

reputations developed rom well-articulated reputing strategies are better poised to improve in a

number o ways: attract better talent; be perceived as providing more value, which oten allows them

to charge a premium; have customers who are more loyal and buy broader ranges o products and

services; and, because the market believes that such companies will deliver sustained earnings and

uture growth, have higher market value and lower costs o capital.

It doesnt matter whether you start the process o improving your labor standards perormance toavoid painul damage to your reputation, to improve the perormance o your company, or improve

the lives o your workers and the community the important thing is to just start. Later in this

section we hope to convince you that there are bottom-line business benets to improving labor

standards in your company.

I t takes twenty years tobuild a reputation andve minutes to destroy it....

I you lose dollars or the

rm, I will be understanding.

I you lose reputation, I will

be ruthless.

Warren Buet,

Chairman o Berkshire Hathaway


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Importance to Investors 9

Importance to InvestorsSocial and environmental issues are an important, stated condition or investment or lending by the

International Finance Corporation (IFC). PS2 is now being used by export credit agencies around the

world as a guideline or evaluating the labor standards perormance o companies. A growing number

o the worlds largest private banks have adopted the Equator Principles as a benchmark to manage

social and environmental issues in project nance.

The investment community is increasingly seeing that corporations must consider environmental,

social and governance issues as key elements o any long-term growth strategy. This belie has spawned

the eld o socially responsible investing. Originally a boutique part o the business, major multi-

national banks and investment rms are now setting up business units to ocus on socially responsible

investing and/or actoring social responsibility into their investment and lending decisions. There isan estimated US$5 trillion in these targeted unds.

O equal importance, the ideas o sustainability and reputational risk are starting to work their way

into all investment analysis.

In a May 2007 interview published by McKinsey Quarterly, David Blood, previously the head o

Goldman Sachs Asset Management, and current partner at Generation Investment Management, said,

Sustainability investing is the explicit recognition that social, economic, environmental, and ethical

actors directly aect business strategyor example, how companies attract and retain employees,

how they manage the risks and create opportunities rom climate change, a companys culture,

corporate-governance standards, stakeholder-engagement strategies, philanthropy, reputation, and

brand management. These actors are particularly important today given the widening o societal

expectations o corporate responsibility.

Lending and investment decisions are based on assessing the risk, and it is clear that a company aces

perormance risks based on its corporate social responsibility perormance. The risks to a corporations

perormance are both short-term and long-term. Labor strikes, media exposs, product recalls, serious

accidents are all examples o events that can have an immediate negative impact on a companys sales

and its related value to shareholders.

There appear to also be long-term risks that can be mitigated through improved corporate social

responsibility perormance. Better worker-manager relations reduce worker turn-over. Integrated

labor standards perormance and productivity systems reduce deect rates. The sustainable sourcing

management o raw materials helps ensure supply and stabilize prices. Intelligent product design

minimizes waste in production and packaging.

Although environmental compliance and sustainability has taken the lead in gaining media and

corporate attention, the growing attention is benecial to labor standards perormance. Academic

80% see the existence o high perorming CSR programs as a proxy or how

eectively a business is managed

74% believe that labor standards perormance will add long-term shareholder value

82% o European and 59% o North American companies somewhat or ully integrate

environmental, social and governance into all corporate project evaluations

McKinsey Quarterly (Feb. 2009) survey o 238 CFOs, investment proessionals and fnance executives.


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10 Importance to Investors

research is underway seeking to identiy links between high-level CSR perormance and nancial

perormance. Results rom these early studies are likely to cast more o a spotlight on the topic.

Increasingly, the investment research community is interested in the environmental, social, andgovernance actors that aect the company and how management is adjusting their strategy to

account or them. These newer measurements are starting to be incorporated into traditional

mainstream nancial research. Early results rom traditional nance companies are encouraging. In

a multi-industry review, Goldman Sachs ound that companies that have environmental, social and

governance (ESG) policies in place have outperormed the general stock market by 25% rom August

2005 December 2007. As we know, having a policy in place is a pretty low bar, but it is a step in

the right direction.

Companies consistently participating in the Corporate Responsibility Index outperormed the FTSE

350 on total shareholder return 2002 2007 by between 3.3% and 7.7% per year and demonstrated

decreased share volatility, according to an article titled Now is the Time published in Business in theCommunity.


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Bottom- line Business Benets 11

What are the main business benets to your organization

of having a dened corporate-responsibility policy?

Having a better brand reputation 52%

Making decisions that are better for our

business long term41%

Being more attractive to potential and

existing workers38%

Meeting ethical standards required by

consumers35%

Having better relations with regulators

and lawmakers28%

Our revenue is higher than it would

be otherwise7%

A survey by the Economist Intelligence Unit released in January 2008

Bottom-line Business Benets

Enhancing Business Performance

The message is getting the attention o CEOs and business executives. A recent survey by McKinsey

& Company released at the UN Global Compact Leaders Summit ound that 90% o surveyed CEOs

were doing more on environmental, social, labor and governance issues now than ve years ago. The

CEOs increasingly see their business perormance linked to their environmental and labor standards,

as the CEOs project that consumers will soon become the most infuential stakeholder in shaping

corporate policy.

Despite a growing awareness o labor standards perormance issues, there is still a signicant gapbetween awareness, policy and perormance. The McKinsey survey ound that only 27% o the

companies have a policy that addresses social, labor and environmental perormance in their supply

chains, despite the act the 59% o the CEOs said they should.

