Today, President Rodney Erickson and his council are set to meet to determine whether to suspend the Penn State contract with Adidas based on concerns over workers’ rights violations in one of its suppliers in Indonesia.
The issue was raised Feb. 26 when concerned Penn State students affiliated with United Students Against Sweatshops met with the president and members of his administration to discuss worker rights abuses at the factory and request that Penn State terminate its contract with Adidas as a result of those abuses. The meeting comes after a Feb. 15 visit to Penn State by Indonesian workers who made Adidas products at a factory that closed without paying workers $3.3 million in legally mandated compensation.
The students presented clear, coherent arguments for why Penn State should put pressure on Adidas to address these severe worker rights abuses. As one of three faculty members invited to attend the meeting by the members of USAS, I appreciate that President Erickson took the time to listen to concerned Penn State students talk about worker rights abuses in factories making apparel bearing the Penn State name.
I have been researching workers’ rights issues in the global apparel industry for 15 years, and it is my opinion that the Penn State students have got it right. Adidas has a long track record of worker rights’ violations in its global supply chain, and it is unlikely that they will change their conduct without considerable outside pressure.
My first exposure to worker rights abuses in the apparel industry came in the early 1990s while working with a labor research institute in El Salvador. When abuses such as mass firing and blacklisting of union members, forced overtime, child labor and gender-based discrimination became public knowledge, major corporate apparel firms reacted with a common response: “We are not legally responsible for the worker rights abuses committed by our suppliers.”
In essence, they were saying when “we outsource production and we also outsource our social responsibility.”
Yet, public opinion took a different view and most brands were eventually pressured and shamed by activists into taking responsibility for the conduct of their suppliers.
Some in the industry refer to this as the “Nike moment.” Verbal acknowledgment of responsibility turned into individual corporate codes of conduct and then multi-stakeholder codes of conduct.
While wording in codes varies, the spirit of the codes is similar: retailers and brands take responsibility for the conduct of their suppliers and hold their suppliers to that code of conduct, local laws, and international labor standards. These standards include the appropriate payment of wages and all legally-mandated benefits, such as severance pay.
That shift took place about 15 years ago, but not all brands appear to have received the memo. Based on my analysis of 805 Fair Labor Association (FLA) factory audits, I found that Adidas suppliers had the worst record of major brands on freedom of association rights violations and the second worst record on overall violations, with an average of 21.9 violations detected per factory. This is well above the average of 17.6 violations per factory for all brands. My analysis clearly indicates that something is indeed wrong in how companies like Adidas administer their supply chains.
The concerns raised by the USAS students about Adidas allude to deeper issues about the current dynamics of production and consumption in the global economy and how costs and profits are distributed.
The question that few are asking is this: Why, in an industry that generates billions of dollars in profits, are the factories making the goods so impoverished that they repeatedly are forced out of business without being able to fulfill their most basic, legally mandated obligations to the workers?
The answer is that large, powerful retailers and brands use their market power to squeeze factory owners and their workers to the point that they cannot break even, despite paying such low wages. Research suggests that in some sectors of the industry, retailers will get 56 percent of the sales price of a garment, brands will get 22 percent, material, transportation and related expenses will account for 12 percent, the factory owners will get 8 percent, and workers will get less than 2 percent.
Fixing worker rights’ problems in global supply chains will never be achieved as long as the blame and the legal responsibility is repeatedly placed on the suppliers without ever addressing the skewed distribution of power and profits that cause problems such as unpaid severance pay to happen again and again.
In this vein, a February 13, 2013 request to Herbert Hainer, CEO of Adidas, for direct negotiations made by a broad coalition of labor unions representing Adidas workers in eight countries is crucially important. The coalition calls for “face to face negotiations between representatives of each factory where we represent workers and top Adidas executives to achieve a guarantee of stable orders, fair price and safe factories," according to adidasworkers.org.
The request explicitly assumes that brands are responsible for the stable orders, safe factories, and fair pricing mechanisms that allow for living wages and appropriate payment of benefits, and that the best way to achieve this is through direct, triangular negotiations involving Adidas, its suppliers and the worker representatives at its suppliers.
Members of USAS and the dismissed Indonesian workers who spoke to the Penn State community on Feb. 15 are correct: there are serious and systematic violations of workers’ rights in the Adidas supply chain, and Penn State should terminate its contract with Adidas until such time that Indonesia workers receive the severance pay they are entitled — for more details, see www.badidas.com.
Moreover, Adidas needs to establish new ways of addressing workers’ rights in its supply chain to ensure that these violations will not happen again. It is my view that the best way for Adidas to do that would be to accept the invitation of Adidas workers and their allies to engage in direct negotiations with them and Adidas suppliers.
Mark Anner is an Associate Professor of Labor Studies and Employment Relations and Director of the Penn State Center for Global Workers’ Rights.