Charity sees big loophole in ethical IT code

CAFOD, which exposed the sweatshop conditions in third-world electronics factories earlier this year, says the code of conduct from IBM, Dell and HP doesn't go far enough in addressing the problem

The ethical code of conduct launched last week by IT firms including IBM, HP and Dell appears to contain a major loophole that will allow unscrupulous suppliers to wriggle out of its constraints, according to the charity originally highlighted the issue.

The Catholic Agency for Overseas Development (CAFOD) believes that the code is flawed because it will not give IT factory workers in the developing a guaranteed right to freedom of association through unionisation. Instead it only refers to local laws, which CAFOD warns can vary widely.

"Freedom of association means that workers can represent themselves and ensure that this code is properly implemented," said a CAFOD spokesman on Monday. "Because it is not included in the code, it leaves a loophole that companies can exploit."

In January this year, CAFOD published a damning report into the conditions suffered by employees in the developing world who worked in factories making components for IBM, HP and Dell, among others. All three companies were singled out for criticism because their codes of conduct fell below the standards set by the UN.

This situation arose, CAFOD said, because cost-cutting IT firms were outsourcing their production facilities to parts of the world where wages are low and employment rights limited. In many cases, the factories condemned by CAFOD were not directly owned by these IT giants, but were contracted to supply key electronic components.

The Electronics Industry Code of Conduct addresses several of the issues raised in CAFOD's investigation.

The code replaces several codes used before, making it easier for suppliers to comply and for auditors to check that compliance, HP said in a statement. Any electronics supplier is free to adopt the code, and HP said it expects other companies to do so.

Among the requirements of the code: Bribes, embezzlement and extortion are prohibited; intellectual property must be protected; child labour is prohibited; wasted water and energy must be minimised; hazardous materials must be handled safely; pollutants must be monitored and treated; and occupational injuries must be reported.

Several electronics manufacturers collaborated in writing the code, including Celestica, Flextronics, Jabil, Sanmina-SCI and Solectron.

"We're raising socially responsible business practices to a high level of visibility in our industry," said HP spokeswoman Monica Sarkar last week. "When you have some of the biggest players in the industry [both manufacturers and suppliers] signing on and backing it up, others will inevitably also want to join."

CAFOD broadly welcomes the code's introduction, but it is still concerned about what it calls "unanswered questions".

"What matters is improving the situation on the factory floor. There's not much detail in the code on how change will actually be achieved. We'll be looking for evidence that suppliers have met the standards," said CAFOD public policy analyst Anne Lindsay in a statement issued last week.

Many IT firms are racing to set up operations in China, where it can be very hard to set up a fully functional workers union with genuine powers.

This could be one reason why the companies behind the code of conduct shied away from imposing freedom of association on their own factories and those of their suppliers. But CAFOD feels this was still a mistake.

January's CAFOD report proved highly embarrassing for the companies concerned. The charity believes that IT companies who behave responsibly will win more than just good PR.

"Ethical companies are market leaders," said the CAFOD spokesman.

CNET News.com's Stephen Shankland contributed to this report.