Child labor

Development of Future Workforce

For any private sector company human capital is most vital. Firms regularly require healthy, well-educated and highly motivated labor force as well as a prosperous consumer base to facilitate and ensure continuous production. But employing evil practices like child labor undermines the above-mentioned objectives of the firm and of the society as a whole. This leads to loss of growth of human capital and in the long run affects the company and other stakeholders like society as whole. Private sector firms should not consider about the short-term benefits and rather they should be thinking of long-term goals in order to benefit themselves and in addition to it serve the society as well by helping to eliminate harmful child labor.

Reputational Risk

There is a serious harm to the reputation of the companies that are not socially and environmentally responsible .The companies differentiating their product on these lines have an added advantage over the competitor. But the reverse is also very much true .It may even prove more hazardous to the company and its shareholders too in the long run. Companies that are accused of child labor either in their operations or in the operations of their suppliers and sub contractors risk a serious harm to their reputation in the market. People may most probably stop buying the products manufactured by such companies, which leads to the loss of the value of shares of the companies. Hence consequent loss of market share. Several highly publicized cases in the recent years have indicated that controlling the behavior of supplier is quite difficult. But for example Wal-Mart does not tolerates the use of child labor in manufacturing the product it sells .It does not accepts products from vendor partners who employ child labor in their operations. Controlling the behavior of the suppliers and contractors is a difficult task but nevertheless its most important to a company’s reputation.

Misconceptions about Cost Savings

There may be a lot of reasons why children are sought for work .The most commonly cited of these reasons are low cost and expertise. But research indicates that these cited advantages are more perceived than real. This is because children generally have low attention span. This means that children do not have longer periods of concentration. This is reflected in the number of units produced. Also children have low quality control appreciation, which means the products made by the children are less than the quality standards. These two are the main reasons as to why the products manufactured by a child labor have a high rejection rate, which in turn is balanced by the cost savings that is achieved by not employing adult labor.  

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Addressing child labor issues in the workplace

The old adage that prevention is better than cure could not be more important elsewhere. Companies have realized that the cost of compliance with child labor is much lesser than the media attention and damage control that arises once you are caught in the act. So what it essentially means is that prevention is the key. We need to be proactive. We have to anticipate and eliminate potential situations in the bud. Most of the times, especially when it goes against the normal manner of life in society, these kinds of measures require the company to make a stance. One should never hesitate to lead from the front and by example. To do this one needs to actively spread awareness about child labor among all stakeholders. Once we have educated them on the issue of child labor, we need to implement policies, which state our strict intolerance for this social menace. Implementing policies and procedures to create an exploitation free environment and ensuring that there are strict monitoring procedures to ensure compliance follows this. The private firm would also look at partnerships which more knowledgeable agencies in this field.

Raising Awareness

The first step to be done is to raise awareness among the families, community and companies about the effects of employing children. One of the main reasons that people allow this to continue is because they are unaware of the potential harm that it can create to their children in the long run. Child labor takes a huge toll on the life of the child. It steals his right to an education, and more importantly it will affect the psychological and physiological growth of a child. Forced to work in adult environments at a tender age, they loose out on the natural evolution through innocent childhood. Companies who are respected members of the society should take it upon them to educate people about the consequences of child labor.

Small organizations and local employers should also be clearly intimated about the current laws in the about child labor and how it would affect them if found guilty. The ignominy of being put behind bars and the threat it would pose for the business would dissuade people from allowing children to work for them.

Policy Development

Identify and comply with all relevant national and local labor laws: The company should make sure that it itself is not a perpetrator of child labor. It should at a minimum follow all the regulations, which relate to child labor in the country.

Develop a company policy: The company will have a code of conduct and policies in place to act as guidelines for its decisions making as well as day-to-day operations. We should incorporate guidelines on child labor in these policies. These policies should specifically forbid any business of itself, or its contractors where child labor is used to produce the items. A case in point is that of the retail US giant Wal-Mart wherein they have a special Supplier Partner Standard in place. This standard states that Wal-Mart will not sell any goods produced using child labor. It goes a step ahead to state that it will not accept manufactured good from it contractors, sub contractors or any other relationships where child labor is involved. It specifies the minimum age of child labor as 15(or 14 where the country laws has specified that age) or the minimum age for completing compulsory education, whichever is higher.

