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Conference Board report on ETAG disclosure proposal

June 10, 2003

Disclosure Campaign
Conference Board report won't rock the boat

On May 30, the Competition Bureau of Industry Canada released a long-awaited report on a proposal from the Ethical Trading Action Group (ETAG) calling on the federal government to adopt factory disclosure regulations for the Canadian apparel industry. ETAG is a national coalition of faith, labour, teacher, and nongovernmental organizations, for which MSN acts as the secretariat. ETAG's proposed changes to the Textile Labelling Act regulations would require companies selling apparel products in Canada to publicly disclose the names and addresses of the factories where their products were made. If implemented, factory disclosure regulations would make it much easier to determine whether our clothes were made in sweatshops or under decent working conditions.

In September 2002, the Competition Bureau contracted the Conference Board of Canada to prepare a study of ETAG's proposal. The Conference Board report, which was released by the Competition Bureau on May 30, largely dismisses the proposal as impractical, potentially harmful to the Canadian industry, and of little use to consumers. While not explicitly endorsing the industry argument that factory locations are secret, proprietary information, it gives a great deal of weight and attention to that argument. In fact, it includes a proposal that the government determine whether supply chain information is proprietary, and if so, create mechanisms to "protect that information from unauthorized use."

In contrast, a January 2002 report of the Canadian Democracy and Corporate Accountability Commission endorsed ETAG's proposal for factory disclosure regulations, stating, "To criticize disclosure because it may air the company's dirty laundry is to refuse consumers, investors, and other market players the opportunity to make fully informed choices about the companies with which they wish to deal."

Although MSN and other ETAG members anticipated that the Conference Board report would be critical of our proposal for factory disclosure regulations, especially given the strong opposition to the proposal from the retailers' and manufacturers' associations, we are extremely disappointed at the lack of understanding of that proposal or its objectives that is expressed in the report, and the lack of concrete alternatives proposed.

The report also reveals a disturbing bias against union representation, suggesting that use of supply chain information to organize workers would have only negative and disruptive consequences for the Canadian apparel industry.

Despite the Conference Board's negative assessment of ETAG's proposal, the government has not yet made a decision on factory disclosure regulations or other policy options to address the problem of sweatshop abuses and the lack of information available to consumers. The fact that the study was commissioned at all indicates that the government is well aware that Canadians want action on sweatshop abuses and access to information on where and under what conditions their clothes are made. On February 24, ETAG representatives delivered tens of thousands of clothing labels and petitions signed by over 20,000 Canadians to the office of Industry Minister Allan Rock. The labels and petition signatures were collected by high school students, NGO volunteers, faith groups, and union members across Canada. A 2002 Vector poll found that 8 of 10 Canadians support factory disclosure regulations.

ETAG is now preparing a formal response to the Conference Board report, clarifying our coalition's proposal and its objectives and demonstrating how factory disclosure regulations, in conjunction with other forms of voluntary and/or mandatory corporate reporting, would provide consumers with much of the information they need to make ethical choices. That submission will be fed into Roundtable discussions that are tentatively planned for late September or early October.

What Does the Conference Board Recommend?

After dismissing ETAG's proposal for factory disclosure regulations as unworkable, the report lists a number of alternative options, some of which ETAG members are already promoting, including university purchasing policies, company codes of conduct, multi-stakeholder code compliance initiatives, factory certification initiatives, bilateral trade agreements with labour rights provisions, and social reporting by specific companies. It concludes that such alternatives "have not been effective at achieving the desired policy objective."

It then offers a series of very general recommendations to the federal government, including:

  • Conduct "more definitive" research on the type of information consumers need to make ethical choices;
  • Help determine whether supply chain information is proprietary, and if so, help devise mechanisms to protect such information from unauthorized use (information might only be released when required to inform consumers about fair or unfair labour practices and only after they have been independently verified);
  • Help sponsor "a more broadly acceptable" verification process;
  • Help determine the level at which labour standards information is required for consumers to be informed (labour standards promoted by retailers and suppliers or those actually employed in production facilities);
  • Incorporate voluntary features of various alternatives used around the world, which increase the value of information provided without making public vast amounts of proprietary information (confidential disclosure of location information to a third party, followed by public disclosure of labour practices, either by country or company specific);
  • Build on already existing initiatives by piggy-backing a certification or compliance initiative into a Canadian initiative.

One of the few specific proposals in the report is that government could require public disclosure of labour standards and verification processes being used by companies. This is clearly inadequate, since it would only require disclosure of information on codes of conduct and how compliance with codes is verified, not the findings of factory inspections or the corrective action taken. This would be far less information than is currently being provided by the much criticized US Fair Labor Association (FLA), which includes many of the major US brand-name apparel companies. Last week the FLA published its first annual report and factory audit tracking charts, which provide detailed information on the results of factory inspections and corrective action taken by FLA member companies. To access the report and tracking charts visit: www.fairlabor.org

Two positive examples of government action highlighted in the Conference Board report are a new law adopted by the French government, which requires companies to report on the social and environmental impacts of their activities, including employees, community, the environment, and international labour standards, and an Australian law that supports the implementation of a voluntary code of conduct for garment homeworkers. Unfortunately, the authors of the report chose not to put forward recommendations for similar action by the Canadian government.

In the conclusion to the report, the authors advocate "combining the mandatory disclosure principles with mandated codes of conduct, supplier certification initiatives, and/or audited reporting on practices." They go on to say, "Programs and initiatives could be devised to encourage, if not require, disclosure of the supply chain practices promoted by Canadian apparel retailers and manufacturers. Indeed, the report suggests that a combination of information, verification, and reporting initiatives on the issue of fair labour standards, combined with appropriate consequences when improper labour practices are uncovered, would likely be much more effective than any one of the initiatives currently suggested or implemented anywhere to address this issue."

Unfortunately, that's as specific as the report gets on how to combine regulatory corporate reporting requirements and voluntary initiatives.

Read the Conference Board’s Report.

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