Unilever's labour practices in Vietnam found wanting by Oxfam report

A new report that reveals evidence of poor labour practices in Unilever's operations in Vietnam between 2011 and 2012 is the latest in a long line of collaborations between Oxfam and the food and consumer goods manufacturer.

Unilever are widely seen as a global leader in CSR, confident in robust international standards. However, the results of an in-depth review by Oxfam of one of Unilever's Vietnam factories – to be published on Thursday and shown exclusively to Guardian Sustainable Business – show:

Wages insufficient to make savings or support dependants, with instances of workers unable to eat adequate diets or afford to keep children in school.
Suppliers and managers unclear about Unilever's codes of conduct, in some cases only accessible in English.
Workers too scared to voice grievances or engage in freedom of association.
Factory workers employed by a third party on much poorer terms and conditions.
Suppliers with employees working illegal overtime hours.

Oxfam researchers were given access to the factory at Cu Chi, near Ho Chi Minh city, where 700 workers were directly employed by Unilever and 800 more were employed by Thang Loi, a third party labour provider. Managers and workers were interviewed on site and off site; 48 suppliers were also interviewed, with three selected for in-depth research. The results, published with the approval of Unilever, showed the company fell short of the standards it set for itself.

Although the study found that wages paid by Unilever were in excess of the national minimum wage (approximately £45 per month in 2011) and the international poverty line of $2 (£1.20) per day, wages still did not meet the basic needs of employees and their families.

The minimum wage itself, said the report, "lags behind a rapidly-rising cost of living ... meeting only 40% to 46% of workers' minimum expenses per month." Of workers in the Cu Chi factory, 80% said they needed another source of income to feed their families. One worker recounted having to take two of her three children out of school to work as a consequence of inadequate pay.

Any such labour issues could be dealt with by a grievance hotline or the trade union. However, neither were used nor trusted. There is only one state-run trade union in Vietnam, and it is dominated by senior managers. Similarly, the workers feared that the grievance hotline would simply go straight to the management and put their job at risk. "We dare not raise our voice through the union leaders because they are paid by the company, they are the company's people," said one worker.

Conditions for those employed temporarily, by a third party, or by suppliers, were even worse. Globally, the number of people directly employed by Unilever decreased by nearly a half (45%) from 295,000 employees to 164,000 between 2000 and 2009. However, the report states: "The work of 131,000 people did not disappear. According to Unilever, in 2009 this work was being done instead by 86,000 people that were outsourced and/or under temporary contracts."

In the Cu Chi factory, 748 of the 1,539 workers (53%) were employed by a third party, Thang Loi – mostly migrants living in rented accommodation, paid just above minimum wage (only with cash benefits and overtime did this rise above the local average urban income). Unilever has since stated an aim to reduce the ratio of contracted workers to 30:70 (30 on temporary contracts to 70 on permanent contracts).

Among suppliers outside the factory, 20 of the 48 interviewed said Unilever's supplier code (which requires at a bare minimum an adherence to local laws) had never been mentioned. At one supplier, employees worked four hours' overtime a day, six days a week, for 10 months: well in excess of a legal national limit of 200 hours a year. Another said that offering excessive overtime gave it a competitive advantage.

"We were quite disappointed about the outcome of the Oxfam report," said Pier Luigi Sigismondi, Unilever's global supply chain chief. "Frankly speaking, the assumption that [global operations] would understand our code and that they would comply 100% was a wrong assumption."

Unilever suggested that the problems came out of simply expecting regional operations to follow its global CSR standards which include the UN guiding principles on business and human rights; a code of business principles ; its sustainable living plan, and a supplier code .

Paul Polman, Unilever chief executive, said the company had opened its doors to demonstrate transparency: "It is fair to say that this report highlights areas where we still have a lot more to do. We agreed that Oxfam could publish the report as a means of stimulating this wider debate and encouraging other companies to follow our lead."

Stocking welcomed Unilever's transpancy as the "most transparent and most forward-thinking example I've seen" of a multi-national company allowing access to an NGO or charity in this way. She added: "It is fantastic that they allowed us to do this at all. I think their response has been very reasonable, but of course I'd like to see them go further, particularly on the living wage. If it isn't possible for them to move unilaterally, which I understand, then I want to see them take leadership."

Sigismondi said the company would change the way it organised it's Vietnam operations. "We will organise human labour rights training workshops for all our internal business stakeholders, including our factory leadership in Cu Chi and key suppliers to promote best practice," he said. "We will also work with the 80-plus suppliers to make sure they address the non-compliance issues that were highlighted in the study. We will review again our grievance mechanisms for both temporary and permanent workers to make sure that they become not only understood but accessible."

However, Vietnam is just one case study. Unilever has a presence in over 100 countries, directly employing 171,000 employees (as of 2011). Nearly 55% of its business is in emerging markets. These issues are global, and as such the company has committed to a global review of both wage levels and casual labour. On both counts though, it reserves the right for significant wiggle-room.

Sigismondi expressed concern about workers reportedly unable to support dependants or school their children, but also pointed out that the report covered operations in just one factory. "These are specific data points that are taken from ad-hoc interviews. We have to go back and make sure that our wages are fair, decent and competitive in the eyes of the industries that operate close to the factory, in the sector and also nationally ... This is a constant dialogue. Inflation rates in the emerging markets are quite significant and we face the dilemma of how to improve the conditions of our people and still create or maintain the number of jobs."

On the back of the report, Stocking called on companies to look beyond just national minimum wages. "I think Adam Smith even said that when you're paying wages they had to be something you could live on," she said. "There is an ethical principle here ... although decent companies are all paying the national minimum wage, what they are not paying is a living wage."

Oxfam is clear that this is by no means a single issue for a single company. The operations of other multinational companies in Vietnam were deemed so non-transparent by the report's authors that they couldn't compare results. "Companies need to come together to think these issues through, not just in Asia but across the world," said Stocking. "Being legal is not the problem, but are they really doing the right thing but their workers by paying at these levels? People feel their work is precarious, especially casual workers, and unable to speak out in any meaningful way."

Far from having had its fingers burnt, Unilever has invited Oxfam to come back to Cu Chi in two years time to review progress. When asked if it would be open to working in a similar way with NGOs in its other developing country operations, Sigismondi said: "Yes, any time, anywhere. This is something that I found to be difficult to accept, disappointed in some areas, but very constructive. Hopefully our transparency will give voice to many NGOs and other companies employees so we can raise the standards around the world."

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