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Source: Boston Review May/June 2013:
http://www.bostonreview.net/BR38.3/ndf_richard_locke_global_brands_labor_justice.php
MAY/JUNE 2013
Lead Essay: Can Global Brands
Create Just Supply Chains?
Richard M. Locke
This article leads off our debate on corporate responsibility for factory
workers.
worker sifts cotton at a factory in Chang’an, Donguan, a major Chinese export manufacturing
hub. / Jia Li
A
When Jia Jingchuan, a 27-year-old electronics worker in Suzhou, China, sought
compensation for the chemical poisoning he suffered at work, he appealed neither to his
employer nor to his government. Instead, he addressed the global brand that purchased the
product he was working on. “We hope Apple will heed to its
corporate social responsibility.”
FORUM RESPONSES
Isaac Shapiro Apple’s
recent supplier-responsibility
report is silent on changes to
its purchasing practices.
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In the past, his appeal would probably have fallen on deaf
ears. But today, throughout the world, buyers in many
industries have acknowledged a degree of responsibility for
workplace conditions in supplier factories and pledged to
ensure that the goods they eventually market are not made
under abusive, dangerous, environmentally degrading, or
otherwise unethical conditions. These businesses have
committed to using private, voluntary regulation to address
labor issues traditionally regulated by government or
unions. And for the most part, the companies have acted on
these commitments.
But have these private efforts improved labor standards?
Not by much. Despite many good faith efforts over the past
fifteen years, private regulation has had limited impact.
Child labor, hazardous working conditions, excessive hours,
and poor wages continue to plague many workplaces in the
developing world, creating scandal and embarrassment for
the global companies that source from these factories and
farms.
That is my reluctant conclusion after a decade studying this
issue. Before I turned my attention to global labor
standards, I was a student of labor and politics in Western
Europe and the United States. I came to the idea of private
regulation with the hope that it might be a new, suppler way
of ensuring workers fair compensation, healthy and safe
conditions, and rights of association.
To test that hope, I began studying Nike because I was
impressed with its commitment to labor standards. After
several years of effort, with many conversations and visits
to corporate headquarters, I convinced the company to
share its factory audit reports and facilitate visits to its
suppliers. Eventually my case study evolved into a fullfledged research project involving the collection, coding,
and analysis of thousands of factory audit reports; more
than 700 interviews with company managers, factory
directors, NGO representatives, and government labor
inspectors; and field research in 120 factories in fourteen
different countries. What began as a study of one company
(Nike) in a particular industry (athletic footwear) grew to
include several global corporations competing in different
industries, with different supply chain dynamics, operating
across numerous national boundaries.
Tim Bartley Even firms
praised for responsibility
flee countries where reforms
are underway.
Jodi L. Short and Michael
W. Toffel Codes of conduct
can support the political
action necessary to improve
conditions.
Gary Gereffi Governments
in big emerging economies
can pressure foreign
companies.
Hannah Jones When human
capital is valued, labor rights
are not far behind.
Pamela
Passman Corruption and
intellectual property theft
also pose ethical challenges
in global supply chains.
Drusilla Brown The threat
of trade sanctions improved
labor conditions a century
ago, and it can again today.
Aseem Prakash We need to
know more about what kinds
of private regulation work
best.
Layna Mosley Companies
should press host-country
governments to enable
freedom of association and
collective bargaining.
Richard M. Locke
repliesUntil the costs and
benefits of doing business
are shared among everyone
involved, innovation will
produce at best limited
results.
But what started in hope ended in disappointment. While I
continue to think that companies have a large responsibility for ensuring good labor
standards, I also have a renewed appreciation for the older idea that ensuring fair treatment
for workers—including real rights of association—is a public responsibility.
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Private, Voluntary Regulation
The challenge of improving global labor standards begins with the complexity of today’s
supply chains.
Consider the production of consumer electronics. Raw materials for electronic components
are extracted, often under harsh working conditions, from mines in Asia and Africa. These
materials are refined and processed in Asia and then sold to Western and Asian companies
that manufacture component parts such as computer chips, batteries, cameras, and circuit
boards. These parts are then assembled, primarily in China, in large factory complexes that
employ hundreds of thousands of workers. The final products are shipped back to
consumer markets that are located principally in developed economies. The shelf life of
these devices is relatively short, and the e-waste generated by consumers who dispose of
their phones and other portable devices in exchange for newer models is, in turn, shipped
back to Asia and Africa.
These new supply chains reflect a shift both in the geography of global manufacturing—
from the advanced industrial states to developing countries—and in the organization of
production. In the past, most brands relied on manufacturers and suppliers located within
their home countries or else were vertically integrated multinational corporations that
owned their subsidiaries in foreign markets. Today, lead firms are coordinating the
production of thousands of independent suppliers located for the most part in developing
countries.
