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Did Anyone Learn Anything from Nike?

Over the last few weeks, I have been spedning a lot of timethings about the risks of China. More specifically the risks that either are not thought through, are thought to be too low to consider, or are believed to be removed by a third party relationship. It is a sitution that, as the interview below will show, is almost systematic in the outsourced manufacturing game, and was highlighted by the recent strike at one of Apple’s Suzhou based suppliers two weeks.

It was a strike that particularly frustrated me because Apple has had 3 or 4 other incidents in the past two years, and had in my mind simply not done anything to address the problems in a productive manner. So, I asked long time friend and labor compliance specialist Pierig Vezin (Founder and CEO of WethicA) to answer some questions for me based on his experiences in the field

what are the biggest compliance issues that exist in china?
The more common compliance issue in China is about working time. It is found in almost every factory as the Chinese law is quite strict (40 hours per week), but the reality is that the average working time is among the highest worldwide with around 70 to 75 hours per week.

The toughest compliance issue, bounded labour (i.e. young child labour), is rarely an issue of big factories. Second to the issue of child labor though is that we regularly meet factories that pay workers once a year only, which essentially means that workers can’t resign from their job once they have started. This kind of practice leads workers to be fully dependent on the factory, even in case of major needs to change.

Do firms (buyers)understand the conditions on the ground? do they plan well?

Most of them don’t understand. Actually to be able to claim you are working with compliant factories only is already an evidence of lack of awareness of real situation.When I do training in companies on social situation in factories, I have people astonished by actual situation, and because many figures are not easily understandable , I spend a lot of time helping them understand the meaning of these figures.

For example on working time. When I explain days are often 12 hours long there is always one in each group to explain we were working that long not so long ago in western countries. Ans I also usually have one who claim to work 12 hours a day him(her)self. Then I point out that working in a factory 12 hours is not as working in an office 12 hours as you take break to talk with colleague, take break to eat, having some not fully efficient meeting… When talking about working time in factories it is 12 effective working hours. Then I explain. And what will you do Saturday or Sunday? In factories they will work as usual up to the end of the month. This is when people start to figure out what 12 hours a day 7 day a week really means.

Starting from this gap in understanding the actual situation it is difficult to imagine a proper plan. Experience shows proper plan on this topic can’t be done immediatly as once as to get involved first to be able to define proper goals.

Has anyone learned anything since Nike?

Even Nike haven’t learn anything since Nike.

They were attacked by a Chinese newspaper in November for wages only half the legal minimum in a factory of Jiangsu.

You also still have many brands claiming they are working only with compliant factories, but are still producing in Asia. If we just look at the working time issue, we know it is impossible all goods are done in compliant factories. Thus there are still many people who prefer to claim they don’t know.

Many companies are also having a more pragmatic approach while trying to manage the social f-grade of factories for the best and asking continuous improvement. Thus the understanding is improving, but not everything is done on that topics. Still many need to be taught

Are there industries that have always had high risk or labour noncompliance or cutting corners?
As soon as you work with many workers, that the wages is an important part of your turnover, you are more likely to try to cut “staff cost”. So obviously hand labour intensive users as garment, shoes, jewelry, luggage… small stuff are first in line. But many other industry are huge user of hand labour, even if we don’t think of it. mobile phone, computers,… are high tech goods, but they are also goods that needs to be assembled. The assembly lines are still mainly manual and it is an important part of the production of such goods. Thus they are at risk too.

What are the areas that pose the trouble for firms who are trying to do things right?

The working time is obviously the most difficult one, as it is the one where the gap with the requirement is the biggest. Wages is also a difficult topic as it is directly linked to cost. moreover, the wage system in China is complex and depends on a city level. Thus you can have a factory which pay better wages than another one 10 km away, but this one is not compliant while the other is. The compliance on wages isn’t actually something really important for factories while talking with local government. Thus sometimes you also found factories which give wages lower than legal minimum but many advantages. They could make calculation job to keep wages same level and it appears compliant. they usually don’t bother with that. So asking for improvment in that matter is often not understood as it is always seen as increasing wages.

Safety on the opposite is usually quite achievable while health of workers is a much more difficult topic.

Have things improved over the last 5 years? Still the same?

Yes things have improved. the average wage has increase, the management of the age of workers is usually better even from time to time we have period of higher child labor. But I guess what has the most improved are the living conditions, with cleaner and healthier dormitories. Safety in China is also usually correct.

How have conditions changed over the last 18 months with the recession?

