Over the past few decades, many U.S. corporations have moved their operations overseas to take advantage of lower labor and production costs. Companies also began to outsource production at separately owned contract supplier facilities. Human rights and labor advocates contend that the result has often been poor working conditions, child labor, employee harassment and abuse, and unsustainable wages for workers.

 

As of 2006, Domini was engaged in dialogue with a number of large corporations to address labor conditions in their global supply chains, including Disney, Gap Inc., McDonald’s, and Nordstrom. Despite the substantial resources employed by many companies in an effort to monitor their subcontractors around the world, the public has very little reliable information upon which to base its purchasing and investment decisions. Effective and meaningful public reports can help drive progress on the factory floor by holding corporations publicly accountable for their progress from year to year.

 

Domini’s dialogues with companies over labor standards are often complex and may span several years. Below are details on our engagements with Gap Inc. and with McDonald’s and Disney, and with companies affected by the expiration of the Multifiber Arrangement, which formerly set quotas for textile exports.

 

Gap Inc.
Status: Ongoing dialogue

 

In 2002, we embarked on a new project with Gap Inc. to help develop a model public reporting format so that Gap consumers and investors will be able to gauge the company’s performance as it works to establish compliance with its code of conduct in the thousands of factories worldwide that produce its products.  The resulting report, the company’s first Social Responsibility Report, was released in May 2004, and set a high bar for the rest of the clothing industry. The report includes much information that other companies have been unwilling to reveal, and represents the first time that a clothing retailer has publicly rated the way the factories in its global supply chain treat their workers.

 

In addition to Domini Social Investments, the working group that worked with Gap on the report included the As You Sow Foundation, the Calvert Group, the Interfaith Center on Corporate Responsibility (ICCR), and the Center for Reflection, Education and Action (CREA). The report includes a statement from the group (visit www.gapinc.com to view the report).

 

The report received global press coverage, almost uniformly positive. It was front-page news in the Wall Street Journal, which commented that the report was a “dramatic change in strategy” for the company, but that it might represent “a deft strategic move.” The report may already be having an impact on other companies. According to the Journal, “The report is certain to be scrutinized at the Bentonville, Ark. headquarters of Wal-Mart Stores.” Bill Wertz, a company spokesperson for Wal-Mart, said his company is giving “serious consideration” to the best way to compile information on factory conditions. 

 

Read our press release.

 

 

McDonald’s and Disney

Status: Ongoing dialogue

 

McDonald's Corporation and The Walt Disney Company have joined together with a group of faith-based and socially responsible institutional investors to carry out a unique project that seeks to promote sustained compliance with labor standards mandated by their codes of conduct for manufacturers.

 

For many years, both companies have maintained strict codes of conduct for their licensees and manufacturers. These codes address a range of key labor rights issues including the prohibition of forced and child labor and the setting of requirements in such areas as health and safety, working hours, compensation, and compliance with applicable laws. In addition, both companies have been active in undertaking educational, monitoring, and remediation efforts to promote compliance with these codes at the factories where their products are sourced throughout the world.

 

The project has been launched as part of an ongoing effort to strengthen the effectiveness of these labor standards by drawing on the interest and expertise of interested investor organizations and jointly exploring means of promoting “sustained compliance” with labor codes. This collaborative project seeks to foster the creation and testing of internal systems within factories in order to promote such compliance over time, including enhanced training and education for management, supervisors, and workers, and potential positive compliance incentives. The project will also seek methods of encouraging remediation in facilities that demonstrate significant compliance issues, in order to minimize circumstances in which factory termination is the only business alternative.

 

In pursuing the project the group will work with both local nongovernmental organizations and governmental authorities, as well as individual factories, with the goal of developing practicable implementation approaches, including training and remediation methods and tools. The group's broad objective is to identify effective practices that can be applied across different industries, geographic regions, and socioeconomic and regulatory systems. The project’s first Interim Report was published in January 2005.

 

The project has grown out of the mutual concerns discussed during the extended dialogue among the investor group and the two companies regarding ways to improve conditions in factories on a sustained basis.

 

The investor group participating in the project includes representatives from As You Sow Foundation; the Center for Reflection, Education and Action (CREA); the Connecticut State Treasurer's Office (fiduciary for the Connecticut Retirement Plans and Trust Funds); Domini Social Investments; the General Board of Pension and Health Benefits of the United Methodist Church; the Interfaith Center on Corporate Responsibility (ICCR); and the Missionary Oblates of Mary Immaculate.

  

Multifiber Arrangement

Status: Report published 2005

 

Another project grew from our concern that thousands of apparel factories might close and millions of workers could lose their jobs when an international treaty called the Multifiber Arrangement (MFA) expired at the end of 2004.

 

From 1974 through 2004, under the MFA, exports from developing countries to developed countries were regulated by quotas that were negotiated on a country by country basis. With the expiration of the MFA, poor countries like Bangladesh that benefited from these quotas now must compete with producers elsewhere — especially China.

 

Domini took part in a survey of 65 American companies that we believed would be affected by the treaty expiration, including 20 companies in our portfolio. We asked for detailed information on how they plan to respond to the end of the MFA, and urged them to consider the human effects of their decisions. Based on the results, we coauthored the report Post-Multifiber Arrangement Challenges, which suggested how companies can lessen the negative impact on developing countries. (The report, published by the Interfaith Center on Corporate Responsibility in its “Corporate Examiner,” is available at the ICCR website.)