Background of the complaint against Lidl

Background of the complaint against Lidl

(by Gisela Buckhardt – CCC Germany)

Since a few years the Kampagne für Saubere Kleiding (Clean Clothes Campaign,
CCC, Germany) has taken action for the improvement of working conditions at the
garment suppliers of discount retailers and for the employees of retail chains in Ger-
many. It’s predominantly women who have to work for incredibly low wages both in
producing countries and in Germany.

In January 2008 the Kampagne für Saubere Kleidung published the brochure: “Wer
bezahlt unsere Kleidung bei Lidl und Kik? Arbeitskraft zum Discountpreis-
Schnäppchen für alle? (Who pays our clothes at Lidl and Kik? Labour for discount
price bargains for everyone?). With this brochure the CCC for the first time con-
fronted the discount retailer Lidl with labour and human rights violations at their gar-
ment suppliers (producers) in Bangladesh. Research in 2007 at five producers for
Lidl in Bangladesh showed grave labour right violations: compulsory overtime, non-
transparent and irregular payment of overtime, no factory had a works council, su-
pervisors took a discriminatory attitude against women, etc. The working conditions
at the discount retailers Lidl and Kik in Germany were also researched. In February
2009 another publication by the international CCC, “Cashing In”, (published in Ger-
man as “Kassensturz”), followed, which found labour right violations at Lidl, Aldi,
Walmart, Tesco and Carrefour suppliers in four Asian countries (Sri Lanka, India,
Bangladesh and Thailand). On the occasion of the World Day for Decent Work on 7
October 2009 the CCC presented to Lidl more than 1000 protest postcards that had
been signed by consumers and had been attached onto a 400 m long ribbon.

CCC spoke to Lidl in March 2008 and again in 2009, and expressed its criticism of
the working conditions at Lidl suppliers not only in Bangladesh, but in all producing
countries. Also the situation of the workers in Germany – unpaid overtime, obstruc-
tion of works councils, etc. – was raised.

After the publications and the growing public criticism, Lidl ordered several consulting
firms to organise trainings for their suppliers on social standards. In any case Lidl
was not willing to pay decent prices for the supplied goods – quite the contrary: ac-
cording to statements by producers in Bangladesh the prices for supplied goods had
been strongly reduced during the last few years – more or less up to one third. But
how could producers comply with social standards, if they constantly get less money
for their goods? Instead of engaging in a dialogue of equal partners with their suppli-
ers and assisting them in their efforts to comply with the social standards, the pro-
ducers received orders that had to be executed. Instead of showing real interest and
readiness to change, Lidl rather wants an improved public image.

Lidl told the CCC and the consumers that between 2006 and February 2010 they had
executed more than 7.500 audits and re-audits in factories to monitor the compliance
with social standards. According to Lidl the trainings for suppliers resulted in better
compliance with social norms. But according to information of the CCC the pressure
has led to more deceit and falsification of documents rather than to a genuine im-
provement of working conditions. Impressions after talks with partners in Bangladesh
had to be verified and therefore the “Alternative Movement for Resources and Free-
dom Society” (AMRF) was asked to interview workers at Lidl suppliers in Bangla-
desh. In doing this attention was paid that the suppliers had already been trained by

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the consulting firms as ordered by Lidl, or were undergoing the training program at
that moment. So the factories involved were “demonstration” factories, whose man-
agement had been formed and trained further on social standards. The result of this
research is presented here.

1. What is the BSCI?

Lidl is proud of its membership of the Business Social Compliance Initiative (BSCI).
This association of by now more than 470 companies at the European level aims ac-
cording to their own statement at the compliance with specified social and environ-
mental standards by their suppliers. BSCI has adopted its own code of conduct and
Lidl believes its own adopted code has the same content. But in public, e.g. on its
website, one cannot find its code.

The CCC criticizes BSCI as an initiative that a lot of companies abuse to assume a
social image or to commit ‘social whitewashing’. More in particular the CCC de-
nounces the following:

•   A central BSCI tool is the auditing of factories of members’ suppliers. The em-
    phasis lies on inspection and checking, not on support for the producers to com-
    ply with social standards (e.g. establishing complaint systems, training of man-
    agement and of workers through unions and NGOs).
•   The social audits are performed by commercial auditing firms. They are paid for
    their work by BSCI-members like Lidl, so the audits are not performed by inde-
    pendent external inspectors. Local NGOs and unions are not systematically in-
    volved. In many cases the quality and credibility of these audits must be ques-
    tioned.
•   The BSCI code of conduct does not oblige factories to pay a living wage, only the
    local minimum wage. In many producing countries that is insufficient to survive.
•   The BSCI is a pure business initiative without a voice for other stakeholders
    (trade-unions and NGOs)
•   The BSCI is not transparent: suppliers’ names are not given, nor are the audit
    results of individual factories made public.

