Working environment and social responsibility

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Working environment and social responsibility

Co-operation between Danish-owned enterprises in China and their Chinese sub-suppliers

Report from a preliminary study

July 2006

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1 Introduction

In the beginning of 2006 the Danish Technological Institute visited Danish-owned enterprises and selected sub-suppliers in China as part of a preliminary project under Danida’s ’Programme for Corporate Initiatives’ under the activity ’Public Private Part- nerships’.

The preliminary study has had two objectives: Firstly, on the basis of interviews and observations, to attain knowledge of transferring Danish-inspired principles and guidelines relating to working environment and social responsibility to Danish-owned enterprises in China and their sub-suppliers. And secondly, to identify enterprises and sub-suppliers interested in participating in a main project focusing on the establishment of a co- operation model with the objective of developing a number of tools which may contribute to disseminate the enterprises’ intentions as to favourable working environment and social responsibility.

We would like to thank the Danish and the Chinese managers and employees we have interviewed during our visit to the following enterprises:

Grundfos Pumps Suzhou Ltd., Nilfisk-Advance Suzhou Co. Ltd.,

Flexa Suzhou Furniture Products Co. Ltd., Yual Metal Products Suzhou Co. Ltd.,

Vestas Aircoil Cooling Technology Suzhou Co. Ltd., Danfoss China Wuqing,

Novozymes China,

Beijing Innovative Furniture, Eilersen-Furniture,

Tianjin CMT Industry Co. Ltd.,

Suzhou Shuangrong Rubber and Plastic Co. Ltd.

Tianjin Xilun Stainless Steel Goods.

The project has been co- financed by Danida and is carried through by Palle Banke, Thomas Hermann and Gitte Holm.

Danish Technological Institute Human Resources Development July 2006

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2 Background and methods

Background

Danish-owned enterprises relocating production to low-wage countries are generally re- nowned for their ability to transfer their favourable working environment standards and their capacity to assume a social responsibility for the managers and staff employed by the enterprises. For many, it is a matter of principle that there may be no differences in the rules and levels applying to the working environment in the Denmark-based branch of the enterprise and the relocated branch.

When relocating abroad, Danish-owned enterprises frequently build a new factory (green field site), allowing for a unique degree of freedom as to incorporating the working environment at an early stage, and, accordingly, by-passing the obstacles often hampering the environmental effort in Danish-owned enterprises.

However, in relation to matching the principles in Global Compact, the sub-suppliers’

conditions frequently pose a considerable challenge. Often, the sub-suppliers’ production apparatus does not have the same technological level as the system implemented in Danish enterprises. Moreover, the focus on working environment and social responsibility has been rather scanty. The Danish enterprises may, therefore, find themselves faced with a dilemma, where they have found a sub-supplier capable of matching the requirements to production and quality, but where the working environment and social responsibility fails to match the standards set by the Danish enterprise for the production of their articles.

There is every indication that working conditions of the sub-suppliers will enjoy increased focus in the future. And it will, accordingly, prove very problematic if it is as difficult to find an enterprise with an acceptable working environment, as it is presently to find an enterprise capable of delivering the requested quality. The introduction of satisfactory working environment in both Danish-owned enterprises and their Chinese sub- suppliers is hampered by the lack of guidelines, assessment criteria and tools to support the joint efforts of developing, safeguarding and documenting the working environment and the social responsibility.

The current attention on labour conditions in China

There is a growing awareness of working environment and Corporate Social Respons i- bility in China, both in the media and with the authorities. Very often the focus is on migrant workers from the western part of China working in the developing areas in the eastern part of China. The following examples come from media in China:

§ China has ratified four of the eight core ILO Labour Conventions in April 2006. The ratified core conventions are on Equal Remuneration, on Discrimination, on Child Labour and Minimum Age. China has not ratified the core conventions on the Right to Organise and Collective Bargaining, on Freedom of Association and Protection of the Right to Organise, on the Abolition of Forced Labour, and on Forced Labour.

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§ At the newly held Peoples Congress (February 2006) and in this 11th five years program - the situation for the migrant-workers and especially the accidents at the workplaces and the workers’ poor social conditions were discus sed (CCTV 9, February 2006).

§ Small to medium-sized enterprises should implement corporate social responsibility (CSR) to improve employees’ working efficiency and forge more stable relationships with clients, according to a new study (China Daily, March 2006, Annex 1).

§ In the beginning of April 2006, the China Enterprise Confederation (CEC), which is the Chinese employer association, has urged companies to become members of the Global Compact. It has called for Chinese businesses to actively participate in activities of Global Compact and shoulder social responsibility (China Daily, April 06).

§ Focus on foreign enterprises’ responsibility to have the same good standard as they have in their own countries (CCTV 9, February 2006).

§ Forum on Corporate Reputation together with the Institute of International Reputa- tion (IIR) have made 25 businesses operating in China sign up for a rating system - Chinese enterprises, are increasingly recognising that reputation is a vital part of building a brand name (China Daily, March 2006).

