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Labour Organization

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Codes of Conduct for Multinationals

Concept

Codes of conduct or guidelines for multinational corporations do not have any fixed definition. However, it is important to make a distinction between corporate codes of conduct and codes of conduct for multinational corporations. Corporate codes of conduct are individual company policy statements that define a company's own ethical standards, while codes of conduct for multinationals are externally generated and to some degree imposed on multinationals. These codes are not of the companies' own making, nor are they agreements between companies and the entities which create the codes. In some cases, however, multinationals are involved in the drafting process. The fact that these codes are externally established standards while other corporate codes of conduct are of a voluntary and internal nature has important implications when considering their implementation in corporate practice.

Codes of conduct for multinational corporations must also be distinguished from framework agreements, which are concluded between trade union organizations and individual companies regarding the companies' international activities. There are two types of framework agreements. First, there are written understandings between multinational corporations and international trade union organizations (such as an ITS), which may cover any subject. Examples of such framework agreements include those establishing information and consultation arrangements, as mandated by the European Works Council Directive. Second, there are framework agreements between trade unions and companies concerning the labour practices of the company, or of its suppliers and subcontractors in other countries. Such provisions may also be included in collective agreements that are recognized under national law. (For further reading on framework agreements, see International Confederation of Free Trade Unions (ICFTU), Labour and Business in the Global Market)

In relation to multinationals, codes of conduct for multinationals are recommendations. Even if the codes have been agreed by a number of sovereign states, or such other entities as have been granted international personality by sovereign states, they do not have a status of international law, which would set a binding effect on multinationals operating in those states which have adopted or joined the code. Hence, codes of conduct for multinationals impose no legal, but only moral, obligations on companies, and they are not capable of enforcement by the application of external sanctions. For multinationals, the commitment to the codes is voluntary. But some organizations have placed the acceptance of the their code as a condition to their membership or licensing agreements.

Anyone may introduce codes of conduct for multinational corporations. Besides governments and intergovernmental organizations, codes have been introduced by trade union organizations; employers' organizations; various environmental, consumer, investor, religious, ethical and other organizations; and by various groups protesting certain international phenomena. Some of the codes have been adopted multilaterally, some unilaterally.

Codes of conduct for multinationals may address any issue relevant to their activities. Codes have in fact addressed a wide variety of issues, including: relations between multinationals in world markets (e.g. with regard to advertizing, marketing, sponsorship, and competition in general); labour matters (e.g. terms and conditions of work and equality); environmental standards (e.g. emissions, waste or safety in production and transportation); and health and safety issues related to individual products (e.g. toys, baby milk substitutes, and other products).

Codes of conduct for multinationals can take various forms. Their credibility depends on three main factors - the governments that have adopted them or companies that have subscribed to them (e.g. in number, size or internationality); the nature of the substantive provisions of the code; and any related monitoring mechanisms (such as investigation methods, reporting of investigation results, and dissemination of reports).

Development of codes

Regulating competition

The first international code of conduct for multinationals was created by the International Chamber of Commerce (ICC) Code of Standards of Advertising Practice in 1937. Since then, the Code has been revised a number of times, and a number of new marketing-related codes have been introduced by the ICC. These include the International Code of Sales Promotion, International Code of Practice on Direct Marketing, Code on Environmental Advertising, ICC Code on Sponsorship, and the International Code of Marketing and Social Research Practice.

The ICC codes set rules for member companies, and intend to restrict inter-company competition to certain acceptable forms, in order to help prevent competition from damaging the environment or society in locations where the companies operate. In the introductory section of the revised Advertising Practice Code, the ICC gives the following rationale for its standards: "The globalization of the world's economies, and the intense competition which ensues therefrom, require the international business community to adopt standard rules. The adoption of these self-disciplinary rules is the best way that business leaders have of demonstrating that they are motivated by a sense of social responsibility, particularly in light of the increased liberalization of markets."

In recent years, employers' organizations in various industries have adopted codes of conduct dealing with operational and management practices. For example, the Chemical Manufacturers' Association has adopted six codes of management practice under the Responsible Care initiative, launched in 1988. These include codes on Community Awareness and Emergency Response, Pollution Prevention, Process Safety, Distribution, Employee Health and Safety and Product Stewardship.

Anti-apartheid

The first governmental and inter-governmental guidelines for multinationals were created for foreign companies engaged in business in or with South Africa. South Africa first came into conflict with the ILO in 1949, when it refused to endorse Convention No. 87 on the Freedom of Association. In 1961, the ILO passed a resolution specifically criticizing the country's racial policies in the general field of employment, and advising South Africa to withdraw until such time as apartheid was abandoned. In 1963, Government, Employer and Worker delegates representing thirty-two member States announced, after the opening of the International Labour Conference, their decision not to participate in the deliberations of the Conference in protest against South Africa's continued membership.   In 1964, the ILO adopted the Declaration Concerning the Policy of Apartheid.