At best the BSCI is an instrument to publicly pretend a commitment for social stan-
dards, but the CCC on-site researches show that working conditions (wages, hours
of work, freedom of association) practically do not change at all. That is unsurprising,
because it is the purchasing policies of the multinational companies that decide
whether labour and human rights are really observed in the producing countries. But
the companies are not willing to pay higher prices, which could result into higher
wages for the workers.

2. Whitewashing – Companies against binding social standards

Corporate Social Responsibility (CSR) has become the fashionable expression, with
which more and more companies adorn themselves. A social image is becoming
more and more important. In their shopping decisions consumers are taking into con-
sideration more and more information on companies’ social and environmental con-
duct. Shareholders are also more and more interested in socially responsible invest-
ment. Rating agencies assess companies on the basis of sustainability indicators,
whereby also social commitment is assessed. For experts it is evident that charitable
projects with which companies like adorning themselves, are all too lightly exposed
as fig leaves. Credibility can only be established when social standards are re-
spected in the core business. Translated for Lidl, this means that fairglobe products

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(from fair trade) do not make Lidl a socially responsible company, as long as the
other products are manufactured under violation of social standards, and trade-
unions and works councils are not welcome by the Lidl management.

The association of companies in the BSCI is also an attempt to prevent binding social
standards from the side of the EU or individual governments. Time and again the
companies emphasise that social standards are voluntary obligations and should re-
main so. They do not want binding legal regulations. If companies are serious about
social norms, why are they afraid of legal guidelines? In fact it should be in their own
interest that governments or the EU make the compliance with social minimum stan-
dards binding for the whole supply chain, because then everyone should abide by
them, also the competition. That would limit the global race to the bottom. The intro-
duction of binding social standards would imply that companies could be made ac-
countable for human rights violations and environmental destruction throughout the
production chain. Since a long time the CCC demands an obligation for companies to
publish an annual report on the compliance with social standards in their supply
chain. Such an obligation to publish exists in e.g. the UK for companies quoted on
the stock exchange.

The current German Consumer Information Law does not deserve its name, because
it does not enable consumers to obtain information about the production process.
There is no possibility for consumers to find out how a product has been manufac-
tured, nor whether social standards have been complied with. Due to the failure of
the Federal Government in the area of obligations to provide information to consum-
ers, companies can deceive consumers with their ‘social whitewashing’ measures.

3. Lidl’s misleading advertising – Complaint against Lidl
Lidl advertises that it joined BSCI as early as 2006. But according to Lidl’s own
statements, the discount retailer didn’t know most of its producers/suppliers in 2008,
because most purchasing was done through importers. Not until the CCC criticism,
did Lidl start to have a closer look at its suppliers. Its two-year membership of BSCI
apparently hadn’t obliged the company to engage itself with the social standards of
its suppliers – although this is exactly the BSCI’s objective.

In the meantime four years have gone by since Lidl became a member of BSCI and
unfortunately, as this report shows, the working conditions of the seamstresses on-
site haven’t improved a bit. However, Lidl advertises on its website and in answers to
consumers’ inquiries with the following statements:

“Lidl is aware of its responsibility in the production of its goods and through intensive
efforts and several commitments during the last years has taken a leading role in the
food retailing sector in the improvement of social standards in the producing coun-
tries. In contrast with other business enterprises Lidl actively takes account of ‘the
compliance with social standards in the production sites’ in its purchasing decisions.
Lidl has implemented the following measures: 1. Lidl is a member of the ‘Business
Social Compliance Initiative (BSCI)’. As the first German discount retailer Lidl already
joined the common initiative ‘Business Social Compliance Initiative (BSCI) in 2006’.
BSCI was developed in the framework of the European Foreign Trade Association.
More information can be found at www.bsci-eu.org. Like all BSCI members Lidl’s aim
is to declare uniform social minimum standards binding for the suppliers in the differ-
ent countries and to monitor their compliance through a corresponding monitoring
system. To reach this goal Lidl has developed its own code of conduct, which corre-
sponds with the BSCI guidelines and to the compliance of which the suppliers with
whom Lidl cooperates, engage themselves. The monitoring of the social standards is

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performed by internationally accredited, independent auditing institutions.” (Lidl’s writ-
ten standard answer to consumers)

In an advertising prospectus (1/2010) Lidl writes: “Lidl worldwide dedicates itself to
fair working conditions” and “We at Lidl therefore only accept non-food bids from se-
lected suppliers and producers, who are willing to actively adopt social responsibility
and can show they do so.”