Such changes have had profound implications for labor regulation. For most of the 20th
century, labor standards were regulated largely on a national basis, through a mixture of
laws, union-management negotiations, and company policies. Internationally, the
conventions and technical services of the International Labour Organization (ILO) provided
an additional source of moral authority and advice, though the ILO lacked significant
enforcement power. The emergence of global supply chains stretching across national
borders, from richer to poorer countries, presented a forceful challenge to this model of
regulation.
I began studying Nike because I was
impressed with their commitment to labor
standards. But their efforts ultimately fell
short.
In many cases, the governments of the developing countries hosting these new factories
lacked the institutional capacity to regulate labor, health, safety, and environmental
standards. Moreover, they often intentionally overlooked their own laws for fear of driving
up costs and thereby repelling foreign investment, jobs, and tax revenues.
In the 1990s, in an initial effort to fill the regulatory void, NGOs and others pushed to
include “social clauses” within global trade agreements. These same groups sought to
mobilize consumers in developed countries who would in turn pressure developing
countries to enforce labor laws. These efforts failed: they were blocked by developingcountry governments, which argued that such standards were protectionism with a moral
face. Efforts by the ILO and the United Nations to promote core labor standards through
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the establishment of Decent Work Conventions (2008) and the Global Compact (2000) also
had limited impact because they too lacked enforcement powers.
In the absence of an enforceable system of global justice, private, voluntary regulation
became the dominant approach, promoted by labor rights NGOs and global corporations
alike.
Private, voluntary regulation comes in many forms. The most familiar is a corporate code of
conduct. A global brand—Nike, HP, Apple—develops standards for working conditions,
wages, hours, and health and safety and requires that its suppliers accept those standards.
Private audits are then used to assess factories for compliance with those codes of conduct.
In some cases, outside certifiers label products “sweat free” or “fair trade,” thus signaling to
consumers that the products are made under fair or sustainable conditions.
Heated debates have raged over the specifics of these programs: which standards should be
included in codes of conduct; how factory auditors are trained and selected; how
information generated from factory audits is shared. Yet regardless of the mission, good
will, leadership, organizational design, and even resources underlying private initiatives,
they have all produced limited or mixed results.
Consider Nike. A series of public relations nightmares in the 1990s—involving underpaid
workers in Indonesia, child labor in Cambodia and Pakistan, and poor working conditions
in China and Vietnam—tarnished Nike’s image. At first, Nike managers took a defensive
position, insisting that they were not the employers of the abused workers. But by 1992
Nike formulated its code of conduct, requiring its suppliers to observe some basic labor
standards. After initial efforts fell short, Nike substantially expanded its compliance staff,
invested heavily in the training of its own staff and that of its suppliers, developed more
rigorous auditing protocols, internalized much of the auditing process, worked with thirdparty social auditing companies to double check its own internal audits, and spent millions
of dollars to improve working conditions at its supplier factories. My research collaborators
and I found Nike auditors and compliance staff to be serious, hardworking, and moved by
genuine concern for workers and their rights.
Given all that Nike invested in staff, time, and resources, one might expect that conditions
at their supplier factories improved significantly. But while some factories appear to have
been substantially or fully compliant with Nike’s code of conduct, others have suffered from
persistent problems with wages, work hours, and employee health and safety.
Such disappointing results are common all over the world, in every industry.
“Capability Building”: Promise and Peril
As the shortcomings of the compliance model grew increasingly apparent, analysts and
practitioners began to embrace an alternative approach built around the concept of
capability building.
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Robert Scoble
The capability-building model starts with the observation that factories throughout the
developing world often lack the resources, technical expertise, and management systems
necessary to address the root causes of compliance failures. Whereas the compliance model
sought to deter violations by policing and penalizing factories, capability building aims to
prevent violations by providing the skills, technology, and organizational skills that enable
factories to enforce labor standards on their own. By providing suppliers with the technical
know-how and management systems required to run more efficient businesses, this
approach aims to improve these firms’ financial situations, thus allowing them to invest in
higher wages and better working conditions. At the same time, to keep these factories
running “high-performance” operations, management must also train shop-floor workers to
help identify persistent quality problems.
Capability-building programs envision a mutually reinforcing cycle in which more efficient
plants invest in their workers, who, in turn, promote improvement throughout the factory,
rendering these facilities yet more efficient and thus capable of producing high-quality
goods on time and at cost while also respecting corporate codes of conduct.
According to proponents of this model, the “good” factory auditor behaves very much like
the “good cop”: tough but sensitive to specific situations, using his or her discretion to
promote problem solving and rehabilitation rather than focusing on coercion and
punishment.
These initiatives represent some of the most innovative practices taking place in the arena
of private governance. Yet the capability-building model has also generated very mixed
results that raise serious questions about the extent to which it can lead to sustained and
broadly diffused improvements of working conditions and labor rights.
