By  on June 4, 2009

GENEVA — Business leaders consider monitoring of supply chains and factories for violations of core labor standards to be largely ineffective and unreliable, said the United Nations’ top expert on corporate social responsibility.

“We keep hearing now, from just about everywhere…monitoring doesn’t work,” said John Ruggie, special representative of the U.N. secretary-general for human rights and transnational corporations and other businesses. “Just about everybody, at least off the record, will tell you that monitoring doesn’t work and auditing of supplier factories doesn’t work because people cheat.”

Many companies use either internal monitors or hire outside specialists to conduct inspections of their foreign factories to ensure they are operating under proper labor conditions. This would include working conditions at the factories, as well as auditing to make sure hourly wage and overtime laws are followed.

Ruggie, who submitted a report to the 47-member U.N. Human Rights Council, said the head of a large multinational company told him “up to 70 percent of the audits they get have serious flaws.”

In the report, Ruggie said, “It is often overlooked that suppliers are also companies, subject to the same responsibility to respect human rights as any other business. The challenge for buyers is to ensure they are not complicit in violations by their suppliers. How far down the supply chain a buyer’s responsibility extends depends on what a proper duel diligence process reveals about prevailing country and sector conditions, and about potential business partners and their sourcing practices.”

Ruggie also warned countries and companies against using the economic crisis to loosen up on human rights standards because it “would worsen the backlash against companies.”

Ruggie, who is also professor of international affairs at Harvard University, said some brand-sensitive companies faced with problems “have just simply slammed the door and said they’re not going to do business” with suppliers that have breached core standards.

As for viable options, Ruggie noted that some leading initiatives include the Fair Labor Association, which has decided to take some of the money earmarked for monitoring and use it instead to train factory managers to better oversee the production process and help report problems. In China, the FLA has even started to train state labor inspectors.

“The more brand-visible and the more brand-sensitive the company is, the more resources they put into this problem,” he said.

However, Ruggie said a sustainable solution will have to involve governments.

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