REI will establish its first, full-time physical representation in China this summer in a bid to better track quality control at factories, which are increasingly moving inland to escape rising labor costs, the retail co-operative reports in its latest stewardship report.


Significant economic shifts in worldwide markets for commodities and materials and major changes in the Chinese labor market (now, widely publicized) have added a new set of challenges to factory labor compliance, the retail co-op wrote in the report released last week. Labor shortages in China have had both positive and negative influences on the situation.

 

“For example, increased competition for labor has caused factories to emphasize employee retention, which gives workers more power in negotiations over pay, benefits, and working conditions. On the other hand, factories are moving further into the interior of China, or in some cases to other countries, where labor oversight by both government officials and brands can be difficult. The full ramifications are not yet evident, but we are increasing our presence in factories as our first line of engagement.


The report also disclosed that REI recruited a new manager last year to run its Fair Labor Compliance Program and reassigned that function from its gear and apparel business unit to its legal department, to give it more independence. The new manager and her staff now report directly to the board of directors through the office of REIs general counsel and a Fair Labor Oversight Committee (FLOC) REI created last year. The committee is chaired by an executive vice president and includes REI’s general counsel and two vice presidents. The FLOC is accountable directly to the REI Board of Directors Audit & Finance Committee and is responsible for objective oversight and assessment of the fair labor compliance program.


The report also disclosed that in 2010, REI commissioned five third-party audits of factories in China, Taiwan and El Salvador, but also accepted factory audits conducted on behalf of other brands that are parties to Fair Factories Clearinghouse. By sharing factory audit results we increased visibility into the factories while reducing the “audit fatigue” experienced by the factories, the reported stated.

 

While REI continues to use audits to measure compliance with fair labor standards, it believes the best option for improving compliance lies in collaborating directly with its factories.