Great Britain

In 1973, a delegation from the TUC General Council visited South Africa and published a report recommending as follows: "Opposition to British investments in South Africa should be continued unless British firms operating in South Africa show in a practical way that they are encouraging and recognising genuinely independent trade unions for black workers." The House of Commons established a select committee to investigate the wages and conditions of African workers employed by British firms. Its main finding was accepted by the British Labour government. The government issued amplified guidelines in the form of a Code of Practice for British Firms with operating subsidiaries in South Africa, inviting these companies to file regular reports on progress made in raising African wages and in employment practices. This 1974 White Paper then became the first issue-based code specifically focusing on South Africa. Most British companies cooperated, but only 43 of the 189 companies that cooperated provided all the information requested in the White Paper. (A summary of the company reports is found in the International Encyclopaedia for Labour Law and Industrial Relations, under Guidelines: Background to the Codes.) 

The European Community

The Code of Practice for British Firms was assessed only once, because it was superseded by the code of the European Community in 1977. The formal initiative to draw up a European Code of Conduct, more broadly based than the British Code, came from the British Foreign Secretary, Dr David Owen, at a meeting of European Community Foreign Ministers on 12 July 1977. At that time, the European Community's collective share of foreign investment in South Africa was 64%, with Britain alone accounting for 54%.

The European Code was formally adopted in September 1977 by the foreign ministers of the nine Community governments. It emerged in a framework of political cooperation and had the status of a foreign policy instrument. It stressed the need for an internationally acceptable system of industrial relations based on collective bargaining and the recognition by employers of independent trade unions.

The usual processes of consultation between member governments and their respective employer and trade union interest groups did not take place until after the Code was adopted. The absence of consultations led to some criticism, particularly from employers' groups. Generally, the Code was not accepted among employers or their organizations, although the Bundesverband der Deutschen Industrie accepted the political objectives on which the Code was based.

The unions were generally more welcoming of the Code than employers, but scarcely enthusiastic. The ICFTU especially regretted the lack of a mechanism for verifying company reports and the absence of sanctions in the case of non-compliance.

United States

In March 1977, fully four months before the meeting of Foreign Ministers initiated the European Code, the Sullivan Principles (See the six fundamental principles in, Jill Murray, Corporate Codes of Conduct and Labour Standards) From the start, the principles were actively supported by the Carter Administration and members of Congress, who were able to pressure other companies to subscribe. Within a year of the introduction of the Principles, the number of subscribing United States companies rose to 103; by 1984, the number had reached 150. However, this was only about 60% of all US companies known to have a stake in South Africa. Later on, in 1986, the Comprehensive Anti-Apartheid Act was passed by Congress, requiring all US companies employing more than 25 people in South Africa as well as the US government (with respect to its own employees) to adhere to a code of conduct based on the Sullivan Principles.

The different backgrounds against which the European Code and the Sullivan Principles came into being goes some way towards explaining the differing achievements ascribed to them. The European Code was an elaborate version of the British Code, itself a direct descendant of the Colonial Office approach. It placed emphasis on the role of collective bargaining and on achieving minimum wage rate targets. On the other hand, the Sullivan Principles stemmed from the legacy of combating deeply divisive race discrimination in the United States, the partial healing of which relied on moral persuasion for employers to provide corrective opportunities for the disadvantaged. The Sullivan Principles are therefore oriented towards employers' human resource policies, and did not in their original formulation accord much of a role to trade unions in the process of change.

Ireland

In 1984 the MacBride Principles were created with the aim of influencing the behaviour of US firms in Northern Ireland. The MacBride Principles are a set of nine equal-opportunity guidelines for companies operating in Northern Ireland, modeled after the Sullivan Principles for firms operating in South Africa.

Elimination of unethical business behaviour

Most intergovernmental guidelines for multinational corporations emerged in the 1970s. In the early 1970s, multinational enterprises (MNEs) were widely criticized for their behaviour in developing countries. Host governments and labour organizations claimed that multinational corporations failed to operate in harmony with local economic, social and political objectives. A number of interrelated developments - decolonialization, new movements and organizations of developing countries, etc. - provided the background for these criticisms.

The mood to define a social purpose for MNEs and control their activities was symbolized by the 1974 UN resolution advocating a New International Economic Order, and by the Report of the Group of Eminent Persons, which was convened by the UN's Economic and Social Council to report on the regulation of MNEs. The Eminent Persons' Report is a bold expression of faith in meaningful international action to regulate the power of MNEs, including the "concertation" of national labour laws to ensure the global protection of workers. The Report gave rise to negotiations on a UN Draft Code on MNEs.

In response to pressure from developing countries and human rights groups, several international organizations developed ethics guidelines addressing the conduct of MNEs. In 1976, the OECD (Organisation for Economic Co-operation and Development) adopted its Declaration on International Investment and Multinational Enterprises. The Declaration constitutes a political commitment, adopted by the governments of OECD member states, to facilitate direct investment among OECD members. The Declaration contains the OECD Guidelines for Multinational Enterprises (MNEs), which are divided into separate chapters covering the range of MNE activities. These chapters deal with general policies, information disclosure, competition, financing, taxation, employment and industrial relations, the environment, and science and technology.

In 1977, the ILO Tripartite Declaration of Principles Concerning Multinational Enterprises was issued. The principles cover MNE activities related to labour matters, such as employment, conditions of work and life, industrial relations, consultation, examination of grievances and settlement of industrial disputes. The OECD and ILO codes are still the most universal and comprehensive international codes of conduct for multinationals.