In another recent survey, Grant Thornton International reported that company executives believe

that corporate responsibility programs can positively impact their business and help achieve strategic

goals. O the more than 500 business executives surveyed, 75% believed corporate responsibility could

enhance protability. As a result, 77% said they expected corporate responsibility initiatives to have a

major impact on their business strategies over the next several years.

Corporate responsibility has begun to move rom a deensive to an oensive position, said JackKatz, managing partner o Grant Thorntons Financial Services industry practice. It is not simply

about complying with government regulations. Its about reducing costs, marketing products and

services, raising capital, and winning talent.

A Grant Thornton survey released in September 2007

ound that 75% o respondents said that improved CSR

would increase their companies prots. The survey

was o 500 senior executives rom large and midsize

companies who are members o the Business Week

Market Advisory Board.

This is big. This is worth repeating. 75% o surveyedexecutives said that improved CSR would improve their

protability. Seems like the shit rom thinking o CSR

as a cost to an investment has started.

The real-world results since that survey have proven

them to be right about enhancing protability. The

results are eye-opening.

A 2009 A.T. Kearney study ound that in the ace o

the economic crisis, in 16 o 18 industries, companies

committed to sustainability outperormed industryaverages including protability by 15% as compared

to peers who maintained or cut back sustainability

initiatives.


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12 Bottom- line Business Benets

Benets from Improved Labor Standards

Documented examples

Cambodia

ILO Better

Factories Project

Product Rejection rate reduced by

44% overall

China

Chai Da/Ying Xie

Annual worker turnover decreased

from 78 to 32% in three years

Turkey

Yesim

37% Decrease in lost time from

accidents and sickness

Turkey

Topkapi

Receives 2.5% larger discount on

insurance premiums for casualty

and goods in transit

IndiaEsstee

Worker Turnover reduced from75% to 35%

In the UK, companies that implemented socially responsible employee management systems experienced

a return on capital double the national average and pre tax prot margin that is 50% higher, according

to The Business Case or CSR published by MHC International Ltd.

Productivity Benets

It seems to be a widely held perception that when a company improves its labor standards perormance,

the cost o its operations, products or services goes up. We hear this rom a lot o companies. We hear

this rom senior management. We hear this rom nance departments. We hear this rom procurement

and sourcing departments.

So we set out to nd research on this topic. For better or or worse, it is important to know whether

or not this is always true, and i so, why? What did we nd? Very little. Most o what we ound was

anecdotal and inconclusive.

You may say, i I pay the workers 15% more and labor is 30% o the direct cost o my operations, the

cost o my product/service must go up. Seems logical.

But what i I am a manuacturer and the production deect

rate goes down rom 10% to 2%? What i I am a bank and my

customer service representatives can handle 25% more calls per

hour? What i I am a arm and the average output per worker

hour goes up rom 6 crates to 7 crates because experienced

workers stay at the arm longer or because workers are not

constantly exhausted? What i worker retention improves rom

60% per year to 80% per year and you spend less money on

recruitment and training?

These are direct cost savings. They may or may not eliminate

the impact o paying the workers more money. But they clearly

help to oset it. In some cases, they may actually reduce the cost

o delivering the product or service.

When quality management systems were rst introduced to

business, there was resistance. At the time, people said it was a

waste o time and money - why do I need to document what

I already do? But now in a wide range o industries, qualitymanagement systems have been completely integrated into

day-to-day operations. The management systems that are now

considered essential to managing quality can also incorporate

social, labor and environmental standards perormance. The table on the let gives examples o how

improved labor standards leads to eective human resource management and direct business benets.


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Bottom- line Business Benets in Marketing 13

Business-to-Business Marketing Benets

Clearly improved labor standards perormance is an asset in business-to-business marketing. Multi-national companies have developed supplier codes o conduct. Many companies conduct a pre-audit

beore they start buying rom you. Many supplier contracts now mention adherence to a code o

conduct as a requirement. They audit suppliers. They use labor standards perormance as a criterion

in selecting some as strategic suppliers, while eliminating others. Some companies are setting annual

targets or improving the aggregated labor standards perormance o their supply base. Some retailers

are running electronic auctions to purchase certain commodity items only companies meeting a

certain labor standards perormance level are allowed to participate.

In 2009, the IBM Institute or Business Value surveyed 224 worldwide business leaders and ound

that 60% believe corporate social responsibility has increased in importance over the past year (a year

with tremendous economic downturns). Only 6% consider it a lower priority.

So it is sae to conclude that improving your labor standards perormance is a valuable part o

becoming a supplier to multi-national companies. O course, your labor standards perormance by

itsel wont get you the business, but it helps. It helps now, and it will help more in the uture.

The next decade will see an upward spiral o labor standards perormance in companies that is

business-driven.

There are also some examples o successul business-to-business labels. The Forest Stewardship

Council (FSC) has certication programs that include chain o custody requirements. The thrust

o the marketing or their FSC certied label has been towards major corporations to change their

internal purchasing to use FCS certied paper products. This business-to-business approach has beensuccessul as paper mills, paper converters and printers now oer FSC certied papers. Corporations

such as Coca-Cola and Disney, use FSC certied paper in some o their corporate publications.

The Cotton Made-in-Arica program helps Arican armers produce cotton in a more sustainable,

socially-responsible and protable way. The program promotes the use o the

Cotton Made-in-Arica brand among apparel companies, increasing market

access or the armers in the program. The program has been successul in

attracting over 30 companies to use Cotton Made-in-Arica in their products

and to eature the label in their marketing communications.

The next decade will

see an upward spiral

o labor standards

perormance incompanies that is

business-driven.