§ China Enterprise Reform and Development Society is preparing a set of standards on Corporate Social Responsibility, which is to be finished in 2006. The standard will give some information to the enterprises about labour rights, environmental protection, resource saving and charitable obligations. The first phase will be on basic workplace safety and payment guarantee (China Daily, December 2005).

§ 13 % of the salaries are lower than the government’s minimum salaries. 8 % did not receive payments on time. Many companies refused to insure their employees. The survey was fulfilled for the Standing Committee of the National People’s Congress (NPC) (China Daily, March 2006).

§ The central government pointed out in a document in January 2006 that “farmer- turned-workers were a new labour- force that has contributed tremendously to urban prosperity, rural development and the country’s modernisation drive” and therefore it is important to pay attention to their situation (China Daily, February 2006).

§ Labour and Social Security Department in some provinces has handed out cards illustrated with pictures and vital information on the Labour Law. The cards contain simple messages in Chinese about labour laws and rights, low wages, inadequate compensation for overtime and injuries in the workplace.

§ 800.000 work-related accidents, 135.000 deaths - 80 % of the victims were migrant workers (China Daily, April 2006).

§ As part of the pledge to improve health of the 200 mill. transient labourers in China (120 mill. migrant workers and 80 mill. farmers working in local enterprises in rural areas) the deputy director of the Ministry of Health has announced that a national survey of occupational diseases will be conducted among migrant workers this year.

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It was also said that they would improve the monitoring of occupational diseases. A critical NGO in Beijing (Culture and Communication Centre for Facilitators) wel- comed the programme but said that the government should also reinforce the legal obligations of employers to hold work safety assessments and training (South China Morning Post, April 2006).

Interviews, observations and seminars

The collection of data has been achieved on the basis of interviews and observations in a total of 12 enterprises. Only two of the contacted enterprises did not wish to partic i- pate at the suggested time. (List of the participating enterprises in annex 2 and 3)

The preliminary study has included an observation of how Danish-owned enterprises handle the working environment and the social responsibility. The question is to which degree:

§ Danish models for environment and safety measures have been applied directly in or as inspiration to the development of tools?

§ To which extent a dialogue has been undertaken with the Chinese sub-suppliers, and to which extent possible requirements on the working environment and the social responsibility have been implemented?

§ Has the Chinese culture and mentality prompted changes or adjustments in the way enterprises normally tackle these issues?

§ Has it been possible to include the Chinese employees in the day-to-day safety efforts in the same way as tradition has done in a Danish enterprise?

§ What differences are prevalent and what is the background?

The aim has been to conduct scanning visits by approaching the above-mentioned Dan- ish-owned enterprises which have all gained relevant experiences and considered the necessary measures in relation to the objectives of the preliminary project. During the visits to the Danish-owned and Chinese enterprises, we have carried out interviews with managers and employees to identify possibilities of promoting and disseminating ideas from the Danish-owned enterprises to the Chinese sub-suppliers.

At seminars with a total of nine participating enterprises, including one Chinese sub- supplier (see annex 4 and 7) the observations from the visits have been presented in Be i- jing and in Suzhou. At the seminars, the enterprises have discussed options for a future co-operation on development activities in line with Global Compact principles.

The purpose of the seminars has been to establish a focus on the guidelines and audit systems that need to be developed to allow Danish-owned enterprises to initiate a development within their Chinese sub-suppliers.

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3 Main impressions from visits to the Danish- owned enterprises and sub-suppliers

Danish-owned enterprises

Three of the Danish-owned enterprises have between 300-600 employees in China and have more than 10 years of experience in the country. They represent the metal and steel works and biochemical industry. One of the Danish-owned enterprises has been here for two years and ha s 75 employees, but expects in the near future to expand the production. All three enterprises belong to a holding company with several enterprises and thousands of employees world-wide. The main reason for being in China - for these companies - is to be close to the market in the Far East.

The six other Danish-owned enterprises have between 40 and 200 employees and produce furniture and components for the metal industry. The cheap labour is the ir main reason for being in China.

The impressions from the Danish-owned enterprises

Observations from the visits to the Danish-owned enterprises:

§ Overall, the enterprises follow the Chinese labour laws, and the ILO-Conventions ratified by China, e.g. the regulation on weekly working hours, the regulation on overtime and Chinese rules of payment for overtime. But the enterprises have diffi- culties in fo llowing the regulation on weekly hours, as the employees (especially the migrant workers) expect to work long hours to keep a higher income. Therefore, the tendency is that working hours are longer than the 48 prescribed by the ILO- regulation. All the enterprises are following the four conventions that China has ratified:

− Discrimination

− Equal remuneration (the equal right to have the same payment for the same work)

− Child labour

− Minimum age - which after Chinese law is 16 years.

Less focus has been given to:

− Right to organise and collective bargaining

− Freedom of association and the protection of association and protection of the right to organise.

§ The Danish-owned enterprises make a great effort to secure a very good relationship with the local government and the authorities. And it is also very important for the enterprises to show that they are very effective, have a high degree of social responsibility and a good external as well as internal environment. ‘Being a good citizen’

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§ Three of the Danish-owned enterprises have implemented - what can be described as

‘a formal working environment and social responsibility system’. Some have signed the Global Compact, and some have an OHAHS 18001 certificate (Occupational Health and Safety Assessments Series Specification) and have implemented ISO 14001. They also use the principles for working assessment (WA) that are demanded in Denmark. These enterprises have - close to - a working environment similar to what is common in production enterprises in Denmark. They have used Danish as well as international models for environment, health and safety.