Some codes adopted by international organizations focus on certain products. For example, in 1981 the World Health Organisation (WHO) adopted the International Code of Marketing of Breastmilk Substitutes, which aims to halt the commercial promotion of bottle feeding and to protect and promote good infant nutrition.

New social responsibilities for liberalized global business

A new surge of social responsibility emerged in the late 1980s. This time questions focused not so much on disparities between developed and developing countries as on the more visible role of market forces globally. As deregulation and privatization continues, corporations are expected to assume responsibilities and roles which used to be the province of the public sector. As business and its effects have greater global impact, corporations are expected to bear the responsibility for the consequences globally.

On the national level, it has been typical of the 1990s that the codes of employers' organizations have become more broadly oriented in social terms, covering issues which go beyond simple business or labour matters. The number of such codes has increased rapidly. A good example of a country-wide employer code is the revised version of the Charter for Good Corporate Behavior (1996), of the Japan Federation of Economic Organizations (1996). The Charter includes obligations for the subscribing companies concerning philanthropic activities; firmness against antisocial forces and organizations that threaten the order and security of civil society; possibilities for employees to lead relaxed and enriched lives; guaranteeing a safe and comfortable work environment; respecting employees' dignity and individuality; transparency of corporate activities; providing socially useful goods and services; giving full consideration to safety; and other matters.

Consumer awareness

A great number of industry-specific codes have emerged recently, mainly in the consumer goods industries and in industries that are traditionally labour intensive, are concentrated in developing countries, and involve low levels of worker skill. Usually, these codes appeal to consumers, and have been initiated in developed countries.

United States

The Clinton Administration has been very active in preparing guidelines for multinationals. The United States Department of Labor has sponsored sectoral codes, such as the White House Textile and Apparel Partnership on Sweatshops and Child Labor involving companies, NGOs, and trade unions. The agreement was adopted in April 1997. Its Workplace Code of Conduct has provisions on child labour (under the age of 15), worker abuse, safety and health, discrimination and harassment, freedom of association and collective bargaining, as well as wages, benefits and hours. In addition, its Principles of Monitoring has provisions for independent monitoring. In 1995, Clinton Administration created its Model Business Principles which call for "fair employment practices, including avoidance of child and forced labour and avoidance of discrimination based on race, gender, national origin or religious beliefs; and respect for the right of association and the right to organize and bargain effectively".

In the apparel industry, a number of codes adopted by employers' organizations and trade unions have emerged since 1995. In June 1995, two New York locals of the International Ladies' Garment Workers' Union (ILGWU) and three industry associations signed a three-year code of conduct on workers' rights for employers' overseas contractors and subcontractors. The union and industry parties agreed to a "Code of Conduct for Overseas Vendors" (see summary) that touches upon key human rights issues covered by conventions of the ILO, including the right to freedom of association. Two organizations that bring together the bulk of United States apparel producers and retailers - the American Apparel Manufacturers Association (AAMA) and the National Retail Federation (NRF) - have also developed codes of conduct. (For codes of conduct for in the apparel industry and corporate codes of specific apparel companies, see United States Department of Labour, The Apparel Industry and Codes of Conduct)

Europe

In Europe, the Clean Clothes Campaign, which was launched in Holland in October 1990 and unites consumer, trade union and other organizations and research institutions, introduced two codes in 1997. The Code of Labour Practices for Apparel Industry Including Sportswear and the Fair Trade Charter for Garments seek an end to the oppression, exploitation and abuse of workers in these industries (most of whom are women) by advancing concerns of consumers who purchase products made and sold by these industries. The codes are addressed to retailers, manufacturers, and to all companies positioned in between them. The codes are based on the ILO's core labour standards, but they also include provisions on wages, working hours, the employment relationship, and working conditions. The European Apparel and Textile Organization and the European Trade Union Federation of Textiles also adopted a Charter in 1997, the content of which is limited to a list of ILO core standards.

Great Britain

The British Toy and Hobby Association's Code of Practice, which was adopted in 1996, forbids the use of forced, indentured or underage labour in the production of toys, and deals broadly with working and living conditions. It also includes recommendations on working hours. A slightly amended version of this code was adopted by the International Council of Toy Industries in May 1996. (See, Jill Murray, Corporate Codes of Conduct and Labour Standards)

International

The ICFTU adopted a basic code of conduct for use by trade unions as a benchmark when considering codes of labour practice. The ICFTU-ITS basic code, adopted in 1997, is a relatively short list of key principles meant to correct the deficiencies in various codes of conduct. (For further reading on trade unions and codes, see ICFTU, Labour and Business in the Global Market). In September 1996 the ITGLWF, FIET and the ICFTU concluded an agreement with FIFA on the Code of Labour Practice for Production of Goods Licensed by the Federation Internationale de Football Association (FIFA). In February 1997, the International Labour Office formed a partnership with the Sialkot Chamber of Commerce and Industry (SCCI) and UNICEF with the goal of eliminating child labour in the soccer ball industry in Sialkot, Pakistan, during the next 18 months. The Agreement marks the first time the organizations of multinational corporations and their local suppliers have teamed up with international organizations to eliminate child labour from this specific industrial sector.

