Home Depot desperately wants to avoid a new strain of public-relations disaster. The Christmas-week NBC show asserting that Wal-Mart’s “Buy American” program misleads consumers also leveled a more sinister charge: that children as young as 9 churn out clothes for the nation’s largest retailer in Bangladeshi sweatshops. Other big-name U.S. importers aren’t waiting to see whether the public buys Wal-Mart’s denials. Instead they’re making sure their own suppliers are free of environmental, human-rights or other potential embarrassments. The supplier police had better hurry. Jeff Fiedler, the AFL-CIO official who helped NBC mug Wal-Mart, says that he’s drawing beads on a dozen new targets, including apparel and dress-shoe companies.
Suddenly, “going global” invites a hazard nobody mentioned back in B-school. Activists pushing a variety of causes have discovered that exposing corporate exploitation will accomplish what tamer strategies, such as leafleting annual meetings, have not. Scrutiny by labor unions, activists and socially conscious investors is forcing importers to monitor not just their foreign subsidiaries but their far-flung networks of independent suppliers-and their suppliers’ suppliers as well. Says Donna Katzin of the Interfaith Center on Corporate Responsibility, “Just because companies don’t make a product themselves doesn’t relieve them of all obligations.”
Take the case of H.J. Heinz. The Pittsburgh-based food processor doesn’t catch its own tuna, but that made little difference when environmental groups enlisted schoolchildren in a campaign to end fishing techniques that kill large numbers of dolphins. After a barrage of mail from young consumers, Heinz announced in 1990 that its Star-Kist brand would buy tuna only from fishing boats that used approved methods. “Consumer response has been extremely positive,” says Star-Kist spokeswoman Susan Halberstadt. The victory emboldened environmentalists to broaden their knowledge of who buys what from whom overseas. Unions have followed suit, seeking to discourage imports and win new trade barriers by exposing poor working conditions and suppliers’ avoidance of U.S. import quotas.
Is it fair to hold Third World suppliers to U.S. standards of conduct? Even many of those who say it is admit to ambivalence about imposing their values on countries and companies halfway around the world. “It’s easy to take cynical views of American corporations,” says Northwestern University business ethicist David Messick. “But what gives us the right to decide at what age people in Bangladesh should work?”
To which image-conscious executives might answer: why take risks? As the Wal-Mart case demonstrates, even perceived transgressions can lead to big embarrassment. Wal-Mart’s heavy reliance on imports has long rankled the AFL-CIO. Fiedler says NBC called him first, but didn’t have to twist his arm. In the television footage, it was the union guy who looked authoritative and Wal-Mart CEO David Glass who appeared not to know how his company buys its merchandise. Wal-Mart maintains that the NBC report was blatantly false. But the fact that an executive of Glass’s stature could be tripped up by one obscure link in his company’s vast chain of thousands of suppliers shows how vulnerable a major corporation can be.
Several companies have made pre-emptive strikes to avoid similar pratfalls. Last March, Sears said it wouldn’t import forced-labor products from China. Phillips-Van Heusen explicitly threatens to terminate orders to apparel suppliers that violate its broad ethical, environmental and human-rights code. And Dow Chemical asks suppliers to conform not just to local pollution and safety laws, but to the often tougher U.S. standards. At least one major U.S. company acted merely to stamp out falsehoods: persistent rumors that McDonald’s suppliers grazed their cattle on cleared rain-forest land finally led it to ban the practice in writing.
Executives may well take the increased scrutiny as a sign of an antibusiness conspiracy. But three distinct types of tactics are now evident. Socially conscious investors and mainstream religious groups promote the positive message that companies should extend their own high standards to all their business partners. Environmentalists and other activists tend toward the more direct pressure that comes from naming names. Union officials are taking a more investigative approach to locate human-rights and other violations, including schemes in which foreign manufacturers, especially in China, circumvent U.S. textile quotas by misidentifying the country in which their goods were made. Unions have approached a number of companies about these issues; most pledged to enforce appropriate rules and have avoided negative publicity.
Exasperated importers say they can’t possibly patrol the world. For openers, there is no central repository of information about exporters. “How can you know what’s happening in Bangladesh when everyone between here and there has reason to lie?” says John Schultz, president of Ethical Investments, which helps bleeding-heart investors pick stocks. Some charges of misbehavior reach the United States through regional groups like Hong Kong’s Committee for Asian Women, which exposes beatings and other factory abuses. But in a global market of component parts, generic goods and layers of middlemen, it’s hard to keep score. “I can’t control the factory that supplies my supplier,” says Russell Berrie, whose New Jersey company is a big buyer of trinkets from China.
How can importers behave honorably-or at least watch their backs? The model of aggressive enforcement is Levi Strauss & Co., which last March laid down tough standards of conduct to its 600 suppliers worldwide. After inspecting each one, the company ditched about 30 suppliers and exacted reforms from an additional 120. Levi Strauss also pulled out of Myanmar, citing that government’s pervasive human-rights violations. And in Bangladesh, where factories routinely employ youngsters under the legal age of 14, the company struck a bargain to protect 40 children who would have been fired under its new rules. That could have impoverished entire families. Instead Levi Strauss will help to educate the kids while local suppliers pay them regular wages until they turn 14.
Separating right from wrong overseas doesn’t guarantee a company high praise at home. Just ask Nike, which ran afoul of cultural relativism late in 1992. Harper’s magazine printed a U.S. labor activist’s dissection of a pay stub for an Indonesian woman; she netted the equivalent of $37.46 a month for making sneakers. Later, an article in the Far Eastern Economic Review reported that Indonesians who make Nikes earn far more than most workers lucky enough to get factory jobs in the impoverished country. “Americans focus on wages paid, not what standard of living those wages relate to,” says Nike’s Dusty Kidd. But such reasoned argument misses the point. When it comes to social responsibility, it’s not enough for a company to be right. It also has to convince its increasingly touchy customers.
