Ministry of Labour - Invalids and Social affairs Institute of Labour Science and Social affairs ----------o0o---------- Study on Corporate Social Responsibility Study on Corporate social responsibility labour-related practices Final Report 1 Hanoi, February 2004 1 All analysis, conclusion, assessment and proposals for Government’s roles in this final report which were based on study results in the coverage of selected enterprises and partners only showed the observation and viewpoints of the study team, they were not official standpoints of Vietnamese Government.
Transcript
Ministry of Labour - Invalids and Social affairs Institute of Labour Science and Social affairs
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Study on Corporate Social Responsibility
Study on Corporate social responsibility labour-related practices
Final Report1
Hanoi, February 2004
1 All analysis, conclusion, assessment and proposals for Government’s roles in this final report which were based on study results in the coverage of selected enterprises and partners only showed the observation and viewpoints of the study team, they were not official standpoints of Vietnamese Government.
Abbreviation
MOLISA Ministry of Labour- Invalids and Social affairs ILSSA Institute of Labour Science and Social affairs WB World Bank VGCL Vietnam General Confederation of Labour VCCI Vietnam Chamber of Commerce and Industry GSO General Statistic Office ILO International Labour Organization NGO Non-Governmental Organization IRD International Relations Department LEFASO Vietnam Leather and Footwear Association VITAS Vietnam Textile Association CSR Corporate Social Responsibility OSH Occupational Safety and Health CoC Code of Conduct SoE State - owned enterprise FDI Foreign directly - invested enterprise FCP Fire Control and Prevention TAP Technical Assistance Program
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Participators
1. Steering Board Dr. Nguyen Huu Dzung Director, ILSSA Board Director Nguyen Thi Lan Huong Deputy Director, ILSSA In-charge of synthetic report Nguyen Manh Cuong Deputy Director, IRD Head of Segment I Dao Quang Vinh Deputy Director, ILSSA Head of Segment II Phan Duc Binh Deputy Director, Dept. of Legislation Head of Segment III 2.Members Ngo Van Hoai Researcher, ILSSA Duong Danh Manh Researcher Do Dang Thang Researcher Luu Lan Anh Researcher Tran Van Ha Researcher Pham Minh Thu Researcher Nguyen Vinh Ha Researcher Hoang Thi Minh Researcher Le Hoang Dzung Researcher Nguyen Duc Hung Researcher Nguyen Thuy Ngan Expert, Dept. of Legislation Vu Huu Tuyen Expert, Dept. of Employment 3. Technical consultant: Tara Rao, CSR Specialist of World Bank 4. Assistant: Hoang Thi Anh ILSSA Nguyen Thanh Hai Dept. of International Relations Nguyen Nhu Tuan Dept. International Relations Do Quynh Chi Dept. of International Relations
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Acknowledgements
The research team would like to express the sincere thanks to valuable and cooperative suport and assistance of international experts, Vietnamese agencies, NGOs, enterprises and companies involved in the program, specifically: Nigel Twose, Foreign Investment Advicosry Service, WB Washington D.C, USA Martin Rama, Lead Economist, WB, Hanoi, Viet nam Carrie Turk, Senior Poverty Specialist, WB, Hanoi, Viet nam Nguyen Minh Hoa, Assistant, WB, Ha noi, Viet nam Nguyen Thi Tong, General Secretary of LEFASO Nguyen Duy Lam, Head of Northern Office of VITAS Nguyen Duc Thinh, former General Diretor of VITAS Tran Trung Phuc, Deputy Head of Bureau, VGCL Ho Uyen, Head of Division, Nike company Thuy Duong, Head of Division, Adidas company Carey Resiger and Nguyen Ngoc Chau, Global Standards company Tran Ngoc Tue, Head of Division, Action Aid Viet nam Nguyen Anh Thuan, Care Internationals Bui Thi Phuong, Baker Mc. Kenzie company Surveyed textile and footwear enterprises Consultation and certifying companies
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Content
Page
PART I : Summary on technical assistance program 5 PART II: Some key findings of study 14 I. Overview of textile and footwear sectors 14 II. Nature, content, role and application mechanism of CSR 18 III. Awareness, drivers and approaches to CSR 21 IV. Comparison between Vietnamese legislation and CoCs 23 V. Main improvement activities in response to CoC’s requirements 36 VI. Implementation situation of CoCs’ Requirements 40 VII. Enterprise difficulty and challenges in CSR implementation 48 VIII. Role and ability of relevant stakeholders in CSR' implementation 51 VIII. Effect assessment of CSR's implementation 53 IX. Lessons learnt 55 X. Future plan on CSR's implementation 57 Part III: Roles of government in CSR's implementation 61 I. General conclusion in CSR's implementation 61 II. Proposed roles of government 67 III. Recommendations for Vetnamese enterprise 70
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PART I : Summary on technical assistance program
During January 2003 to March 2004, the World Bank and Institute of Labour
Science and Social affairs (ILSSA) implemented a program of technical assistance on government roles for strengthening Corporate Social Responsibilty (CSR). The program is designed to increase the competitiveness of Vietnamese enterprises within a globalization and trade liberalisation. This initiative focused on CSR issues of labour standards through a case study of the footwear and textile industres in Viet nam to draw lessons aimed at supporting exports business in integration and development process. 1. Goals and Objectives of the Program:
At present, CSR is regarded a important instrument to join in world trade market. However, CSR’s implementation is based on economic and technical conditions of enterprises as well as the support and facilitation of stakeholders, especially Goverment’s role. The overall goal of the program is to indentify goverment’s roles in strengthening CSR ralted to the Government’s priority exports sectors.
The specific objectives are as follows:
- To build enough awareness about CSR’s requirement among different stakeholders: Government, enterprise, worker representative association, employer, buyer, certifying compnay and so on to facilitate Vietnamese business to raise the competitiveness in global market;
- To explore and identify realistic and appropriate roles of relevant line ministries, branches in improving the working conditions and standards to be in accordance with natioanl regulation and internatnioanl practices;
- To pilot the dialogue on promoting CSR-related labour standards among key stakeholders with respect of Vietnamese legal framework.
2. Key activities
a. Dissemination and awareness raising workshops:
The program offered chances to policymakers, enterprises and related organizations to attend multi-stakeholders symposia and dissemination workshops which were targeted to provide information on CSR-related labour standards performed in footwear and textile enterprises, opportunities and challenges in mobilizing the involvement of
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relevant stakeholders, especially government agencies, in assisting Vietnamese business to take part in global economy. Workshops were held in the North (Hanoi) and in the South (Hochiminh city).
b. Establishment of a multi-sectoral Advisory Group
Under the TAP’s framework, a CSR Advisory Group was formed with the membership of WB, ILO, representatives of VITAS and LEFASO, VGCL, VCCI, Buyers (Nikes and Adidas), legal consultation companies (Global Standards, Baker Mc. Kenzie), NGOs…. The Advisory Group was designated to support technically for the study and propose solutions to enhance the stakeholder’s roles in favour of Government to broaden public dialogue in this regard. Members were invited to attend 3 Advisory Group meetings and supposed to play active roles in dissemination and capacity building workshops. c. Research on CSR’s implementation in some textile and footwear enterprises and interview with related companies: The research was paid attention to some Vietnamese enterprises of footwear and textile industries which are known as most important exporters in Viet nam. These are labour-intensive sectors which have been affected directly and strongly from sensitive issues on labour in open-door and integration process over past few years. The objective of the research was to identify the challenges/barriers and opportunities in CSR’s implementation, accordingly to formulate the sectoral integration strategy and feed into the Government’s strategic planning on Vietnamese business competitiveness.
3. Expected outputs - Identification of (i) CSR-related labour issues faced by Vietnamese enterprises in
liberalization and globalization, and (ii) difficulties/challenges, cost/benefit of adopting CoC’s requirement, sustainability of CSR’s implementation.
- Raised awareness of related stakeholders, especially enterprises, VITAS, LEFASO, government officials to contribute to CSR initiatives in Viet nam; Increased expertise of government (as represented by MOLISA), representative group of key ministries, civil society (NGOs, media), labour representatives and the private sectors (as represented by the multi-stakeholders advisory group) to guide the public debate on stakeholder’s roles, especially government’s roles; Provision of CSR information among related stakeholders.
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- Proposal of supportative measures for enterprises to have well-performed CSR-related labour standards in integration process and competitiveness raising via improved labour standards; the application possibility of CSR varied among enterprises.
- Pilot of Monitoring and Evaluation (M & E) mechanism on CSR’s implementation; Capacity developed companies commitment to CSR and benefits of CSR activities as well as the response of related stakeholders in advocating best practices for workers.
4. Study components
In order to realize above objectives, a term of reference outlining the specific details of the study components was developed with following 3 main contents:
Segment I: Information dissemination
It provided general information about CSR and raised the awareness of CSR for enterprises and related stakeholders. It considered the support possibility in terms of information from government, associations and other actors. Its main activities were conducted in forms of workshops and expertise exchanges with the participation of key stakeholders (government agencies, enterprises, associations, buyers, certifying companies ... ).
Segment II: Assessing the challenges, barriers and opportunities in CSR’s implementation from enterprise perspective
The assessment covered the short-time impacts (i.e. cost, benefit, efficiency and effectiveness) and long-time span (i.e. benefit, condition and sustainability) of CSR’s implementation. Under this segment, a direct survey in CSR-implementing and CSR-initiated enterprises were carried out to have comparative analysis with CSR-detached ones.
Segment III: Assessing challenges, barriers and opportunities in CSR’s implementation by enterprises from buyer, consultation company and certifying company perspective The segment was expected to be in charge of: - Discussing with buyers, consultation companies and certifying companies;
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- Identifying the necessary roles of Government in strengthening and supporting CSR’s implementation in Vietnamese circumstance based on the findings of the Segment I and II.
5. Study framework
A analysic framework for 3 segments was designed to cover following broad contents:
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a. The main pillar (at the middle) fosucing on the assessment of :
+ Awareness of enterprises on CSR’s implementation, including the matter of drivers for CSR to be accessed by ‘WHY” (Why and why not having implemented CSR?), by that determine the sustainability of CSR’s implementation. + Activities done by enterprises in relation to before-during-after scenario of CoC’s performance, in other words it took a view at implementation/application system and mechanism of cost, benefit and improvement. This part also tapped difficulties, challenges, opportunities and barriers in CSR’s implementation. + The final row was experiences, lessons, future plan and recommendation of enterprises and related stakeholders in implementation process. b. Approaches The comparative approach was used to demonstrate the objectives. It took the notices of the variation of drivers, strategy, operational mechanism and future plan of enterprises based on many factors, including geography (North, South), ownership form, enterprise scale, the participation in labour arrangement system, export and import situation. Besides, the approach was analyzed from CSR's engagement and amount of required CoCs perspectives. This was shown in the left pillar, the middle pillar was also reflected by this methodology. Besides, the assessment on awareness, benefit, difficulty and challenge of CSR's implementation was derived from other internal groups such as: seminar management board, functional officials, trade union representative, worker (i.e. right pillar).
c. Incorporated sample-based survey and in-depth interviews To draw a comprehensive picture of CSR's implementation, a sample-based survey was undertaken to worker group, while in-depth interview was applied to representatives of directly and indirectly engaging in CSR's implementation. - Direct interviews were consisted of 24 textile and footwear enterprises with 6
focal groups of Senior Management/CSR specialist, Trade Union, Human Resource Development, Occupational Safety and Health, Finance, Worker.
- Indirect interviews were involved by 12 representatives of buyers, consultation
companies, and supervising/assessing/certifying companies. It benefited for the multi-dimension analysis in line with basic contents of CSR's implementation.
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Table 1b: Surveyed enterprises by regions, ownership and CSR engagement
Textile Footwear Total
Ownership Gr. I
Gr. II
Gr. III
Gr. I
Gr. II
Gr. III
Gr. I
Gr. II
Gr. III
State owned 2 3 1 5 1
Private 4 1 2 3 2 7 1 2
Joint venture 1 2 3
100% of foreign capital
2 1 3
Total 9 1 2 9 3 18 1 3
Note: Group I: CSR-implementing, Group II: CSR-initiating, Group III: CSR-detached
Table 2: Structure of surveyed companies
Surveyed companies Amount 1. Legal and CSR consultation companies 3 2. Assessing and certifying companies 6 3. Buyers of textile and footwear products 3
6. Delivarables The study resulted in following outputs: - Records of CSR workshops; - Synthetic reports on CSR’s implementation - 02 sub-segment reports on CSR’s implementation in textile and footwear sectors; - 01 Synthetic report on CSR’s implementation from enterprise perspective; - 01 synthetic reports on CSR’s implementation from non-enterprises perspectives; - Dataset of surveyed enterprises; - Data on CSR’s implementation synthesized from enterprises, workers and other
non-enterprise sources. 7. Member of research team: The study was hosted and executed by Institute of Labour Science and Social affairs (of Ministry of Labour – Invalids and Social affairs). The Director of Steering Board is Dr. Nguyen Huu Dzung, Director of ILSSA and main charge was undertaken by
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Ms. Nguyen Thi Lan Huong, Deputy Director. It was credited with hands of ILSSA's researchers in cooperation with experts from IRD and Department of Legislation (MOLISA).