Summary of ILO Tripartite Declaration of Principles Concerning Multinational Enterprises

Scope

Addressed by Governing Body of the International Labour Office
Addressed to Governments of States Members of the ILO, the employers' and workers' organizations concerned and the multinational enterprises operating in their territories
Definition of multinationals Multinational enterprises include enterprises, whether they are of public, mixed or private ownership, which own or control production, distribution, services or other facilities outside the country in which they are based.

Content

Freedom of association
  • Right to establish and join organizations of workers' own choosing without previous authorization;
  • Protection of organizations against any acts of interference;
  • Support to representative employers' organizations;
  • Application of the principles of Convention No. 87, Article 5;
  • Right for consultation and exchange of views among workers.
Collective bargaining and agreement
  • Encouragement and promotion of the full development and utilization of machinery for voluntary negotiation between employers or employers' organizations and workers' organizations, with a view to the regulation of terms and conditions of employment by means of collective agreements;
  • Provision of facilities as may be necessary to assist in the development of effective collective agreements;
  • Multinationals should not threaten to utilize a capacity to transfer the whole or part of an operating unit from the country concerned in order to influence unfairly those negotiations or to hinder the exercise of the right to organize; nor should they transfer workers from affiliates in foreign countries with a view to undermining bona fide negotiations with the workers' representatives or the workers' exercise of their right to organize;
  • Collective agreements should include provisions for the settlement of disputes arising over their interpretation and application and for ensuring mutually respected rights and responsibilities;
  • Systems devised by mutual agreement between employers and workers and their representatives should provide, in accordance with national law and practice, for regular consultation on matters of mutual concern. Such consultation should not be a substitute for collective bargaining.
Disclosure of information
  • Governments should supply to the representatives of workers' organizations on request, where law and practice so permit, information on the industries in which the enterprise operates, which would help in laying down objective criteria in the collective bargaining process. In this context, multinational as well as national enterprises should respond constructively to requests by governments for relevant information on their operations;
  • Multinational enterprises should provide workers' representatives with information required for meaningful negotiations with the entity involved and, where this accords with local law and practices, should also provide information to enable them to obtain a true and fair view of the performance of the entity or, where appropriate, of the enterprise as a whole;
  • In considering changes in operations (including those resulting from mergers, take-overs or transfers of production) which would have major employment effects, multinational enterprises should provide reasonable notice of such changes to the appropriate government authorities and representatives of the workers in their employment and their organizations so that the implications may be examined jointly in order to mitigate adverse effects to the greatest possible extent.
Settlement of disputes Multinational as well as national enterprises jointly with the representatives and organizations of the workers whom they employ should seek to establish voluntary conciliation machinery, appropriate to national conditions, which may include provisions for voluntary arbitration, to assist in the prevention and settlement of industrial disputes between employers and workers. The voluntary conciliation machinery should include equal representation of employers and workers.
Terms and conditions of work
  • Promote equality of opportunity and treatment in employment, with a view to eliminating any discrimination based on race, colour, sex, religion, political opinion, national extraction or social origin;
  • Make qualifications, skill and experience the basis for the recruitment, placement, training and advancement of their staff at all levels;
  • Endeavour stable employment for their employees and should observe freely negotiated obligations concerning employment stability and social security. In view of the flexibility which multinational enterprises may have, they should strive to assume a leading role in promoting security of employment, particularly in countries where the discontinuation of operations is likely to accentuate long-term unemployment;
  • Avoid arbitrary dismissal procedures;
  • Provide some form of income protection for workers whose employment has been terminated;
  • Develop national policies for vocational training and guidance, closely linked with employment;
  • Ensure that relevant training is provided for all levels of their employees in the host country, as appropriate, to meet the needs of the enterprise as well as the development policies of the country. Such training should, to the extent possible, develop generally useful skills and promote career opportunities. This responsibility should be carried out, where appropriate, in cooperation with the authorities of the country, employers' and workers' organizations and the competent local, national or international institutions;
  • Participate, along with national enterprises, in programmes, including special funds, encouraged by host governments and supported by employers' and workers' organizations. Wherever practicable, multinational enterprises should make the services of skilled resource personnel available to help in training programmes organized by governments as part of a contribution to national development;
  • Offer wages, benefits and conditions of work not less favourable to the workers than those offered by comparable employers in the country concerned;
  • When multinational enterprises operate in developing countries, where comparable employers may not exist, they should provide the best possible wages, benefits and conditions of work, within the framework of government policies. These should be related to the economic position of the enterprise, but should be at least adequate to satisfy basic needs of the workers and their families. Where they provide workers with basic amenities such as housing, medical care or food, these amenities should be of a good standard;
  • Provide adequate safety and health standards for their employees;
  • Cooperate in the work of international organizations concerned with the preparation and adoption of international safety and health standards;
  • Cooperate fully with the competent safety and health authorities, the representatives of the workers and their organizations, and established safety and health organizations.

Implementation

  ILO Declaration
Acceptance The Declaration or its Annexes do not include anything about the acceptance of the Declaration by Member countries or enterprises.

