By design or by chance, multinational corporations (MNCs) have become a galvanizing force behind Chinese manufacturers' increasing adherence to the nation's labour, health and safety laws - and better communication between labour and management.

In a hotel conference room in Dongguan, Zhou Weidong has been conducting a training session for some 30 factory-floor managers regarding the methods to be used to keep work areas healthy and safe for their employees.

"Finding safe substitutes for hazardous substances is always the No 1 issue to consider," Zhou says, when appraising a safety checklist presented by a safety manager who has marked protective equipment for staff and ventilation of the workspace as priorities.

Zhou is the founder of PDA Network, a non-profit organization affiliated with the Guangdong Human Resources Management Association.

The organization is backed up by a consortium of MNCs which are intent on making sure that suppliers operate in compliance with the relevant health and saftey laws.

"PDA stands for Participatory Development Appraisal and is a method we use to promote corporate responsibility and workplace-based health in the industrial sector," says Zhou.

"MNCs are serious about improving health and safety in the work environment, mostly due to pressure from their own countries," says Zhou.

Recent years have seen labour-rights activists and human-rights advocates turning the spotlight on companies which set up "sweatshops" in developing and underdeveloped countries that have low cost labour.

To ensure that its suppliers do not ill-treat workers, US retail giant Wal-Mart has 40 inspectors on the mainland; Nike and Disney, 12 each; and Adidas, four, according to industry insiders.

In 1991, Levi Strauss, headquartered in San Francisco, was the first company to adopt a code of conduct based on principles laid out by the International Labour Organization and the Universal Declaration of Human Rights, Zhou says.

There are several ways an MNC can ensure its suppliers conform to local labour laws, he notes. It can request its suppliers to conduct self-inspections; it can send its own inspectors or it can commission a third party to do the job.

Zhou believes there are pros and cons in each approach. For example, an independent inspection firm can hire other professionals to design special inspection programmes.

The use of such firms carries the risk of corporate crime occurring without the MNC's knowledge however, and they are also in a position to allow any illegalities to continue if they wanted to.

Zhou cites Reebok as a good example of how a company can prevent illegal work practices from occuring.

The company posts code-of-conduct notices on suppliers' factory floors, and lists its complaints hotline number so that workers can report any violations directly to the company itself.

Since 2000, Zhou has worked for Pentland Group, which operates a number of brands and businesses in the footwear and clothing markets. Its brands include Speedo, Ellesse and Kickers.

Pentland is an active member of a consortium of companies which is active in promoting corporate responsibility.

Before joining Pentland, Zhou was a senior labour inspector in the Department of Labour in Shandong Province and also worked in senior management at a number of Chinese import/export companies for 10 years.

With the success achieved by Pentland, Zhou expanded his horizons and this eventually evolved into the work PDA now handles.

"My boss at Pentland has an NGO background and good understanding about work-related issues in developing countries, which makes things easier to communicate," Zhou says.

Training and education have always been part of any MNC's efforts to bring its suppliers' work practices up to acceptable labour and safety standards.

But Zhou says he has observed a change in approach.

"It used to be that they sent foreign experts to give lectures to the suppliers, but the corporations found it unsatisfactory. So now they have started hiring locals who are more familiar with China's corporate culture."

Also, the tactic of beating suppliers into submission has had little effect. "It only drove them into cheating," Zhou says.

Zhou instead advocates a "mindset change", which involves the willingness of suppliers and their management to participate in changing the workplace environment, and recommends "good practices".

Of course, the threat of cancelled orders is the ultimate motivation, he says.

Orders may not necessarily be withdrawn outright, but violators can be given a clear message that, "if they don't change their way of doing things, they may not get new orders".

In September 2002, a shoe factory in Zhongshan that employed 500 people was forced by its buyer into a two-month shake-up because it did not pay its workers the minimum wage.

Around the same time, a poisoning incident at a shoe factory supported by Taiwanese investment and located in another town in the PRD, led to the complete cancellation of a large order by an international buyer.

In another incident in 2001, Peng Mingjiang and 16 of his co-workers who made a living by washing merchandise in a Dongguan factory, had begun to feel feeble and weak in the course of their duties.

After receiving their complaints, local health inspectors checked the conditions of their workshop and found that emissions from the cleaning solutions they were using were well above acceptable limits and were actually poisoning the workers.

While in hospital, their employer indicated that the staff should not mention medical bills or compensation if they wanted to keep their jobs.

At the prompting of some NGO staff, the sick workers contacted the international buyer - in this case, Disney - directly. Disney, in turn, pressured the manufacturer into improving its treatment of the workers.

However, the supplier sought to escape its liability on a technicality and most of the sick workers, unsure of whether the employer would cover their medical costs, chose to stop treatment and left the company with only two months' extra pay, which was less than 1,000 yuan (US$120) for each worker.

The problem of worker abuse is more serious in Guangdong Province, Zhou says, because most of the factory workers there are from other provinces and have little recourse to social networks that they could rely on.

Zhou acknowledges that local governments, in their rush to attract foreign investment, often looked the other way when violations occur. This, in effect, elevates the importance of the inspections and worker education programmes established by MNCs, he says.

But a dramatic turnaround took place when Premier Wen Jiabao championed the cause of migrant workers in an incident where they were fighting against the deferment of wages, Zhou says.

"The West endorses a bottom-up approach to these things," he says, "but that does not work well in the Chinese environment for political and cultural reasons. The top-down style is a sign of resolve and the nation's new leadership has substantially improved the conditions of these workers."

MNCs, while a positive force in corporate ethics, should also take some of the blame for violations against workers occuring downstream in the business chain.

By exerting too much pressure on price, they effectively force their Chinese manufacturers into a dilemma where they are faced with losing profits due to the additional costs of complying with labour laws or staying price-competitive and in business.

Some of the Pearl River Delta suppliers have grumbled to Zhou that they used to make money from selling to Western markets, but now they can only do so by improving efficiency and "squeezing the workers".

However, a paradox has emerged in the drive to comply with laws and industry standards such as SA8000 and ICTI. Factories that have shown better-than-expected compliance with the standards often become the proverbial "fast cows that are repeatedly whipped", for minor infractions.

These companies may not be perfect when meeting all of the requirements, but they are still in the spotlight and are subject to more scrutiny as a result.

As well as this, some suppliers stay competitive with local rivals in the market by cutting corners. That has put the "good guys" in a quandary.

Fortunately, the local media have recently exposed a number of abuses, including private factories hiring children who are barely into their teens. The businesses that are responsible usually have multiple violations and may not even have proper business licences.

Another problem is rooted in the existing labour laws regarding overtime, which are more strict than some of those in the West.

The law stipulates that no worker should work more than 36 hours a month in overtime, but overtime pay is a significant portion of income for many migrant workers, especially for piece-rate workers, Zhou says, thus leading to many workers to toil away for long hours.

Zhou believes that good communication and participation in discussions between both parties is the best way to balance the needs of the workers with labour laws.

Managers should be good listeners, he says, and decisions like the appropriate length of overtime should be based on both production needs and what is acceptable to workers.

China's competitiveness in manufacturing has been one of the nation's greatest achievements, but without the necessary monitoring of work practices and a company code of conduct, the sector may hide a plethora of abuses.

Eliminating these bad practices requires effort from all concerned, including buyers, suppliers, workers, government agencies and non-government organizations, says Zhou.

(HK Edition 11/30/2004 page20)