Segment I: Headed by Mr. Nguyen Manh Cuong, Director of International Relations Segment II: Headed by Mr. Dao Quang Vinh, Deputy Director of ILSSA Segment III: Headed by Mr. Phan Duc Binh, Deputy Director of Legislation
In addition, the study also had the fruitful and active contribution of VITAS and LEFASO, personally Ms. Nguyen Thi Tong, General Secretary of LEFASO and Mr. Nguyen Duy Lam, representative of Northern Office of VITAS and Mr. Nguyen Duc Thinh, Former General Secretary of Southern office of VITAS. Participation from VGCL of Mr. Nguyen Trung Phuc was also appreciated.
8. The limitation of the study:
- CSR is an extensive definition of enterprises' responsibility in carrying out key elements relating to labour and environment issues. However, the study had just took CSR labour-related practices into consideration.
- The study took a small sample size which the bias was placed to large-scale enterprises, well-positioned enterprises to apply CSR. Specifically, one out of 24 surveyed enterprise had labour scale of less than 500 (450 workers), one was classified into CSR-implementing and 5 into CSR-initiated groups, the rest were found totally in large scale and mostly had been implementing one more than one CoCs. Owning to the limited size, it somewhat restrained from comparison and analysis breakdown by labour scale and group of CSR’s engagement. Therefore, findings and conclusions were viewed as cases and typical incidence in certain areas, it could not stand for overall CSR’s implementation in Viet nam in general and SMEs sector in particular (which consisted of approximately 90% of Vietnamese enterprises).
- As for consultation and certifying companies: CSR has come into exist in Viet nam for past 5 -7 years, therefore it has not yet been able to attract large number of enterprises to go along with; some companies felt hesitated to respond and provide information sufficiently, especially in terms of cost for CSR’s implementation. Therefore, it made difficult for Government to identify possible financial support to assist enterprise in handling with CSR.
- Time and funding is limited.
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PART II: Some key findings of study
I. Overview of textile and footwear sectors
1. Role of textile and footwear for economic and export growth:
In 2002, Viet nam has about 1972 textile and footwear enterprises --1622 of textile and 350 of footwear, which making up more than 3% of total business and production enterprises and 12% of total industry sector (including mining, manufacturing, electricity, gas and water)2 . They have been proved to be important drivers for Vietnamese economy in the initial period of modernization and industrialization. Their growth rate has been witnessed with higher rate of overall industry's in Viet nam.
Source: Statistic Yearbook 2002, General Statistic Office (GSO)
These sectors were characterised by the diversity of ownership forms. By 2002, State sector made up 20 - 22% of total, while FDI took the share of about 40%.
Table 4: Structure of footwear and textile by ownership forms (%) State-owned Non-state Foreign-invested Textile 22 44 34 Footwear 20 40 40
Source: Report of LEFASO and VITAS at CSR Workshop in Hanoi on 5 August 2003 and Hochiminh city on 7 August 2003
It is widely known that textile and footwear are export-orientated industries. Their export quota showed a remarkable achievement of more 26% of national export
2 According to GSO, in 2002, there were 62908 business and production enterprises, of which about 15858 were industrial enterprises.
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turnover, moreover, they are among 4 leading export sectors (with crude oil and seafood) in national economy as a whole. It indicated that the openness rate of these industries were high.
Table 5: Export turnover of footwear and textile 1995 - 2002
In 2002, 15% and 11% of total export turnover were contributed by textile and footwear respectively. Commendably, Viet nam at present is one of top 10 footwear producers and exporters in the world.
- Footwear sector: it has its main markets in Germany, the Netherlands, France,
Belgium, and Britain which accounts for nearly 80% of the total export turnover. In addition, America, Hong Kong, South Korea and Taiwan are also important clients;
- Textile sector: The main markets are mainly in America, EU, Japan, CIS (Council of Independent States) and Western Europe.
That Vietnam’s integration into world and regional economic practices, bilateral trade agreement with the United States and application for WTO accession, ASEAN Free Trade Agreement (AFTA) has been witnessed progressively will further advance Vietnam along path of integration, exposing domestic enterprises to expanded opportunity and access to new technology and management as well to develop its comparative advantages. Over past years, footwear and textile sectors have embarked on improvement activities in response to market demand and competitiveness which particularly included quality and environmental management standards and corporate social responsibility (CSR).
As far as location is concerned, at the moment these sectors, especially FDI are locating mainly in 2 key economic zones of North and South in such big cities as Hochiminh city, Dong Nai, Binh Duong, Hanoi and Hai Phong.
This gathering has motivated a labour turnover from one to other region, mainly from rural and agriculture regions to these condensed areas.
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2. Labour and employment situation in Footwear and Textile sectors:
Not only making great contribution to the economic and export growth but textile and footwear sectors are also generating large number of employment. By the end of 2002, a contigent of about 938,688 were working in these sectors which accounted for more than 21% of total labour in business and productioin and more 38% of industry sector2. This was said to thanks to a development strategy based on labour intensive application which takes advantages of abundant and cheap labour.
Table 5. Labour in footwear and textile sectors, 1997-2002
Source: *Report of LEFASO and VITAS at CSR Workshop in Hanoi on 5 August 2003 and Hochiminh city on 7 August 2003.
** GSO, Survey on business establishments in 2000, 2001 and 2002
The specific feature of gender imbalance is shown clearly in footwear and textile sectors where averagely 80% or even 90% are female workers.
3. Difficulties and challenges of textile and footwear sectors in economic integration:
Although economic integration is bringing out a plenty of oppotunities on export and growth, it is posing a lot of challenges for all players involved, including Vietnamese textile and footwear enterprises. Taking part in global market means adopting “international rules” and increasingly fierce competition, particularly when China officially entered the World Trade Organization (WTO).
The main difficulties and challenges are often seen as follows:
- Limited expertise, management skill and technical level in majority of enterprises; - Out-of-date production method with focus on sub-contract performance, lower
production capacity than other regional nations like South Korea, Taiwan; old
2 GSO, Results of Business Survey, 2000, 2001, 2001, Statistic Publishing House, Hanoi, 2004; In 2002, there were 4350531 people working in business and production enterprises, of which 2440669 were doing in industrial enterprises.
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factory, old technology and equipment; insufficienct specialized skill in production line; poorly designed model and style.
- Poor quality domestic materials supply source which fails to compete with imported materials leading to the dependence on imported materials, model and style and technology. Nearly 75% of materials for footwear and textile like: cotton, fiber, chemicals, dyes etc are imported.
- Losing out on comparative advantages of labour cost due to low labour productivity and shortage of skilled workers, specifically:
o Low-skilled workers are not able to access to new advanced technology o Labour turnover causes adverse impacts on production stability. Such
unexpected changes somehow lead to ‘false’ labour insufficiency in the labour market.
o Migrant -labour force which are mainly female workers constitutes a rather large proportion. As a consequence, these mobile workers often quit job since they face with difficulties of living conditions and do not feel secure at work.
o The seasonal nature is obviously noted in production leading to the ad hoc labour arrangements. This is also one of reasons causing lengthened working time (e.g. 10- 12 hours per day) during peak time or waiting idly in other time of year or moving seasonally.
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II. Nature, content, role and application mechanism of CSR
1. Definition and drivers of CSR:
One of the rationale for the study was to clarify the nature of CSR which is known as Corporate Social Responsibility.
In the current context of world globalization, it has been emerging various groups of benefit which involve in not only the output of trade process (exchanged products) but also the ways and production process.
The findings of the Segment I showed that the initial drivers of CSR were pushed up by consumers in capital investors’country. Multi-nation economies (MNEs) which are investing in developing countries are put under the pressure of an increasing number of consumers who want reassurance about the "clean performance" behind the products they buy. As such, originally CSR’s implementation was significant, humanity and people-centered towards sustainable development. As defined by World Bank, “Corporate social responsibility is the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life in ways that are both good for business and good for development "3.
In fact, there has been much argument on the nature of CSR. Whether CSR’s implementation is made use by different social groups for different purposes, such as protection for domestic products, political and economic purposes which cause damage to developing countries. Whether CSR is attached with environment and labor issues (tendency to include corruption, HIV/AIDS,...) to integrate into international trade. + In importing countries (often known as developed ones), since imported products would have direct impacts on employment and compete with domestic manufacturers (in importing countries), groups which are interested in CSR are consisted of consumer; trade union; domestic enterprise; human rights and non-governmental organizations; certifying company and Government. These countries would be in trend to increase the standards with a view to set up "trade barrier " to control the imported products. + In exporting/producing countries (often known as developing ones) the concern on CSR is paid by: association, export enterprise, trade union, certifying and supervising organization and Government. Normally, by fulfilling the partners’ requirement
3 World bank, what is CSR? Report at workshop "CSR and National competitiveness: Good for business and Good for Society", in Hanoi and Hochiminh city in December 2002.
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enterprise and association expect to have more business orders, customers and larger market. + Internally, CSR is now taking the attentions of many organizations and multilateral forums, such as ILO, WB, UN; human right and environment organizations, social organizations and so on. Whether CSR is the tool imposed by "fourth party" to re-balance the benefit
This issue should be given in-depth analysis. Labor issues traditionally were processed by 3 parties. However, many benefit group in society (as mentioned earlier) did not feel satisfied with this mechanism, as their voice and benefit were not counted in national and/or international laws. This absence is not only shown in the content but the role of supervision, monitoring and putting sanction as well. Therefore it is CSR which is designed to deal with this. It is worthy noting that from the original starting point of customer’s expectation (consumers) CSR though was named as products of ‘civil society", however this society got "too many" such social groups representing for different benefit groups. As a result, the issue of CSR has been pushed “to” and “fro” with various forces and drivers. Even it is abused and made use for different objectives. This is what enterprises, associations and organsiatons in exporting coutnries should be aware. 2. Nature of CoC and application extent CoC is abbreviated from ‘Code of Conducts’, it includes nearly 10 contents which are related mainly to labour regulations in workplace, to specify CSR’s requirements in international trade exchange. CoCs imposed by foreign partners (e.g. MNEs, foreign retailing company) are required to apply to supplying enterprises in trade excahnge in voluntary manner between two parties (th volunatry manner is known similarly as the exchange in design). Different foreign companies have different CoCs which showing their own trade mark. It can be said that CoCs are in fact applying in enterprises which are producing for export based on certain buyers. Even large-scale enterprise (Corporation) which has many workshops, sometime CoC’s adoption is merely taken in some workshops in relation to the ordered products rather than the whole enterprise. What do CoCs regulate?
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As far as CoCs are studied, there is a trend of which their contents are taken notices. In reality, when an enterprise undertakes a certain CoC, this enterprise (i.e. supplier or subcontractor) commits itself to: firstly implement all the CoC’s requirement; secondly be under the obligation to be supervised, assessed and monitored by buyers (if CoC belongs to Group I) or third party (if CoC belongs to Group II)4.
Whose is CoC? By whom CoC is developed and for whom CoC benefits?
It is one of the fundamental contens mentioned in study span and dicussions. In order to understand these questions (i.e. who makes it, who does the monitoring and supervising and who gets benefit from CoC), in fact CoC is divided into 2 groups: Group I, CoCs are made by MNEs and retaling companies in which CoCs are most widely applied. Group II, CoCs are invented by organisations and private companies, these kinds of CoCs are not popularly practiced. The example for this group in Viet nam is SA 8000. Taking the comparison between the 2 groups into consideration, there are 3 main differences: (i) the requirement extent (i.e. CoC’s contents), (ii) who does the checking, assesment and monitoring (iii) who bears the cost of the work. The study findings showed that CoCs of Group I are mosly conformable to and similar with national law in Viet nam . The afterward supervison and monitoring are undertaken by buyers (or third party hired by buyers). All the cost is in charge of buyers. In this case, there is no need to have certificate. If the assessment is favour, the trade agreement is reached. The CoCs of Group II which are formulated by independent organizations or private companies (e.g. SA 8000 of SAI) are on one hand based on the maker’s benefits which are not in line with MNE’s or exporting enterprise’s, and on the other hand they might offer too high requirements which consequently lead to the loosened competitiveness of enterprises. If enterprise takes the initiative of applying this kind of CoC, it has to take the responsibility to be supervised and monitored by assessing company (i.e. third party) rather than buyer. All the corresponding cost is shouldered by supplier (i.e. producing enterprise). The outcome of the assessment is often acknowledged by a certificate. However, there is point that this certificate is neither applicable for other buyers who are applying different CoC nor substituting for beginning and whole assessment and monitoring of buyer. Normally buyer considers the certificate purely own business of supplier.