At its Sessions, the Governing Body has called upon governments and employers' and workers' organizations to further promote acceptance of, and adherence to, the principles of the Declaration. One measure suggested in the 226th (May-June 1984) Session was that the annual reports of enterprises (both domestic and multinational) should express support for, and adherence to, the provisions of the Tripartite Declaration.

Reporting and monitoring The Declaration or its Annexes do not include anything about reporting or monitoring.

At its 205th (February-March 1978) Session, the Governing Body invited governments to report periodically on the effect given to the Declaration after full consultation with the national employers' and workers' organizations. The action taken by the Governing Body was confirmed and reinforced in a resolution adopted at the 65th Session of the International Labour Conference in June 1979. The Governing Body Subcommittee on Multinational Enterprises is called upon to examine these reports, and the Working Group, constituted by its Officers has been entrusted with the task of analysing them before they are submitted to the Subcommittee.

See the sixth report.

Conflict settlement
  • When a request for interpretation of the Declaration is received by the International Labour Office, the Office shall acknowledge receipt and bring it before the Officers of the Committee on Multinational Enterprises. The Office will inform the government and the central organizations of employers and workers concerned of any request for interpretation received directly
  • The Officers of the Committee on Multinational Enterprises shall decide unanimously after consultations in the groups whether the request is receivable under the procedure. If they cannot reach agreement the request shall be referred to the full Committee for decision.
  • Requests for interpretation may be addressed to the Office as a rule by the government of a member State acting either on its own initiative or at the request of a national organization of employers or workers; by a national organization of employers or workers, which is representative at the national and/or sectoral level; by an international organization of employers or workers on behalf of a representative national affiliate.
  • The draft reply to a receivable request shall be considered and approved by the Committee on Multinational Enterprises prior to submission to the Governing Body for approval.
  • The reply when approved by the Governing Body shall be forwarded to the parties concerned and published in the Official Bulletin of the International Labour Office.

Summary of OECD Guidelines for Multinational Enterprises

Scope

Addressed by Governments of OECD Member countries
Addressed to Entities of multinationals which operate in OECD Member countries and domestic enterprises of OECD countries.
Definition of multinationals Multinational enterprises usually comprise companies or other entities whose ownership is private, state or mixed, established in different countries and so linked that one or more of them may be able to exercise a significant influence over the activities of others and, in particular, to share knowledge and resources with the others. The degrees of autonomy of each entity in relation to the others varies widely from one multinational enterprise to another, depending on the nature of the links between such entities and the fields of activity concerned. For these reasons, the Guidelines are addressed to the various entities within the multinational enterprise (parent companies and/or local entities) according to the actual distribution of responsibilities among them on the understanding that they will co-operate and provide assistance to one another as necessary to facilitate observance of the Guidelines. The word "enterprise" as used in these Guidelines refers to these various entities in accordance with their responsibilities.

The labour relations content of the code

Freedom of association
  • Right of the employees to be represented by trade unions and other bona fide organizations of employees;
  • Observation of industrial relations not less favourable than those observed by comparable employers in the host country.
Collective bargaining and agreement
  • Enable authorised representatives of their employees to conduct negotiations on collective bargaining or labour management relations issues with representatives of management who are authorised to take decisions on the matters under negotiation;
  • Engage in constructive negotiations, either individually or through employers' associations, with such employee organizations with a view to reaching agreements on employment conditions, which should include provisions for dealing with disputes arising over the interpretation of such agreements, and for ensuring mutually respected rights and responsibilities;
  • Provide such facilities to representatives of the employees as may be necessary to assist in the development of effective collective agreements;
  • In the context of bona fide negotiations with representatives of employees on conditions of employment, or while employees are exercising a right to organize, not threaten to utilise a capacity to transfer the whole or part of an operating unit from the country concerned nor transfer employees from the enterprises' component entities in other countries in order to influence unfairly those negotiations or to hinder the exercise of a right to organize.
Disclosure of information
  • Provide to representatives of employees information which is needed for meaningful negotiations on conditions of employment;
  • Provide information which enables them to obtain a true and fair view of the performance of the entity or, where appropriate, the enterprise as a whole;
  • In considering changes in their operations which would have major effects upon the livelihood of their employees, in particular in the case of the closure of an entity involving collective lay-offs or dismissals, provide reasonable notice of such changes to representatives of their employees, and where appropriate to the relevant governmental authorities and co-operate with the employee representatives and appropriate governmental authorities so as to mitigate to the maximum extent practicable adverse effects.
Terms and conditions of work
  • Observe standards of employment not less favourable than those observed by comparable employers in the host country;
  • In their operations, to the greatest extent practicable, utilise, train and prepare for upgrading members of the local labour force in co-operation with representatives of their employees and, where appropriate, the relevant governmental authorities;
  • Implement their employment policies including hiring, discharge, pay, promotion and training without discrimination unless selectivity in respect of employee characteristics is in furtherance of established governmental policies which specifically promote greater equality of employment opportunity.

