Disclosure Campaign

September 25, 2005

Industry Minister rejects call for factory disclosure regulations

On a Friday afternoon in the dead of summer, 2005 - after sitting on it for a year and a half - Industry Canada finally released a long-awaited report on the Ethical Trading Action Group's (ETAG) proposal for federal regulations requiring public disclosure of where our clothes are being manufactured.

ETAG had put forward a set of policy proposals for increased transparency in the apparel industry in order to encourage apparel companies to ensure respect for labour rights in their global supply chains. The centre piece of the proposals was a call for the Industry Minister to amend regulations under the Textile Labelling Act to require companies to publicly disclose the names and addresses of the production facilities where their apparel products were made for sale in the Canadian market. That information would be posted on an already-existing Industry Canada internet database.

Most large apparel retailers and manufacturers, as well as the Retail Council of Canada and the Canadian Apparel Federation, opposed the proposal on the grounds that factory locations are "proprietary information" that should not be disclosed to customers or shareholders.

The report, prepared by the Public Policy Forum (PPF), which convened a November 2003 roundtable on the issue with company, government, labour and NGO representatives, is available here.

The Public Policy Forum's recommendation was to reject ETAG's disclosure proposal on the grounds that a) there was no consensus on the proposal, b) it should apply to all sectors, not just apparel, and c) there are alleged technical difficulties with the proposal. They conclude, "if the federal government chooses to continue to explore the issue of disclosure in some form, the Textile Labelling Act is not the appropriate policy tool."

However, the PPF does identify some other policy alternatives that "received a broad level of support from many stakeholders". These include:

more multi-sectoral dialogue;
ensuring fair labour standards are applied in Canada;
a federal procurement policy;
unspecified tax incentives for transparent reporting on CSR;
preference in government financial support for companies that have codes, audits and that report on their efforts;
possibly setting up a Canadian version of the US-based Fair Labor Association;
linking access to the Canadian market to compliance with basic labour standards; and
including labour standards in multilateral trade agreements.

Significantly, a number of these "suggestions for action" are very similar to proposals that were put forward by ETAG at the roundtable, including:

Providing incentives for more transparent reporting on Corporate Social Responsibility (CSR) initiatives through vehicles such as:
Procurement Policies - based on the implementation of best practice in ethical sourcing of goods;
Financial Support - giving preference in the awarding of loans, grants, overseas investment insurance and other benefits to companies that have adopted codes of conduct that are consistent with ILO core conventions, that are using credible third-party auditors to verify compliance with those standards, and that are making public summaries of all audit reports and corrective actions taken;
Linking access to the Canadian market to compliance with basic labour standards;
Supporting the protection of labour standards in multi-lateral trade agreements; and
Working with bilateral trading partners to help develop and implement appropriate and effective mechanisms to support basic labour rights.

cut ETAG has since received a letter from Industry Minister David Emerson, in which he repeatedly congratulates ETAG for "effectively raising the issue of ethical sourcing" and welcoming "meaningful opportunities to work with ETAG".

Not surprisingly, however, Emerson rejects the ETAG factory disclosure proposal outright, stating, "the Conference Board of Canada and the Public Policy Forum have clearly demonstrated that amending the Textile Labelling Act would not adequately address the scope and complexity of the issues you have raised. Both concluded that implementing the ETAG proposal would involve significant technical, logistical and legal complexities and costs in ensuring that current, accurate and verifiable information is entered on a central database, with no guarantee that the information provided would be used by consumers or be effective in achieving the ultimate policy objective of curbing unfair labour practices."

ETAG's disclosure proposal, of course, was not intended to resolve all labour rights issues in company supply chains in one step. Rather it was meant to increase transparency in the industry, publicly linking the brands to the workers that produce their goods and thereby encouraging brands and retailers to better monitor the conditions under which workers manufacture their products.

Nor is there any evidence that disclosure of manufacturing sites involves "significant technical, logistical and legal complexities and costs". In fact disclosure of manufacturing sites has been achieved by apparel companies like Nike, Russell Athletic, GEAR for Sport, and Jansport, all of whom post regularly updated supply chain data on their websites for consumers, workers and other stakeholders to access.

Emerson says, "While I do not intend to proceed with the ETAG proposal to amend the Textile Labelling Act, it is clear that the broader issue of improving working conditions in the apparel industry is important and that there is a shared responsibility for moving forward with any solution."

He suggests that "there may be other ETAG proposals that federal departments and agencies could explore in cooperation with your organization. I have therefore taken the liberty of forwarding a copy of this letter and the consultants' reports to the ministers of key affected departments for their consideration, and I have raised this issue with my Cabinet colleagues at the Department of Foreign Affairs and the Department of Labour."

While government action on fair trade, labour rights enforcement, and government procurement would certainly be welcome, full public disclosure of factory locations would have been a relatively simple step entirely within the authority of the Government of Canada that would have had positive impacts on labour rights in global apparel supply chains.

"Disclosure could be the key to unlocking collaboration necessary to create sustainable change," Nike said in its 2004 CSR report. "Transparency should encourage factories to use corporate responsibility as a point of differentiation and to be rewarded by brands that are proactively seeking responsible factories …. While we cannot say with absolute certainty what greater levels of factory disclosure will unleash, we know that the current system has to be fundamentally transformed to create sustainable change."

"It's a sad commentary on the state of affairs when a company that was once an international pariah is leading on this issue and Canada, once seen as a leader on human rights, is so far behind the times," said Robert Fox, Executive Director of Oxfam Canada. "Canada needs to take these issues seriously. They need to find ways to protect workers and fully inform consumers and investors in this global industry."