By  on July 8, 2008

BEIJING — The China National Textile and Apparel Council released its annual report on corporate social responsibility, stressing both the ethical and economic importance of cracking down on illegal overtime and child labor in the industry.

"Let's not fixate on what we produce, but how we produce it," Ou Xinqian, vice minister for Industry and Information Technology, told attendees at a conference last month unveiling the report. CNTAC surveyed nine large-scale textile companies' corporate responsibility practices through a series of on-site visits, interviews and other research.

The language of the report indicates China is taking a tougher stance on CSR, avoiding vague terminology and clearly identifying terms such as: "child workers," "compulsory labor," "discrimination" and "harassment and abuse."

The report identified working hours as one of the biggest CSR challenges facing the textile industry. Although the situation for overtime has shown some improvement, all but one of the companies surveyed failed to comply with legal working hours.

The majority of employees questioned confirmed a decrease in overtime to less than 40 hours a month. Still, 22 percent of employees surveyed stated they work between 66 to 90 hours of overtime a month, exceeding the Chinese legal limit of 36 hours a month.

In the area of child labor, results were mixed. All the enterprises surveyed employed legally registered juvenile workers (defined in Chinese law as workers over the age of 16 but under the age of 18), but roughly half the companies failed to provide proper medical records for these workers. Only one enterprise had a child worker, identified as "an inherited case." Nearly all the companies were found to be in compliance with CSR guidelines when it came to issues of discrimination and compulsory labor. The two exceptions were a firm whose labor ad bordered on residency discrimination and another that asked employees to turn in IDs to prepare documents and passes (holding employees' IDs is often an indicator of forced labor). No widespread or serious cases of harassment or abuse were identified in any of the companies.

Council representatives expressed concern that rising costs, linked to rapidly rising oil prices and the appreciation of the yuan, could force some companies to put CSR on the back burner.Soaring oil prices are putting a strain on China's chemical fiber industry. Meanwhile, the country's currency revaluation is biting into exports. For every 1 percent appreciation of the yuan, the industry loses 7.2 billion yuan ($1.05 million) in profits, according to the report. The yuan is expected to rise an additional 8 to 10 percent in 2008, according to the Bank of China. Also, small and medium-size textile and apparel companies have suffered from some government policy changes, such as the scaling back of export tax refunds for the third time in as many years.

"CSR helps your bottom line," said David R. Kelley, a former senior research fellow with the National University of Singapore's East Asian Institute, who attended the conference. "It may not help the bottom line in every case, but without that incentive, it has no future in China."

At present, the industry is focusing on the environmental commitment issue. The report cited energy saving and emission reduction as the industry's top development priority. One target is to lower wastewater emission per unit of output by 22 percent over the course of five years. CNTAC statistics show the dyeing and printing sector has the second-highest water consumption among manufacturing industries, but only recycles 7 percent of its used water.

A notice from the Ministry of Commerce and State Environmental Protection Industry should provide plenty of incentive for companies to clean up their act. The notice, issued late last year, promised harsh punishment for environmental violations, the most serious being the suspension of export licenses.

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