Implementation

Acceptance
  • OECD Member countries adopted the code.
  • All enterprises concerned are recommended to indicate publicly their acceptance of the Guidelines, preferably in their annual reports.
Reporting and monitoring
  • Member Governments shall set up National Contact Points for undertaking promotional activities, handling inquires and for discussions with the parties concerned on all matters related to the Guidelines so that they can contribute to the solution of problems which may arise in this connection. The business community, employee organizations and other interested parties shall be informed of the availability of such facilities.
  • National Contact Points in different countries shall co-operate if such need arises, on any matter related to the Guidelines relevant to their activities. As a general procedure, discussions at the national level should be initiated before contacts with other National Contact Points are undertaken.
  • The Committee on International Investment and Multinational Enterprises (hereinafter called "the Committee") shall periodically or at the request of a Member country hold an exchange of views on matters related to the Guidelines and the experience gained in their application. The Committee shall be responsible for clarification of the Guidelines. Clarification will be provided as required. The Committee shall periodically report to the Council on these matters.
  • The Committee shall periodically invite the Business and Industry Advisory Committee to OECD (BIAC) and the Trade Union Advisory Committee to OECD (TUAC) to express their views on matters related to the Guidelines. In addition, exchanges of views with the advisory bodies on these matters may be held upon request by the latter. The Committee shall take account of such views in its reports to the Council.
  • If it so wishes, an individual enterprise will be given the opportunity to express its views either orally or in writing on issues concerning the Guidelines involving its interests.
  • The Committee shall not reach conclusions on the conduct of individual enterprises.
  • This Decision shall be reviewed at the latest in six years. The Committee shall make proposals for this purpose as appropriate.
Conflict settlement
  • Member countries may request that consultations be held in the Committee on any problem arising from the fact that multinational enterprises are made subject to conflicting requirements. The Member countries concerned shall give prompt and sympathetic consideration to requests by Member countries for consultations in the Committee or through other mutually acceptable arrangements, it being understood that such consultations would be facilitated by notification at the earliest stage practicable. Member countries concerned will co-operate in good faith with a view to resolving such problems, either within the Committee or through other mutually acceptable arrangements.
  • The Committee will continue to serve as a forum for consideration of the question of conflicting requirements, including, as appropriate, the national and international legal principles involved.

Summary of Sweatshop and Clean Clothes Codes

Scope of the codes

  Sweatshop Code Clean Clothes Code
Addressed by Business for Social Responsibility, Interfaith Center on Corporate Responsibility, International Labor Rights Fund, Lawyers Committee for Human Rights, National Consumers League, Union of Needletrades, Industrial and Textile Employees, Robert F. Kennedy Memorial Center for Human Rights, Retail Wholesale Department Store Union, AFL-CIO and some individual companies (see members of the partnership) Alternative Consumer Union, Phillipine Group Netherlands, Bangladesh People Solidarity Center, The Center for Research on Multinational Corporations (SOMO), India Working Group of the Netherlands and the Federation of Worldshops in the Netherlands
Addressed to Individual apparel companies Retailers as well as manufacturers and all companies positioned in between those in the apparel and sportswear including sports shoes supply chain, industry associations and employer organizations
Definition of apparel industry No definition Apparel and sportswear products (including sportshoes). The code specifically applies to the following general industrial classification of economic activities within the European Community (NACE) classification codes:
  • 436 knitting industry
  • 451 manufacture of mass-produced footwear
  • 452 production of hand-made footwear
  • 453 manufacture of ready-made clothing and accessories
  • 454 bespoke tailoring, dressmaking and hatmaking
  • 456 manufacture of furs and of fur goods

The labour relations content of the codes

  Sweatshop Code Clean Clothes Code
Freedom of Association and Collective Bargaining Employers shall recognize and respect the right of employees to freedom of association and collective bargaining. The right of all workers to form and join trade unions and to bargain collectively shall be recognized (ILO Conventions 87 and 98). Workers' representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to enable them to carry out their representation functions (ILO Convention 135 and Recommendation 143). Employers shall adopt a positive approach towards the activities of trade unions and an open attitude towards their organizational activities.
Forced labor and child labor There shall not be any use of forced labor, whether in the form of prison labor, indentured labor, bonded labor or otherwise.

No person shall be employed at an age younger than 15 (or 14 where the law of the country of manufacture allows) or younger than the age for completing compulsory education in the country of manufacture where such age is higher than 15.

There shall be no use of forced, including bonded or prison, labour (ILO Conventions 29 and 105). Nor shall workers be required to lodge "deposits" or their identity papers with their employer.

There shall be no use of child labour. Only workers above the age of 15 years or above the compulsory school-leaving age shall be engaged (ILO Convention 138). Adequate transitional economic assistance and appropriate educational opportunities shall be provided to any replaced child workers.

Employment relationship   Obligations to employees under labour or social security laws and regulations arising from the regular employment relationship shall not be avoided through the use of labour-only contracting arrangements, or through apprenticeship schemes where there is no real intent to impart skills or provide regular employment. Younger workers shall be given the opportunity to participate in education and training programmes.
Equal treatment Every employee shall be treated with respect and dignity. No employee shall be subject to any physical, sexual, psychological or verbal harassment or abuse.

No person shall be subject to any discrimination in employment, including hiring, salary, benefits, advancement, discipline, termination or retirement, on the basis of gender, race, religion, age, disability, sexual orientation, nationality, political opinion, or social or ethnic origin.