4 Group I and Group II are defined in ‘whose is CoC? By whom CoC is developed and for whom CoC benefits?’
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Which CoCs do foreign companies (buyers) often apply? Why?
In fact, most of buyers base on their own CoCs to select the suppliers for 3 reasons. First, imposed standards are linked with trade mark for advertisement purpose. Second, the reference to local laws enables buyers to take full advantages of competition in that country. Third, buyers handle directly the assessment and monitoring work, so suppliers can take positive actions without interference or impacts of third party (i.e. assessing company, or NGO). While, if buyers parctice CoCs of Group II, they turn out to be dependent on another CoC (i.e. made by independent company or organisation), on the evaluation result and particularly on the supervison of third party. More importantly, buyers are much likely to lose their competitive advantage because they have to follow a higher standard. That is why buyers mainly apply the CoCs of Group I. According to WB, there have been more than 1000 these CoCs world wide, whilst there have been more or less ten CoCs of Group II.
III. Awareness, drivers and approaches to CSR 1. Awareness Since CSR has been newly introduced in Vietnam, its definition was conceived by various ways. Given understanding and awareness, it can be divided into following 4 groups: First, it understands CSR implementation as the participation in manners of humanitarian and charitable gestures. Such kind of concept were in other words corresponding to tradditional way of Viet nam. Second, CSR understanding is based on satisfying customer demands in terms of quantity and quality of product as well as timeframes for delivery of goods. Third, it understands CSR as a certification process , which mainly is SA 8000 or its certificate. Four, this category understands CSR from a “brand protection” perspective, which require safeguarding the quality of life of workers, while stabilizing and developing production.
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* In relation to geography, Southern enterprises had better awareness level than the Northern counterparts and they belong to the fourth group (buyer-led) whereas Northern enterprises are found in other three groups. * From aspect of economic sector, while most of foreign invested enterprises both in the North and South largely fall into the fourth category, most of domestic enterprises, esecially Northern ones are included in the first and the third group. * In terms of CSR’s engagment, CSR-implementing and CSR-initiating enterprises posessed a better understanding than the CSR-detached ones. However, some enterprises revealed that they were only provided and accessed to CSR at certain level.
2. Main Drivers for CSR’s implementation The study captured different drivers of CSR by surveyed enterprises: (a) By meeting the demand of customers: with a hope to get more orders and partners
and to extend the market; (b) By self-awareness of enterprises: with a consider taken for CSR’s
implementation as a strategic plan in business and production development, especially for high-quality labour force, high-yield productivity, better product quality and image, effective business and production.
(c) By support of other stakeholders : with assitance from VITAS and LEFASO in propaganting and providing information, implementing project and program (e.g. OSH program, Initiatives for Business Link...) and support from consultant companies.
3. Main approaches to CoCs
Basically, CSR’s implementation is to realise the requirement of buyers specified in CoCs. The survey had found out different approaches to CoCs. a) CoCs providers are direct customers. All 19 CSR-implementing and CSR-initiated enterprises received one or more CoCs from their customers.
b) Self- searching : during the implementation process, enterprises found it beenfitcial to carry out the customer’s requirement, so that some voluntarily involved in a certain CoCs or set up their own standard with reference from some CoCs. However, such cases were few.
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c) Other channels: Some enterpirses accessed to CoCs via pro-enterprises projects, workshops and experience exchanges and VITAS, LEFASO (e.g. SA 8000).
However, it should emphasize that CoC-implemeting enterprises did not often realise the origin and source of CoCs, especially why buyers aksed them to adopt with a certain CoC. Interviewed with buyers, legal consultation and certifying companies, it reconfirmed the "top -down" manner in CoC's application imposed by multinational companies (e.g. Nike, Adidas... ). Furthermore, because of not learning the fact that CoCs were sometimes based on the pressure of host customers for imported products, on needs of improved image and reputation and so on3), enterprises refered CoCs which required by buyers or assessing and certifying companies as international standards, accordingly the adoption thereof would enable to open the market widerly. As a result, enterprises had made "great efforts" to fulfill the buyer's requirement specified in CoCs. The "top -down" manner was apparently demonstrated in CoC's Guidelines. For instance, Adidas Solomon company layed the groundwork with a social development since 1980 and officially applied some CoCs in period of 1995-1996. To support enterprises to follow its CoC, Nike company developed programs for human resource training, M & E planning etc. Finally, it was the existance of offices in local country (i.e. Vietnam) with function of supervising and guiding CoC's performance, and (last but not least important) discovering "new suppliers" with qualified and well-positioned status for CoCs5. According to the response of buyers, having recognised the benefits of CoC's adoption, many Vietnamese enterprises had strived to get "in advance" certificates of certain CoCs, especially SA 8000, in order to prove themselve qualified with any buyers. This approach (i.e. "bottom - up") is on rise with the establishment of SA 8000 Representative Office in Viet nam in October 2003. IV. Comparison between Vietnamese legislation and CoCs
As provided by most of CoCs with which national law must be compiled, the study was designed to have a comparison between Labour Code and CoCs with a view to
3 As stated by Nike, they concerned about CSR, because " this work must be done, must be in compliance with national law. It makes business significant and improves the image and prestige of the company". 5 As stated by representative of Nike Office, if enterprise has reached about 70% of Nike's CoC, it can be accepted to produce for Nike, however it needs a commitment to continue improving. After 3 times of checking (every 6 months), unless the result is satisfied after 3 times of checking, Nike will terminate the order. The same provision was noted in Adidas company.
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have strategic orientation for enterprise. In this field, it was contributed with a paper comparising Vietnamese law and over 20 CoCs (by Ms. Bui Thi Phuong, Baker Mc. Kenzie company). The preliminary findings revealed that majority of CoCs were similar to Vietnamese laws6. This observation was reconfirmed according to the evaluation of the interviewed stakeholders and the findings from the profile study. As stated by respondents, basically CSR were performed through the compliance of CoCs as required by the buyer-companies or certificate granting firms with respect to labour legislation of Vietnam. However, there are still some gaps which are not so large among the provisions and practices. Under this TAP, a more specific comparison between Vietnamese legislation and CoCs' requirements in textle and footwear were made upon following key contents:
1- Child labour: a) Vietnamese laws: Vietnamese laws provided 2 age level which is considered minimum wage to work. - The minimum age to involve in normal work in normal working conditions as
provided in Article 6 of Labour Code as “at least 15 years of age”. - The minimum age to be employed in hard, hazardous jobs or in working
conditions which having harmful and toxic factors is 18 years old. However, for those who are at age of 15 –18 (or called as junior laborers), Vietnamese law set a really strict provisions on employers when employing them, specifically: + Article 121 of Labour code: ‘An employer shall only be permitted to employ junior worker in work suitable to the health of the junior workers so as to ensure their physical, spiritual and personal development, and is required to take care junior workers on their work, wages, health and training in the course of their employment’. + Clause 1, Article 119 of Labour Code: ‘At places where junior workers are employed, separate records shall be kept with mention in full of the name, date of birth, work assigned, results of periodical health checks of the junior workers, and shall be presented at the request of labour inspectors’.
6 Bui Thi Phuong, Compared CoCs and Vietnamese Labour legislation, Paper presented at 'Start-up workshops on CSR', December 2002.
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+ Clause 1, Article 122 of Labour Code: ‘The hours of work of junior workers shall not exceed 7 hours per day or 42 hours per week’. b) Code of Conducts: CoCs set the different regulations on minimum age to be able to work. Commonly, CoCs of buyers often stipulate the higher level of age than other organizations, for specific instance:
- The minimum age is 15 years or level equally to having completed the local
compulsory education, if more than 15 years of age (Adidas Salomon); - The minimum age is 16 years or level equally to having completed the local
compulsory education (Timberland); - The minimum age is 18 years for footwear producing or 16 years of age for
sport clothes, tools or instruments (Nike).
While the regulations set in the CoCs of Factory certification programs are: - The minimum age is 15 years (or 14 years of age in developing countries,
provided to be in conformity with the dispensation terms of ILO’s Convention No. 138); or age level equally to having completed the local compulsory education if more than 15 years of age (SA. 8000);
- The minimum age is 14 years or level equally to having completed the local compulsory education or level provided by law, it depends on which level is higher.
In relation to sanction on employemnt of junior worker: - All CoCs and Vietnamese legislation provided that employers had to undertake
measures to enable for junior workers to enroll in school for education or skill training.
- Stricter provisions are moreover stated in Vietnamese legislation in terms of employing child labour, particularly:
+ Article 9, Decree 38/CP on 25 June 1996 on administrative sanction against the violation of labour legislation stated that a fine of 1,000,000 VND would be charged to such violations as:
# Employing junior workers to do heavy or hazardous occupations or contact to hazardous substances;
# Violating the regulation on working time for junior workers.
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+ Article 228 of the Penal Code: a fine of 5,000,000 VND to 50,000,000 VND would be charged to the person who employed children to work in heavy, hazardous jobs or contact with hazardous substances as categorized in the State list; or to the person continued committing this sort of violation. In case of offender committing the violation in frequency, or with many children, s/he would be prosecuted to imprison for 3 months to 2 years, if the damaged consequences were noted, s/he would be sentenced to 2 years to 7 year's imprisonment with a fine of 2,000,000 VND to 20,000,000 charged.
The draft Decree on administrative sanctions against the violation of labour legislation (for replacement of Decree 38/CP) will amend with more forms of sanctions and fine increase (i.e. from 10,000,000 VND to the violation of Article 121 of Labour Code).
2- Forced labour:
a) Vietnamese laws:
- Clause 2, Article 5 of Labour code stated: “Maltreatment of workers and the use of forced labour in whatever form are prohibited’. This provision was guided in the Clause 1, Article 11 of Decree No. 44/2003/ND-CP on 9 May 2003 as “in case worker is beaten, insulted or forced to work which not suitable work with sex impacting his/her heath, dignity and morality’.
- Article 1 of State law on public labour obligation provided “ The public labour obligation is the duty of contributing a working day to do work for the sake of the community”.
So far it has been absence of sanction for violations, the draft Decree on administrative sanctions against the violation of labour legislation itends to place very strict sanctions on such violations. The fine of highest level stipulated by labour legislation (from 15,000,000 VND to 20,000,000 VND) shall be charged on the violation of forced labour, proposing for deposit from workers in contrary to legal documents. Additionally, the offender has to pay off the deposit and interests born from the deposit for worker.
b) Codes of conducts:
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Generally, all CoCs have stipulations on the forced labour, especially in buyer’s CoCs this matter is clearly mentioned as ‘forced labour in whatever form is prohibited’; however in some other CoCs of organizations certain forms of forced labor could be allowed to employ as follows:
- No forced labour (however prison labour could be allowed – WRAP); - No forced labour (exception for prison labour – SA.8000).
As such, basically CoCs and Vietnamese legislation are in common with the prohibition of forced labour, yet the variation is noted in the permission of some certain forms like ‘prison labour’ in the former. A noticeable point in most of CoCs is the contents of ‘bonded labour’ or ‘indentured by deposit of identity documents – SA. 8000’ which are also regarded as forced labour .
3- Discrimination, abusing and harassment: a) Vietnamese law: According to the Vietnamese laws, there will be no discrimination in whatever case, specifically as follows:
- Article 52, Amended and supplemented Constitution in 1992 stated ‘all citizens are equal in front of law’.
- Article 63 of Amended and supplemented Constitution in 1992 reconfirmed ‘female and male citizens have the equal rights in political, economic, social and family fields; the discrimination against women, offending women’s dignity are prohibited; female and male workers get equal wage to the same work’.
- Article 70, Amended and supplemented Constitution in 1992 stipulated ‘citizens have freedom to follow or not follow religions and beliefs..’
