I know I’m belaboring these now, but I’m learning a lot from all the people writing in to add points and arguments to my Myth of the Ethical Shopper article. Here’s one from Glen, a project manager at a contract manufacturer in Shenzhen:
Awareness is the first step, and this article does an excellent job of pointing out that contract manufacturing will always result in unfair labor practices. The smaller companies are the biggest offenders because their order sizes don’t warrant the attention of “golden factories”. Not that Apple and Wal-Mart are good examples, but their manufacturing is some of the cleanest out there… After working for a contract manufacturer in China for several years, I can give you a quick glimpse of how it looks in China in relation to this article:
1) Wal-Mart gets caught with unfair labor practices > people protest > Policy reform
These reforms are pushed on factories that really want to improve, but mostly they want the business. They reform simply to keep the business.
2) Factories conform to reforms > operation costs at factories go up > Factories lose money
Making these changes and being socially compliant come at a HUGE cost to the factory, but larger customers will not accept the increased costs to reflect in their orders. Suddenly, factories are losing a lot of money, but they can’t lose Wal-Mart as a customer. Most Wal-Mart-contracted factories operate at zero margins just for the business. They’ll use the molds to remake products under other brands to sell in China.
3) Factory finds cheaper factory to do their production
The original factory might do 20% of the order, but they’ll contract “shadow factories” to do the bulk. These are your “sweatshops”, they don’t exist on paper, but they make up easily 95% of the factories out there. Now, the large Wal-Mart orders can once again turn a profit, because costs are reduced by manufacturing at the shadow factories.
4) Factory becomes an audit mill.
Passing an audit is a big deal, especially the strict standards of Wal-Mart compliance. The factory can now make large sums of money fronting for other companies and factories. They will host audits on a regular basis, to give compliance to hundreds of other companies. A company might not even have a factory, but they’ll get compliance to make products. Now they can make products wherever they want, and when it comes time they can set up their front at the fake factory. Most companies do this.
5) No reason for factories to TRULY conform to regulations
Now that these workarounds are in place, it’s quite easy to get certified without even having a factory. So now that most factories are off the map, they have no incentive whatsoever to follow anything close to standards being set in the USA. Everyone is protected by the “golden factories” that are running fake audits and essentially covering for the ones doing real production runs. Foxconn is a golden factory. Their conditions are incredible compared to those of 99.9% of factories in China. In over 4 years working in China I have never set foot in a factory that is as clean and compliant as Foxconn.
6) Audit companies get in the game as well.
For MANY if not MOST inspection companies in China you can’t pass an audit unless you pay a bribe. Usually $1000/inspector is enough. Even if your factory really is perfect, you need to pay off inspectors to get the certification.
7) American companies have no control
US companies might know this is happening, or not…. it really doesn’t make a difference. Companies that are aware will distance themselves intentionally so that they’re not liable or seen as negligent. Companies that aren’t aware really truly believe that they are covering their bases.
8) The danger of trade companies passing an audit.
Our trade company passed the [Shoe Company Inc.] audit on a factory that doesn’t exist (we used the name of our company as the factory and the inspection took place at a factory we contracted specifically for a social compliance audit). Now that the trade company has passed this certification, we can make products ANYWHERE. It’s a step beyond the factory using contract manufacturers. Most trade companies are lying to their customers, so it’s incredibly difficult to know if you’re working with a trade company or a real factory. In my experience it’s almost always a trade company if you don’t have boots in the ground in China.
9) When a company issues a RFP (request for proposal), they are essentially GUARANTEEING that their products will be made in some of the nastiest ways possible.
This is very common for companies in our space, sports accessories. Companies like [Shoe Company Inc.] will essentially say some requirements for a product, and they’ll send that to all of their licensees. Those with licensing rights to the brand will contact their suppliers to have them compete for the best prices. Trade companies are typically the supplier they contact, and those trade companies will contact all of their connections for the best price. RFPs are are designed so that the companies like New Balance will get the best and cheapest deals for the required products they need. It’s a beautiful system for the brand, because they do no sourcing whatsoever, and they hold no responsibility whatsoever on how the product is being made.
10) Trade companies intentionally used as a buffer.
I don’t think this is news to you, but some companies with use trade companies because they understand the process. This will keep them legally exempt from issues and can blame the trade company for hoaxing them on their labor practices. A lot of companies know this and I’ve had several people tell me to just “do what we do” to make sure things work on our end.
11) The yoga mat industry in China is disgusting
Just a comment to add here. I did a sourcing project for a [Shoe Company Inc.] request for yoga mats. The factories I saw we’re disgusting. I literally saw a naked baby standing in a pool of water just yards away from where the finished goods were being stacked. These were all TPE yoga mats, and I found it ridiculous that in the factory they were printing logos that said “eco-friendly”. Anything that is so simple to make is going to eventually make its way to these kind of factories.
I chose not to use that factory and instead went with a better factory (still wouldn’t pass an audit, but who does?) for the proposal. We didn’t get the business, it was beyond their budget. Had I used the prior factory we would have fallen within their price target…
This is the current state of things. There isn’t an easy fix. There aren’t regulations to solve this. All I know is that with more awareness solutions will be worked out in the future. I know a lot of these points were made in the article, but I felt they needed repeating. These are truths that I wish all consumers could know and understand.
Go read Glen’s blog it’s hella good!
One response to “‘I literally saw a naked baby standing in a pool of water’: Eleven observations from a contract manufacturer in China”
Thanks for all your work on this topic. It is important and appreciated! 🙂