Equality of opportunity and treatment regardless of race, colour, sex, religion, political opinion, nationality, social origin or other distinguishing characteristic shall be provided (ILO conventions 100 and 111).
Health and safety Employers shall provide a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. A safe and hygienic working environment shall be provided, and best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the industry and of any specific hazards. Physical abuse, threats of physical abuse, unusual punishments or discipline, sexual and other harassment, and intimidation by the employer is strictly prohibited.
Wages and benefits Employers recognize that wages are essential to meeting employees' basic needs.

Employers shall pay employees, as a floor, at least the minimum wage required by local law or the prevailing industry wage, whichever is higher, and shall provide legally mandated benefits.

In addition to their compensation for regular hours of work, employees shall be compensated for overtime hours at such premium rate as is legally required in the country of manufacture or, in those countries where such laws do not exist, at a rate at least equal to their regular hourly compensation rate.

Wages and benefits paid for a standard working week shall meet at least legal or industry minimum standards and always be sufficient to meet basic needs of workers and their families and to provide some discretionary income. Deductions from wages for disciplinary measures shall not be permitted nor shall any deductions from wages not provided for by national law be permitted without the expressed permission of the worker concerned. All workers shall be provided with written and understandable information about the conditions in respect of wages before they enter employment and of the particulars of their wages for the pay period concerned each time that they are paid.
Hours of work Except in extraordinary business circumstances, employees shall (i) not be required to work more than the lesser of (a) 48 hours per week and 12 hours overtime or (b) the limits on regular and overtime hours allowed by the law of the country of manufacture or, where the laws of such country do not limit the hours of work, the regular work week in such country plus 12 hours overtime and (ii) be entitled to at least one day off in every seven day period. Hours of work shall comply with applicable laws and industry standards. In any event, workers shall not on a regular basis be required to work in excess of 48 hours per week and shall be provided with at least one day off for every 7 day period. Overtime shall be voluntary, shall not exceed 12 hours per week, shall not be demanded on a regular basis and shall always be compensated at a premium rate.

Implementation of the codes

  Sweatshop code Clean clothes code
Acceptance Calls individual companies to voluntarily adopt the code and require their contractors to adopt the code Calls companies, industry associations or employers' organizations to adopt the code and require their contractors to adopt the code
Reporting and monitoring Those companies which adopt the code shall establish an Internal Monitoring System that outlines the obligations each company will undertake to ensure that the Code of Conduct is enforced in its facilities and its contractors’ facilities both domestically and internationally.

Those companies which adopt the code make a commitment to form an Association over the next six months that will:

  • Recruit new member companies which also will abide by the Code and implement independent monitoring;
  • Develop a reliable, independent means to provide for public confidence that the above obligations are being met; and
  • Develop a mechanism or seal of approval informing consumers about which companies abide by the Code and monitoring.

Independent External Monitors will conduct independent reviews of participating company policies and practices; provide company employees and contractors’ employees with secure communication channels to report concerns of noncompliance; audit production records and practices to ensure compliance; conduct employee interviews and site visits; and verify that the company is in compliance with its obligations and commitments under the Code of Conduct.

When adopting the code, the company agrees to take positive actions to implement the code, to incorporate the code into all of its operations and to make the code an integral part of its overall philosophy and general policy. The company will assign responsibility for all matters pertaining to the code within its organization and inform the independent institution and other relevant bodies where this responsibility is assigned. The Board of Directors (or other governing body) of the company shall periodically review the operation of the code, including the reports of internal and external monitoring. The company accepts responsibility for observing the code with respect to all employees and workers that it supervises and agrees to:
  1. assign responsibility for implementing this code at each place that it owns or controls;
  2. ensure that all workers are aware of the contents of the code by clearly displaying an authorised text of the code at all workplaces and by orally informing these employees in a language understood by them of the provisions of the code;
  3. refrain from disciplining, dismissing or otherwise discriminating against any employee for providing information concerning observance of this code.

The company will make observance of the code a condition of all agreements that it enters into with contractors, suppliers and licensees.

When a sufficient number of companies, industry associations or employers' organizations have adopted the code of labour practice for the apparel and sportswear industry, then they, in conjunction with appropriate trade union organizations and NGOs, shall establish jointly an independent institution, referred to in this document as "the Foundation", which conduct, directly or indirectly, through other organizations, the independent monitoring of compliance with the code; assist companies in implementing the code; and provide a means to inform consumers about observance of the code and more generally about labour conditions in the industry.

Companies adopting the code of labour practice for the apparel and sportswear industry shall enter into an agreement with the Foundation. This agreement shall provide for the following:

  • the time-frame in which the production in the different facilities should comply with all the standards in the code;
  • the information the company has to give to the Monitoring Foundation;
  • the payments the company should make to the Monitoring Foundation;
  • the procedures for the actual monitoring and the obligations of the different parties; and
  • the use of the Foundation contract by the company in its public relations.