- Clause 1, Article 5 of Labour code: “every person shall have the right to work, to choose freely an employment and occupation, to learn a trade, and to improve his professional skills without any discrimination in respect of sex, race, social class, beliefs or religion’.
- Clause 1, Article 109 of Labour code : ‘The State shall ensure the women’s right to work on a basis of equality in any respect with men; formulates policies to encourage employers to create conditions for providing female employees with regular employment, and to apply widely in their respect, the
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regime of employment with flexible timetable, part-time work or home-based work.
- Clause 1, Article 111 of Labor code: ‘The employer must implement the principle of equality between men and women in respect of recruitment, employment, and advancement in wage grades and remuneration.’
- Decree No. 23/CP guided some provisions of Labour code on female workers.
In order to reduce the abusing of elderly employment, baby -bearing female workers and so on the amended and supplemented Labour Code has provisions (Article 27) specifed eligible conditions for definite term contracts; if the employees continue working the contract shall become into indefinite term. To deal with violation cases, the draft Decree on administrative punishment developed the option to fine 500,000 vnd to 10,000,000 vnd upon the number of violated workers.
b) Codes of Conducts: CoCs have common provisions on discrimination as follows:
- No discrimination against race, social class, religion, disability, sex, sexual tendency, marriage tendency, participation in trade union, political tendency or age;
- No discrimination in labour recruitment and utilisation; - No sexual, physical or verbal harassment/abusing.
In term of regulation, there is no difference between Vietnam legislation and CoCs. However, the issues of sexual harassment and abusing have not been specifically provided by Vietnamese laws, it would lead to the difficulty in implementation. While it was concretely provided in CoCs.
4- Payment (wage, bonus and other benefit schemes):
a) Vietnamese laws:
- Article 56 of Labour code: ‘The minimum wage is fixed on the basis of the cost of living to ensure that an employee performing the most elementary work in normal working conditions recuperates his/her basic work capacity and partly accumulates reverse for regenerating enhanced capacity’.
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- Article 61 of Labour code: 'Workers performing overtime work shall be paid wages basing on the per labour unit wage or the current wage rates applies to their work' , as follows:
+ on normal work days, an amount at least equal to 150 percent;
+ on weekly rest days, an amount at least equal to 200 percent;
+ on public holidays and holidays with payment, an amount at least equal to 300 percent.
- Clause 2, Article 60 of Labour code: ‘The employer shall not impose penalties by way of deduction from employee’s wage’.
- Article 73 and 74 of Labour code: 'an employee shall be entitled to have fully paid days off during 8 public holidays and to annual leave of 12 to 16 days depending on the specific work.'
- Clause 1, Article 23 of Labour code: 'An enterprise is responsible for carrying out programs to improve the occupational skills of its employees and for re-training employees before transferring them to other jobs within the enterprise’.
- Clause 1, Article 17 and Clause 1 Article 42: 'when terminating a labour contract (due to business production demand or not), employer must pay such employee a severance allowance at the rate of half a month’s salary (for normal loss of work) or 1 month salary (for the change in business and production) for each year of service'.
- Article 149 of Labour and provisions of Regulations on Health insurance: The social insurance and health insurance funds shall be formed from the contribution of employers at the rate of 15 percent and 2 percent respectively of the total wages fund of the enterprises.
b) Codes of Conducts:
CoCs are in conformity with national laws, specifically:
- The minimum wage: defined as national law or applied by the current level of the sector, no impose reduced wage as penalty;
- Payment of overtime: higher than level provided by law
- Other benefit schemes as stipulated as law.
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Some CoCs regulated in detail of social insurance scheme, shelter, meal at shift, canteen, recreation, sport and social functions, toilets, life insurance, medical insurance, regular medical check-ups . .
There were some obstacels in implmeneting:
- There were different understandings on the definition of minimum wage: For instance, Vietnames law defined the minimum wage annouced by State, while it was specified in SA 8000 as fully satisfaction of basic demand plus 10% of accumulating needs.
- Vietnamese State does not proclaim periodically minimum wage, thus enterprises find hard to estimate the necessary cost in dealing with subcontracting with partners as when the wage is made public.
5- Time of work and time of rest:
a) Vietnamese Laws:
* Time of work
- Article 68 and 72 of Labour code: ‘The normal working hours shall not exceed 8 hours per day or 48 hours per week’, and ‘each employee shall be entitled to a break of at least one day (24 consecutive hours) per week.’
- Decision No. 188/1999/QD-TTg of the Prime Minister on the application of 40 working days to administrative and Communist Party agencies and mass organizations.
- Circular No. 23/1999/TT-BLDTBXH on 4 October 1999 of MOLISA on guidelines the reduction of working hours for state-owned enterprises. According to it, state-owned enterprises are entitled to deciding working hour per week from 48 hours in 6 days to 40 hours in 5 days or 44 hours in 5.5 days.
- To junior workers, Clause 1, Article 122 of Labour code stated ‘the hours of work of junior workers shall not exceed 7 hours per day or 42 hours per week’.
* Time of rest:
- Article 69 of Labour code ‘an employer and an employee may agree on additional working hours, provided that the number of additional hours worked shall not exceed four hours a day, or 200 hours a year, with the exception of some special cases stipulated by the Government’.
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- Decree No. 109/2002/ND-CP on 27 December 2002: special cases including: enterprises, production and business establishments producing or sub-contracting export products (i.e. seafood processing, textile and garment, leather and footwear...)
b) Codes of Conducts:
- Regular working hours: 48 hours/week or legal limits whichever is less;
- Overtime hours: 12 hours/week, voluntary and not on regular basis;
- Most of the Codes allow the excess of 60 hours per week including normal and additional working hours (Adidas com. allows more than 60 hours in extraordinary business cases). After 6 sucessive working days, workers are entitled to taking a day off.
Notes:
- Both in Vietnamese law and CoCs, overtime working is provided on basis of voluntary manner, except with some urgent cases which permitted by laws.
- Most of codes set 12 hours as the maximum weekly overtime without imposing an annual overtime limitation and do not allow to take successive working overtime. However it does not clarify the term of “successive working”.
- Vietnamese legislation sets 4 hours as the maximum overtime per day and 200 hours per year; yet the provision is hard to caculate.
6- Freedom association and labour collective bargaining:
a) Vietnamese laws:
* Freedom of associaton:
- Article 69 of Amended and supplemented Constitution in 1992: ‘Citizens have freedom of speech, press; have rights to be informed; rights to meet, associate and demonstrate as provided by law’.
- Article 1 of Trade union Law: “Vietnamese workers who are working in business and production undertakings of all economic sectors, foreign-invested establishment, public and administrative agencies, state agencies, social organizations all have the rights to set up and enter trade union under the framework of Vietnam Trade union Regulations
'All acts which prevent and violate the voluntary principles of participating trade union; discrimination on workers who are members of trade union shall be prohibited’.
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- Article 153 of Labour code: ‘all acts to impede the establishment and the activities of the trade union in enterprises are strictly prohibited’.
- Clause 3, Article 154 of Labour code: ‘employers shall not discriminate against employees on the ground of their forming or joining trade unions, or participating in trade union activities, and shall not, by economic measures or other maneuvers, seek to interfere in the organization and activities of trade unions'
- Draft Decree on administrative sanction of violating labour legislation planned to have article on sanction of violation on Trade union establishment and operation.
* In relation to freedom of association:
- Clause 1, Article 44 of Labour code: ‘a collective labour agreement is a written agreement concluded between the workers’ collective and the employer concerning conditions of work and employment and the rights and interests of each parties to the labour relationship.
A collective agreement is negotiated and signed by the representative of the worker collective and the employer on the principles of voluntaries, equality and publicity’
- Clause 1, Article 46 of Labour Code: ‘each party shall have the right tot request the signing of a collective agreement and propose its terms and conditions. No later than 20 days after receiving the request, the receiving party must accept to bargain and agree on a date to start bargaining.’
b) Codes of conducts:
The main contents in CoCs are consisted of:
- Respect the freedom of association and labour collective bargaining;
- If restricted by law, employer provides parallel means of independence and freedom of association.
Some difference between Vietnamese laws and CoCs: - Under the Vietnamese law, workers have rights to join or not in Trade Union.
They also are enttiled to be free and voluntary to collective bargaining. However, Trade Union is the unique organization representing and protecting rights and benefits for workers.
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- Majority of CoCs referred the issue of association to national laws; some required for equal treatment to non-trade union workers' representatives.
7- Supervision, monitoring and reporting:
a) Vietnamese laws:
* Supervision and monitoring:
- Clause 6, Article 180 of Labour code: ‘Labour administration by the state has the function to carry out inspection and supervision of the application of labour legislation, to impose sanctions on breaches of labour laws’.
- Article 186 of Labour code: ‘State labour inspection has the duty to carry out inspection of the compliance with statutory provisions on labour; occupational safety and occupational hygiene’.
- Clause 2, Article 5 of Trade Union law: ‘ Trade union shall have responsibility to supervise and speed up the implementation of labour-related policies and schemes’.
- Clause 1, Article 9 of Trade Union law: ‘ within its function and capacity, trade union shall check the compliance of labour contract, recruitment, dismissal, wage, bonus, labour protection, social insurance and other policies related to rights and benefits of workers.’
* Reporting:
- Article 182 of Labour Code: ‘Within 30 days of the date of starting business, the employer shall declare the number of workers employed and subsequently during the period of operation, shall report to the local labour authority on changes in the labour situation of the enterprise, according to the regulations issued by MOLISA. Within 30 days of the enterprise’s ceasing its activities, the employer must submit a report on termination of employment of labour to the local labor authority.’
- Circular No 23/LDTBXH-TT on 18 November 1996 of MOLISA: ‘agencies, enterprises, organization and individuals who are employing labour must synthesize the situation of work accidents of first and second half of a year and submit to local Department of Labor- Invalids and Social affairs’.
- Circular 06/1998/TT-BLDTBXH on 15 April 1998 of MOLISA provided the guidelines for the Article 182 of Labor code.
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With an aim to create a healthy and equal completion environment among enterprises, the draft Decree on administrative sanction of violation labour legislation which is now submitting to the Government, is going to impose strict penalty to enterprises which commit the labour legalities, especially these enterprises will be announced on public; on the other side, those who have well-performed legislation would be rewarded.
In order to recover the shortcomings in labour legislation’s performance recently, MOLISA is planning to strengthen labour inspection and compliance in enterprises in coming time.
b) Codes of Conducts:
* Supervision and monitoring:
- In general, CoCs required enterprises to set up voluntary supervision system on the site;
- Besides, some buyers conduct the S and M directly by them selves, while other authorize the third party to take over the task. Some CoCs do not mention to sub-contractors, other check and supevise this cupplying chain.
As such, the work of M & E can be undertaken unscheduled or regularly, inspectors are free to come and check the concerning profiles, reports of the enterprise.
* Reporting:
Although CoCs do not give specific contents on reporting scheme whether on regular or irregular basis, it requires the work to deal with archives, records so as to enable supervisors and/or inspector to check easily and quickly whenever they want.
Differences between Vietnamese laws and CoCs: - Under CoCs, M & E are normally conducted through on -site inspection
and/or offside interviews; - In Vietnamese laws, M & E and reporting are mainly done on
regular/unscheduled basis either in forms of written documents or in person to the enterprise. Besides, the supervision of legal compliance is designated to Trade union.
8- Working environment (OSH and working condition):
a) Vietnamese laws:
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- Article 56 of Amended and supplemented Constitution in 1992: ‘ State issues policy and scheme on labour protection’
- Clause 2, Article 95 of Labour Code: ‘the Government shall establish a national program on labour protection, occupational safety and health; and it shall promulgate standards, procedures and regulations for occupational safety and health’.
- Clause 1, Article 95 of Labour Code: ‘ An employer shall be responsible for providing adequate means of protection to the employees, ensuring occupational safety and health, and improving the working conditions for the employees. The employees must comply with regulations on occupational safety and health and comply with the internal regulations of the enterprises. Any organizations or individual concerned with labour and production must comply with the laws and regulations on occupational safety and health and on environmental protection’.
- Article 97 of Labour code: ‘An employer must ensure that the workplace meets the standards on space, ventilation, lighting, and the health standards permitted in request of dust, stem, toxic gas, radioactivity, electromagnet field, heat, humidity, noise, vibration, and other harmful factor. Such factors must be periodically checked and measured.’
b) Codes of Conducts:
CoCs contains some following points in OSH:
- It should create a safe and healthy working environment with necessarily protective measures to prevent work accidents;
- It should have specific policy and standards on environment, safety and health.