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14

1

The Elements o

Labor StandardsPerormance 3


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15

Background on Labor Standards

Perormance & Labor StandardsWhen we talk about labor standards perormance in a company or its supply chain, we are really

talking about human rights and labor rights in the workplace. This may be a little simplistic, but

most o the social standards, industry codes and corporate codes address the same basic elements.

The core concepts defning the elements o labor standards perormance come rom the International

Labor Organization (ILO) and the Universal Declaration o Human Rights (UDHR). The countries

ratiying the ILO Conventions must integrate them into their national labor laws.

The ILO was created in 1919 rom the Treaty o Versailles and it became the frst specialized agency

within the United Nations in 1946. Its purpose is topromote social justice and internationally recognized

human and labor rights. The ILO has a unique tripartite

structure with each countrys representation consisting o:

Government (two delegates)

Employers Associations (one delegate)

Workers Organizations (one delegate)

Corporate codes o conduct and the resulting industry

codes o conduct are largely based on the same ILOand UN conventions. So there is a clear link between

the national labor law o many countries and most labor

codes or standards.

So dont think o labor codes or standards as just add-ons or additional requirements. Remember that

the ILO conventions are integrated into the national laws o ratiying countries. Meeting corporate

codes or other labor standards like PS2, which are based on ILO conventions, advances your eorts to

comply with local and international law.

It is ILOs tripartite

structure that served

as a reerence point or

the creation o what

are now called multi-

stakeholder initiatives.


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The Elements o Labor Standards Perormance

The overall objectives of PS2 are to:

Establish, maintain and improve the worker-manager relationship

Promote the fair treatment, non-discrimination and equal opportunity of workers, and compliance with

national labor and employment laws

Protect the workforce by addressing child labor and forced labor

Promote safe and healthy working conditions, and to protect and promote the health of workers

16 Background on Labor Standards Performance & Labor Standards

Introduction to

Perormance Standard 2 (PS2)Perormance Standard 2 (PS2) recognizes that the pursuit o economic growth through employment

creation and income generation should be balanced with protection o the basic rights o workers.

For any business the workorce is a valuable asset, and a sound worker-manager relationship is a

key ingredient to the sustainability o the enterprise. Failure to establish and oster a sound worker-

manager relationship can undermine worker commitment and retention, which can jeopardize the

business. Conversely, through a constructive worker-manager relationship and by treating workers

airly and providing them with sae and healthy working conditions, enterprises may see tangible

benefts, such as the enhancement o efciency and productivity.

The requirements set out in PS2 have been in part guided by a number o international conventions

negotiated through the International Labor Organization (ILO) and the United Nations (UN).

We are using the term Workerin the broader sense. Itincludes all non-managementworkers, supervisors and managers

employed directly by the company

or indirectly through contractors or

agents.

IFC Defnition o Worker


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Protecting the Work Force

Child Labor The company, contractors and suppliers will not employ children.

Forced Labor The company, contractors and suppliers will not employ forced labor.

Working Conditions and Managementof Worker Relationship

Human Resources Policy The company will adopt a human resources policy that outlines itsapproach to managing workers consistent with the requirements of the

Performance Standard.

Working Relationship The company will document and communicate all working conditions andterms of employment to all workers.

Working Conditions andTerms of Employment

Where the company is a party to a collective bargaining agreement witha workers organization, such agreement will be respected; the company

will provide reasonable working conditions and terms of employment that

comply with national law.

Workers Organizations The company will recognize workers rights to form or join workersorganizations regardless of the recognition of this right by the national law.

Non-Discriminationand Equal Opportunity

The company will base employment decisions on the principle of equalopportunity and fair treatment.

Retrenchment The company will develop a plan to mitigate the adverse impacts ofretrenchment on workers.

Grievance Mechanism The company will provide a grievance mechanism for workers to raisereasonable workplace concerns.

Occupational Health and Safety

The company will provide workers with a safe and healthy work

environment.

Non-Employee Workers

The company will verify the legitimacy of, as well as adherence to, the

standard by contractors.

Supply Chain

The company will address child labor and forced labor in its supply chain.

Performance Standard 2


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Guide to ThisSection

18

Additional labor-related publications can be ound at:http://www.ic.org/icext/sustainability.ns/Content/Publications_PS2_Laborhttp://www.ic.org/icext/sustainability.ns/Content/Publications_LaborStandards

On the ollowing pages we careully examine each

element o PS2. On these two pages, we are presenting a

guide to help you easily navigate this section and get the

most out o it.

There are two-pages on each PS2 element. They are all identical in design.

On the let column is the actual text rom PS2. In this column we provide

some insight into the topic. We try to give you a broader perspective on

the element and what it means to you. We also try to help you see some o

the issues rom the workers point o view.

On the right page, we start with Guiding Principles. Here we summarize

the text o PS2 to make it as clear as possible. We try to capture the

underlying intent.

The ar right column has three sections. Here we provide you with insight

to see your company rom an auditors point o view. This is particularly

helpul or your Internal Labor Standards Perormance Team, and should

be a useul reerence or verifcation and monitoring.

Monitoring Resources are the things an auditor would look or at your

company to veriy you are ollowing the guidelines or the PS2 element.

Common Non-Conformities are the problems that occur in companies all

over the world. Potential Solutions are ideas or addressing the problems.

These are based on best practices rom around the world.

This section will provide you with an understanding o the management

systems and related human resource management procedures to address

PS2. It will also help you to assess your current perormance with PS2 and

determine corrective measures to be implemented.

At the top o this page is a navigational tool that will help you see how the

elements ft together in the PS2 categories . The poster on the previous

page is also helpul or this.