Summary of football codes (FIFA code and Sialkot code)

Scope of the codes

  FIFA Code Sialkot Code
Addressed by ITGLWF, FIET, ICFTU, FIFA International Labour Organization, United National Children's Fund, Sialkot Chamber of Commerce and Industry
Addressed to Each licensee licensed by FIFA under the FIFA Denominations Programme, and each contractor and subcontractor engaged by the Licensee Manufacturers engaged in the production and assembly of soccer balls in Sialkot District and its environs, Government of Pakistan and other important institutions in Pakistan
Addressed child labour Workers not above age of 15 years Stitching by children under 14 years

Content of the codes

FIFA Code Sialkot Code
  • There shall be no use of forced or bonded labour
  • Equality of opportunity and treatment regardless of race, colour, sex, religion, political opinion, nationality, social origin and other distinguishing characteristic shall be provided
  •  There shall be no use of child labour. Only workers above age of 15 years shall be engaged
  • The right of workers to form and join trade unions and to bargain collectively shall be recognized
  • Wages and benefits paid shall meet at least legal or industrial minimum standards and should be sufficient to meet basic needs and provide some discretionary income
  • Hours of work shall comply with applicable laws and industrial standards. Workers shall not on a regular basis be required to work exess of 48 hours per week nor more than 12 hours overtime, and shall be provided with at least one day off for every 7 day period.
  • A safe and hygienic working environment shall de provided, the best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the industry and of any specific hazard.
  • Employers should endeavor to provide regular and secure employment and refrain from the excessive use of temporary or casual labour. Obligations to employees arising from the regular employment relationship should not be avoided through the use of labour-only subcontracting arrangements, or through apprenticeship schemes where there is no real intent to impart skills or provide regular employment. Younger workers should be provided the opportunity to participate in educational and training programmes.
  • Prevent the practice of stitching by children under 14 years within 18 months.
  • Ensure that the elimination of Child Labour does not create new and potentially more serious dangers to the affected children or their families. This Program shall have the following elements:
  • Rehabilitation. A rehabilitation initiative shall target children under 14 removed from the soccer ball industry to support their placement into appropriate education programs.
  • Education. An educational initiative shall also seek to discourage children at risk of becoming engaged in Child Labour from abandoning the educational system by upgrading the relevance and value of educational opportunities currently available to them.
  • In-kind Assistance. An assistance initiative shall seek to provide appropriate in-kind forms of support to facilitate the participation of chi’ldren in educational programs.
  • Awareness Raising. An awareness-raising initiative shall target communities in Sialkot which serve as important sources of child workers and educate local community leaders (including members of the business community), religious leaders, parents and children of the importance of education for all children and the serious health and developmental consequences of sending children to work instead of school.
  • Income Generation. An income generation initiative shall offer families the opportunity to replace the income lost when children have been removed from the soccer ball industry by means that do not require Child Labour. Such opportunities shall include, but not be limited to, replacing stitchers under age 14 with qualified members of their families who are older than 14 years.

Implementation of the codes

  FIFA Code Sialkot Code
Acceptance Each licensee participating in the FIFA Denominations Programme must agree, as a condition of the license agreement.

Any licensee, contractor or subcontractor found to be in breach of one or more terms of this Code of Labour Practice shall be subject to a range of sanctions up to and including withdrawal of the right to produce or organize production of FIFA-licensed goods. Furthermore, licensees who fail to ensure that their conctractors or subcontractors abide by the Code of Labour Practice shall be subject to the same range of sanctions.

Manufacturers engaged in the production and assembly of soccer balls shall be invited to join a voluntary program of prevention and monitoring (the "Prevention and Monitoring Program").

By joining the program, participating manufacturers shall publicly commit to a series of actions designed to prevent the practice of stitching by children under 14 years within 18 months, by requiring the formal registration of (i) all contractors responsible for overseeing stitching on behalf of the manufacturers, (ii) all stitching locations such that they are clearly identifiable and open to unannounced inspection and (iii) all stitchers, including documentation verifying that they are over 14 years.

Reporting and monitoring Licensee, their contractors and subcontractors shall provide FIFA or its agent with relevant information concerning their operations; permit inspection at any time of their workplaces and operations by approved inspectors; maintain records of the name, age, hours worked and wages paid for each worker and making these available to approved inspectors on request; inform, verbally and in writing, the workers concerned of the provisions of this code; and, refrain from disciplinary action, dismissal or otherwise discriminating against any worker for providing information concerning observance of this Code. Each participating manufacturer agrees to establish an internal monitoring department to verify that it is in compliance with the Program and to designate a senior manager with responsibility for this function. Each participating manufacturer agrees that its monitoring department shall provide training to employees to enable them to monitor the ages of stitchers and to prepare periodic reports on its monitoring efforts.

The Partners agree to establish a Coordinating Committee to administer implementation of the Project. The Coordinating Committee shall consist of an authorized representative of each of the Partners as well as other members that the Committee may decide to invite.

The Coordinating Committee shall approve a plan that articulates the programmatic priorities for the Social Protection Program and proposes non-governmental organizations to implement them within a time frame that is consistent with the Prevention and Monitoring Program. The Coordinating Committee shall be responsible for overseeing the implementation of the Social Protection Program plan, including approving the disbursement of funds.

The Coordinating Committee shall select an internationally credible Independent Monitoring Body to verify the compliance of participating manufacturers with the Terms of Reference of the Prevention and Monitoring Program.

Independent Monitoring Body shall provide periodic reports to the Coordinating Committee and to the World Federation of Sporting Goods Industry (for dissemination to their customers and consumers in Europe, the Americas and Asia). These reports shall be made public.


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