The other Danish-owned enterprises have - what can be called - a more informal way of handling the working environment and the social responsibility. They do not have a certificate, but to some degree, they are following the same kind of values as the enterprises with a more formal working environment. During visits to the production facilities it was noticed that working environment has been on the agenda, and there are many good solutions, but also that it is not easy to reach the same level as in Denmark. As one puts it: “This is China, and sometimes it is difficult to find the right kind of solutions here”.

The Danish-owned enterprises’ co-operation with sub-suppliers

All the Danish-owned enterprises were interviewed about their co-operation with sub- suppliers. Three of the sub-suppliers were visited. Two of the sub-suppliers have 800- 900 employees, and one sub-supplier had 70 employees. One of the sub-suppliers is in the foundry industry, one is in the metal and steel industry and one in the rubber industry.

The general impressions of co-operation are:

§ In three of the Danis h-owned enterprises there is systematically a formal dialogue with the sub-suppliers about the working environment and the social responsibility.

In six of the Danish-owned enterprises, the dialogue is more informal - and less demanding. Few have developed codes of conducts or tools to ensure that requirements have been implemented.

§ The selected sub-suppliers have a close co-operatio n with the purchasers from the Danish-owned enterprises. The purchasers have contact with the sub-supplier about quality, logistics and principles fo r Global Compact and working environment.

§ The purchasers from the Danish-owned enterprises have frequent contact with the sub-suppliers and have the possibility to observe, control and coach the sub-supplier.

The purchasers have the possibility to influence the sub-supplier, but they lack in- struments and methods to take a more active part in changing the working environment and the social responsibility. They also have potentially conflicting roles as they are expected to negotiate low prices and at the same time demand investment in working cond itions. In three of the companies, this dilemma is being dealt with.

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4 Work organisation, working environment and CSR in Danish-owned enterprises

Work organisation

Various forms of organising work are implemented in the Danish-owned companies:

§ Lean production and just-in-time are implemented in most enterprises.

§ Work is organised around assembly lines where employees often have to put in and take away objects. But quite a lot of the assembly is organised around one or several manual workplaces where the employees are working on a common workflow.

§ In two enterprises, they have group organisation and have experienced that it is possible to implement the same kind of principles as in the Danish enterprise.

§ We have met two points of view about the blue-collar workers:

1) “It is difficult for the workers to be responsible and self-employed”

2) “The workers have an expectation and acceptance of authority, but if you challenge their attitude, it might change their way of behaviour”.

Management and co-operation

§ Almost all production managers and middle managers in the Danish-owned enterprises are Chinese.

§ There tends to be more middle managers than in a similar Danish production. - The span of control is more narrow.

§ Most enterprises have put a lot of efforts into the education of the managers - internal courses as well as courses in Denmark.

§ The challenge has been to overcome reluctance to come forward and take part in discussions and decision-making.

§ Points of view we have met:

1) ”Middle- managers have an acceptance of authority which is difficult to ove r- come.”

2) “They are not happy about taking independent decisions - they want to ask their superior every time”.

Some Danish managers have succeeded in changing this attitude by using a

‘pedagogical problem approach’ instead of providing specific answers.

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Qualifications and organisation

§ It is often said that in the West there are better qualifications and experiences for working together.

1) “Chinese HR staff view this as a problem, which has to be overcome.”

2) “The fact is that the Chinese have not been trained in group work during pri- mary school or at university.”

§ A special demand for training has been observed by some of the enterprises: “The migrant workers have to be confident with the demands in an industrial production - it is very important to make everybody understand high quality”.

§ The dilemma is to educate the employees, because you may lose them to other enterprises. “The Chinese employees care very much about the pay, so if they can be paid better by another enterprise, they will move on”. There have also, however, been blue-collar workers, who have said that an interesting job makes them stay put.

§ The competition between the companies about the qualified employees: ”It is very sought after for a Chinese to be employed with a European or American enterprise and less sought after to be in a Taiwanese, Korean or Chinese enterprise”.

Working environment in the Danish-owned enterprises

Managing the working environment

Three of the Danish-owned enterprises use international standards and certifications like OHSAS 18001 which describe how to manage the environment, and ISO 14001 about managing the working environment. Another guideline used is EHS (Environment, Health and Safety). Workplace Assessment (WA) is used in two companies as an ana- lysing tool in connection with the above described management systems, and they also maintain an internal safety organisation with safety committees and safety representatives. Through the safety organisation, blue-collar workers are included in the day-to- day safety efforts, but as mentioned by several managers, it is not easy to have the same degree of awareness from the blue-collar workers as in a Danish enterprise.