- This standard should be specific and in detail about dorminatary, toitets, shelter….
Some differences were shown as follows:
- In general, most of CoC's requirements on OSH and working condition are mandated relatively sufficiently in Vietnamese legislations and provided guidelines in detail.
- However, some CoCs' guidelines required the assessment on living conditions of workers which might be higher than that provided by national law.
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V. Main improvement activities in response to CoC’s requirements
Comparison results in Section II Chapter II show that , although most of
CoCs requirements and Vietnamese law are relatively similar and requirement based on national law, however in fact to respond requirement of these "national standards" are not easy completely. Discussed with Enterprises and buyers, Consulting and Certificate-Issuing Companies agreed that internal enterprises which new set up, foreign investment enterprises have more advantages, because they prepared in design and standard investment of infrastructure and equipment. Enterprises which constructed a long time ago (over 10 years) or state enterprises have limited in infrastructure, to meet requirements from buyers they must have a long time for investment progress with very costly, therefore these enterprises are difficult implementation also. Especially, difficult to implement CoCs requirement with middle and small enterprises.
According to the reported of enterprises, includes both of enterprises, which have been initiated and implementing follow requirement of one/some CoCs must carry out improvement mass activities. Moreover, these improvements usually implemented, including before and during the CSR implementation.
Main improvement activities include:
1. Improvement and upgrading on production workshop, equipment, machinery and technology
Improvement and upgrading tasks are most common activities, because they were most considered in monitoring reports. It is worthy noting that these activities are mostly undertaken on frequent basis. Thanks to that, enterprises had been improved much with clean, spacious and modern sites and less pollution. This progress was determined in statistical reports. In CSR-implementing and CSR-initiating enterprises, the respective investment for premises and infrastructure were taking the second position in total of investment (after machinery and equipment), over past 7 years since 1996 to 2002, the investment rate for premises and other infrastructures were constituted from 24% to 48% (Table 7)
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Table 7: Investment rate for premises and infrastructures by total investment, period 1996-2002 (%)
Enterprise Group 1996 1997 1998 1999 2000 2001 2002
Besides, enterprises also had to spend much on upgrading and improving other infrastructures, such as: storage, internal path, canteen, toilet, kindergarten. 2. Improvement on OSH and working condition This work deals with a lot of items and relates to various divisions and workers in the enterprise. - Improvement on sanitary and technical equipment: Anti-heating systems, lights, vacuum cleaner, toxic gas, waste water and garbage treatment, ventilation systems.
Table 8: Improvement activities on working condition of enterprise Installation of sanitary
and technical systems
Waste water
treatment system
Garbage treament/plan
Improveed internal
path/ workshops
Ventilation Cooling water
system
Lighting system
Fire control
1. Footwear Industry
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Ent. No.1 TT T T T x x x TT Ent. No.2 TT T T T x x x x Ent. No.3 TT T T T x x x x Ent. No.7 TT T T TT x x x x Ent. No.8 T T T T x x x x Ent. No.9 T T T T x x x x Enter.No.10 TT T T T x x x x Enter No.11 TC TC TC TC x x x x Enter No.12 TT T T TT x x x 2. Textile Industry Enter No.1 TT TT T T TT TT Enter No.2 TC TT T TC TT TT Enter No.4 TT TT T TT TT Enter No.5 TT TC T T T TT Enter No.6 TT T T T T Enter No.7 T T T T T TT Enter No.10 TT TT TT TT TT Enter No.11 TC TC TT TT T TT Enter No.12 TT TT TT x T TT
Source: Statistical reports from 24 enterprises surveyed Notes: TC - Improvement before CoC applied; T - Improvement during applying CoC; TT - Improvement both before and during applying CoC; X -Improved but could not identify the time.
- Improvement of safety technical systems: Safety for electricity, machinery, equipment, fire prevention system. All enterprises equipped more fire extinguishers which put at right places (as required by certain CoC) and usually examined water tank, fire prevention system. Besides, fire control regulation was composed, more signs and instructions were placed and training and drilling were provided for workers. - Health care: Health care work was provided with first- aid facilities, sick-bed.
Workers' health was kept in track with a management system; more medical officials were required; medical equipment and medicine were added, especially, some foreign-invested enterprises hired doctors for all day working. In production area, a medicine cabinet was installed in order to provide first-aid treatment for workers who were sick or suffered from work accident suddenly; moreover, emergency medical staff was assigned to do their duties at workplace. - Provision of personal protection equipment (PPE): CoCs specified in terms of provision of gauze mark, protective cap, clothes, shoes, anti-noise plug, and metal
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gloves. Such regulation was compulsorily taken and applied more strictly to all workers in CSR-implementing enterprises than that in CSR-detached ones.
3. Improvement on production arrangement and working organization: One of the most challenge for textile and footwear enterprises is the seasonal manner in production and labour turnover. Although it is eligible to increase the working hours to 300 hours/year, most of enterprises are not propely compiling it (most of them expected to have in range of 450-600 extra hours/person/year). However, given CoC's requirement which not allowing to get excess over the national standards, enterprises must renovate the production arrangement and working organization, e.g. rearranging production line, making use of production area, reducing unneccesary actions in production stages, standardizing actions for workers in each production line, increasing productivity or sending workers abroad to learn advanced methods. 4. Traning of Human Resourse Development. To implement CoCs, human resourse is also one of challenges faced by eneterprises. Majority of enterprises reported that they were insufficiency on number of staff and level of qualification to monitor and evaluate CoC’s requirements. Therefore, it called for the needs of on-the-site training. All surveyed enterprises were diversifying training forms and setting flexible timetable and appropriate cirriculum for specific groups of workers in the enterprise (e.g. on-the-site traiing, tutoring-based apparenticeship..). Indirect workers, technical staff and officers were sent to domestic vocational training centers or oversea courses. An textile enterprise set up it onw a technical training school. 5. Developed and improved internal monitoring and management (M & M) system All CSR-implemnting and CSR -initiating enterprises were improving internal M & M system. They specified function, responsibility, personnel, facilities and detailed work plan to each management unit. Rule system and regulation were informed to workers in different ways. As far as it can be seen, the most important improvement of M & M systems is (i) the transparancy on policies applied to workers, and (ii) the respect for workers. These policies were posted up a notice at workplace or gathering place. The report frequency was increased with a view to catch up promptly all the progress of production. Accordingly, report quality was improved and in more details. Especilally, record systems related to personnel management, labour protection and
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fire control, health care, time of work and time of rest, wage and benefit schemes were improved considerably.
VI. Implementation situation of CoCs’ Requirements
At the time of survey, 18/24 enterprises were implementing and one enterprise were initiating one or more CoCs. It was total of 35 CoCs applying in 18 enterprises (of which 11 ones in footwear and 24 ones in textile). However, enterprises did not share the same amount of CoCs implemented. 11 out of 18 CoC-implementing enterprises were applying 2 and more CoCs, an special exception was noted for a case of 2 textile enterprises which were taking 6 CoCs.
Table 9. Enterprise by sector and applying CoCs Unit: No. of Enterprise
Some enterprise had long time contract with only one customer, for example Adidas or Nike . . therefore they adopted only a CoC of Adidas or Nike. However, many enterprises, mainly SoEs, private enterprises and Northern enterprises which were searching for customers or processing for multi partners, they had to take different CoCs.
Table 10. CoCs applied in Textile and Footwear enterprises
No. Textile Foot Wear
1 GAP Filamarco 2 Federated Bata 3 ITOCHU Decathlon 4 PVH ETI base Code 5 PRIMO&CAOLA (Hungary) Andree 6 Seidenstiker (Germany) Mar&spencer Global 7 Reebook Reebook 8 The Limited Inc 9 Gymbory
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10 Target 11 Walt Disney Walt Disney 12 Colby 13 SA8000 14 Nike Nike 15 Adidas Adidas 16 Haggar 17 Jones 18 KW 19 Jiaxing 20 Li & Fung 21 Colombia 22 Comtextile 23 Novi Novi 24 FT
Source: Survey result in 18 enterprises applied CSR
Implementation situation of some main contents of CoCs in Enterprise:
1. Child labour
All CSR-implementing enterprises showed no employment of worker under 18 years old. However, 2 out of 5 CSR- detached enterprises still got evidence of employing labour who were under 18 years old in weaving work which is specified as hard and harmful by labour legislation. Some CSR- detached enterprises were witnessed with some abuse cases as: - Workers declared a higher age or used other’s records to get the job;
- Children of some workers came to take apprentice;
2. Forced Labour
In general, all surveyed enterprises (in 3 groups) were complying well with Vietnamese legislation and CoC’s rules. However, some enterprises are detected to have some violations such as:
- - asking for payment from workers in recruitment; - Forcing workers to work overtime - Restricting the time of using toilet at work time; - Keeping wage/payment during probationary/apprentice period;
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- Asking for deposit when working in enterprise - Regulation applied to young female workers on baby-bearing - Short-term contract signed only to regular worker to terminate it
legally in case he break the commitment - Employment of young workers to avoid the responsibility
These cases did not occur widely among Vietnamese enterprises, however it seems to be the case at before time of CSR’s implementation, since Vietnamese law did not use to have guidelines in this issue.
3. Wage and Salary - All enterprises were paying higher level than the minimum wage stipulated by State. However, it existed a different understanding between enterprise and buyer in terms of availing minimum wage. Some buyers did not accept it and asked for developing another level to ensure the minimum living standard in accordance with the real price. (upon formulation of CoCs). - More than 98% of interviewed workers said that wage was understandable and easy to calculate. Most of enterprises made public the wage unit at the workplace, so workers could know how their salary was calculated. - However, there had been an inconsistency in paying the overtime hours. For example, in which case the overtime wage was paid. A private textile enterprise paid overtime in accordance to the Law only when the worker had accumulated 26 working days/month. Another private textile enterprise did so on fixed unit price regardless to the ordinary days, weekends or holidays. 4. Social and welfare schemes
- Newly recruited workers were given health care card issued by clinic station and were examined by enterprise's medical officials. Their health dossier were monitored by enterprise during the working period. - In CSR-implementing and CSR-initiated enterprises, they had clinic stations and employed officials in charge of health care. Some stations had in-patient wards, doctors or nurses and adequate medical supplies. Each workshop was equipped with a first-aid medicine cabinet placed at the most convenient store with name and photograph of the official in charge. The regular health examination for workers were properly conducted in order to discover early occupational diseases for prompt treatment.
- A large number of workers were contributed to social and health insurance. The ratio of social and health insurance was not much different among SOEs and
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private ones, CSR-implementing and CSR-initiating enterprises. Nevertheless, it was on the contrary for domestic and foreign-invested enterprises, CSR-implementing /initiating and CSR-detached enterprises.
Table 11: Rate of social insurance contribution by total of workers (%)
Source: Statistical reports from 24 enterprises surveyed
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5. Discrimination The survey in enterprise and interview with workers showed no gender discrimination in wage payment, training and promotion opportunities. There was no recruitment criteria given on religion, ethnic group or race. However, when unskilled labour was needed, apart from having good health and qualified profile, most footwear enterprises put an age limitation of 30 and completed upper secondary education. The reason referred here was to prevent from low productivity and longer time for these laborers to train. As a consequence, many opportunities were not open to them. 6. Time of work and time of rest Although footwear and textile enterprises are allowed to extend overtime hours to be up to 300 hours/year (against 200 hours/year in other sectors), however many viewed that such level was too low to fit with the real demand. Most of enterprises had overtime hours exceeding the stipulated level of labour legislation. As stated by enterprises, it was unavoidable to work overtime in some period in the year, because of delivery deadline, especially those were producing for different partners without long-time contract by subcontracting one.
Table 13. Labour opinion on number of working day/week and number of
hours/ day in different period in the year Unit: %
Source: Result of workers' survey 7. Occupational safety, health and environment
In CSR-implementing enterprises, most of them paid remarkable attentions to OSH performance. In general, Southern business took more notices of working condition improvement than those in the North; foreign-invested enterprises placed great concern in this issues and environmental protection. Nearly 71% of interviewed workers praised the better working condition than it used to be. By and large,
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premises were well-improved and qualified with customer’s requirement (after improvement was conducted).
- In CSR-initiating enterprises, working condition were also improved significantly. - However, in comparison with CSR’s implementing group, OSH and
environment in other two groups were facing with many obstacles in terms of premises, OSH equipment, and PPE and fire prevention.
8. Harassment, abuse and disciplines practices
- There has no evidence of harassment and abusing of workers at workplace. - There no case in which workers were fined by wage cutback; however bonus was reduced and cut in few incidences. - In one joint-venture of footwear that CSR initiating, there was a case in which workers were beaten by a foreign manager.
