Designated Suppliers Program – Update

To:Primary Contacts, WRC Affiliate Colleges and Universities
From:Scott Nova
Date:January 22,2008
Re:Designated Suppliers Program – Update

As you know, the WRC has requested that the Antitrust Division of the U.S. Department of Justice issue a favorable Business Review Letter for the Designated Suppliers Program (DSP). We have now learned from the Department of Justice that they will not provide the antitrust clearance we have requested. We are, therefore, withdrawing our Business Review request at this time. We are entitled to re-submit it in the future, with or without any changes to the program. Given the Justice Department’s more positive approach to these issues in the past, we have good reason to expect that a future Administration would be very likely to look more favorably on the DSP. We thus hope that the barrier will prove to be temporary.

Even so, DSP implementation will not be possible before early to mid 2009. This leaves the question of what to do in the meantime. Where can universities that have expressed support for the goals of the DSP focus their immediate efforts? The WRC staff has, of course, begun to think about this question, and I want to share a few relatively informal thoughts and invite your responses on them. There will, I am sure, be much thinking and much discussion in the weeks ahead among all of us who work on code of conduct issues.

First, I want to emphasize that we do not see any way to achieve a comprehensive solution to the problems of labor rights enforcement without the supply chain reforms that are at the heart of the DSP. Until the DSP or another program that addresses these supply chain issues in a meaningful way can be implemented, we fear that the ultimate goal of broad and sustainable compliance cannot be achieved.

There are, however, a number of constructive intermediate steps that individual universities could take that would generate concrete and meaningful progress now, even though any broader solution must be deferred. Several ideas are outlined in brief below. Please bear in mind that these are not formal proposals, but rather ideas that we believe have potential and are worthy of discussion and further development.

Possible voluntary efforts involving university bookstores: Individual university bookstores may wish to consider buying some products from any licensee(s) that would agree to meet higher labor standards on a voluntary basis. If licensees see a substantial interest among enough bookstores in buying such products, one or more licensees may be interested in making and selling them. This would not involve any university imposing any new rules on licensees. Instead, it would offer a profit-making opportunity for any licensee that is willing to voluntarily adopt and enforce higher labor standards, including payment of a living or non-poverty wage. This is essentially the “fair-trade” approach to encouraging higher standards – with individual retailers, the bookstores, buying apparel from a high-standards vendor the way numerous corporations, institutions, and universities, currently buy fair-trade coffee. As with fair-trade coffee, the vendor would likely ask for a higher price for the product.

We believe it could be an important step forward, even though it would be a purely voluntary endeavor, and on a much smaller scale than the DSP. Among other benefits, it would allow us to test whether higher labor standards, including a living wage, can be effectively implemented at the factory level with any resulting costs accepted by consumers. We encourage each university to think about this concept in terms of its own bookstore operation, bearing in mind that bookstores would need to buy in substantial volume in order to make the business attractive to any licensee(s). I would be happy to talk with any university that would like to discuss the idea. The WRC will also be doing a bit of informal outreach to some licensees, to gauge potential interest.

Asking licensees to document their compliance systems: Another step any university can take is to ask current and prospective apparel licensees to outline their code compliance programs and demonstrate that they have some way to verify compliance and identify and correct violations. A number of university licensors are already doing this. As we all know, code compliance requires active engagement by licensees. If there are licensees that are not engaged in meaningful compliance efforts, and we believe there are, then this is a problem that should be addressed.

As you know, we believe there are major flaws in the compliance programs of the large apparel brands, but these companies at least have systems in place. Our experience tells us that companies with active compliance programs tend to be more responsive than others when the WRC identifies serious problems at one of their factories. Asking licensees to demonstrate that they have a meaningful compliance program cannot address some of the key problems targeted by the DSP, but it would be a positive step. If actively pursued by enough individual universities, it will encourage greater compliance with existing codes and help ensure that less responsible licensees do not lead a race to the bottom in the sourcing of university logo apparel.

Making sure licensees understand the expectations of WRC affiliate universities: The WRC will, of course, continue to do the work we have always done – responding to complaints from workers at individual factories, assessing compliance with existing university codes, and seeking to achieve remediation where violations have occurred. However, one challenge to our code enforcement work is the reluctance of some licensees to accept WRC monitoring. Most major licensees understand and accept the WRC’s role, because they know that universities expect this, but we continue to encounter some licensees, large and small, that do not. For obvious reasons, licensees will never be as comfortable working with the WRC as they are with their own monitors or with the FLA. We would not expect them to be. The independence that makes the WRC effective necessitates an arm’s length relationship with the industry. For this reason, it is important that licensees understand that individual universities expect licensee cooperation in the context of WRC factory assessments. As the recent case involving Russell Athletic demonstrates, this type of problem can be resolved through forceful communications from universities to the company, but the Russell case was nonetheless instructive.

We will be reaching out to university affiliates in the months ahead to explore steps that could be taken to ensure that all licensees understand the WRC’s role and universities’ expectations.

Finally, while the DSP cannot be implemented at present, we encourage continued discussion and debate about the program. There is no reason why schools that have been considering supporting the program cannot continue their deliberations. And schools can, of course, decide to sign on to the DSP concept on a provisional basis, pending a resolution of the legal issues. The DSP Working Group will continue to meet to discuss both the DSP and options for moving forward short-term, such as those outlined above.

The news concerning the Business Review Letter is obviously frustrating. We nonetheless remain committed to working with our affiliate universities to find ways to move forward. We look forward to talking with you about these concepts and your ideas.

As always, please feel free to contact us with thoughts or questions about any of this information. I should note that I will be in China all this week, so I will not be available for discussions until Monday the 28th. In the meantime please feel free to contact my colleague Nancy Steffan at the WRC office to discuss any aspect of this communication.

Scott Nova
Worker Rights Consortium
5 Thomas Circle NW
Washington DC 20005
ph 202 387 4884
fax 202 387 3292