KPMG Study: “Investing in Working Conditions in China is Good for Business”

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KPMG Study: “Investing in Working Conditions in China is Good for Business”

Business case analysis for responsible electronics manufacturing
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New KPMG/IDH/ELEVATE report: Business case analysis for responsible electronics manufacturing” Read more:
Tuesday, July 2, 2013 - 8:00am

CAMPAIGN: IDH Electronics Program

CONTENT: Press Release

July 2, 2013 /3BL Media/ - Manufacturers that invest in working conditions can improve their profit margins and increase their competitive advantage. Recent research by KPMG, commissioned by IDH The Sustainable Trade Initiative, and ELEVATE, indicates that investing in working conditions can provide a return on investment of as little as 4 months for electronics manufacturers in China.

IDH Director, Ted van der Put, said: “While things have certainly improved over time, we have recently been confronted with cases where working conditions do not meet the internationally accepted minimum. This study shows that efforts like creating a better working environment or investing in training can result in an improvement in manufacturers’ bottom line as worker productivity goes up and worker turnover goes down. It’s win-win”. According to the study, the margin improvements can be significant, particularly as a typical manufacturer net margin is about 2%-3%.  

The study was commissioned as part of the IDH Electronics program, the main focus of which is on establishing worker-management dialogue as a means to improving working conditions and facilitating operational efficiency.   KPMG analyzed data gathered from over 70 factories, interviews with factory management teams, and 99 published academic studies on the subject of working conditions. KPMG then built a modeling tool to assess the payback and margin impact resulting from a range of examples of investments in more responsible electronics manufacturing practices.  The report “Business Case Analysis for Responsible Electronics Manufacturing” and demonstration model are available to the public.

 “This report confirms what we are seeing in practice,” says Ian Spaulding, Senior Partner at ELEVATE. “One of the factories we work with installed air conditioning to bring down temperatures in the factory during the summer and the number of faults per worker went down drastically. That’s just one example.”

The report intends to kick-start a constructive conversation between manufacturers and the large electronics brands that buy from them. Says Jerwin Tholen of KPMG in the Netherlands, co-author of the report: “Our report shows examples of business cases for investing in working conditions, with the payback time ranging from 4 to 20 months. At the higher end of this range, manufacturers may be reluctant to invest if they don’t have the commitment from brands to co-invest or at least continue working with them for an extended duration.”

While the effects of investing in working conditions are strongly dependent on the context in which these take place, such as the country and industry sector, the analysis suggests that generally speaking workers who are more engaged, and enjoy better working conditions, are more likely to be more productive and stay longer, which helps to pay for those investments.

In China, where labor supply is becoming increasingly constrained and wages are rising fast, reducing worker turnover is a key competitive advantage for manufacturers. Van der Put: “Improved working conditions can pave the way to a more sophisticated level of manufacturing, in which the focus shifts from costs to skills and adding value.”

IDH and Elevate will continue to work together with IDH Electronics program factory partners to apply this ground breaking business sustainability approach over the course of the next 2 years.  The program goals are to improve social and environmental performance of electronics factories in China focusing on capacity building, going beyond compliance and promoting worker-management dialogue to facilitate a process of continuous improvement.  The program seeks to improve working conditions for 500,000 workers across 100 electronics factories.

The KPMG report is available at

To learn more about the model, and its application please contact IDH, ELEVATE or KPMG (contact details and profiles below etc).


Contact details



IDH Sustainable Trade Initiative



Monique Lempers

+31 624143165

Xiaolei Qian  

+1 (852) 28540818


Jerwin Tholen

+31 206564503






Follow the link to find out more

About IDH

IDH The Sustainable Trade Initiative is a non-profit organisation the brings together front-running companies, civil society organisations and governments in public private partnerships.  These partnerships are designed to transform markets towards more environmentally and socially sustainable production, trade, and consumption.  Founded in 2008 with a match-funding grant from the Dutch government, IDH operates globally in 18 commodity sectors ranging from coffee to aquaculture.   Together with partners, IDH develops, implements, co-funds and monitors innovative business models and then works toward upscaling and mainstreaming the models to make sustainability the norm.


ELEVATE (formerly known as INFACT Global Partners) is a global professional services firm that specializes in supply chain social, environmental and business performance. A recognized industry thought leader, ELEVATE believes that sustained, impactful improvement in social and environmental performance requires sincerity of intent and a responsible balance between maximizing financial return and meeting supplier responsibility requirements.  This “Business Driven Sustainability” is the foundation for ELEVATE’s mission to help brands and retailers design and implement customized programs that provide complete insight into risk and improve supply chain performance.

About KPMG

KPMG is a global network of professional firms providing high-quality services in the field of audit, tax and advisory. We work for a wide range of clients, both national and international organisations. In the complexity of today’s global landscape our clients are demanding more help in solving complex issues, better integration and collaboration across disciplines and faster returns on their investments through value-added partnerships.

KPMG’s Climate Change & Sustainability Services is a global team comprised of over 700 professionals who work in the field of climate change and sustainability – offering advisory, tax and assurance services to both public and private sector organisations.




Keywords: Responsible Business & Employee Engagement | Business Ethics | CSR Reports | CSR payback | IDH | IDH Electronics program | INFACT | Innovation & Technology | KPMG | Level Works | Margin impact

CAMPAIGN: IDH Electronics Program

CONTENT: Press Release