Six of the enterprises have not introduced the safety organisation and the workplace assessment known from Danish enterprises. The impression from observations is that health and safety is on the agenda in the day-to-day safety efforts, but they have not been able to implement new models or tools. The enterprises have not found new ways to include the blue-collar workers in the health and safety work. Many enterprises are very much aware that they cannot implement high product quality unless they maintain a high standard of working environment.

List of examples of working environment in Danish-owned enterprises:

§ The physical factors generally have a high standard with new buildings and layout with lots of space and daylight from windows, which is at a higher standard than in many Danish enterprises. Also the leased buildings have a high standard. However,

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there is need for improvement when it comes to lightning in many of the workplaces.

A special problem is the temperature. Several work areas lack heating and air- conditioning.

§ Many enterprises have assembly lines or workplaces with a great deal of repetitive job-functions, but time pressure is moderate as they often do not have piecework. In many of the workplaces there is a tendency to work too many hours at the same workplace which can have an effect on the workers’ health.

§ In two of the enterprises they are working in production groups where flexibility and responsibility for the production in the group has meant improve ment of the psycho- logical as well as the ergonomic conditions.

§ There are many examples of cranes and lifting systems used to carry heavy burdens to prevent accidents and the blue-collar workers to be worn out.

§ Workplace design and work postures can be improved in most of the workplaces.

§ Protective equipment as earplugs, glasses and safety shoes is available in workplaces where it is needed, but in many workplaces it is not used as often as laid down in the instructions.

§ Enterprises often use the same chemical materials (e.g. imported from Denmark to China) as in their Danish enterprises, for instance water-based glue and lacquer.

§ Welding work demands a special workplace design and ventilation. One enterprise had a satisfactory solution, and another had bought, but not yet installed, a ventilation system.

The listed observations are not complete as the purpose of the visit was to get an overall knowledge and not a factor-oriented information about the working environment.

Corporate Social Responsibility

The reputation in the local area

All the Danish-owned enterprises emphasise that it is very important to have a good reputation and relationship with the authorities in the local areas. It is important to be known as a good citizen being an asset to the local community. There are several exa m- ples from the visited enterprises where Corporate Social Responsibility has been a core issue in the co-operation with the local authorities. The following examples have been mentioned:

§ Employed older people who have been given the sack from some of the closed state- owned enterprises

§ Employed handicapped people in the production

§ Support to school for the blinds - provided the school with touch-typing machines

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§ Support to employees who needed glasses

§ Invitation to the employees’ families, so they can get an introduction to the enterprise - called ‘family days’.

The Danish-owned enterprises also mentioned the close relations hip with the technical schools and universities as examples of how a good reputation can be maintained with the local authorities. It is important for the enterprises to be in touch with the local education system and have this kind of relationship because of the necessity to recruit highly qualified employees.

Social responsibility in relation to the migrant workers or farmers -turn-workers Three of the Danish-owned enterprises face a huge challenge in integrating the migrant workers or so-called farmers-turn-workers from the western part of China.

The migrant workers have been farmers living in rural areas in West China, and when they are employed, they have to learn everything about a modern industrial workplace.

They do not know anyt hing about rules in a workplace; working hours, safety risks, working environment etc. They do not know about Chinese labour laws and health and safety. They have moved to the eastern part of China to earn money to send back to their poor families in the west.

The Danish-owned enterprises have a difficult task as they have to make training ses- sions (programmes) to meet the migrant workers’ need for knowledge about an industrial workplace while at the same time they have to provide them with skills for the job function.

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5 Co-operation between the Danish-owned enter- prises and the sub-suppliers

Co-operation with the sub-suppliers

The Danish-owned enterprises have several sub-suppliers, but the number depends on the kind of production, the degree of outsourcing, size of the enterprise and the sector of industry.

The Danish-owned enterprises choose a sub-supplier on the basis of 1) quality 2) logistics and 3) price. Enterprises also underline that price is very important, “but not at any price”. In the evaluation of the suppliers as regards social as well as environmental is- sues, principles and values from Global Compact, working environment and CSR are to a certain degree used by the purchasers from the Danish-owned enterprises.

The sub-suppliers learn from the Danish-owned enterprises when it comes to produc ing a better quality and develop a better logistic. To some extent they also listen to sugges- tions about development of the social conditions as well as working environment.

Some of the Danish-owned enterprises have experienced different ways of pushing a development forward in co-operation with the sub-suppliers. Managers from the sub- suppliers are invited to meetings, and some also have ‘inspiration-tours’ in the production.

To develop the co-operation between the sub-supplier and the enterprises, two of the enterprises have developed audit forms and codes of conduct followed by education and training of the purchaser as regards how to handle the demands when they visit the sub- supplier. But the audit systems as well as training are still not fully developed.

Working environment and Global Compact at the sub-supplier

Working environment at the sub-suppliers

A common view of the working environment among the Danish-owned enterprises is that they can not expect a level of working environment at the sub-supplier similar to the one in their own productions: “This is China, and we have to accept another level and standard”. At the same time, everybody says: “There is a limit to the kind of work- ing environment we will accept”. As one puts it: “The lowest price is not always the best price”.

