Stephen Foley: Decades of criticism have not cleaned up supply chains

Last year it was Nike. Indonesian workers manufacturing for its Converse brand told undercover reporters that supervisors slap them in the face and kick them if they make mistakes. The mainly female workforce at the factory in Pou Chen makes 50 cents an hour, we learned, and those who file complaints can expect to be fired.

It is two decades now since opprobrium first rained down on the rest of the garment industry for its use of sweatshop labour from foreign contractors; it is well over a decade since the industry promised to shape up. So why are abuses like these still happening?

The blame lies with the fractured nature of manufacturing supply chains in today's globalised world. Long gone are the days when a paternalistic corporate boss paced a factory floor. Manufacturers outsource to whoever offers the lowest cost and the greatest flexibility. Nike publishes a list of more than 700 different suppliers across the world. Contractors outsource to sub-contractors of their own. There are a lot of people in a supply chain who have incentives to screw down pay and conditions for workers.

It is up to consumers to make sure turning a blind eye to this is too expensive a gamble for companies. A company's brand is its biggest asset, and that includes its reputation. It is not that consumer boycotts amount to much, but the threat is that talented employees will desert a company whose morality is seen as tainted.

What the garment industry has built is a vast system of codes of conduct and audits aimed at highlighting abuses, but such a system will never be funded sufficiently to match the scale of the supply chain. Apple, under fire for dangerous conditions and child labour in its supply chain, this year became the first electronics firm to join the Fair Labour Association (FLA), set up by the garment industry to inspect factories. But the FLA has so far audited just three of Apple's largest outsourced manufacturing plants. The iPad maker lists 156 companies which make parts or assemble its devices.

And so what if you could audit every factory? What the FLA's audits have revealed is that large numbers of suppliers do not comply with laws or codes of conduct. Transparency has pushed out some of the worst excesses, but cleaning up the supply chain will require more creative thinking.