Soundbites: Supply Chain Transparency for Global Brands

This is Deirdre Hess with Heron.org, and I’m here today with Kohl Gill, the founder of LaborVoices. Kohl, thanks for joining us.

My pleasure.

So, earlier in your career you spent some time with factory workers in Sri Lanka and Bangladesh, and you came up with a way to address labor and human rights violations in the supply chains of major brands. What did you do? Tell us a bit about this. 

We started a for-profit company called LaborVoices and we just went out to South India. We set up a phone system so that workers could call into a phone line, answer a very brief survey on how they were being treated at work, and we would aggregate that information and provide that to workers, and then in principle provide it to other stakeholders as well. So now what we do is we’ve operated in 11 countries, we’ve touched 20,000-plus workers in apparel, agriculture, a little bit in electronics, a little bit in home housewares and things like that.

What we’re been doing so far has been connecting with workers in supply chains on behalf of companies. So a multinational will contract with us and we’ll go into their supply chain. We’ll connect with those workers there; we’ll survey them; we’ll pull together some information and provide that information to the multinational and a little bit of information back to workers.

It allows us also to collect a lot more data that’s useful for workers, so that an average worker can call us and can hear what the top five factories are on the basis of wages, or maternity leave, or lack of verbal abuse or various things that workers have to deal with.

I’ve heard you talk in the past about how workers are afraid of getting blacklisted. Is this a way to turn this phenomenon on its head, or sort of blacklist the worst factories?

That’s right. Workers should be able to vote with their feet based on the best working conditions, and right now without LaborVoices they don’t have a whole lot of information on where the best factories are. So they essentially end up making a random walk. This actually doesn’t help anybody, because even the factories’ management don’t want workers just randomly leaving. If you look at Bangladesh’s apparel sector, about 12 percent of workers leave a factory for another factory every month. It’s huge! It’s ridiculous. So in one of the factories we’ve been operating in for a while, we’re been taking these results and turning it back around to management so that they can make changes, and monitoring those changes over time, we’ve see that that turnover rate drop to 6 percent.

Here at Heron we are interested in the supply chains of our investments, and in particular we’re trying to see what kind of impact they are having on the communities in which they operate. So, let’s approach this for a second from the point of view of the American larger companies that are trying to manage their supply chains, they’re trying to manage their PR risks, and presumably would like to not have abuses in their supply chain—I’m just going to give them the benefit of the doubt here. I know that traditionally inspections have been the way to go. So why is it that LaborVoices’ model is better? 

Typically companies, as you said, have been hiring inspectors to check on their supply chains and the inspection regime that they have been working with has been modeled after quality inspections, where inspections are really valuable. If you want to check on how a product is being made, sending a quality inspector in there to monitor the machinery and so on is great. But the things they’re the least useful for are the things that change the fastest. For example, are the fire exits open so that people could actually use them if they needed to get out of the building? Of course, while the inspector is there the fire exits are open, but once the inspector leaves, the factory will often lock the fire exits because they suspect workers are stealing materials. So we’ve actually seen factories burn down and workers die because the fire exits are blocked.

If you want to check on how a product is being made, sending a quality inspector in there to monitor the machinery and so on is great. But the things they’re the least useful for are the things that change the fastest.

Tell me about one of your success stories.

So in agriculture when we’ve dealt with migrant farm workers, for example, there was a situation where workers were complaining about how much they were being paid. They were comparing their pay slips with each other and seeing that there were differences in their pay. And it turned out that this was the first formal sector job that these workers had had. Before they were always essentially working for cash, working under the table. But this was the first formal sector job that they had. So the employer was deducting taxes based on their family sizes and so on, and because the workers had different family sizes they were getting different take-home pay. Once we were able to explain this to workers it was fine, but before we were able to communicate that back to workers about 20 percent of workers were going to just walk off the job because they didn’t think they were paid fairly and they were upset by that. That small —what we would consider “small” information change has a big effect.

Have you had any surprises or challenges along the way?

There have been a few surprises. We’ve seen a huge variation within individual companies. So for example, you’ll have a major European or American multinational that sources from a supplier and the supplier may have ten or fifteen factories that the supplier draws from. All of those factories have been inspected and they’re all supposed to be great factories. But the variation of the factories from the same supplier can be pretty broad. And what it points to is that if workers are miserable in one factory and they’re doing great in another and they’re all owned by the same person, that says that there’s probably some low-hanging fruit of just quick changes that can be made to bring everybody up to the same level.

Another surprise was the dire situations that we’ve found in places that were supposedly very good. So you have factories that have been very well inspected that are sourcing to very well-known international brands, and the conditions within them are worse than anyone has talked about.

So, let me back up. Typically when people talk about what auditing has done for the world, what social auditing has done for these industries, particularly the apparel industry, they point to child labor. They say at the very least, child labor is pretty much eradicated from our clothing supply chains. And I think that was more or less the accepted truth up until 2005 or so. But what we’ve seen in the data that we’ve gathered directly from workers is, that is not the case. Even in these top-tier factories it’s not the case today. We’re also hearing reports in the news on Syrian child workers in Turkish apparel factories for example. So once you fix the problem, it doesn’t stay fixed necessarily; you have to have eternal vigilance to keep the problem at bay.

So that’s something that’s pretty surprising. It points to the need among brands to have a continuous monitoring system, an early warning system. A system that tells them when their supply chains are trending negative, so that they can intervene at that point rather than waiting until there’s an urgent issue.

Which reminds of something else I’ve heard you say, that [the workers] wouldn’t say anything about the things that are driving them crazy until the moment when it all becomes too much and they take extreme action.

That’s right. Most of the workers we’re dealing with have never had any negotiation training. They expect verbal and sometimes physical abuse from their employers, and by the time they get to a point where they must assert their needs the only way they know how to assert it, is through violence. That in-between zone doesn’t exist, where a worker asserts her rights and then expects some kind of positive response.

What we’re hoping is that LaborVoices can do two things: one is provide something of a collective monitoring process so that workers can know where  to go to avoid abusive situations obviously. Over time we would like to expose our users to more and more training on our system so that they know what they can expect, they know how to ask for it, they know what to do if they don’t get what they want—to give them the full suite of options and recourse that you and I take for granted.

Do you have any predictions about what’s going to happen next in this space? What do you see coming down the pike?

There are other folks that are trying different technologies to implement transparency in supply chains and I think that’s only going to increase. The common term for this is sousveillance. So ”sous” meaning “from below”, sort of “surveillance from below.” The movement for more transparent supply chains is going to continue.

There is an open question, I would say, around how far we’ll go with this before the operative window closes, and by that I mean: most of what we’re talking about in terms of corporate social responsibility, where companies are trying to improve their supply chains because their customers care, because investors care. The thing to keep in mind is that really a small sliver of customers and investors actually care. They’re very vocal and they’re mostly American and European.

So as purchasing power shifts to the Brazilian, Russian, Indian and Chinese economies I’m not so sure that those consumers and investors coming from those economies are actually going to care as much, at least not initially. So that means there’s likely to be a lull of sorts in the corporate social responsibility space, and we have to be thinking now about how we’re going to bridge that gap. What are we going to be able to provide to companies that is positive socially and is just a no-brainer, even if they don’t care about workers?

That’s an interesting insight and a good question to ponder as we close. As the global economy continues to change, how do we continue the push for a rising tide that lifts the boats of workers everywhere? Kohl, thank you so much for your time.

Thank you, Deirdre.

With Heron.org, this is Deirdre Hess. Thanks for listening to Soundbites.