We ask: is that not misleading the consumers? Doesn’t this suggest to the consum-
ers that the Lidl suppliers comply with the social standards?

Whereas BSCI speaks about the aim of complying with the social standards, Lidl
publicly expresses itself in a way that consumers can get the impression that the
standards are currently already complied with. In this way the consumers are de-
ceived, with which Lidl obtains for itself a competitive advantage vis-à-vis its competi-
tors. Because companies cannot deceive consumers so easily, the CCC supports a
complaint of the Verbraucherzentrale Hamburg (VZHH - Consumer Association
Hamburg) against Lidl because of unfair competition. Legal support is also supplied
by the European Centre for Constitutional and Human Rights (ECCHR).

The complaint concerns two aspects of the deception of the consumers:
      1. Advertising with the BSCI Code of Conduct in the sense that the code of
         conduct would assure the compliance with social standards. Customers
         trust this. The BSCI code, though, does not imply it. It only refers to the
         aim of reaching compliance by its suppliers with specified social and envi-
         ronmental standards. This small but fine difference hardly attracts the at-
         tention of most readers. That’s precisely why the business initiative is so
         suitable for ‘social whitewashing’, because it doesn’t commit them to
         genuine compliance, but only to aiming at the goal.
      2. The other deception of the consumers consists in the fact that reality at
         the Lidl suppliers looks completely different from what the code assures.
         This was investigated through research at four Lidl suppliers in Bangla-
         desh and the results are presented here.

4. Exemplary analysis of some elements of the BSCI Code
Because Lidl refers to the BSCI Code of conduct and claims it is equal to its own, we
will cite relevant passages from the BSCI code. In addition the ILO conventions are
mentioned, to which BSCI refers.

The following elements of the BSCI code were investigated in the four factories:

Working hours: “The maximum allowable working hours in a week are as defined by
national law but shall not on a regular basis exceed 48 hours and the maximum al-
lowable overtime hours in a week shall not exceed 12 hours.. … An employee is enti-
tled to at least one free day following six consecutive days worked.” – In accordance
with ILO Conventions 1 and 14.

Voluntary overwork: On this the BSCI code states: “Overtime hours are to be worked
solely on a voluntary basis and to be paid at a premium rate..”

Prohibition of wage deductions and disciplinary measures: “Deductions from wages
as a disciplinary measure are forbidden, unless this is permitted by national law and
a freely negotiated collective bargaining agreement is in force. Supplier companies
shall ensure that wage and benefits composition are detailed clearly and regularly for

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workers.” “The company shall not engage in or tolerate the use of corporal punish-
ment, mental or physical coercion and verbal abuse of personnel..” – In accordance
with ILO Conventions 29 and 105

Freedom of association and the right to collective bargaining: “All personnel shall
have the right to form, join, and organise trade unions of their choice and to bargain
collectively on their behalf with the company. The company shall respect this right,
and shall effectively inform personnel that they are free to join an organisation of their
choosing and that their doing so will not result in any negative consequences to
them, or retaliation, from the company. The company shall not in any way interfere
with the establishment, functioning, or administration of such workers’ organisations
or collective bargaining. In situations where the right to freedom of association and
collective bargaining are restricted under law, the company shall allow workers to
freely elect their own representatives. The company shall ensure that representatives
of workers and any personnel engaged in organizing workers are not subjected to
discrimination, harassment, intimidation, or retaliation for reason of their being mem-
bers of a union or participating in trade union activities, and that such representatives
have access to their members in the workplace. .” – In accordance with ILO Conven-
tions 87, 98,135 and 154.

Prohibition of discrimination: “No discrimination shall be tolerated in hiring, remunera-
tion, access to training, promotion, termination or retirement based on gender, age,
religion, race, caste, birth, social background, disability, ethnic and national origin,
nationality, membership in workers’ organisations including unions, political affiliation
or opinions, sexual orientation, family responsibilities, marital status, or any other
condition that could give rise to discrimination..” – In accordance with ILO Conven-
tions 100, 111, 143, 158, 159.

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