We thought the economic downturn would lead to less work in factories and decrease the overtime. Actually the opposite happens. As factories had no idea of the future they refuse to hire workers, and ask the present ones to do more. Since this summer the situation is going back to “normal” (not compliant) level. Actually the main consequence has been the stop of some action taken by the government. In January 2008 started the new labour contract. It wasn’t much different from the previous one, but it was a way to claim for its implementation. It as actually started , but then stop soon, and we still find as many workers with no contract at all than before. We also see factories who has understand they won’t be able to continue to compete only on price with other countries. Bangladesh is already much cheaper than China for basic garments. Thus some are changing their approach by trying to upgrade their level. it is going also in a social upgrade as they need to keep the best workers.

How much does it cost to do it right? What are the costs of doing it wrong?

It depends on what right and wrong means. Wrong is sometimes prison where labour cost close to zero. If right means compliant, then you’ll have not to produce in China. You can’t ask a factory to work 40 hours a week when all others are working 70 or 75. Actually if you ask it to strongly and refuse to see it is impossible, then you ask the factory to lie to you. Asking for better than the average is reachable. Asking for compliance is not.

Now on how much it cost, it is very difficult to answer. It depends on the good, it depends on what is expected, and it depends on how you implement it. Workers productivity in Chinese garment industry for example is very low. it is low because of lack of training, of organization, of rest. If you have workers waiting for goods to be worked, and the same workers making overtime all night because they are late, it is not talking about cost, it is talking about organization. Thus you can’t take the cost of social requirements separately of the whole factory organization. Another important topic on cost is the cost of the work on a global product. In a trouser, the cost of the fabric is usually much higher than the cost of the workers who cut an sew it. But pressure is done on this step as it is the most seen. To finish about costs, western buyers should sometimes rethink their buying process. I have seen so often company switching from suppliers for few cents per piece, while cost of changing supplier was to count in dollar per piece.

What do you make of the recent news of Apple’s compliance issues( should apple be doing more? What could they do?

Apple has decided long ago to work with a supplier well known for workers abuse. Every one or two year problems are raised on this topics. this summer it was about the student who “had been jumped” from his apartment window. before that it was about the sickness of girls working on Ipod. Apple has never shown any real action on that matter. We talked about Nike before. Even if not every thing perfect with Nike, when facing such challenge, they act and try to improve the situation. The current situation in Nike factories is better than the average of comparable factories. It is not the case for Apple. I guess that’s my answer about Apple actions.

Do codes of conduct really help? Can suppliers be trusted to follow these?

COC are guidelines, they are just reminder of what is asked; It is just a way to remind “we don’t want you to work with children…”; But they are not dynamic and most if not all of them have the same flaws in. They are not dynamic. They ask the factory to comply today. They are written in a western point of view when they have to be applied in Asia. The very notion of a law or a rule is different in Asia and in western countries. This it is most of the time impossible for factories to comply and sometimes even not fair. Let’s take the example of Young workers. The young workers are the one above child age (usually 16) but still minor. In local legislation young workers must usually be protected (avoid dangerous job…). In India for example (but it is seen in China even not so directly) most of factories forbid workers below 18 years old. Thus they don’t have to manage these workers; Thus young workers can’t found job in structured factories and have to work in unofficial workshops. Should the factory who is hiring young workers from time to time but not perfectly managing them be considered of lower social grade than the one refusing young workers?

What role can the market play to improve conditions? Are Apple and Nike still at risk of consumers pushing back?

The market can surely play a role. The toy industry is a good exemple. Even if not everything perfect the Mattel case have stressed the risk for the brands of lack of control on the supplier. They have act together on the whole toy industry and worst factories have been closed. But there are still problems of huge subcontracting not always managed by the buyers. Even if they ask factories not to do so, it is not always respected and sometimes they prefer not to know. Managing the supply chain is probably the key factor on that matter as well as consumer safety. To answer your question on Apple and Nike, as Apple has done nothing effective yet, they are still at risk. The last fall example of Nike been attacked for lower wages also shows they are still at risk. But in the case of Nike, an important part of their goods is properly managed and the risk is lower.

What can brands do together to make improvements? do brands work against each other?

In my opinion the most important thinks brands can do to make improvements is to stop to hide themselves the true. When an audit report is perfect, you have to wonder how it is possible. How can a factory be so different from the prevailing practice. Why (as it is the perfect factory) there is no a queue of 1000 workers waiting each morning to be hired. By accepting lies from factories brands are pushing factories to lie more and more and to invest on better lying system. There is automated IT system to generate compliant time records, wages… simultaneously as the real one. This is pushing to invest on non transparency. So if Brands were wanting improvement they should first accept the actual situation and starting from here instead of starting from where they want Asia to be. Then it would be possible to favor factories that really try to improve and not the one that looks like. So every brand that accept to work with lying factory is working against the ones who push for improvements.

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Release date: 2010-02-10

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