The Danish-owned enterprises find some of the following points about working environment very important in the dialogue with the sub-suppliers:

§ Safety risks - for instance dangerous work and shielding of machinery

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First of all, dangerous work - or the risk of accidents in the production - is an important issue for the Danish-owned enterprises in the co-operation with the sub-suppliers. The purchaser or other from the Danish-owned enterprise finds it difficult to judge the safety risk, and several are worried about the safety after the purchaser has left the enterprise.

“Do they use the shield around the machine all the time, or is it only when you visit the sub-supplier? Do they use the masks and the safety shoes all the time?”

§ The sub-suppliers’ awareness of health and safety

To the Danish-owned enterprises it is also important to know the sub-suppliers’ awareness of health and safety. The purchaser observes how the sub-suppliers care about the emplo yees’ health and safety; for instance: Do the blue-collar workers work for 12 hours a day 6 or 7 days a week? Are there any special risks in the production that can course serious health problems, for instance use of heavy burdens, dangerous chemicals, smoke from welding work or dangerous ways of casting iron or steel e.g. spray of hot metals, smoke etc.?

§ Working conditions

Several Danish-owned enterprises have mentioned that it is very important to be aware of the working environment, as otherwise the product quality will be poor. The purchasers have to make sure and to observe that the conditions are acceptable, for instance that there is heating in the wintertime as this can be lacking in China.

Global Compact principles and the sub-suppliers

The Danish-owned enterprises - whether they have implemented it or not - are inspired by Global Compact values in their co-operation with the sub-suppliers. These values supply and - to some degree overlap - the factors of working environment as me ntioned above, and they are mentioned and discussed in relation to the sub-suppliers.

These values are:

§ No child labour

§ Work against corruption

§ Labour standards as working hours, payment on time, health insurance, discrimination and living situation

§ An acceptable environment

§ Free trade unions in the enterprise.

The Danish-owned enterprises do not want to be involved with sub-suppliers that employ children. Everybody is facing problems with corruption and is working against the problem which is very current in China. The labour standard is an important issue in the Danish-owned enterprises, but the enterprises have mentioned that they find it very difficult to demand and observe that the sub-suppliers follow all the labour standards.

Acceptable environment - external as well as interna l - is on the agenda. There is - as mentioned above - awareness of the working environment, and there is also awareness of conditions in the production that can influence the external environment.

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When auditing suppliers, trade unions are not yet on the agenda, as China has not ratified the ILO-regulation on this issue.

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6 Discussion and conclusion

The preliminary project was implemented with the objective of clarifying the possibilities of whether Danish-owned enterprises in China would be able to make a considerable contribution in the development of working environment and job quality at Chinese sub-suppliers. In the framework of UN Global Compact and CSR, visits to nine Danish- owned and three Chinese enterprises were implemented in order to conduct interviews with the management and staff and to make observations during a visit to the production plant. Seminars were subsequently implemented in Suzhou and Tienjin with the visited enterprises, where proposals to the content of a main project based on feedback from the visit were discussed.

The main and unambiguous conclusion is that there is a considerable potential to be ex- ploited as regards improvement of working environment in Chinese enterprises on the basis of a targeted co-operation with Danish-owned enterprises. It is also concluded that there is a need for experience-based material to provide inspiration and support for such a process. Several enterprises have declared interest in participating in a main project.

The strength involved in the usage of sub-supplier chains to initiate development of working environment in a wide context is found in the possibility of creating win-win- situations for both staff and enterprise - coming ’close to business’, as someone put it in one of the seminars. This conclusion conforms perfectly to experiences from development of working environment in Denmark, where it rather self-evident ly has turned out that improvements tend to obtain a better impact and become more robust, when they concurrently produce improvements on the bottom line. This does, however, not imply that every single sub-activity has to be measurable. But it has to be consistent with a general objective, comprising both development of working environment and the enterprise’s result, for instance on the basis of increased productivity, quality and flexibility.

Reduction of absentism and a lower staff turnover also constitute significant factors.

In this connection, development of the working environment - distribution of tasks and the right to make decisions - has received a pivotal role. And the organisation of work tasks has, consequently, received particular attention in the preliminary project. It has been stated that aiming at a development as in a win- win strategy and with a methodo- logical approach similar to the development we have seen in Denmark is rather amb i- tious. Some believe that the traditions on the Chinese labour market and fundamental cultural differences would render staff involvement in the creation of job development with wider job functions and a higher degree of delegation of responsibility impossible.

The perception has been that Chinese production workers (blue-collar) are so authorita- tive by nature that they would “never” take an independent initiative, but will only “do what they’ve been told to do, until they’re asked to do something else”. White-collar workers often give the impression that the only motivating factor is the salary. “If the company next door offers more, they’re gone.”

The implemented interviews and seminars attempted to focus on these themes, as the degree of inflexibility to such views will have decisive impact on the possibility of implementing a Global Compact strategy in the field of working environment.

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Reports indicated that superficially there is “some truth in it”. But there are also exa m- ples proving that if an enterprise makes an effort in implementing the developments, for instance with regard to flexibility, quality and operational safety, it is possible to orga n- ise delegated responsibility, for instance on the basis of group organisation. This has been successfully implemented in the two enterprises (Danfoss and Grundfos) acting as hosts at the seminars. Experience indicates it may require more resources for instance as regards training, and that it may take a little longer than similar change initiatives in Denmark. But experience also shows that the result completely justifies the effort.