PS2

The PS2

Standard

In this column is theactual text from PS2

related to the element.


Protecting theWork Force

OccupationalHealth and Safety

Non-EmployeeWorkers

SupplyChain


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GuidingPrinciples

In this column welsummarize the guidingprinciples behind thePS2 element.

We try to give youl the idea in a simple,clear way.

You may want to uselthis language orcommunicating theconcepts to workersthrough posters,hand-outs, etc.

Monitoring ResourcesMonitoring resources are the things you would look or tosee i you are meeting PS2.

You can use these as a reerence or conducting internalaudits and to prepare or audits by external groups.

Common Non-ConormitiesCommon non-conormities are the common problemsound in companies around the world.

You can use these as a quick reerence to evaluateyoursel.

Potential Solutions

Potential solutions are suggestions or you to consider.

These are based on best practices rom companiesaround the world.

Youll see that having clear policies and proceduresand trained people is a solution that spans everyelement o PS2.

Guide to This Section 19


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Human ResourcesPolicy

20

It is clear that management systems have become the

key to improving labor standards perormance in a

company. At the most basic level, management systems

consist o policies and procedures. But you need trained,

motivated people to make it work.

Put more simply, the policies are the rules, and the procedures are the

steps required to consistently ollow the rules. People are key to the

implementation o your management system; you need people that have

the right attitude, skills and knowledge. People that are committed

and motivated. Policies and procedures are just the start; eective

communication to your organization is crucial to the implementation

process. How you decide to communicate to your organization will be

up to you, but you ultimately want to send everyone in your company the

same understandable message.

The use o management systems can also provide you with operating

benets. Many companies around the world have documented

improvements in worker retention as well as lower deect rates as they use

management systems to improve labor standards perormance.

PS2

HumanResources PolicyStandard

The client will adopt a

human resources policyappropriate to its size andworkorce that sets outits approach to managingworkers consistent withthe requirements o thisPerormance Standard.

Under the policy, theclient will provide workers

with inormation regardingtheir rights undernational labor andemployment law,including their rightsrelated to wages andbenets.

This policy will be clearand understandableto workers and willbe explained or madeaccessible to eachworker upon takingemployment.

Working Conditions and Managemento Worker Relationship


OccupationalHealth and Saety

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GuidingPrinciples

The company will have aldocumented policy andprocedure related to PS2

The company will inorml

workers o their rightsunder PS2, national laborand employment law

Policy must be clear andlunderstandable to allworkers

Monitoring ResourcesComplete review o all policies and procedures

Review o management-worker committeemeeting minutes

Communications (memos, letters, etc.) to workers,suppliers, contractors and multi-stakeholder groups

Interviews with management and workers

Interviews with external stakeholders

Budgets related to implementing labor policy

Training curricula and logs

Common Non-ConormitiesPolicies not complete, up-to-date and centrally maintained

Policies not implemented at all subsidiaries

Policies do not conorm to all aspects o national laborlaw and PS2 standard

Policies not clearly communicated or understandableto workers

Procedures do not support stated policies

Job perormance measurements do not supportstated policies

Senior management actions do not substantiatestated commitment

Lack o regular, systematic training

Potential SolutionsCentrally organize all policies and procedures; identiyand record responsible person and last date modied

Conduct an annual review o all policies and procedures

Prominently display policies and procedures in alllocal languages

Appoint a person responsible or monitoring policies andprocedures related to PS2 and national law

Implement standardized routine training

Human Resources Policy 21


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WorkingRelationship Policy

22

Imagine you are a worker. You are excited to start a new

job. You arrive at your new job and the HR supervisor

tells you about the company and how things work. You

begin working in your new job, but nobody mentions your

contract. A ew weeks later, you receive your rst paycheck.

You were expecting to make more money. You are unsure o

how your pay was determined. You dont know who to ask.

Your excitement has turned to rustration and distrust.

In just a ew weeks your new worker is no longer enthusiastic. Part o

creating a productive working environment is creating a shared, clear

understanding between you and your workers. All o your workers,

rom senior executives to hourly production workers, have a right to

know their contract terms. Your workers have a right to know how their

pay is calculated and what benets they will earn. They have a right to

understand the companys rules about working hours and overtime. They

have a right to understand pay deductions.

By making sure they understand this undamental inormation, you are

creating a positive communication channel between your managers and

workers. Your workers are more likely to eel motivated, to develop an

attitude o trust and to provide greater benet to your company.

PS2

WorkingRelationshipStandard

The client will document

and communicate to allemployees and workersdirectly contracted bythe client their workingconditions and terms oemployment, includingtheir entitlement towages and any benets.




Non-EmployeeWorkers

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GuidingPrinciples

The company willldocument andcommunicate workingconditions and terms oemployment to all workers

Wages and benets mustlbe clearly communicatedand understood by allworkers

Monitoring ResourcesContracts or all workers

Policies and procedures related to workercontracts and wages

Communication and training on wage calculation,including local laws

Payroll records, time sheets and pay stubs

Piece rate or perormance pay calculations veriedagainst minimum wage

Worker interviews

Engineering studies used to set perormancepay quotas and bonuses

Common Non-ConormitiesAll workers do not receive a contract

Employment contracts are not understandable orprovided in workers language

Workers do not understand wage, benet and deductionscalculations

Companies unairly mix hourly and perormancewage calculations

Overtime is not paid at a premium rate accordingto local law

Quotas and perormance targets are unrealistic

and unattainable

Potential SolutionsProvide all workers with a contract in theirnative language

Provide documented training on contracts, wages,benets and deductions or all workers

Routinely provide workers with a clear record

o pay calculationsUtilize credible engineering studies to setproduction quotas and perormance targets

Working Relationship Policy 23


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Working Conditions& Terms oEmployment Policy

24

As the management in your company, you have theobligation to meet national labor laws. This is the minimum

that is acceptable or meeting PS2. This means providing

the minimum to every worker in your company. It also

means having clearly dened policies and procedures that

refect your commitment to labor standards perormance by

everyone at all levels o your company.