9. Freedom Association and Labour collective bargaining: a. Trade unions - 23/24 surveyed enteprises had trade union (all 19 CSR-implementing/ initiating were included). - Workers were encouraged to join in trade union. As a result, approximately 82% workers in 23 enterprises were member of trade union. This figure was recorded highest in SOEs (95%), followed by foreign-invested enterprises (79.3%) and lowest by private enterprises (72.7%) - 58% trade union members usually attended meetings. The respective rates were ranged in private enterprise (22.2%), in SOE (64%) and foreign-invested enterprise (81.4%). - The biggest role of trade union is to disseminate information (in terms of labour legislation, rights and benefit of workers...) and to settle down labour disputes and human resource training. - Obstacles: Some grass-root trade unions did not perform properly to protect worker’s rights and benefits. b. Signing Labour collective bargaining
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- In 23 enterprises having Trade Union signed labour collective bargaining with employer and registered (reported) with local labour authority. The contents of bargaining are in accordance with labour code.
- In general, labour collective bargaining has mentioned to all related issues to industrial relation in enterprises, it translates specifically the provisions of labour legislation into particular circumstances of enterprises, thereby it further advances to all items in CoC which committed by the enterprises.
- Obstacles: Some enterprises signed of labour collective bargaining for formality, the contents seemed to be a copy of legal regulations leading to the inefficiency of the bargaining.
10. Human Resource Training - In CSR-implementing enterprises : All surveyed enterprises formulated human resource development plans including skill training, improved specialty, fire control, labour legislation and so on. Besides, some enterprises organize training courses on foreign languages and basic educational subjects etc. The contents and curriculum were composed to be appropriate with specific targets. - CSR-initiating and CSR-detached enterprises: They had lower rate of training investment than other group, although an increase had been seen recently. These groups did not make specific work plan on human resource training as well as commitments and controlling mechanism proposed thereof.
Table14: Training rate by total investement Enterprise Group 1998 1999 2000 2001 2002
South 0.00 5.20 2.31 1.06 1.11 Source: Statistical reported from 24 surveyed enterprises
11. Monitoring and supervising system
CSR-implementing enterprises:
+ State labour management agencies organize periodically or suddenly inspection and checking OSH performance, benefit schemes for workers, social/health insurance, labour contract....However, at present, these activities are not frequently conducted because of insufficiency on staff and other facilities. +In addition, Enterprises established an internal supervision and especially voluntarily monitoring by customers (or third party) * Representative of buyer companies carried out regular monitoring, supervision on CSR’s implementation in enterprises. For instance, Timberland Company had supervision program every three months by external staff and twice per week by internal staff; Nike company took it every 6 months; Adidas company did it once in one or two months.
* Beside, some enterprises were supervised by other organizations, e.g. organizations certified by FLA; organizations authorized by SAI or WRAP (for enterprises were engaging in SA 8000, WRAP). + Enterprise set up and applied human management software program (database, updated working progress in associated with benefit scheme...) + Guidelines and instruction document for management system of IS0 9002 were also developed. Documents should be clear and easy to check. + However, there is still no evidence of regulation on CSR’s implementation, in which clarifying responsibility of related units, reports duration and reporting channels. Nor does any enterprise set up internal monitoring, supervision in systematic way to handle CoC’s contents. - CSR-initiating/detached enterprises + No internal supervision and monitoring system had been formed, they neither had it done by third party. + The task was still mainly undertaken by State agencies, however it has not been performed properly due to the shortage of staff and other facilities.
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VII. Enterprise difficulty and challenges in CSR implementation
1. Difficulty in initiating CSR:
a. Finance: all enterprises had to invest in building, workshops, office, OSH equipment, fire control and prevention, reformed management system and consultation services. Obviously, such a big investment often requires access to loans from bank, which is a constraint faced especially by private enterprises..
b. Management officials: The growth and the effect of improvement depends primarily on the conception and competency of management staff. However, in State-owned and private enterprises this force were neither trained professionally nor insufficient to manage in market economy context, they just relied more on their work experience. Moreover, SOEs faced problems in offering kind and cash incentives to promote workers to make great efforts.
c. Administration: most of enterprises, especially SOEs and private enterprises started with out-of-date management system, records, reports which were not transparent. Furthermore, the internal supervision and monitoring system was inefficient and given with nominal performance.
d. Information: Enterprises did not have chance to access to adequate and right information on CSR and its performance, this caused to misunderstanding and wrong implications in some enterprises. Some enterprises took passively in response with buyers’ requirements.
e. Labour force: Workers were not fully aware of labour disciplines. Furthermore, they were not accustomed with industrial work style and modern technology. In addition, the capacity and mandate of grass-root trade union had not been brought into full play.
f. Culture different: As for foreign-invested enterprises, in addition to above problems, they had to cope with matter of languages, custom and culture between workers and foreign managers.
2 Difficulty and challenge in CSR’s implementation Along with the process, the problems of the initial process are remained in accordance with emerging challenge. Enterprises continue responding to the demands of customers, accepting the supervision of buyers or third party and thereby sustaining their relationship with customer and increasing their competitiveness. The constraints are commonly faced as follows:
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a) Further investment for improvement: Investment in upgrading, improvements and maintenance must be carried out regularly during the production process. Such work is necessary to sustain and innovate labour standards and environmental conditions which enterprises have committed to observe.
b) Seasonal feature: the instability of production is caused by nature of orders, seasons and material sources. This consequences low business efficiency and high labour turnover. In response to this, enterprises have to increase shift and working hours especially at peak time. This phenomena is widespread among textile and footwear enterprises. Labour turnover makes not only difficult to organize production but also hard to implement some regulations on social and medical insurance.
c) Low labour quality: A majority of labour are not skilled and untrained. They mainly take on the job training and often provide low productivity. Management staff are often appointed from workers who have low professional training/management skill. Enterprises have both invest in recruitment and retraining for workers. In short, low labour quality make productivity low and limited investment for improvement activities.
d) Competitiveness: Enterprises one hand have to cope with the competition on price of product, price of labour; on the other hand they have to bear high cost of inputs due to the dependence of imported materials and subsequent cost of improvements based on CoCs’ requirement.
e) Information and support: Many enterprises stated that even when they had implemented a certain CoC they were still lack of information of origin, source and underlying reasons for its performance. Besides, there has been an insufficiency of support from state agencies, business association and relevant social actors.
f) Supervision: Ones of the challenges faced by enterprises in CSR’s implementation is that enterprises are subjected to supervision and monitoring visits from buyers. Consequently, they waste time, money and personnel in dealing with this. Many said in order to have an internally effective and efficient supervision system they spent considerable investments and effort .
3. Difficult by difference between Vietnamese labour legislation and CoCs a. Difficulty by difference between Vietnamese labour legislation and CoCs
One of the difficulty is the difference between CoCs’ requirement and Vietnamese laws.
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As mentioned in part II, although Vietnamese laws and CoCs’ requirements share many common points, some points in CoCs are regarded more “loosen”, while some others “stricter”. - The most difficult issue is average overtime working. While Labour code stipulated a maximum of 300 hours/year, CoCs have a maximum of 12 hours/ week, or working time (including overtime) can have a maximum of 60 hours/week without limitation for a year. This is interpreted by many enterprises that CoCs offer “more loosely” when allowing overtime hours up to 600 hours/year. More seriously, many think this is “international standard”, therefore, they keep asking to have labour code amended. - Some CoCs require on health/ social insurances to be higher than labour legislation (e.g. Nike, Adidas asked to have health/social insurances contribution right from the first working day...). - Social functions and sport activities, entertainment area, dormitory and so on are considered “working environment” - In OSH term, specific requirement were more detail than national law. - Some legal documents, guidelines of labour inspection are not introduced promptly, it makes difficult for negotiating, agreeing with customers (e.g. Circular on minimum wage in 2003 was taken into effect two months later.)
b.Difficult by difference among CoCs - Most of CoCs have similar contents, especially in main issues of forced labour, discrimination, freedoom associassion etc. If enterprise used to take one, it therefore can result in the potentials to follow other. - The requirement for minimum age also cause a little bit dificulty. However, enterprises now recruit workers who are more 18 years oldin response with that. - The contents on working conditions, wage, benefit schemes are seen with considerable difference among CoCs such as:
+ Placement of lighting system + Placement of fire prevention, exist doors... + Minimum salary canculation for workers + Unit price canculation for working day
- Another difficulty is the sense in which the acknowledgemet of a certain CoC is not admitted by buyers and consultatiion company. Thus, enterprises have to manage requirements of different partners, especially as and when they are not unified each other.
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VIII. Role and ability of relevant stakeholders in CSR' implementation
1. Trade union
Trade union is provided by Law on Trade Union and labour code (chapter XIII) to be the unique organization to “represent and protect eligible rights and benefits of workers and worker group”.
At surveyed enterprises, the local trade unions handled progressively CSR’s implementation. However, because of various reasons mainly caused by the limited knowledge on trade union and public relation skills, most of trade union officers have been concurrently working in some enterprise leading to the limited dependence of trade union. This evaluation was as same as opinion of buyers, consultation companies, certifying company and workers. Many viewed that trade union’s role was not effectively performed.
Figure 2: Trade union’s role by opinion of workers in CSR-implementing Source: Result workers surveyed at 24 enterprises
Other
1%Don’ t know
4%Not ideas
1%Have not any role
33%
Organization activities
movement 1%
Training8%
Solution working dispute
16%
Dissemination informationn
36%
2. Roles of Buyers
Given it own benefit, during in initiating and implementing process, buyers (directly or indirectly) have supported actively enterprises. The roles of buyers were shown in following activities:
(a) Provide information, advices, experience CSR’s implementation; These activities actually raise the awareness and management competence for Vietnamese enterprises.
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(b) Organize training programs for workers with financial support: basic subjects, social behaviors, OSH, management skills...
(c) Provide technical assistance, including equipment, machinery in forms of
installment-based payment, technology transfer, improvement activity, reformed production line, effective M & E model.
(d) Through checking, M & E, enterprises were push in a position to improve and upgrade management capacity, transparent document, records systems to be ready for customer's demand.
(e) Establish long-term business relation and ensure stable trade contract by which
buyers make great contribution to guarantee CSR's practices in enterprises.
3. Roles of Consultation companies and Certifying companies The prominent role of consultation company is seen in a ranges of activities, such as: to provide information, advice to improve production organization, re-structure labor and upgrade factories, machinery and equipment, develop record system and train the management skills. Based on its functions and performance, (as requested by buyer), these consultant companies also take part in enhancing management capability and CSR's implementation for enterprises.
4. Roles of Associations Association is on behalf of representative body for rights and benefit of workers, it has been just come into exist in Vietnam recently and achieved remarkable roles. Although, associations have not make significant contribution to directly help members to implement CSR, they are highly appreciated in supportative activities, such as: commercial promotion, exhibitions and workshops; deploy programs for enterprises such as "Initiative to link enterprises on safety and health for workers", provision of study tours in overseas to learn advanced experiences. 5. Roles of Government With the majority of CoCs’ requirements complied with national laws, it can see the potential roles of governemnt in orienting enterprises to adopt CSR. By formulating Labour code, guideline documents and amending regulation to be conformable with
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globalisation and integration process, Government has in fact created basical conditions to let enterprise take initiatives of fufilling CoCs’ requirements. Beside, activity of labour and environment inspection system of state management organization (i.e. regualr investigating on OSH performance, beenfit scheme for workers, social/health insuarance, employment contract...) have assisted enterprises in improving and overcoming existing problems. It can see that difficulty of enterprises is shown in 2 aspects (i) lask of information, and settlement for the variation between CoCs and national law. Most of enterprise expected to have futher assistance from Governemtn in terms of more information provision and specific guidelines to comply with national law.
VIII. Effect assessment of CSR's implementation
One of the concerns in this study is to assess the effect of CSR’s implementation and takes it into the correlative relation with cost, economic and social effects...Thanks to that, it comes up to the right and legitimate attitudes and solutions from Government towards CSR’s implementation. 1. Economic and labour effects:
Economic effect is evaluated some indicators such as revenue, profit, labour productivity and development trend of these indicators. Although, has not separated, the survey presented of effect among CSR-implementing enterprises are excessable over CSR-detached ones.