Visits to enterprises and seminars have provided confirmation that Danish enterprises can act as model enterprises for development of Chinese workplaces and general innovation as regards workplace conditions.

The preliminary project constitutes the platform for many considerations and ideas related to development in enterprises and on the labour market in a Global Compact context. Provided below is a list containing ideas as to how Danish enterprises can contribute to this development. Some activities primarily aim at supplier systems, while others target the creation of a wider societal understanding of the possibilities to be obtained in the joint development of working environment, job quality and the finances of a bus i- ness. This may be achieved on the basis of a co-operation in the main project with schools, universities and NGOs working with Global Compact issues:

• Demonstration of how mutual learning may be established between Danish- owned and Chinese e nterprises.

Development projects, which may span from six months to a year and a half, are implemented at a sub-supplier, where an audit indicates a possibility and a requirement for development. Importance is attached to working with ’close to business’- activities, which also improve the working environment. Tools include innovation and testing of methods securing a wide staff involvement in the innovation efforts.

The methods are assessed and documented with regard to general application in development work in China.

• Integration of migrant workers from western and central China in the work- place culture focussing on working environment and assuming responsibility.

A qualification survey is implemented in 5-10 enterprises, employing a substantial number of migrant workers. The survey will focus on:

− Roles of workers/managers

− Qualifications

− How to train.

The result shall subsequently constitute the platform for the preparation and testing of a development course. After receiving evaluation from the participants and the enterprise, the course is adapted for general application. The course will target the introduction of migrant workers in enterprises located in the established industrial areas in the East and Danish (and other) enterprises’ establishment of a supplier basis in central and western China. This task is performed in co-operation with Chinese

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• Extending purchasers’ role to following up and coaching sub-suppliers’ pe r- formance within Global Co mpact and CSR.

This dual role is difficult to administer, as purchasers are expected to obtain inexpen- sive supplies, and many working environment activities will presuppose investments at the sub-supplier, even though this frequently may be achieved at surprisingly low costs. There is, however, a growing awareness in Danish enterprises “that the lowest price is not always the right price”, and that the excess price paid provides a return in terms of improved working environment. One purchasing manager stated that five per cent above the lowest possible price is more acceptable and perhaps even more correct.

One proposal for an activity to develop this function was to establish network groups of purchasers from several enterprises. These groups are to be supplied with inputs, and course modules are to be developed and tested with this particular focus on the role of the purchasers.

• Preparation of case material illustrating specific corporate experiences with co- operations on development.

There is a particular focus on working environment and work organisation, but other elements in the UN Global Compact will also be involved.

The material will target staff and management at Chinese as well as western enterprises and can be applied by schools, universities and consultancy firms. The material will take the form of pamphlets, richly illustrated and supplemented with DVDs containing statements from employees and managers. The result achieved with the working environment and the financial result of the enterprise will be illustrated and quantified to the extent possible.

• Development and testing of a prototype for an audit capable of determining whether a sub-supplier matches a given standard as well as identifying im- provement needs and possibilities.

Particularly small and medium-sized enterprises have a profound need for audit systems with less demanding requirements. This system will also take account of the fact that an SME enterprise seldom constitutes a customer large enough to motivate the sub-supplier to employ considerable resources in satisfying special requests.

What is needed are simple scanning systems, possibly in the form of lists illustrating items needing particular attention, and how these items may be made operational in practice. Such a task would ideally benefit considerably if it could be developed in conjunction with the large Danish enterprises having already begun the development of this form of audits, and with SME enterprises dedicated to giving this issue particular attention. Ideally, the system should be adjusted to the individual enterprises’

requirements as well as the differences to be found at the various sub-suppliers in the most developed industrial areas and in enterprises located in the central and western China.

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• Co-operation with universities and engineering schools

Representatives from Danish enterprises may offer their services as guest teachers as regards the theme ’development of business in a Global Compact perspective’. The background for such an activity is that many Danish enterprises want to improve re- cruitment channels for hiring white-collar staff. Reports in the preliminary project from several Chinese employees indicate that the delegating management style prevalent in some of the Danish enterprises, involving assumption of responsibility and less strict conventions, is considered very positive. An interaction with for instance technical schools and engineering schools may accordingly amount to support for a development of future production workers’ awareness of their scope of possibilities as regards improvement in working environment in a bottom line perspective.

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7 Annexes

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Annex 1

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Annex 2

Plan for visit in Suzhou

Tuesday, 21 February

9.30 a.m. JUAL Metal Products (Suzhou) Co., Ltd.

48 Yang Qing Road North LouFeng

Suzhou Industrial Park Contact: Martin Thomsen

Tel.: +86-512 6742 2623 Fax: +86-512 6742 2622 Direct: +86-512 6742 2622 E- mail: mt@jual.dk

2.00 p.m. Administrative Committee of Suzhou National Hi-tech Industrial Park

Investment Promotion Bureau Suzhou New District

Yunhe Road 8, 16th floor Contact: Johnny Holst

Tel: +86-512-68088185 Fax: +86-512-68252478 Mobil: +86-135 0621 0530 E- mail: johnny@snd.gov.cn

Wednesday, 22 February

9.00 a.m. Nilfisk-Advance Suzhou Ltd.