I you have negotiated a collective bargaining agreement with your workers,

your responsibility is to uphold this agreement and integrate the terms othe agreement into your policies and procedures. All workers should be

covered by the collective bargaining agreement. I you are in the process o

negotiating a collective bargaining agreement, do so in good aith. Some

companies report more orderly and ecient labor relations ater collective

bargaining agreements are in place.

In some countries, the enorcement o labor laws may be relatively lax. This

does not mean that you are excused rom meeting the labor laws within

your own company. It all ties back to operating your company in a way that

treats all workers with dignity and respect.

PS2

WorkingConditions& Terms ofEmployment

StandardWhere the client is a partyto a collective bargainingagreement with aworkers organization,such agreement will berespected. Where suchan agreement does notexist, or does not addressworking conditions andterms o employment(such as wages andbenets, hours o work,overtime arrangements,overtime compensation,and leave or illness,maternity, vacation orholiday) the client will

provide reasonableworking conditions andterms o employment that,at a minimum, complywith national law.




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WorkersOrganizations

26

Freedom o association (FOA) and the right to collective

bargaining are key and undamental rights in the workplace.

This core element empowers workers and gives them a

collective voice. It involves them in the production process

and osters dialogue between workers and managers.

Management that does not allow reedom o association and

collective bargaining is not embracing one o the core labor

standards. Embracing reedom o association and collective

bargaining does not mean promoting unionization. There is

a ne but clear line between the two.

PS2

WorkersOrganizationsStandard

In countries where national

law recognizes workersrights to orm and to joinworkers organizations o theirchoosing without intererenceand to bargain collectively,the client will comply withnational law. Where nationallaw substantially restrictsworkers organizations, theclient will enable alternativemeans or workers to express

their grievances and protecttheir rights regarding workingconditions and terms oemployment.

In either case described inthe prior paragraph, andwhere national law is silent,the client will not discourageworkers rom orming or

joining workers organizations

o their choosing or rombargaining collectively, andwill not discriminate orretaliate against workerswho participate, or seekto participate, in suchorganizations and bargaincollectively. Clients willengage with such workerrepresentatives. Workerorganizations are expectedto airly represent the

workers in the workorce.

Freedom o association can be one o the most challenging labor principles to

implement. How do you ensure your workers understand this is one o their

principal rights? Beyond this knowledge, how can you tell whether or not

your workers eel ree to bargain collectively? How can you tell i they really

do not want a union or are too intimidated to orm one? How do you make

sure your workers understand their rights, but you are not seen as infuencing

their decisions? The situation is complicated.

You may ear that allowing reedom o association in your company will lead

to unionization, which can lead to higher costs and workfow interruptions.

Your role is both to ensure that workers are educated on their reedom o

association rights and to maintain an environment where this is possible.

It is not the purpose o this Handbook to argue the pros and cons o

unionization. However, it is worthwhile to repeat:

Freedom o association (FOA) and the right to collective bargaining are

key and undamental rights in the workplace.

Embracing reedom o association and collective bargaining does not mean

promoting unionization.

Developing trust and credibility with local NGOs and unions is a critical

part o understanding the real situation around reedom o association. It is a

critical part o any serious eort to improve labor and working conditions.




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GuidingPrinciples

The company will complylwith national law thatrecognizes workersrights to orm and to joinworkers organizations

I national law restrictslthe right to organize, thecompany will enable themeans or workers tobargain collectivelyand organize

I national law restrictslworkers organizations,

the company willestablish an alternativeway or workers tole grievances

The company cannotlinterere with ordiscriminate againstworkers who chooseto organize

Worker representativeslmust have access tomanagement

Worker organizationslare expected to airlyrepresent the workorce

Monitoring ResourcesDocumented policy regarding collective bargaining

Minutes and records rom collective bargainingsessions, reviews or other actions

Procedure or workers to select worker representativewithout management intererence

Interviews with workers, NGOs and trade unions

Worker-manager training curriculum

Collective bargaining agreements

Grievance mechanism

Common Non-ConormitiesNo clear policy allowing collective bargaining

Collective bargaining agreement not negotiated orhonored in good aith

Management nominates worker rep or avors one

worker organization over anotherWorkers or others involved in organizing are redor harassed

Management does not clearly inorm workerso their legal rights

Company advises workers that unions willdiscourage investment

Potential SolutionsClear communication to workers on their rights tocollective bargaining

Allow workers to meet to address workplace issues

Worker rep as in PS2

Regular training on worker-manager communications

Regular meetings o management and worker reps

Periodic documented communication with localunions and NGOs

Workers Organizations 27


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Non-Discrimination& Equal Opportunity

28

Discrimination is an extremely complex issue. Negative

discrimination is used to prevent equal opportunity

or people. Less commonly, positive discrimination isused to correct the wrongs o past discrimination and

provide advantages to those people who are or have been

discriminated against or socially excluded.