Figure 3 Compared indication in before-after scenario of CSR-implementing enterprises
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-50.00
0.00
50.00
100.00
150.00
200.00
250.00
300.00
Revenue per turnover
(%)
Export per turnover (%)
Turnoverper worker (labour productivity
(ml.vnd)
Labour productivity increase
(%)
Turnover increase
(%)
Before
After
Source: Survey on 24 enterprises - Thanks to CSR’s implementation enterprises received more number of contract and higher value ones. Turnover increased by 25%. - Rate of export products out of the total products was high, increased from 93.9% at before scenario to 96.9% at after scenario. - One of positive effects was the attraction to workers, even the labour turnover was still occuring. The labour increase rate was very high at nearly 15%/year in 2001 and 2002. The rate was stayed unchanged and at high level in foreign-invested enterprises, Sothern enterprises and CSR-implementing ones. On the contrary, CSR-detached and CSR –initiating ones were reducing labour force over the same period.
Despite high labour increase rate, the productivity by revenue/worker/year increased from 34.2 million VND to 35.78 million VND thanks to the higher rate of turnover than labour increase.
2. Social effects - Generally, the fundamental achievement of CoCs’ implementation resulted in a good image and building prestige among the clients as stated by enterprises. In other words, it was the investment in the development and long-term running. This was reflected obviously by more traditional clients as well as new contracts with new partners. Moreover, enterprises are given more opportunities to lure investment. All that would gain economic benefit. - Another important effect is better performance on taking care of workers. Workers are provided with working conditions of qualified OSH. Additionally, health care, salary, bonus, social welfare, labour contract were more taken notices. - Capacity building on labour legislation enforcement to overcome the obstacles in the insufficiency of labour inspectarate. CSR’s implementation means to follow CoCs and Vietnamese laws. Internal supervision mechanism in associated with the monitoring of second/third party have been significantly supporting state labour supervision system. - The linkage between management and labour was strengthened. Workers were more in close relation with enterprises. They could make contribution to the production and harmonise indutrial relation in enterprise. - The linakge between enterprise – buyer – other customers was established. Well-performed CSR could meet customer’s requirements. The more improvement enterprises make the more favourable condition they can have to set up long-time business relation.
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To global extent, CSR is a factor of globalization, to have good practice of CSR enterprises can have more chances to spread their trademark in the world market. IX. Lessons learnt
The survey was designed to explore the sources of lessons learnt in CSR’s implementation. Although the most of enterprises have implemented it for just 2-3 years, the major lessons can be drawn as follows: 1. Determination of enterprise leaders: CSR’s implementation requires big changes in management procedure and method. Besides, it needs taking bold measures in terms of investment and specific work plan and suitable steps. This depends much on leadership, especially the director. The enterprise management board must be clear-sighted and ready to face with risk to wisely evaluate the trade-off between short-term cost (usually big) and long-term benefits (difficult to define) in performing CSR.
2. Unification in enterprise
The determination of leadership should be motivated by committment and aggreement of workers and trade union. Such cooperation should be based on the knowledge, understanding, adaquate and reliable information and right awareness of CSR of enterprise managers and related stakeholders. 3. Good performance of Vietnamese labour law
Most CoCs require to observe properly with national law. Therefore, the
sound implementation of Vietnamese labor code is the precondition to proceed and perform efficiently the social responsibility.
4. Provision of precise and sufficient information
Enterprises should be provided fully information on the variation between Vietnamese laws with CoCs’ requirements. 5. Preparing elaborately and taking suitable steps It is necessary to study carefully contents and CoCs’ requirements with respect to real circumstance and capacity of enterprises; enhance negotiation capability and skills; take full advantage of customer's consultation on improvement to reduce the cost and
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maintain the orders; focus resources onto improvement action, make no point of pursuing to any certificate, especially in case of applying more than one CoCs.
6. Preparation of financial sources: Many enterprises have to carry out a series of costly improvement actions under the reality of old premises and out-of date equipment and facilities. Therefore it should have well-prepared financial plans and investment projects. The investment for environment and working condition must be phased step-by step in accordance with capacity and financial status of enterprises. 7. Continuous Improvement: The common pressure at the time being is a shorter time of order completion and delivery, while the enterprises must meet CSR’s requirements, especially in provisions of working and leisure time. It calls for the continuous improvement to rearrange production, labors to increase labor productivity; to reform internal supervision system and CSR unit; to apply scientific advance into management work.
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X. Future plan on CSR's implementation
1. Continuous investment
19 CSR-implementing and CSR-initiated enterprises confirmed the continuation to implement CSR in coming years. 2 out of 5 CSR-detached enterprises planed to proceed CSR in forthcoming time, but others (including most of textile enterprises) had not yet seen the rationale to deal with groundwork to implement CSR.
Priority sectors
(a) For the textile enterprises: Continuously invest to improve environment and working conditions of
employees. Assure well-formed OSH work, fire control in enterprises. Improve machinery and technology, train employees to increase the working
productivity, reduce overtime working of employees.
b. Footwear Enterprises - CSR implementing enterprises + Construct new production areas; expand production and upgrade workshop; renovate technology and install more machinery to increase productivity and reduce overtime; improve working condition to limit hazardous impact for workers; + Strengthen training for taskmasters, team leaders; send oversea to take training course in Korean, Taiwan, Czech... + Improve canteen, shelter and ensure security for workers + Sustain and performe well standards ISO 9001, ISO 14000. Some enterprise set up plan to implement SA 8000 and get its certificate by 2005.
- CSR detached enterprises + Invest much in production workshops, machinery, equipment; expand and search for new markets; Give priority to working condition, ensure stable job, reduce overtime and increase salary for workers. + Study SA 8000 and analyse benefit/cost of CSR’s implementation. An enterprise planned to implement the first CoC in 2005 and get certificates of SA8000, ISO 14000 in period of 2005-2010. - SOEs: Apart from improvement work, SOEs planed to carry out the equitisation.
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2. Investment source All enterprises think that the investment for activities of CSR's implementation is extracted from enterprise’s profit; the possible capital mobilization from other sources is limited because of many obstacles in accessing to bank loans as other investment channels. Few enterprises hope to receive grants/aids from clients and other organizations to realize improvement projects such as construction of waste-water treatment system, OSH system, ... 3. Demand for support from Government and related stakeholders As mentionned above, there were 2 aspects of difficulty: insifficency on information and the variation between CoC’s requirements and national law, especially, when the latter provided "more strictly". That was sources of support which enterprises expected to get from government and related stakeholders.
Proposed supports include:
a. Provide consultant and information:
All enterprises expected to access promptly to information on current trend of CSR’s implementation nationally and internatioanlly, CSR performance module and best practices, management method, contents operational way and so on. Buyers and consultation and certifying companies stated that Government should consider a agency/inter-institution committtee to study, disseminate, supply information and guide on CSR’s implementation. CSR is a new conception, not only for enetrprises but also for state management organizations, associassions and many other organizations in Vietnam, therefore, it should be clearly studied in in prior to make public, propagate and instruct enterprises. It can use different channels such as: workshops, seminars, tivi, radio, magazines and so on to handle with this task.. MOLISA can design an website on CSR to update information, exchange ideas and propagate on CSR, or associaton can open forum on CSR.
b. Completion of legal system
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It should continue improving legal system, timely promulgate the guidelines documents, provide overseeing and apply prompt sanction on implementation to create equality in legal enforcement. Those are essential helps and assurance to enterprises from Government. For instance, in order to help enterprise to avoid uncesary disputes with with buyers, legal provisions should be more strictly, specifically, clearly and promptly.
c. Incentive policy: Many enterprises recommended that State should have referential regime to encourage CSR’s implementation such as loan policy, land use policy , rewards for best practices, weekly CSR’s implementation… d.Human resource development training
Skills, techniques and methods for CSR’s implementation such as evaluation method, standards for evaluating, selection of subject and construction of improvement projects, design of internal management and supervision system and so on are questions beyond the ability of enterprises, therefore, Government should support enterprises to develop competent manager staff who have good understanding of CSR as well as skilled workers.
The training activities should be strengthened, along with great support from States, vocational-training system, Associations and other agencies.
Government labour management organizations, institutes, universities and associations should participate in specific programs.
e. Co-operation with other stakeholders Buyers and certifying conmpanies suggested that Government should strengthen cooperation with other stakeholders in accessing and sharing information with a view to reduce the burden of labour inspection for enterprises, for example, Government should enable different stakeholders to access to or search for legal documents easily and conviently. Government also has possibilty to collaborate with consultation organizations, buyers, especially big corporation like Nike, Adidas, Timberland,....in CSR human training for Vietnamese enterprises.
f. Focus on social affairs
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Government should develop policy orientation to manage workers and apartments for workers in industrial zones; to ensure the security and handle with social evils in surroundings of the site and stablise labour force; settle soeical affairs.
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Part III: Roles of government in CSR's implementation7
I. General conclusion in CSR's implementation
A. CSR - new game rules in context of globalization and trade liberalization.
1. Vietnam is in international integration process and participation in global commercialization with export and expanded export markets as one of noticeable economic orientation. Vietnamese commitments toward full integration in the AFTA initiated by ASEAN: participation in APEC forum, trade exchange expansion with EU, Japan; Vietnam-US trade agreement conclusion; and being in negotiation round for its participation in WTO have brought numerous opportunities as well as challenges and 'new game rules' to Vietnamese enterprises. 2. Up till now, nature and motivation of CSR are not accepted consistently. The study results showed that the primary drivers of CSR was pushed by consumers in capital exporting countries. MNEs investing into developing countries must bear the pressures of internal customers on proving the "cleanness" of products produced in developing countries. Based on such approach, CSR was originally given with humanity and people-centered objectives towards the sustainable development. In fact, there has much argument on nature of CSR, many opinions referred that nature of CSR was to link environment and labour standards to international trade in an increasing trend. That means, in order to get business contracts with MNEs, enterprises have to implement requirements on labour issues which specified in some CoCs. Recently, many researchers indicated that CSR's implementation has been used with different purposes by different social groups such as internal products protection, political and economic purposes and these matters somewhat damaged developing countries.
7 The proposals for Government’s roles in this final report which were based on study results in the coverage of selected enterprises and partners only showed the observation and viewpoints of the study team, they were not official standpoints of Vietnamese Government.
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3. CSR's implementation is specified in CoCs which defined some labour-related issues (known as Codes of Conducts). CoCs are imposed by foreign companies (e.g. MNE, foreign retailers) which request suppliers to follow in production process on voluntary basis between two parties (the voluntary manner is referred as similarly as transaction on product design), It should emphasized that CoCs are not international conventions and standards on labour issues, nor agreement on labour standards at national level. In fact, CoC is applying only in export-driven enterprises in ways of realizing the customer's demands, therefore it is subjected to concern by large-scale enterprises with ability to sign contract directly with buyers. Most of buyers do not require to apply CoCs in subcontracting enterprises. B. CSR's implementation - Accept to play game 1. The term "CSR" itself has led to misunderstanding among Vietnamese, therefore many people proposed not to use this word. - It should notice that CSR's implementation is not a totally new to Vietnamese enterprises. Traditional CSR conception includes such charity activities as support for invalids, orphan, disabled people and so on which operating outside of enterprises. This obligation promotes the image in "social activities" with the society as a whole. Such approach of CSR has been performing well by Vietnamese enterprises. - CSR under CoCs is totally different in terms of contents. CSR here is defined as the corporate responsibility towards the whole society through products which produced in standard working and environment condition and other requirements. As such, it is necessary to identify that CSR's implementation in integration process is the compliance with requirements of buyers on some labour-related issues specified in CoCs. 2. The findings of the study showed that there were 2 groups of CoC: Group I, CoCs are made by MNEs and retaling companies in which CoCs are most widely applied. Group II, CoCs are invented by organisations and private companies, these kinds of CoCs are not popularly practiced.(an example for this group in Viet nam is SA 8000). According to WB, there have been more than 1000 these CoCs world wide, whilst there have been more or less ten CoCs of Group II.
