"The widespread forging of records threatens to undermine the aims of the corporate social responsibility movement ." - Financial Times April 22, 2005 "Why Ethical Sourcing Means Show and Tell" by Lauren Foster and Alexandra Harney

"One recent study suggested that nine out of every ten Chinese factories were breaking the law and that seven out of eight were maintaining falsified records of their employment practices." - Neil Kearney, General Secretary of Textiles Global Union

"Huang Xiaobing is a labor compliance auditor from a social auditing company, whose responsibility is to conduct audits on domestic suppliers on behalf of the multinational corporations. However, during these two days of class, his responsibility shifted to teach the factories how to trick auditors of his kind." - Southern Weekly Dec 15, 2005 "Training Course for the Game of Cat & Mice" by Lei Jianqiao

In the past few years we've seen a startling increase in the use of record falsification and the intense coaching and intimidation of workers by factory managers. Although the variables driving factories to resort to such measures are complicated, the objective of such activity is simple; to pass labor compliance audits. Furthermore, an industry of consultants focused on teaching factories how to cheat has sprung up to meet their needs. Although this problem exists in many countries, as one might imagine, the problem is mostly concentrated in countries were intense production of consumer products is taking place. Logically, this coincides with where the bulk of labor compliance auditing takes place. A shortlist of countries where this problem abounds is China , India , Bangladesh , Pakistan , and several Gulf states . This problem also exists in many other countries to some extent.

The percentage of factories that falsify records varies by industry, country, and regional location. Ironically, available data also suggests that the more a factory has been audited the more likely they are to falsify their records. Thus, in the apparel sector the percentage is higher than some other product categories. For the following high risk countries, Level Works estimates the following percentages for factories falsifying their records;

• Field staff not aware of the extent that this problem exists
• Field staff are not properly trained or experienced enough to find evidence
• Field staff feel they need 'smoking gun' evidence to report the issue
• Field staff bribery
• Field staff themselves feel that the buyer/client program is a 'game'
• Chances of field staff being discredited by the factory increases with reporting the issue
• Soft reporting methodology

• Lack of program 'buy in' by vendors/factories
• Endemic corruption
• Blanket implementation of unrealistic expectations & timeframes for remediation
• Sourcing practices that contradict code implementation

• For an average Chinese factory, with 1000 workers, to pay all wages per local law would cost an additional $US 50-60,000 per month
• Many factories don't have the ability to track actual work hours as their compensation system is usually by piece
• Factories in India, Bangladesh, Turkey, China, etc. have slightly different issues they seek to hide via falsifying records
• Some factories create multiples sets of records that will purposely show some wage and hours of work violations to make them seem more realistic

• Data gathered on factory compliance completely distorted
• Risk management benefits of monitoring program lost, as the majority of worker protests can be linked to wage related issues
• Corrective action cycle never begins
• Monitoring $, time and energy wasted
• Internal and external confidence in compliance program diminished

Record falsification is a critical challenge shared by Level Works and our clients, as real corrective action can never begin without addressing it. In meeting this challenge, we must continually evaluate how we uncover such practices (to the extent that we can), report related findings, advise our clients on best practices, and protect workers throughout the process. Below is a short list of action items taken by Level Works to address this issue:

• We guarantee information you can use to make decisions with
• We offer the first scalable Continuous Improvement & Engagement Monitoring (CIEM) program model designed to address record falsification and drive change
• Surveillance auditing services provided
• Focused auditor trainings
• Key Performance Indicator (KPI) tracking team performance related to this issue
• Country specific trend tracking mechanism
• Enhanced auditor anti-bribery integrity program
• Specific reporting guidelines that protect workers