Chinese OEMs still not auditing for labour rights abuses

China watchers will be well aware of the story by now. Most of the shiny tech kit we buy in the western world is produced in conditions ranging from ‘challenging’ to downright miserable. Apple provider Foxconn is often highlighted as a prime offender but the depressing truth is that it is one of the better employers. As long as labour rights abuses continue, though, they should continue to be reported.

The below is a piece I wrote up from my chat with IHS analyst Tom Dinges:

Half of China-based OEMs still don’t require third party audits of their manufacturing providers despite many high profile cases emerging this year involving serious breaches of labour laws and widespread strikes, according to market watcher IHS iSuppli.

The supply chain analyst revealed the news as part of a wider survey of the global technology industry.

Over the past year incidents at factories belonging to Apple supplier Foxconn, as well as plants run by contract manufacturer VTech and Samsung provider HEG Electronics, among others, have highlighted the poor level of compliance with local laws at many plants.

Although China has strict labour laws which prevent children under the age of 16 working, keep working hours and overtime to manageable levels and prohibit discrimination, they are poorly enforced.

Not-for-profit groups including China Labour Watch and Hong Kong-based SACOM have time and again uncovered incidents alleging such rules have been broken, with reports claiming physical violence, bullying and filthy living conditions are the norm in many factories.

Staff dissatisfaction comes to a boil periodically in the form of strikes or bouts of violence. In October it was claimed that thousands staged a walk out at Foxconn’s Zhengzhou factory where the iPhone 5 was being made, while a month earlier, scores of workers were hospitalised after a mass brawl at a managed dorm near Foxconn’s Taiyuan plant.

“There are aspects of the labour laws many firms turn a blind eye to for the sake of satisfying their customers and getting products out of the door,” IHS analyst Tom Dinges told me.

“Considering how much of the supply chain is embedded in China it’s too costly to move to another region so the issue is ‘what do we do to ensure our suppliers adhere to the local labour laws they’re supposed to?’.”

Dinges added that the ‘headline risk’ of bad publicity, especially as it filters down to middle America through regional media outlets, should be forcing change on this front.

Foxconn is one notable supplier which seems to be taking a lead on this, having agreed with Apple to on-going audits by the Fair Labor Association, although worrying cases of rights abuses continue to emerge at some of its plants.

China Labor Watch also claimed at a Congressional hearing in the summer that the audit process is flawed in many cases, with widespread bribery and collusion on the part of suppliers and auditing companies.

Dinges said that as the industry matures this situation should improve, with auditors taking their cue from financial investigators.

“These organisations will have to meet a certain expected level of authenticity, vigour and independence,” he added.

“We’re past the stage of hyper growth. Now a lot of what is produced there ends up staying in China. If that’s the case then the factory employee is also a customer and you want to be sure to treat your customers well.”

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Samsung latest to be hit by supplier labour abuse scandal

factoryAnother week, another woeful tale of big tech brands taking advantage of weakly enforced labour laws and immoral supply chain manufacturers.

This time it was Samsung that had its supplier factories investigated, and what was revealed, as always, was not pretty.

HEG Electronics’ plant in Guangdong – which apparently makes phones, MP3 players and other electrical kit for the Korean giant – was infiltrated by spies from not-for-profit China Labor Watch, yup, the same group that warned of severe irregularities in the auditing system of the tech supply chain.

The same old problems came to light as at Foxconn and VTech, of low pay, staff bullying and physical abuse, dangerous working conditions and forced and excessive overtime.

However, HEG was also accused of employing kids as young as 14 year’s old – illegal even in China –and paying them, and the huge intake of student interns it uses to man its factory, just 70 per cent of their rightful salary.

To its credit, Samsung did respond with a little more than we got from VTech and its customers:

Samsung Electronics has conducted two separate on-site inspections on HEG’s working conditions this year but found no irregularities on those occasions.

Given the report, we will conduct another field survey at the earliest possible time to ensure our previous inspections have been based on full information and to take appropriate measures to correct any problems that may surface.

Samsung Electronics is a company held to the highest standards of working conditions and we try to maintain that at our facilities and the facilities of partner companies around the world.

The issue here again goes back to the validity of the inspections. Unless they are independent – conducted for example by not-for-profits like China Labor Watch – and unannounced then they are virtually useless.

Samsung, if you remember, was highlighted as a client of Intertek, the professional auditing company that has in the past been found guilty of accepting bribes from clients in return for passing a clean bill of health.

There’s no suggestion that happened at its HEG audits, but it’s clear that the audit card should no longer be accepted as a reasonable explanation of such irregularities.


