Sweatshops and online freedom are among the issues.

By Bill Baue 

China, host of the 2008 Olympics and a market of enormous importance to many multinational corporations, is also shaping up to be an Olympic battleground on another front: corporate responsibility and law. The controversies over Chinese sweatshops in the supply chains of U.S. corporations such as Nike and the Gap over the past decade are likely to continue on a broader scale. American labor groups and human rights organizations are actively supporting anti-sweatshop legislation proposed by Senator Byron Dorgan (D-ND) and Representative Sherrod Brown (D-OH).

The Decent Working Conditions and Fair Competition Act (S-3485) prohibits the U.S. sale of products manufactured in sweatshop factories abroad. The ban would be enforced with fines of up to $10,000 for each violation, and a provision that allows competitors of retailers who sell sweatshop-produced products to sue for damages for each violation.

"China is preparing to host the Olympics in two years and that spotlight could shine an uncomfortable light on the labor and human rights practices of multinationals in China,” says Susan Aaronson, Director of Globalization Studies at the Kenan Institute, the Washington, DC arm of the University of North Carolina's Kenan-Flagler Business School.

The IT companies argue they must abide by the law of the land in China. Information technology companies can also look forward to continuing pressure on issues involving online freedom and conflicts between Chinese and U.S. law. The IT companies, such as Microsoft, Google, and Yahoo, argue they must abide by the law of the land in submitting to Chinese government requirements curbing freedom of expression on the Internet. For example, Yahoo turned over identifying information on user Shi Tao to Chinese authorities, who then sentenced the journalist to 10 years in prison for forwarding to foreign journalists a message his newspaper received from the Chinese government warning against overplaying the 15th anniversary of the Tiananmen Square protests. Critics say such action flies in the face of democracy and corporate responsibility—and may also run amok of U.S. law.

Soon after calling on these companies to testify in high-profile Congressional hearings in February, Rep. Chris Smith (D-NJ) introduced the Global Online Freedom Act of 2006, which seeks to set minimum corporate standards for online freedom.

"This legislation in its original form was seen as well-intentioned by people in the human rights, SRI, and CSR communities, but was also seen as unrealistic,” says Bennett Freeman, Senior Vice President for social research and policy at the Calvert Group, a socially responsible investing (SRI) firm. The bill was significantly revised and re-introduced in amended form as HR 4780. “It’s unlikely that the Smith bill will be enacted in this form, but it has been an important impetus for the industry to focus on developing its own standard,” Freeman adds.

Freeman says the Washington, DC-based Center for Democracy and Technologies has convened a multi-stakeholder dialogue involving a number of the IT companies, plus academic experts from Berkeley and Harvard, non-governmental organizations (NGOs) such as Amnesty International, Human Rights Watch, and Human Rights First, and SRI firms such as Calvert and Boston Common Asset Management.

The result could be adoption of a standard driven by the IT industry. “I’m reasonably optimistic that in calendar year 2007 we will see an industry-led standard addressing online freedom issues out in the public domain,” Freeman says. “What remains to be seen is how far-reaching the standard will be, how credible it will be, and therefore what degree of support or endorsement it might attract, if any, from NGOs and SRIs participating in the process.”

Bill Baue (bbaue@socialfunds.com) of Sunderland, MA, writes about social investing for SocialFunds.com and co-hosts the Corporate Watchdog Radio show.Published in CRO Magazine, Fall 2006.