PS2

Non-Discrimination& Equal OpportunityStandard

The client will not makeemployment decisions

on the basis o personalcharacteristics unrelated toinherent job requirements.The client will base theemployment relationshipon the principle o equalopportunity and air treatment,and will not discriminatewith respect to aspects othe employment relationship,

including recruitmentand hiring, compensation(including wages andbenets), working conditionsand terms o employment,access to training, promotion,termination o employmentor retirement, and discipline.In countries where nationallaw provides or non-discrimination in employment,

the client will comply withnational law. When nationallaws are silent on non-discrimination in employment,the client will meet thisPerormance Standard. Specialmeasures o protection orassistance to remedy pastdiscrimination or selectionor a particular job based onthe inherent requirements othe job will not be deemeddiscrimination.

Realistically, in almost every culture there is some orm o deeply ingrained

discrimination. Even where discrimination can be easy to spot, it can be an

enormous challenge to change. It may be centuries old. It may be woven

into the abric o society.

In some cultures it is religious discrimination. In some cultures it is racial

discrimination. In some cultures it is gender discrimination. In some cultures

it is age discrimination.

Within a workplace, people should be hired, evaluated and compensated

based only on their ability to do a job. Policies and procedures must be clear

and understandable to all workers, supervisors and managers. They must be

eectively communicated.

It is your responsibility to make sure that discrimination is clearly not

tolerated in your policies and procedures. It is also your responsibility to

make sure that it is not a problem in your day-to-day operations. Because

discrimination can be so ingrained in people, you need to maintain constant

vigilance against it appearing in your company.




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GuidingPrinciples

People should belhired, promoted andcompensated solelybased on their abilityto do the job

All workers should havelequal access to training,tools and opportunitiesor advancement

All workers should belree rom harassmentby management orother workers

Positive discriminationlmay be allowable incases where it protectsdisadvantaged orexcluded groups andprovides them specialopportunities

Monitoring ResourcesDiscrimination policy and related employment policies

and procedures

Company policy and procedure to address and managediscrimination issues when ound

Comparative demographics o workers and managers

Documentation o handled discrimination cases

Diversity training curriculum and attendance log

Interviews with workers and managers, including thosewho may be likely to be discriminated against

Interviews with local NGOs and trade unions

Hiring, promotion and termination records

National law as it relates to discrimination

Common Non-ConormitiesMinorities or women denied equal benets and

job opportunities

Manager distribution not refective o workplacedemographics

Pregnancy testing to deny women employment oradvancement

Hiring or advancement retribution or union activities

Workers over a certain age not hired or retained

Workers hired or advanced based on religion or race

Ads speciying gender, race, country o origin, etc.

Potential SolutionsClearly dene anti-discrimination policy in hiring,training, promotions and compensation

Regularly review worker and manager demographics

Develop long term remediation plan to address pastdiscrimination

Provide regular training to workers and managers

Establish condential and secure communication channels or workers to reach managers

Actively promote a harassment- ree workplace

Non-Discrimination & Equal Opportunity 29


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Retrenchment

30

Good Practice Note: Managing Retrenchment:http://www.ic.org/icext/sustainability.ns/Content/Publications_GPN_Retrenchment

Naturally, within any business environment, change

is a constant actor. It is impossible or you to control

all o the variables that impact your business. What

i a big customer o yours were to go out o business?

What i raw material costs were to increase, making

you less competitive in a key market? What i improvedproduction processes cut your labor requirements? What

i a merger required a reduction in your workorce?

All o these things can necessitate dramatic adjustments within your

company. Understandably, business survival becomes your number one

concern. But you still have a responsibility to those that work or you.

Imagine you are a worker. You live rom one paycheck to the next. You hear

there will be layos. You wonder who will remain employed, and whether

or not you will be one o them.As a manager, you have a responsibility to communicate with the workers

and to involve them in the difcult decisions that lay ahead. A decision to

reduce your workorce will be a difcult one. You must make your lay-o

process air and transparent. You also need to consider the impact on the

community and do what you can to minimize any negative repercussions.

At a bare minimum, you need to provide severance that meets national

labor laws and company policy.

PS2

Retrenchment

Standard

The client will developand implement a plan

to mitigate the adverseimpacts o retrenchment

on workers, i itanticipates the elimin-ation o a signicantnumber o jobs or a

layo o a signicantnumber o workers.

The plan will be based

on the principle o non-discrimination andwill refect the clientsconsultation with workers,

their organizations and,where appropriate,the government.




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GuidingPrinciples

The company will developland implement a planto mitigate the adverseimpact o retrenchmenti it anticipates a largenumber o layos

The plan will incorporatelnon-discriminationprinciples and includethe input o workers,their organizations,where appropriate, thegovernment

Monitoring ResourcesPolicy and procedure related to workorce reduction,

severance and transitionAnalysis o alternatives

Procedures or selecting workers impacted byworkorce reduction

Documentation o prior instances o workorcereductions

Minutes rom management meetings and discussions

Communications with workers related toworkorce reduction

Communications with external stakeholdersand community groups

Interviews with current and past workers

Common Non-ConormitiesCompany has no plan or retrenchment

No alternatives have been analyzed

Workers are suddenly laid o without advancenotice or any required severance

Company does not consult workers or outside parties

Company uses lay-os to discriminate or retaliate

No legal benets are paid

Potential SolutionsPolicy and procedure or workorce reduction,including worker selection

Analysis o alternatives to workorce reduction

Engage workers in discussions with workers related toworkorce reduction as early as possible

Communication to all workers about why andhow the reduction will take place

Discussions with local NGOs about how the communityimpact o workorce reduction could be minimized

Retrenchment 31


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GrievanceMechanism

32

Despite all of your efforts, there will be problems in your

company. You are dealing with people in a constantly

changing environment. Every worker in your companyhas pressures. Frustrations build. Maybe a worker feels a

supervisor discriminates against him or her. You need to

make sure that there is a clear, safe channel for the worker

to communicate his or her concerns to management. You

need to make sure that the worker feels that you heard his

or her concerns, took them seriously and acted on them.

