measure & improve your labor standards performance
TRANSCRIPT
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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.
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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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Building the Business Case
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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Building the Business Case
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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Building the Business Case
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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The Elements o Labor Standards Perormance
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.
Working Conditions and Managementof Worker Relationship
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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The Elements o Labor Standards Perormance
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
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
Non-EmployeeWorkers
SupplyChain
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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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The Elements o Labor Standards Perormance
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.
Working Conditions and Managementof Worker Relationship
Protecting theWork Force
OccupationalHealth and Safety
Non-EmployeeWorkers
SupplyChain
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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
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The Elements o Labor Standards Perormance
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.
Working Conditions and Managemento Worker Relationship
Protecting theWork Force
OccupationalHealth and Saety
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
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The Elements o Labor Standards Perormance
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