Make policies positive rather than punitive: This talks about providing incentives for children to leave the workplace as against using punishment and threat as means to check child labor. Where children are at work in hazardous situations, they should be shifted to less hazardous situations. They could be provided with some kind of arrangement, which would allow the child to still bring the income to the family table without working. (E.g. incentive stipend for attending school.

Make the policies participatory: Invite the employees to be part of the policy team in the same way that employees are involved in creating mission and vision statements for the organization. This will lead to a large pool of ideas. It will also give them a sense of ownership since they are directly contributing to it. This leads to shared accountability cutting across all divisions of the organization.

Implementation

• Age verification procedures need to be put in place
• Establish a crisis management and crisis communication protocol in the event of child labor instance being observes in the company
• Communicating the policy to all stakeholders
• Propagating the idea through senior management
• Identify champions from committed core groups
• Training and awareness programs
• Assigning accountability and responsibility
• Rewarding staff for proactive measures
• A grievance redressal and feedback mechanism in action to provide anonymity and confidentiality to employees for bringing up issues

Monitoring

Eternal vigilance is the price of freedom. Companies should always be on the watch to make sure that their policies are followed in word and spirit. This calls for active monitoring and enforcement. There are three kind of monitoring. They are: -

• Internal Monitoring: Here the monitoring is conducted by the company staff. The companies will train and empower their staff to conduct inspections in the workplace.
• External Monitoring: External auditing firms are used to monitor the workplace
• Independent Monitoring: This is generally conducted by NGO’s or other interest groups. This type of study gives more credibility and independence to the process as it is conducted by sources, which are not partial to the company.

Forging Partnerships

For addressing the issue of child labor, private companies do not have to navigate uncharted territories. There are already a large number of business and other organizations, which have been involved in this fight for a long time. Some of the greatest successes have come from partnerships with such organizations. Their hindsight can act as our foresight and they would already have processes, which we could also implement, or work together with. They would also have resources with them about how to most effectively address these problems in a given situation.

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How to respond when child labor is detected?

The simplest response of sending the child away when child labor is detected many a times proves to be a very wrong response. The children working in harmful condition in many cases are the sole bread-earners in the family. This results in a real ethical dilemma for the employers who find out about child labor. Some of the best practices that are globally accepted involve:

• Releasing the children from harmful work
• Enrolling them in schools
• Address the physical and mental health of children working under harmful conditions
• Create conditions that remove the need for children to do harmful labor
• Protect and educate children who work legitimately
• Provide alternative income generation activities for he parents or other adult relatives of the children who are relieved from harmful work

Children who are legally underage should be removed from work, but kept in payroll till a solution is arrived at. In many cases the harmfulness of the work is in the number of hours of work. The companies should ensure that the children having legal rights to work should not be working beyond a certain time. It is also essential to provide education wherever possible.

The whole idea of solving the problem is to identify the economic root of the problem and address the issue accordingly. As Levi Strauss & Co demonstrated by continuing the salary of the underage girls working in its contractors industry till they become legally aged to work. Also, the company invested a lot of money on the schooling of the children.

In certain industry such as mining, quarrying etc., which are identified as harmful to the physical and mental health of children, the approach should be different if child labor is detected. The employers should work towards providing other opportunities of work to the legally aged children. The alternative work should not involve harmful activities.

Managing Supply Chain Risks

Companies trying to solve the child labor problem not only have to address their own workforce. They regularly find themselves in a scenario where they are unable to control or have control over the child labor problem in their supply chain. Although, the companies in many of the cases do not have any say in the practices of their suppliers, yet they are directly affected by them in terms of the reputation risk. Harmful child labor can be found in both the regulated and the unregulated sector of the supply chain. Out of the two it is very difficult to monitor and control the informal sector, which mostly employs the children in domestic and household works.

Some of the methods the companies use in order to have some control over the risks of harmful child labor from supply chain are

• Selecting Quality Suppliers
• Contractual Agreements
• Subcontracting Safeguards
• Labeling and Certification
• Consolidating Production Centre
• Supplier Training and Incentives

Selecting Quality Supplier

The best way to manage the risk to the company from supply chain is by carefully selecting the partners with whom the company is involved in business. It is essential to choose suppliers who share the company viewpoint about the social contribution and harmful child labor. This not only works out for the best interest of the company but also in reducing the menace from root levels. Most of the companies nowadays have a stringent vendor selection process to ensure that they are complying with the policies and viewpoint of the company.