Remember, improving labor standards perormance is a journey a processo continual improvement. There will always be problems that arise. The

key is to have systems in place so you identiy and address the problems

early and eectively. Everyone needs to understand the process. Everyone

need to think the process is air and transparent. It needs to be credible.

Providing a grievance mechanism or workers is smart or your company.

Without a communication channel workers can eel trapped. It leads to

resentment and rumors. It leads to an us against them attitude.

You need to create an environment where workers eel sae expressing their

concerns. They should be able to le anonymous complaints. They should

not ear retaliation. You need to create a system or workers that is simpleand secure. The system needs to be responsive and air.

PS2

GrievanceMechanismStandard

The client will provide a

grievance mechanismor workers (and theirorganizations, where theyexist) to raise reasonableworkplace concerns.The client will inorm theworkers o the grievancemechanism at the time ohire, and make it easily

accessible to them. Themechanism should involvean appropriate level omanagement and addressconcerns promptly, usingan understandable andtransparent process thatprovides eedback tothose concerned, withoutany retribution. Themechanism should notimpede access to other

judicial or administrativeremedies that mightbe available under lawor through existingarbitration procedures, orsubstitute or grievancemechanisms provided

through collectiveagreements.




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GuidingPrinciples

The company willlestablish a transparentprocess or workers toexpress concerns andle grievances

There will be no retaliationlor discrimination againstthose that expressgrievances

Management will treat thelgrievances seriously andtake appropriate action

The companys grievancel

mechanism does notreplace other channels asdened by law or collectivebargaining agreements

Common Non-ConormitiesNon-existent or incomplete policy and procedure

Workers are not aware o the grievance mechanism

Workers distrust the process or ear retaliation

No action is taken by management based on grievances

No way to le anonymous complaints

Potential SolutionsEstablish clear policies and procedures or grievances

Communicate the grievance process to all workers

in a clear, understandable mannerProvide ongoing training to all workers

Document all grievances and the resulting actions

Make worker reps a key part o the process

Grievance Mechanism 33

Monitoring ResourcesDocumented policy and procedure or worker grievances

Worker and manager interviews

Training curriculum and log on grievance handling

Communications to workers, supervisors and managers

NGO and trade union interviews

Records o complaints lodged and actions takenon grievances

Employment and termination records


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Child Labor

34

Good Practice Note: Addressing Child Labor in the Workplace and Supply Chain:http://www.ic.org/icext/sustainability.ns/Content/Publications_GPN_ChildLabor

On the surace, child labor seems to be an easy issue to

combat. It is the marquee issue in international labor

standards perormance. This is the issue that attracts the

media. People around the world have all heard horror

stories regarding child labor, and many people equate no

child labor with labor standards perormance.

Many experts in the feld o labor standards perormance have said that we

are past the use o child labor. But it seems that while some o those inside

the feld have moved onto other issues, the reality on the ground is dierent.

Child labor is still an issue in some sectors and in the supply chain o some

products or services. It is still a huge, complex issue. It is still a long way

rom being solved.

You may eel certain there are no children working at your company. How

do you ensure you do not have children working? Can you answer this with

certainty? How do you veriy with confdence the age o the people you hire?What about children working at your suppliers acility or at a contractors?

Are you as certain about that? There are also nuances within child labor that

need to be addressed rom country to country.

Young workers are those between the legal age and 18 years o age. Local

laws may allow apprentice programs as a way to train young workers.

Properly managed apprenticeships can certainly be a valuable part o

education; however, many extensive studies has shown there are abuses.

Finally, you must have a remediation plan in place should children be ound

working in your company, or in a suppliers or contractors company. Youneed to be able to instantly tell the media and your external stakeholders

exactly what you will do. I you wait to develop the plan until child labor

puts you on the ront page o the newspaper or in widely read blogs, it

is too late.

PS2

Child Labor

Standard

The client will not employchildren in a manner

that is economicallyexploitative, or is likely

to be hazardous or tointerfere with the childseducation, or to beharmful to the childs

health or physical, mental,spiritual, moral, or socialdevelopment.

Where national lawshave provisions for theemployment of minors,the client will follow those

laws applicable to theclient. Children belowthe age of 18 years willnot be employed in

dangerous work.



OccupationalHealth and Safety

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GuidingPrinciples

The company will notlemploy workers underthe minimum age oremployment as denedby national law

Workers between thelminimum age and 18will not be employed indangerous work or workthat intereres with theireducation or development

Monitoring ResourcesPolicies and procedures or age verication in hiring

Documentation regarding apprentice programs

Interviews with workers, local children, tradeunions and NGOs

Visual observation

Pay records, medical records, birth certicates,

IDs, school records

Common Non-ConormitiesChild labor policy not eectively communicated toworkers and interested external parties

Lack o procedures to eectively veriy age when hiring

No remediation plan in place

No procedures to assure proper use o young workers

Apprentice programs permitting children to work orimproperly using young workers

No clear policy communicated to contractorsand suppliers

Potential SolutionsWrite clearly dened policies and procedures or ageverication make them publicly available

Oer an apprentice program designed with theinvolvement o external stakeholders

Develop remediation plan or use in cases where childrenare unknowingly employed despite your No Child Laborpolicies and procedures (ex: child presents alse ID)

Engage with local stakeholders to develop proactiveplans to address child labor issues

Communicate your child labor policies to your suppliersand contractors and provide them with the training andtools to address the issue

Child Labor 35


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Forced Labor

36

Like child labor, orced labor presents a nightmarish image

in the minds o many people: workers chained to their

work tables, prisoners working at manuacturing acilities.

