May 23, 2024 Last Updated 6:09 AM, May 21, 2024

Corporate social responsibility?

Jeff Ballinger

A new phenomenon has swept the world of international business over the past decade or so. Transnational company giants such as Nike, Levi’s, Reebok and others have developed sophisticated corporate social responsibility programs designed to develop a desirable corporate public image. They are driven by a need to respond to increasingly articulate and well-informed criticisms of the sweatshop conditions under which they produce shoes and garments in developing countries. To succeed they need to be seen as attractive brands produced by responsible companies, whose products are desired by fashion conscious and socially aware consumers. But do these social responsibility programs effectively deal with the issues social activists are campaigning about? And what do workers in the sweatshops think about them?

Corporate mirage

There are two very different worlds in which corporate social responsibility programs operate. One takes place at conferences about ‘the triple bottom line’ or ‘ethical-supply-chain-management’. The other takes place where ‘the glue meets the shoe’ in factories and the squalid workers’ dwellings that surround them across Indonesia and elsewhere.

In conferences and academic business schools in western capitals, companies like Nike are often lauded for reaching the pinnacle of social responsibility. Some western environmental groups are effusive in their praise for the ‘green’ initiatives of corporations. The apparel conglomerate Levi’s aspired to the same giddy heights in Indonesia. Back in the early 1990s Levi’s offered to fund a clinic for the workers making jeans under contract. Of course in some circles this was seen as a worthwhile attempt to ameliorate the awful working conditions at the Levi’s supplier. Teten Masduki — then a top legal advocacy coordinator — was offered a leading role in managing the clinic. He rejected the offer, emphasising the demands of the protesting workers, who wanted local managers at Levi’s sub-contractor to sit down and bargain with them in a dignified manner. A clinic was far from meeting their primary concerns, no matter how impressed business journalists and some social critics might have been half a world away in the United States.

The core issues for workers in sweatshops are their basic conditions and the right to bargain collectively. Local suppliers and sub-contractors in Indonesia have no intention whatsoever of addressing workers’ real concerns as long as they are being squeezed by the big buyers like Nike. This, of course, is at the heart of the out-sourcing paradigm. Nike and others with an inter national image to protect long ago decided that sub-contracting production to local suppliers had serious benefits. It not only reduces their costs; it distances their brands from the unseemly exploitation of the workers who make their products.

This business model is ruthless. A Nike board member, Michael Spence, acknowledged this when he told business students in Singapore several years ago that businesses needed to be hardheaded about out-sourcing. This, he said, had become an imperative inter nationally, especially in the garment, footwear and toy industries. What he didn’t tell them was how it led to a dramatic increase in abusive conditions in factories around the world. Or that it had crippled many formerly vibrant trade unions.

In the context of this ruthless out-sourcing, social responsibility programs were seen as a profound assault on the very idea of human rights and demo cratic values in the factories themselves. How could the cheated and abused Indonesian workers have drawn any other conclusion? Corporate strategies are really aimed at forestalling factory-level collective bargaining, which, in turn, inhibits the development of worker self-organisation. Workers — and Indonesian society as a whole — were denied the powerful voice of organised labour in their efforts to challenge the military-dominated klepto cracy of the late Suharto era. Unlike workers in Brazil, South Korea, Poland and South Africa, who were able to play lead roles in ousting autocratic regimes, Indonesian workers were for the most part quiescent.

Social activists compromised

Business is not alone in designing projects that steer workers away from confrontation. Some progressive social movements have inadvertently contributed to workers’ woes. Dita Sari, a leader of the most militant trade union grouping in Indonesia, sees even the World Social Forum (WSF) in this light. According to Dita, ‘The WSF has succeeded in making the working classes and the poor more aware that capitalism is the source of war and injustice. But after four forum meetings the anti-globalisation movement has not yet broken out of its limits as a moral movement, and has yet to transform itself into a political movement that offers clear and explicit economic and political alternatives.’ Dita also made a harsh assessment of Reebok’s Human Rights Award for social activists, a prominent part of its social responsibility strategy. When offered the award she rejected the honour — and its US$50,000 grant — on the grounds that the Reebok offer was hypocritical when its contractors near Jakarta were still actively cheating and abusing workers.