Contractual Agreements

Another method very commonly used is having clearly stated contracts with vendors prohibiting them from the use of harmful child labor in their workplace. This method is effective only to the extent of monitoring that can take place along with the stipulation. The companies must be willing to take the terminating step in case it finds the vendors defying the clauses in the contract. In one of the cases, Shell Brasil is one of the first companies to utilize this method in avoiding harmful labor from its work force. Forced to include alcohol in the supply of fuel in Brazil, it had to rely upon the local produce of alcohol from sugarcane. Children were very often involved in the sugarcane industry. Shell Brazil included the clause of prohibiting the vendors from using child labor in producing alcohol it used. Further, the company backed the contract by terminating the contract whenever there was violation.

Subcontracting Safeguards

Supply chain can be complex in many industries. It may be multi-tiered making it impossible to have any absolute control over the contractor. The risk is amplified when the contractor engages in subcontracting the services. One of the approaches that business follow in order to avoid the trouble caused subcontracting is to prohibit the use of subcontractors itself. This is mainly stipulated in the contractual terms. Many other companies hold the contractors legally responsible for the non-compliance with the code of conduct. A lot of companies also ensure that the quality of the subcontractor has a minimum level, the same way they ensure for contractors.

Labeling and Certification

When rightly applied labeling and certification proves to be an effective way of managing and ensuring the products and material that the consumers purchase are sourced and produced using ethical production methods. A large number of organizations give voluntary certification, specifically child labor free certification, to companies. For instance, ABRINQ Foundation’s child friendly Company Program is a social labeling initiative aimed at engaging companies in activities that can improve the lives of Brazilian children. The foundation ensures that the certified companies follow the code of conduct for eliminating child labor. Another example is the RUGMARK, an international initiative to eliminate harmful child labor in the carpet industry. Traditionally carpet-manufacturing industries in India, Pakistan and Nepal have been employing children in production of carpets. Carpets produced according to RUGMARK criteria receive the internationally registered label. The carpet manufacturers receiving label have to comply with certain requirements such as (a) not employing children below the age of 14 years (b) paying official minimum wages (c) disclosing orders to RUGMARK and (d) accept unannounced inspections at any time. RUGMARK also maintains a license program in the consumer countries whereby the importing companies pay a license fee for every imported RUGMARK labeled carpet. The money that is collected is used for rehabilitation of the former child workers and children in carpet industry.

There are also other agencies such as the International Labor Rights Organization (ILRO) that give voluntary certification for child labor free production. Although certification is beneficial for the companies and consumers, the experience with such programs has been varied. The companies must ensure that the certification program that they are bidding for is legitimate and has real motives behind it.

Consolidating Production Process

Many companies operate in different countries where various stages of production process results in subcontracting and home or piece work. It becomes really difficult for companies to monitor and ensure that the production that is happening in varied geographic area is done without the exploitation of children.  To address this issue, some businesses have built centralized factories, centers or depots where workers are brought in to do their work, which they did in home. For example, Nike worked with its soccer ball supplier in Pakistan to device a plan whereby stitching previously done in the home could be done in a controlled environment. Stitching the balls was one of the main activities that were done in homes, generally employing the children. One of the options that the company considered was to abolish homework altogether and construct a factory in the city. But the option would have affected the livelihood of many families as the going to city and working would never have been an option. Considering this issue, the company constructed eight stitching centers near Sailkot, providing a place within the ambits of the villages for work. This completely eliminated the child labor in the manufactured balls.

Supplier Training and Incentives

The national and multinational companies are trying to improve the working conditions and practices of the suppliers by educating them. Also, training is being imparted to the suppliers on the ethical workplace practices. Companies are also resorting to monetary incentive as a means for encouraging suppliers to stop using child labor. Rewards and recognition programs have been shown to increase supplier employee motivation and diligence with regards to workplace practices. These approaches are not only meant for reducing reputation risks but help in increasing the productivity and profitability of the company in long run.