306 Su Hong Zhong Road, Building 2 Suzhou Industrial Park

215021 Suzhou, PRC

Contact: Christian Kühl

Tel. (mobile):+86 139 1313 0262

Tel. (office):+86 512 8918 5656 ext. 888 Fax (office): +86 512 8918 5666

Internet Fax (private): +44 870 135 6298 E- mail: christian.kuhl@nilfisk-advance.cn

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12.00 a.m. Suzhou Shuangrong Rubber and Plastic Co., Ltd.

East Chunshenhu Road

Xiangcheng Economic Development Zone, Suzhou Post Code: 215131

Contact: L.U. Wei

Tel.: +86-512 65451222 Fax: +86-512-65456123 Mobile: 13906211541

2.00 p.m. Flexa (Suzhou) Furniture Products Co., Ltd.

36, Ni Bang Road, Loufeng North Zone SIP, Suzhou

Post Code: 215122

Contact: Morten Johansen Tel.: +86-512 6274 2751 Tel. direct:+86-512 6274 2726 E- mail: mhj@flexa.com.cn

Thursday, 23 February

10.00 a.m. Grundfos Pumps (Suzhou) Ltd.

NO.72 Qinqiu Street Suzhou Industrial Park Suzhou, Jiangsu

Post Code: 215126 Contact: Søren Ishøy

Tel.: +86 512 62831800, ext. 1930 Mobile: +86 13906203137

Fax: +86 512 62831802 E- mail: sishoey@grundfos.com

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Monday, 8 May

9.30 a.m. Vestas Aircoil Cooling Technology (Suzhou) Co., Ltd.

No.369-10, Tayuan Road, FengQiao Civil- Run Sci-Tech Park,

Suzhou New District, Post Code: 215129

Contact: Anders R. Jensen

Tel.: +86 135 0613 6089 Tel - office:+86 512 8816 8913

2.00 p.m. South Denmark Asia Office Huating Building, Office 1801 Laodong Road no. 28

Suzhou 215004

Contact: Christina Maria Hansen Tel. +86 512 686 22161 E- mail: cmh@euvest.com

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Annex 3

Plan for visits in the Beijing area

Monday, 20 March

10.00 a.m. Novozymes China Biotechnology Co. Ltd. ,Tianjin 150 Nanhar Road - TEDA

Tianjin 300457

Contact: Bjarne Ege Hundstrup

Tel.: + 86 22 25322062 Mobile: 0-13902008105

E- mail: BHU@novozymes.com

Afternoon: Visit to a sub-supplier:

Tianjin Xilun Stainless Steel Goods Co., Ltd.

160 Muning Road, 11th Ave. TEDA 300457, Tianjin,

Tel.: +86 22 25293666 Fax: +86 22 25320862 Mobile: +86 1392 000 8828

Tuesday, 21 March 2006

1.00 p.m. Danfoss Tianjin

5 Fu Yuan Wuqing Development Area Tianjin 301700

Contact: Nis-Peter Iwersen

Tel.: 022 8217 7400 Mobile: 137 0122 7641 Fax: 022 8212 6416

E- mail: iwersen@Danfoss.com

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Thursday, 23 March 2006

9.30 a.m. Beijing Innovation Furniture 15 Fengxiang San Yuan, Fengxiang Development Zone Yangsong Town, Huairou District Contact: Yang Jianwei (Jerry)

Tel.: 6167 8558 -306 Fax: 6167 9918.

E- mail: Yang@inno.com.cn Webside: www.inno.cn

2.00 p.m. Eilersen Furniture

Contact: Jens Juul Eilersen

Tel.: 22 29 39 00077\ 2282 1265 31 Mobile, Ivy: 1380 21 87 411 Mobile, Eilersen 0045 2027 6531

Friday, 24 March 2006

10.00 a.m. Tianjin CMT Industry Co., Ltd.

No. 0-10 Tang Han Road Tanggu Development Area Tianjin China Post Code: 300451 Contact: Arnold Chen

Tel.: 86-22-25211445-7 Fax: 86-22-25212977

E- mail: arnochen@tjcmt.com

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Annex 4

Danida Project - Working environment and social responsibility Seminar on:

Co-operation between Danish enterprises and their Chinese suppliers

Objective and contents:

The seminar will focus on possibilities of establishing a co-operation of development with suppliers to cover the environmental as well as the commercial aspect.

As an opening and starting point of debate Danish Technological In- stitute will recapitulate impressions from visits to Danish and Chi- nese enterprises in Suzhou, Beijing and Tianjin.

After lunch, Mr. Soeren Ishoey will offer a tour of the facility to those interested.

Time: Tuesday, 9 May, 09.00 am - 01.00 pm

Venue: Grundfos Pumps 72 Qingqiu Road Suzhou, Jiangsu Tel.: (512) 62831800

Arrangement: The seminar will be held in English. Participation is free.