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3. As and when a certain CoC is undertaken, an enterprise (i.e. supplier or subcontractor) is under obligation to do two things Firstly, it commits to realize requirements of a certain CoC; Secondly, it is supervised, assessed and monitored by buyers (if CoC belongs to Group I) or third party (if CoC belongs to Group II)8. CoCs of Group I are mostly compatible to legislation provison of Viet nam. The afterward supervison and monitoring are undertaken by buyers (or third party hired by buyers). All the cost is in charge of buyers. In this case, there is no need to have certificate. If the assessment is favour, the trade agreement is reached. The CoCs of Group II which are formulated by independent organizations or private companies (e.g. SA 8000 of SAI) are on one hand based on the maker’s benefits which are not in line with MNE’s or exporting enterprise’s, and on the other hand they might offer too high requirements which consequently lead to the loosened competitiveness of enterprises. If enterprise takes the initiative of applying this kind of CoC, it has to take the responsibility to be supervised and monitored by assessing company (i.e. third party) rather than buyer. All the corresponding cost is shouldered by supplier (i.e. producing enterprise). The outcome of the assessment is often acknowledged by a certificate. However, it should emphasize that this certificate is neither applicable for other buyers who are applying different CoC nor substituting for beginning and whole assessment and monitoring of buyer. Normally buyer considers the certificate purely own business of supplier. 4. Most of buyers take their own CoCs (group I) to be evaluation standards in process of choosing supplier because: (i) Standards made by the corporate or company are closely connected with their trade mark resulting in advertisement work. If group II is undertaken, buyers will depend on another CoC of third party (i.e. a independent company or organization). (ii) the compliance to local law will help buyers to make full use of competitiveness in that nation; (iii) buyers directly come and evaluate the suppliers, therefore they take initiative of work without being interfered or impacted by third party (i.e. evaluation company or authorized NGO).
C. CSR's implementation - A game brings benefits for participants (Win-Win-Win... game)
8 Group I and Group II are defined in ‘whose is CoC? By whom CoC is developed and for whom CoC benefits?’
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1. Although it has been newly emerged in Vietnam, CSR has affected to some relevant stakeholders. This process, if enterprises are in well -positioned, is positive trend, a playing that all players get benefits. - The findings of the survey reported that recently Vietnamese associations, export enterprises for foreign companies have rapidly responded to CoCs as required by customers. A good practices of CoCt means signing contract, expanding markets and increasing benefits for enterprise. Currently, the leading players in CoC's implementation in Vietnam are textile and footwear enterprises for exporting, especially ones makes products to export to America and EU. Such quick response has been increasing the export volume of these industries in past few years. Thus, well-performed CSR is as same as broaden contracts and growth. - In relation with workers, working conditions are improved by commitment and closely monitoring of CoCs' implementation, stable employment and income, and more decent work. - Law enforcement is impacted by 2 dimensions: On one hand, enterprises with good performance of Vietnamese law do not have much difficulty in following CoCs imposed by buyers; On the other hand, most of CoCs based on national law regulations, even some CoCs' requirement are stricter than it is provided in the latter, moreover it needs having proper and regular inspection, M & E work. In short, CSR's implementation enforces the law performance. - As for buyers, by demonstrating the "clean products", they are able to increase the satisfaction of domestic consumers resulting in greater turnover. - From aspects of integration, it is the integration of enterprise into society, customers and consumers. It can be said that, the doors of CSR- implementation enterprises are always open and ready to welcome different supervision delegations. This work actually lessen the burden and make up the insufficient capacity of government in monitoring and inspecting labor plegislation performance. 2. Although survey sample was small and unrepresentative, it showed that investment in working condition improvement and increasing income for workers are resulting in higher productivity, less disputes, more transparency and encouraged dialogue among related stakeholders, especially consolidating the relationship between labour-management with the core role of trade union. Thanks to that, the competitiveness and prestige of enterprise are increased accordingly.
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D. CSR's Implementation - A game with condition 1. Given comparison between CoCs and Vietnamese law, it presented that most of regulations in CoCs are provided in national law or international conventions. However, points should be considered as: (i) Some requirement in CoCs are different from national law, even contrary with national law (freedom association) or higher than national law (OSH standards)… (ii) There are inconsistent points in different CoCs, especially specific requirements on minimum working age, salary, OSH conditions, report frequency and so on. (iii) However, the biggest variation between national law and CoCs is the way in which the work of monitoring and supervising on the performance is undertaken . To national extent, enterprises should take consideration into law compliance on labour and get the supervision from competent authority, in which mainly from labour inspection agency. While, CoC-implementing enterprises instead of "dealing" they are voluntary and interested in being monitored in order to prove that they have good application of CSR's regulations.
2. Continuous and comprehensive improvement activities in before-after scenario of CoCs' implementation demonstrated that, CSR's implementation is a risky decision. Under the context of Vietnamese enterprises, CoCs are posing 4 big challenges.
a. Misleading CSR's awareness:
CSR is new activity in Vietnam, therefore, it has not got a specialized body to be in charge of providing information on trade-off, cost/benefit relation to guide enterprises and adjust action under the national legal framework. It is really essential when the labour inspection staff is not "sufficient" to deal with the practice. The findings from workshops organized under TAP framework showed a various awareness on CSR among enterprise community. Many enterprises made a mistake that once they had implemented requirements of a certain CoC they had involved in CSR. More dangerously, many enterprises misunderstood that CSR's implementation meant to get SA 8000 certificate and
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referred it as a international standard, a visa for imported goods to US market. This misunderstanding should be adjusted soon. b. Lack of information Most of enterprises complained about the lack of information on CoCs' situation and contents which they have to know in being ready to receive from potential customers; information on benefits-cost, advantage, disadvantage in CoCs' implementation. c. Investment The findings from researches in the world and survey on 24 enterprises and related stakeholders presented that the main drivers of CSR's implementation were for business purpose and for requirement of buyers. As for enterprises it is new game rule which they are forced to join in order to get forward. In this "game" they have to make great attempt to invest, improve and prove labour standards and environment issues. Depending on the partipatory possibility of "cost for CSR's implementation", it can be divided enterprises into 4 groups: Group A: Easy to implement: Enterprises are big size, modern and newly established, they can be either foreign-invested or joint-venture with foreign country, this group find easy to follow CoCs' requirements because they take the step ahead of that. They consider the good performance of CoCs and successful export is necessary, moreover it is chance to reconfirm the competitiveness of enterprises and show ability in international market; Group B: By requirements of buyers, they take CoCs as one of the precondition to get contract, so that such investment is necessary and able to be refundable. Group C: Needed to be adjusted much, they face a lot of difficulty in investment and if they are supported, they can manage to respond well. Group D: Unable to implement due to finance limitation . d. Settlement on the differences between Vietnamese law and CoCs requirements Most of enterprise found confused in settlement on the difference between Vietnamese law and CoCs' requirements. Because some of them misunderstood CoCs as international standards, so they proposed "to amend and adjust national law to be
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compatible to international practices"9. This proposal is right and should be corrected immediately. - Solution for differences among CoCs Although most of CoCs are similar to some extents, CoCs' implementation is also one of challenges for enterprise, especially in contents of OSH, report, statistical data and so on. It is more dangerous in situations which enterprises do not have specialized officials in CSR as well as reporting skills, M& E competency; further it is the fact that stakeholders do not accept the evaluation results each other (e.g. Viet Tien Textile enterprise had received over 100 different supervision visits a year) II. Proposed roles of government
A. Main reasons for government to participating in CSR activities: 1. Support Vietnamese enterprises in increasing capacity in internationally economic integration process. Internationally economic integration is an indispensable trend in development process, Vietnamese enterprise can not stand outside and neither can government as a guide to lead enterprises in the process. 2. Lessen the burden of state inspection agency in monitoring of law implementation At present, labour inspectorate way not enough, therefore they are not able to fulfill the duty and responsibility to handle the related tasks. CSR's implementation can be seen as a solution for this and placed priority to work of inspection in enterprise. 3. Amend promptly shortcomings and misleading orientation of management agencies, organizations, associations to enterprises in CSR's implementation. CSR's implementation is new matter in Vietnam in associated with the open-time and integration period of the country. Internationally, it is an emerging matter, too. Therefore, Vietnamese enterprises and relevant organizations have been little informed about CSR. The "fever" of SA 8000 showed a need for action taken by government to effectively propagate and raise the awareness of enterprises,
9 e.g Overtime working to be more than 200 and 300 hours/worker/year.
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associations, as well as to prevent and control timely if CSR is abused for different purposes in order to protect the benefits of domestic enterprises and national's interest in process of international economic integration.
4. Strengthen social dialogue and set up a sharing mechanism among different partners to support Vietnamese enterprises to get ready for CoCs' requirements. As analyzed earlier, CSR is not a national standard, but mostly based on national law. Otherwise, by starting from different foundations, CSR's implementation can be either (i) a economic push; or (ii) pressure of labour law implementation; or (iii) burden in finance or human resource or (vi) barrier to participate into international market., therefore government has not/ should not promote this matter. However, CSR as regarded as a new play in commercial relation as and when the labour and trade standards are closely interacted increasingly, Government's role is there to assist Vietnamese enterprises to overcome challenges, to change these challenges into chance to succeed in international market. B. Proposed Government's roles:
Government should and must take higher roles in assisting enterprises to overcome challenges in CSR's implementation by a enabling legal environment; guide and assist enterprises through activities of information provision, consultation, guidelines for export enterprise; Set up and publish mechanisms, policies of transparent report of enterprises. - Concentration on export enterprises should be given, especially goods exported to markets which usually require different CoCs' implementation.
3. Expected Government's activities:
1. Government should continue getting information on drivers, constraints, challenges of enterprises in the implementation of labour-related contents in CoCs in trade globalization process.
- Keeping to get evidences of benefit/cost, impact of CoCs' implementation in different enterprise will facilitate to direct for decision making of Government in related support. - To have a full picture and more understanding on CSR's implementation in Vietnam it should conduct in-depth study with coverage of other sectors (not only two
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industries of footwear and textile). Especially, it is the evaluations and dissemination impacts of CSR's implementation.
2. It shall guide the information dissemination and increase awareness on CSR for different stakeholders.
- Fully and truly information supplying for community enterprises and different stakeholders on CoCs will enable for government to encourage advantages and control the disadvantages of CSR's implementation - This includes dissemination information through mass media as website, public document... - Dissemination of information contents guidelines for realizing contents of CoCs. - Best practices of CSR shall be praised, on contrary bad performance of CSR will be identified. 3. Facilitating enterprises to better implement labour code's regulations in related to CoCs - Continue mandating provisions and terms of labour legislation - Compose guidebook on implementation and reporting of labour legislation in general and contents related to CoCs in particular - Strengthen dialogue with enterprises to get the perfection of labour legislation in accordance with international trend.
4. Strengthening capacity of enterprises in working condition improvement, reducing burdens of supervision and monitoring on implementation of labour standards, setting up sharing mechanism, supporting information among related stakeholders
- Continue completing mechanism and institutional structure for inspection work in a way "A location - A inspector". Increase roles of consultation, instruction of inspectors; - Experiment mechanism of sharing information in reports on implementation of labour standards among enterprises, labour inspectors, independent evaluation organizations and buyers. Experiment cooperated inspection to reduce the burden for enterprise.
5. Management and enhancement of labour standards and competition
- Enable to complete and increase Vietnamese labour standards in accoradnce with international trend in general (on working condition, income...).
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- Propagate labour standards as a competitve advance Vietnamese labour - Strengthen mechanism in sharing information of labour standards in more transparent way.
6. Strengthening dialogue and cooperation mechanism between government and other stakeholders - As proposed by enterprises, MOLISA should be continuousely taking the main role in supporting enterprise to implement CoCs' requirements in integration process. - Besides, MOLISA should closely cooperate with other social partners such as : occupational association, trade union representative, buyer, training and consultative companies, internal and external NGOs to make sure the achievement of outcomes.
III. Recommendations for Vetnamese enterprise
Based on lessons learnt from researchs, with a view to actively and sucessully intergrate in CSR's implementation, Vietnamese enterprises should:
1. Analyse and recognize inner ability of enterprise, market demands and customer's requirement. Should carefully elaborate immediate cost and long-time benefits and guarantee to harmonise the benefits of enterprise and workers. 2. Choose potential customers to promote the advantages of enterprise, thereby to set up strategy for CSR's imlementation with appropriate steps. For example, what goods, for whom, which markets and potetial buyers, to make plan for negotiating. 3. Select consultants, or connect to necessary and realibale information to prepare specific planning and feasibility on CSR. Experience learnt from many enterprises is to meet requirement of CoCs rather than to get up certificate. 4. Implement improvement activities in corresponding ways under the capacity of existing infrastructures, finance and human resource. The lesson is priority given for improvement of working condition, environment, internal M & E system. 5. Set up trade union organization with effective activity under the functions and responsibilities provided in law on trade union and labour legislation. Enterprise management should have commitment and assistantce for trade union activities. 6. Continue implementing evaluation, supervision and organization improvement activities. Should refer supervision of buyer or third parties as beneficial push for enterprise. 7. Implement and observe national law with high priority in order to serve CSR's implementation.
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