Apart from following these approaches the companies need to ensure that the policies and followed and complied with. Companies must actively monitor the working practices of the vendors and supplier by regular inspections and take corrective steps in order to align the work practices of the suppliers with the work practices of the company. The corrective steps may even involve termination of contract at times.

Many a times the small size of company does not allow it to impose its ethical policies of work practices on its suppliers. In such cases it becomes really difficult for the company to manage the supply chain risk on its own. In scenarios like this companies in similar line of business must join hands to influence the employment practices in the industry as a whole. Also, many times the standards of international companies have positive impact on the national companies. The ABRINQ foundation constantly tries to involve partners from different industries to improve the working ethos of different industries in Brazil.

Obeetee’s Case Study

This is a classic case of handling the child labor within and around the supply-chain of a company.

Obeetee is the leading manufacturer of hand-knotted, hand-tufted and flat woven carpets. It is India’s leading producer of finest carpet since 1920. OBEETEE carpets have been sold in the USA since the 1940’s at well-respected department and specialty stores. Many projects have involved the making of carpets for illustrious and historic properties worldwide. It is also the world’s first licensee of “Woolmark” and “Wools of New Zealand”.

Obeetee’s main supplier of carpets is the informal sector of local artisans who manufactures carpets in their houses. Because of high demand world wide for Indian hand-woven carpets,

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the industry experienced rapid growth. This lead to increased labor and suppliers, which also led to employing children both in the factory and at supplier’s production sites, mainly homes. Since for most of them, it was a family owned business, most of the children of the households were working. Child labor became more and more prevalent in the industry.

In 1986, the Indian Parliament passed the “Child Labor (Prohibition and Regulation) Act,” which prohibited the use of children under the age of 14 in carpet weaving, except on the looms of their parents or siblings. Obeetee was already getting a bad name in the industry due to employment of child labor and this act added fuel to the fire. Urgent measures were required to stop the practice.

Challenges

Obeetee took a corporate decision of not employing child labor in their company or at supplier’s premises. It was easier said than done especially the latter part. Company faced lot of challenges during the process:

• Handling Child Labor Issue at supplier’s end was a challenging task due to lack of control. Work was done in thousands of villages across 4000 looms inside the houses of the suppliers.
• Since success of the business depended on the volume, more labors were a big advantage and hence children became a big source for the same. With such a high-dependency, any hindrance had a huge impact on the income of the suppliers.
• Obeetee’s also had a huge short-term impact on the cost and the profitability because of removal of child labor force.
• Tracking of real age of children was almost impossible due to lack of records of birth etc. It made the monitoring and tracking all the more difficult.

Remedial Measures

In spite of the above challenges, Obeetee too up the task of eliminating child labor by taking various steps:

Cultural Changes:

Increasing awareness of the issue was the most important step in the whole process. Unless the suppliers were themselves convinced about the harmful effects and impact on their business, the problem would continue. Obeetee’s manages went from one village to another to spread the message. They made the loom owners aware the impact of new policy and act on the business and what could be the consequences if the compliance was not met.

Policy and Process Changes:

Obeetee made lot of policy and process changes in this regards, such as:

• Increasing the wages for the labors in the company and to the suppliers. This had a short-term impact on the profits, but led to higher profits in the long-term. Company gained lot of good will because of this change.
• Blacklisting of suppliers using child labor
• Creating depots around the company premises to facilitate labors to work closer to the factory. This also controlled the use of child labor.

Increased Monitoring and Inspection

• Monitoring and Inspection in the depots by employing inspectors on a periodic basis.
• Creating a child labor cell for handling complaints.
• Registering each carpet for public and independent inspections
• Different Labeling and Certification programs

Seeking external help

• Working in partnership with NGOs and government agencies to take care of future needs of displaced children through welfare programs and education.

Conclusion

Child labor is a big issue especially in India and requires special attention. No child deserves bad life and each of us has a responsibility to ensure the same. It is the responsibility of managers of the companies to take pro-active steps to handle the problem. They were to take conscious decisions to not to employ child labor and create policies and process in the system, which can take care of the problem in a global way. This is the only way to grow themselves, their organizations and the country.

References

1. Course Handbook
2. http://www.indlaw.com/
3. http://www.antislavery.org/
4. Harvard Business Review
5. http://www.ilo.org/