However, the reality o orced labor is oten ar more

insidious. It is not always so easy to spot and can be hidden

within actual air labor practices. Your company may havea mix o direct employees and people working at your

company through employment agencies or third parties. Do

you know the details o those arrangements?

The increase in the use o contracted workers has created new models o

orced labor whether you are in the arming, construction or manuacturing

industry. Combine this with the increase o cross-border migrant labor and

you have even more cases.

Imagine an employment agency that recruits workers or you. The agencymay send the workers to you rom another country. The agency might hold

their passports, allegedly or saekeeping. In some cases, the company may

deliver pay to the employment agency instead o the contracted workers.

What i the agency charges the workers a recruitment ee? What i the agency

deducts money rom the workers paychecks or the recruitment ee? Or

dormitory ees? Or tools and saety equipment? These ees may be hidden

rom you.

You may not be aware that the workers do not have their passports. You may

think that the workers are being paid a air wage or their work. The workers

may then be let with no money and no passport; without these things, theybecome victims o orced labor.

I you are condent you have these issues under control in your company,

your work is not done. As part o PS2, you also need to think about these

same issues or your suppliers.

PS2

Forced LaborStandard

The client will not employorced labor, which

consists o any work orservice not voluntarilyperormed that is exactedrom an individual underthreat o orce or penalty.

This covers any kind oinvoluntary or compulsorylabor, such as indenturedlabor, bonded labor or

similar labor-contractingarrangements.




Non-EmployeeWorkers

SupplyChain


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GuidingPrinciples

The company will notlemploy orced labor

Workers have the rightlto retain their personaldocuments and money

Workers are ree to leavelthe workplace ater work

Workers have the rightlto resign

Monitoring ResourcesEmployment contracts in all appropriate languages

Contracts with employment or recruitment agencies

Payroll records, timesheets and wage deductioncalculations

List o permanent workers and contracted workersat your acility

Worker passports or IDs

Interviews with all workers, employment

agencies and external stakeholdersInterviews with security guards

Common Non-ConormitiesCompany uses employment agencies to avoid payingworkers legal wages and benet

Workers do not possess their passport or working papers

Workers do not have a copy o their contract in their

languageCompany or agency holds wages as a deposit

Company or agency requires worker to pay orrecruitment, job training, protective equipment,tools or excessive ees or housing

Company requires worker to sign termination letteras condition o employment

Potential SolutionsClearly dene workers reedom in employment contract,including right to personal documents at all times

Provide employment contracts to all workers in theirlanguage - direct or contracted

Dene and enorce policy regarding use o employmentagencies and expectations

I employment agencies are used, audit relationshipbetween the agency and the workers

Provide training or all workers to explain their rights

Pay all job related training and equipment expenses

Forced Labor 37


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OccupationalHealth & Saety

38

PS2

OccupationalHealth and SafetyStandard

The client will provide the

workers with a sae and healthy

work environment, taking into

account inherent risks in its

particular sector and specifc

classes o hazards in the

clients work areas, including

physical, chemical, biological,

and radiological hazards. The

client will take steps to prevent

accidents, injury, and disease

arising rom, associated with,or occurring in the course o

work by minimizing, so ar

as reasonably practicable,

the causes o hazards. In a

manner consistent with good

international industry practice,

the client will address areas,

including: the identifcation

o potential hazards to

workers, particularly thosethat may be lie-threatening;

provision o preventive

and protective measures,

including modifcation,

substitution, or elimination

o hazardous conditions or

substances; training o workers;

documentation and reporting o

occupational accidents, diseases,

and incidents; and emergencyprevention, preparedness and

response arrangements.

Health and saety can be a challenging issue. There is oten

misunderstanding about what it takes to properly address

it. Companies oten tackle health and saety frst as it seems

like the easiest element to quickly address. However, otenthe ocus is too narrow, on just immediately visible risks.

Companies oten dont have the technical expertise and

management systems to properly assess and mitigate health

and saety aspects throughout their operations.

Since it can oten provide material evidence, you might think healthand saety is easier to audit than issues such as reedom o association ordiscrimination. But lets look deeper. Within health and saety, some aspectsare very straightorward, with visible evidence. Does your acility have the

proper number o fre extinguishers? Are there fre escape plans? Are therecurrent and accurate accident and medical treatment logs? Do workers havethe appropriate personal protective equipment? However, other aspects arenot so easy to spot. For example - adverse eects rom workplace chemicals,diseases that develop decades later, abnormalities in children born to workers.You need to be aware o such risks specifc to your industry.

Also, even the visible aspects need expertise and attention to handle properly.How can you determine what other fre fghting equipments are necessary?Are the means o egress appropriate? What are the technical characteristicso the smoke detectors? Personal protective equipment is the last option an

expert will take to mitigate impacts. So, it is not just a matter o observation,but o appropriate analysis and proactive action. This requires technicalexpertise and managements systems.

The purpose o PS2 is to provide a system or continually improving healthand saety in your company. Implementing management systems is thebest way to address systemic problems. Policies, procedures and eectivetraining are imperative or ongoing perormance. A good system willprevent injuries. The main problem is oten management commit

measure & improve your labor standards performance

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