Ethical Performance
inside intelligence for responsible business


Bottom-up approach may improve factory conditions

July 2008

A collaborative approach to ethical supply chain management can lead to 'substantive' improvements in factory working conditions, according to the experience of two high-profile western brands.

McDonald's and Disney say they are pleased with the results of a joint pilot scheme that introduces new working practices from the 'bottom up'. The two multinationals had found that relying on an 'audit and compliance' regime to improve workplace conditions had not been particularly effective at raising standards.

Analysis of the pilot, named the Kaleidoscope Project, has shown that between 78 and nearly 100 per cent of workers at participating factories could point to long-term improvements in areas important to them, such as timely pay.

Other persistent failings, such as excessive working hours and wages inconsistent with the law, were also found in far fewer of the factories at the end of the five-year trial, and the companies claim that a former 'systemic' failing to pay required insurance has been eliminated. Progress has been directly attributed to the new policy, which was tested at ten contractor factories in southern China producing toys and other goods for McDonald's restaurants and Disney licensees. The factories varied in size from 450 to 17,000 workers.

McDonald's and Disney conducted the pilot with the support of seven investor groups and non-governmental organizations, including Domini Social Investments and the Interfaith Center on Corporate Responsibility, because they had become frustrated at the slow pace of workplace improvements, despite the existence of strict codes of conduct for licensees and manufacturers. The project placed emphasis on winning the hearts and minds of both operatives and their supervisors through a mix of training and greater staff involvement in management decisions.

The factory managers themselves were encouraged to act as internal monitors rather than waiting for auditors to pick up on breaches. The report argues that managers are best placed to do this because they have firsthand knowledge of what leads to the breaches, such as unexpected changes in product demand or specifications, labour availability and power shortages. They were provided with both a self-assessment tool and a manual giving further guidance.

The multinationals concede such 'internal compliance management' takes 'time and persistent effort', but argue that breaches fixed by managers tend not to recur.

Kaleidoscope Project | Global | Supply Chain Management

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