Neil Kearney, general secretary of the International Textile, Garment and Leather Workers’ Federation has gone even further. He bluntly accuses some social activists from the west of usurping the rights of sweatshop workers to bargain for themselves. ‘These people are taking it upon themselves to enter factories, uninvited and without the consent of workers, to pontificate on and attempt to direct practical industrial relations issues...Many NGOs (non-government organisations) have made an amazing contribution to creating a climate for change, but some are now overstepping the mark, entering workplaces and donning a representative role without any mandate from workers. This is disempowering these workers and hindering rather than hastening the elimination of exploitation.’

Uncritical media

Corporate social responsibility programs have succeeded in part because of lazy and uncritical media reporting. This is one of the reasons the shoe and apparel companies have been able to paper over the ‘sweatshop’ issue. Most of the commercial media in western countries blithely accept company pronouncements on social responsibility and ignore any evidence to the contrary. When Dita Sari rejected Reebok’s award, local press reports barely noted her principled stance and failed to ask the presenter, Archbishop Desmond Tutu, what he thought of it. When a Nike report on Indonesian factory conditions was released in 2001, it revealed widespread sexual harassment. The company offered no compensation but won unqualified praise for its ‘transparency’. Meanwhile, women workers at an auto factory in North America shared a US$9 million jury award for sexual harassment and the company was fined US$34 million. Social responsibility programs are not only cheaper than rights for workers, they provide better public relations.

Reporters writing about the new global factory-production system may be easily fooled by skilled public relations teams offering up dubious ‘monitoring’ and NGO-partnership schemes, but something more insidious is happening. Many of the ideas on corporate social responsibility emerge from ‘independent’ think tanks and universities. In truth, the intellectuals involved are often financed by the corporate giants themselves. One recent study of Nike in the respectable Harvard Business Review provided ‘objective’ analysis to conclude it had become a top-ranked ethical company. The author failed to reveal that he was paid by Nike and was heavily involved in its now-defunct Global Alliance for Workers and Communities.

The corporate media, academics, NGO activists and ‘ethical investment’ communities fail to ask how much contractors are paid for made-to-export shoes. It is, however, the overriding concern of Indonesian workers. Workers will never attain a living wage or genuine collective bargaining rights under the current exploitative model — a model that the garment and shoe industries brought to Indonesia in the late 1980s, as compliant dictatorships crumbled in South Korea and Taiwan.

Contract suppliers pressured

Contractors working for the big multinationals operate under extreme pressure, as a 2003 assessment of Yue Yuen, the world’s largest contract manufacturer of branded athletic and casual shoes, demonstrated. The report was by the bond rating company, Standard & Poor’s, who noted that the company’s ‘leading market position, low cost operations as a result of economies of scale and low cost production bases’ were being undermined by the ‘increasing pressure on pricing from Yue Yuen’s customers [such as Nike] and high customer concentration’. This is how Nike manages to garner praise for ending sweatshop abuses — by continuing to squeeze the contractors that must actually pay the workers.

That the major-brand sport shoe companies are profitable can hardly be questioned. When Adidas purchased Reebok the outgoing Reebok CEO received US$ 800 million in compensation. In the years that all his contractors were found to be cheating on the Indonesian minimum wage of just 86 US cents per day (1988-91), the same CEO paid himself annual bonuses of more than US$14 million. The insidious nature of corporate social responsibility programs coupled with the ruthless out-sourcing means the future appears bleak. But there is hope. Some promise for justice may lie in the recent victories won by Asian workers against US companies. But transnationals like Nike, Adidas and Levi’s — and their contractors — need to be called to account. They should be made to pay restitution for all the years they have expropriated the wages of workers who are at the bottom of the food chain and least able to defend themselves.

Jeff Ballinger ( launched the anti-Nike campaign in 1992. His involvement with shoe and apparel workers began in New York in 1972.

Inside Indonesia 86: Apr-Jun 2006

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