The Value of Social Compliance

| Dec 3, 2015 | BY Bonnic Chung

While China remains the world’s leading producer of textiles and apparel, it is no secret that the country has been facing several challenges in recent years threatening this status. Rising labor costs coupled with labor shortages and an appreciation in the value of the Renminbi have driven a lot of production out of the country to other nearby regions like Southeast Asia. While many of these forces are beyond the control of the individual production facilities, others can be more directly influenced through the adoption of sound social compliance systems that can result in economic as well as social returns for both workers and management.

One of the biggest challenges faced by Chinese production facilities is a high staff turnover rate. Though low economic growth has temporarily reduced the pressure on salary increases and staff turnover in the short-term, there has been a slowing of new entrants to the manufacturing workforce. One research study reported that factories experience an average of 30% staff turnover each year in the manufacturing industry, meaning that a factory will change all their workers in 3 years. Think about the direct and indirect costs associated with this high turnover, including recruitment, selection, and training not to mention the loss of productivity during this time. If factories are able to reduce staff turnover, this will definitely contribute to increased productivity. When workers enjoy of the factory they work for, they are likely to be more productive, more committed, and more likely to hold their jobs for longer. Employee retention can reduce the costs that associated with turnover.

While many production facilities still view social compliance as an extra cost and a mere buyer requirement to be fulfilled, in fact, good compliance practices can produce economic benefits for both workers and managers.

If factories take good care of their workers, if they empower them, listen to them, which is what Corporate Social Responsibility all about, you will have happier workers, and eventually this positivity will contribute to improve your productivities.

A research project about humanization for garment workers found that there is a balance between the benefit to business, and benefit of workers. What they did simply to be a helpful person to their workers, listening to them, and help the new workers quickly settling down to the new environment. Lot of studies and researches show that companies that take social compliance seriously has greater attention to health and safety, better training and improved communication with management, leading to increase worker satisfaction, loyalty, retention, motivation, and productivity. The turnover figures have been significantly reduced by half simply by treating their workers in a humane and ethical way. It is a re-balancing and the distribution to the benefit of business and benefit to the workers. Because all these factors can enhance differentiation in a highly competitive apparel industry that eventually lead to big benefits to the bottom line and it eventually adds visibility and credibility to the corporate responsibility. This is exactly where the value of social compliance stands.

It is important to remember that achieving success in social compliance takes consistent application over time. In most cases, it is too late to start implementing your social compliance system when you are asked to show a recognized social compliance certificate by your potential buyers. Facilities applying for WRAP certification for the first time must demonstrate that they have been utilizing social compliance practices for a minimum of 90 days before the initial audit. Thus, factories who have established a systematic social compliance system should take a proactive approach to get their factories certified with a globally acceptable certification body, such as WRAP.

Being a WRAP certified facility provides a number of ancillary benefits to a production facility, opening doors to new selling opportunities that may have otherwise not been available. Over 100 major brands around the world use WRAP in some form in their social compliance programs, which can result in fewer audits and inspections from potential buyers leaving more time for doing business. One might say that a WRAP certification is a proverbial “international entry pass” for exporting to overseas markets.

All in all, China’s apparel sector hopes to maintain its leading role through strengthening its responsive supply chain, sustainable production and appropriate vendor compliance.


Bonnic Chung