More trouble at’ mill (or Chinese sweatshop)

factoryMore news on the continuing plight of Chinese workers in tech manufacturing plants, and the apparent blind eye the major multinationals are paying to their condition, emerged this week.

Li Qiang, founder of NGO China Labor Watch, claimed to the Congressional-Executive Commission on China on Tuesday that the audits which most MNCs commission aren’t worth the paper they’re written on.

He pointed to widespread bribery of auditing firms by the big name companies – basically, they bung a few thousand dollars and the auditors agree not to expose any problems in the factories which might require lots of money to fix.

Although Li didn’t accuse any outright of corruption, Dell, HP, Samsung and Apple were all said to have “severely flawed” auditing systems. He also exposed auditing firm Intertek as having been caugt in the past for accepting bribes.

Said firm has Samsung and Siemens as clients and a lot more tech companies besides.

Now the CECC is most definitely sympathetic to the aims of Li and his counterparts in other NGOs, and one can’t help thinking the reason they’re so keen to expose malpractice in China isn’t to get the workers a better deal but to force such a public outcry that US firms decide to bring jobs back to their homeland.

In fact, it was certainly mentioned several times at the hearing that US workers couldn’t hope to compete against factories where staff are paid a pittance and over-worked to the point of exhauston.

Whatever the motives, though, this needs stuff exposing – factory audits are commonly used by tech companies whose plants are found wanting, as a handy cure-all to keep the media and customers happy.

If they fail, there is literally no point – but we kind of knew that anyway. The only way to change things long term is consumer pressure on companies to improve working conditions followed up by independent and random inspections from NGOs.

Needless to say none of the tech companies above have come back to me.

The lack of response is not just typical of local PR failure – I’ll bite my tongue on that one for the time being – but endemic of the lack of transparency at these big tech brands. If they’re really confident in the conditions at the factories – dismiss such accusations out of hand, invite random inspections etc

Hopefully, as consumers and politicians get more savvy to what’s going on and start to ask more searching questions, these multi-nationals will find it harder to fob them off with the old audit card.

There’s a long way to go yet.

(More entries on this subject can be found here, here and here.)


VTech next in line for the Foxconn treatment

factoryJust finished a beast of a story detailing more depressing news from China of  human rights and labour violations in factories making tech kit for some of the West’s biggest brands.

Yup, it’s not Foxconn this time but Hong Kong-headquartered OEM VTech, which mainly seems to make cordless and fixed line telephones for the likes of Motorola, AT&T, Telstra, Sony and others.

The report into poor working conditions at its Guangdong factories list, if anything, worse abuses to those discovered at Foxconn. These include mandatory and excessive overtime; exposure to harmful chemicals; sub-standard living conditions; violence and bullying towards staff; and below subsistence wages.

It’s worth noting that VTech strenuously denies all the allegations.

I’m not disputing any of the findings of the Institute for Global Labour and Human Rights, nor its deliberately confrontational tone and emotive, first-person testimonials from workers at the plant – after all it needs to shame the Western companies involved into taking action.

What is more interesting is what happens now that the genie is out of the bottle.

Motorola and Telstra reacted with shock, exclaiming that compliance with the law and their own codes of conduct are essential and that, if true, these abuses are unacceptable.

Fair play to Telstra for immediately suspending sales of any VTech products while it investigates, but it seems to me that large Western technology firms are more than happy to turn a blind eye to this kind of thing as long as the labour is cheap, the production costs are kept down and no-one is making a fuss.

Saying you mandate compliance with a code of conduct but never enforcing that compliance, for example, is less than useless. As is saying compliance with local laws is compulsory when you know that, as in China, local laws are not worth the paper they’re written on – they’re either not enforced or shot through with so many caveats that the employer can effectively do what they like.

There are those who say that improving conditions in these OEM factories will push up prices at the till.

Well, that is debatable given that the OEMs are making a healthy profit here and could probably stretch to curtains and mattresses in the dorms; better food in the canteens; and certainly stools for workers to sit on during their shifts, without pushing up the cost of production too much.

I think Foxconn was just the beginning. Any tech manufacturer that breathed a sigh of relief, thinking the buck stopped with Apple, better prepare themselves for a rather uncomfortable time going forward.

Bad publicity is the only thing that seems to spur these big name brands into action and as long as there is an appetite among the public to know what misery lies behind their latest shiny gadget then the stories will keep on coming.

Geoff Crothall, a spokesman for not-for-profit the China Labour Bulletin, told me that conditions like those highlighted in the report are endemic throughout factories in the Pearl River Delta.

The best that can come of the constant media scrutiny is that these brands and their OEMs are forced to institute regular inspections and improve living and working standards across the board, because the local government certainly isn’t going to.