Registration: By mail to: palle.banke@teknologisk.dk - before 2 May

Program:

09.00: Introduction to the seminar Danish Technological Institute

09.15: Impressions from the enterprise visits to Suzhou, Beijing and Tianjin

Danish Technological Institute

09.40: Audit methods in relation to suppliers Grundfos

10.10: Coffee / tea

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10.30: Thematic presentations and discussions:

1. Selection and development of suppliers

− Contents of an audit?

− Action plans?

− The purchaser’s role?

2. The environmental contents of an audit

− How can an audit contribute to protection of health and safety at the suppliers?

3. Work organisation and job quality - relevant in China?

4. Global Compact and social responsibility (CSR) - how does the theory match practice?

12.00: Lunch

12.30: End of seminar and tour of the facility for those interested

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Annex 5

Danida Project - Working environment and social responsibility Seminar on:

Co-operation between Danish enterprises and their Chinese suppliers

Objective and contents:

The seminar will focus on possibilities of establishing a co-operation of development with suppliers to cover the environmental as well as the commercial aspect.

As an opening and starting point of debate Danish Technological In- stitute will recapitulate impressions from visits to Danish and Chinese enterprises in Suzhou, Beijing and Tianjin.

In connection with the workshop it will be possible to see the new Danfoss facility in Wuqing.

Time: Thursday, 11 May, 12.00 - 04.30 pm

Venue: Danfoss China 5 Fuyuan Road

Wuqing Development Area Tel.: 8622 8217 7403

Program:

12.00: Lunch

12.45: Introduction to the workshop Danish Technological Institute

13.00: Impressions from the enterprise visits to Suzhou, Beijing and Tianjin

Danish Technological Institute

13.20: Danfoss’ audit methods in relation to suppliers Nis-Peter Iwersen, Danfoss

14.00: Coffee / tea

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14.15: Thematic presentations and discussions:

1. Selection and development of suppliers

− Contents of an audit?

− Action plans?

− The purchaser’s role?

2. The environmental contents of an audit

− How can an audit contribute to protection of health and safety at the suppliers?

3. Work organisation and job quality - how to maintain employees?

4. Global Compact and social responsibility (CSR) - corruption, social benefits

16.00: End of workshop and tour of the facility

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Annex 6

Danida Project - Working environment and social responsibility Seminar on:

Co-operation between Danish enterprises and their Chinese suppli- ers

Grundfos 9 May 2006 List of participants:

Company Participants

Flexa (Suzhou) Furniture Products Co., Ltd.

Han Bin Dale Jin

Morten Johansen

Rene Nellemann Pedersen

Grundfos Pumps (Suzhou), Ltd. Soeren Ishoey Yu Jun Isa Liu

Jual Metal Products (Suzhou) Co., Ltd. Kevin Feng Carol He

Martin Thomsen

Nilfisk-Advance Professional Cleaning Equipment (Suzhou) Co., Ltd.

Haidee Huang

Suzhou Shuangrong Rubber and Plastic Co., Ltd

Alvin Lu LU Wei

Vestas Aircoil Cooling Technology (Suz- hou) Co., Ltd.

Helen Pu Chuck Ren

Danish Technological Institute, Human Resources Development

Palle Banke Thomas Hermann Gitte Holm

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Annex 7

Danida Project - Working environment and s ocial responsibility Seminar on:

Co-operation between Danish enterprises and their Chinese suppli- ers

Danfoss 11 May 2006 List of participants:

Company Participants

Danfoss China, Wuqing Nis-Peter Iwersen

Alex Tian

Novo Nordisk (China) Pharmaceuticals Co., Ltd.

Rachel Chen

Christian Fritz Nyeng Larsen (CFG) Shirley Zhao

Eilersen Furniture Libo Shang

Danish Technological Institute, Human Resources Development

Palle Banke Thomas Hermann Gitte Holm

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Annex 8

Coverage of the project in Ugebrevet A4

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Annex 9

Pictures from the visits was used for presentation and introduction to debate at the seminars.

Examples from the presentation:

On-the-job training at a Da- nish-owned enterprise.

Interview with operators at a supplier. They were very sat- isfied with the training course to become a CNC operator.

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The atmosphere at a workplace tells a lot of the environment - and of the workplace’s reliability as a supplier.

Production worker who has been with Grundfos for many years - when asked whether the pay is the reason for this loyalty. He is convinced that he can earn more somewhere else but he values the working environment and job quality.

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Danfoss has arranged a family day with wide staff support, where spouses and children were given the opportunity to see the enterprise and learn about the working environment.

At the Chinese enterprise Shuangrong the operators are testning a new glue mi x- ture in co-operation with the technicians.

Instead of just making assembly work, they hereby take responsibility for their own work materials. This example created interest among the other enterprises at the seminar in Suzhou.

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There is a need to implement simple ergonomic improvements. The pedal is placed wrongly and a fan is not the correct way to remove solding smoke.

Rational painting technique? Even at good workplaces there is a constant need to develop the safety culture.

Working environment and social responsibility