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Closures, closures, closures ...

October 25, 2006

Whatever happened to Corporate Social Responsibility?

October 2006

As apparel brands and retailers restructure their global supply chains after the demise of the import quota system that was established under a trade agreement called the Multi-Fibre Arrangement (MFA), MSN is receiving almost daily reports from countries around the world of factory closures and massive worker layoffs.

While brand-name companies are being lauded in the Northern media for being more socially responsible, the view from the trenches is that these same companies are failing to take responsibility for the consequences of restructuring on the workers who helped make them globally competitive.

In December 2004, as the deadline for the end of quotas approached, MSN joined with other members of a new multi-stakeholder initiative called the MFA Forum in formulating a set of responsibilities for brand buyers, manufacturers, governments, and trade unions and NGOs in the post-quota transition period. The result of those discussions, the MFA Forum's Collaborative Framework, was published in March 2005.

The Collaborative Framework is a first attempt to set out the terms for a responsible transition in the garment industry to which all buyers and manufacturers need to be held accountable.

It's time to assess what companies are doing in practice, as well as what they should be doing, to live up to their responsibilities to affected workers and communities.

El Salvador: Hermosa

What responsibilities do buyers have when one of their supply factories closes and the employer fails to pay workers what they are legally entitled to?

In the case of the Hermosa factory in El Salvador, the factory owner not only failed to provide workers their legal severance pay, but also refused to pay them proper compensation for the overtime they had worked. The employer also failed to make legal contributions to the government health plan.

In the Hermosa case, brand buyers did work together to try to convince the factory owner to fulfill his legal obligations and the Salvadoran government to enforce its laws. They also encouraged the government to hold job fairs for the laid off workers.

What the brands were unwilling to do was create a fund to directly compensate the workers for the monies owed. Nor did they convince their other suppliers in El Salvador to provide jobs on a priority basis for the workers.

Thailand: Gina Form Bra

The Clover Group, a Hong Kong-based lingerie manufacturer that produces for Victoria's Secret (The Limited), Gap, La Senza, Calvin Klein (Warnaco), and Charming Shoppes, has announced it is closing its unionized Gina Form Bra factory in Thailand and shifting production to China, where independent unions are prohibited by law. It claims to be doing so because this is the "wish of the brands." Some of the brands deny that this is the case.

Workers at the Gina factory are represented by an independent union and have a signed collective agreement. Conditions at the factory and relations between management and the workers have improved considerably since a successful campaign in 2003 convinced brand buyers to pressure their supplier to respect the workers' rights.

Prior to informing its workers of the factory closure, the Clover Group began to remove machinery from the factory and ship it to factories it owns in Cambodia and China. The Thai government has now ordered it cease removing equipment and materials until it is clear workers will receive their full compensation.

Buyers are being asked to make public statements clarifying that they do not want the factory closed and production moved to China, to pressure Clover Group to keep the factory open, and to monitor the possible factory closure process.

  • Read more about the Gina Form Bra case here.

Philippines: Chong Won Fashion

The Korean-owned Chong Won Fashion garment factory in the Philippines has been threatening workers that if they continue to support their union or take strike action buyers will cease placing orders with the factory and the factory will close.

Wal-Mart, the major buyer in the factory, is being pressured to continue placing orders with the factory, to demand that the supplier cease threatening workers with the loss of orders and employment if they support the union, and to facilitate dialogue between union and management.

  • Read more about the Chong Won case here.

Monclova, Mexico: Hanesbrands

What responsibilities do manufacturers have when they close factories and consolidate their operations?

US apparel manufacturer Hanesbrands, formally a division of Sara Lee Corp, has announced it is closing its Monclova International factory in Monclova, Coahuila, Mexico, and moving production to its "lower-cost" Caribbean and Central American facilities.

The factory is expected to close by the end of December 2006, when 1,700 workers will be out of a job.

Meanwhile, employees at another Hanesbrands factory, Madero International, in the same state are denouncing the company for increasing production quotas, which is having a negative impact on the workers' health.

Apparel factories in Mexico seldom pay workers their full severance pay or other legal benefits when factories close or workers are laid off.

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