Hansae under observation for systematic labour violations
South Korea's Hansae, one of the world's largest apparel manufacturers, has been placed under observation by Norway's Central Bank for systematic violations of human rights in a number of its factories in Vietnam.
Norges Bank, or the Central Bank, has placed Hansae Yes24 Holdings and its subsidiary Hansae Co Ltd under observation for breaching the 'Guidelines for observation and exclusion from the Government Pension Fund Global' adopted by the Ministry of Finance in December 2014.
Hansae is one of around 9,000 listed companies under the Bank's Pension Fund, which is worth around US$900bn. It follows a recommendation last month from The Council on Ethics that the company be excluded from the fund for its violations.
One of the largest in the world, the Pension Fund is managed by Norges Bank. The Council of Ethics, as an advisor to the bank, assesses companies within the portfolio and whether their activities breach the fund. This assessment falls under three categories: whether they are involved in serious or systematic human rights violations; whether they cause severe environmental damage; or whether they are involved in gross corruption.
Hansae, which owns garment manufacturing facilities in a number of countries, including South Korea, China, Indonesia, the US-controlled Northern Mariana Islands and Nicaragua, was found to have been violating human rights at several of its Vietnam factories for some time, and that it had not previously proved itself capable of generating lasting improvements in working conditions.
Specifically, the recommendation for exclusion from The Council of Ethics, stated numerous violations of statutory health and safety provisions including overwork leading to workers fainting at their sewing machines, restrictions on employees use of toilet facilities, as well as harassment, deficient fire safety precautions, forced overtime, illegal restrictions on sick leave, unfair dismissal, discrimination and a lack of freedom of association. These violations were found to be taking place at several of Hansae Vietnam's factories, as well as at the company's subsidiary Costec in Myanmar.
The Council works in collaboration with the Fair Labor Association (FLA) and the Workers Rights Consortium (WRC) on its assessments, and in this case uncovered 81 violations of the guidelines.
Consequently, Hansae Vietnam has been ordered to implement around 250 measures via a corrective action plan. According to the FLA, the company has already carried out many measures, with more scheduled for implementation this year. This has included appointing new management at Hansae Vietnam and performing monthly self-audits, the results of which are evaluated and improvements measured.
On that basis, the Bank decided against excluding Hansae from the Pension Fund, and instead placed it under observation, with the Council to follow developments.
It is not yet known how long the company will be placed under observation, but Hilde Jervan, chief advisor for the Council on Ethics, tells just-style the usual time period is around four years. This is expected to be an ongoing discussion with the Bank.
"We hope we can have some leverage with the company. There is a lot of pressure on them to improve but this is a very reactive response. The company has said it will make a corrective action plan but what we want is a more proactive approach. How do you prevent these labour violations happening in your factory? You need to have a risk analysis, see what you can do to treat workers better. We see this a lot in the factories, this reactive approach, and we think it's because of the way the brands have carried out their audits. And it doesn't help very much."
Hansae is the first textile and garment manufacturer the Council has recommended to the Bank. To date, it has focused on companies in Vietnam and Cambodia, but is now looking to expand to Bangladesh, India and Myanmar.
Jervan admits the Council has faced criticism in the past for focusing on the manufacturer rather than the brands.
"There can be no doubt that an employer is responsible for its employees at the factory and how they are treated," she explains. "So rather than going into the supply chain issues and having discussions about who is responsible for what, we just go to the core. And we have been criticised for that because people say it's about the brands because they pay too little, which of course may be true, but it doesn't mean the manufacturers aren't responsible so we have focused on them. We haven't even focused on the suppliers to the manufacturers and that is often where you find the really severe labour violations."
Hansae could not be reached for comment at the time of going to press.