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Some of the inconsistent results can be explained simply by the way capability-building
programs have been implemented. Programs that involve frequent interactions between
buyers and suppliers as well as a buyer’s commitment to invest in long-term, mutually
beneficial relations with suppliers work better than those that entail limited interactions,
one-shot training sessions, and no sense among the suppliers of long-term commitment.
But, those differences aside, some of the limitations appear deeply rooted in assumptions of
the model itself.
One key assumption is that technical upgrading automatically leads to better working
conditions. Perhaps because industrial upgrading can at times lead to skill development,
supply chain observers often believe such upgrades also yield better wages and working
conditions for factory employees.
Some developing-country governments
overlook their own regulations for fear of
driving away foreign investment.
Yet there are two fundamental problems with this assumption. First, little empirical
evidence suggests that it is true. In their 2010 study of global production networks in India,
Anne Posthuma and Dev Nathan found that economic upgrading has not improved
conditions for lower-tier workers and may reduce job security.
Second, this assumption overlooks the fact that the enforcement of some labor standards
may have little to do with the profitability or technical sophistication of suppliers, but
instead hinges on other social and political factors. For instance, standards regarding
freedom of association have less to do with suppliers’ policies than with workers’ political
rights. Such standards therefore cannot be enforced effectively one factory at a time, no
matter how well managed or technically sophisticated these factories are.
A second assumption of the capability-building model has to do with its simplistic notion of
actor interests. Many capability-building initiatives fail to register the divergent (and at
times competing) interests of the players involved.
Consider the global brands and buyers. They want high-quality products delivered as
quickly and cheaply as possible. They also fear that harsh working conditions could, if
discovered, create scandal and hence risk to their reputation. Yet because they are
competing with one another, they are unwilling to pay extra for improved working
conditions, which could lead to price increases that threaten market share.
Even when individual buyers or brands invest in “supplier responsibility” programs—and
many of them do—some of their upstream business practices drive their suppliers into
production schemes that undermine these very same corporate responsibility efforts.
Global brands and buyers pressure their suppliers to reduce costs, manufacture on shorter
deadlines, and produce a greater variety of products in smaller batches. Suppliers respond
to these demands by paying their workers low wages, limiting their benefits, and insisting
on excessive work hours.
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Workers and developing country governments also express contradictory interests.
Governments have an interest in asserting their sovereignty and protecting the rights and
welfare of their citizens. But even those with the institutional capacities to enforce their own
laws often refuse to do so, or they grant manufacturers regulatory exemptions in order to
create more hospitable business environments. And workers, preferring factory jobs to
whatever work was available in their home villages, are often willing to toil long hours
under stressful conditions. At the same time, they want to be treated fairly, to be paid for
their overtime, and to avoid situations that threaten their safety and health.
The capability-building models assume a win-win scenario in which improvements in some
part of the supply chain—say, increased efficiencies at supplier factories—will translate into
gains for all actors involved. But these gains rarely are evenly distributed; they often
accumulate to the most powerful link in a particular supply chain.
A third assumption of many capability-building programs is that management techniques
produce consistent outcomes regardless of the local context. This ignores how initiatives are
shaped by social, historical, and cultural legacies.
These assumptions have led in many cases to an overly technocratic approach to capability
building, with poor results. Investments in production, work organization, and
management can translate into some improvements in working conditions. But, as HP’s
Focused Improvement Supplier Initiative illustrates, when suppliers are not convinced that
investments in capability building will deliver concrete economic gains, their commitment.
Some suppliers involved in the Initiative could not even recall the content of their training
workshops. Vietnamese suppliers who took part in the ILO’s Factory Improvement
Program cherry picked components of the trainings they were interested in (productivity
and quality) and ignored the rest (workplace relations).
A Tale of Two Factories
If there is a role for capability-building programs in improving labor conditions in global
supply chains, clarifying how their costs and gains are distributed among workers,
suppliers, and brands is key. We must also ask whose capabilities—and which ones—are
most in need of development.
The story of two Mexican Nike suppliers is instructive. The two factories—which, owing to
nondisclosure agreements, cannot be named—have many similarities. Both operate in the
same political and economic environment and are subject to the same labor regulations;
both make apparel; both produce more or less the same products for Nike and other
brands; both are subject to the same code of conduct; both interface with the same Nike
office in Mexico City, which is responsible for coordinating orders and compliance visits to
the factories; and both employ unionized labor.
The two factories received comparable scores when audited by Nike’s compliance staff.
However, they pursued very different approaches under Nike’s capability-building plan.
One factory, let’s call it Plant A, empowered shop-floor workers by giving them voice. The
other, Plant B, aimed to reduce worker voice and discretion. At Plant A, management
invested in training and allowed employees to work in autonomous cells. These workers
often took initiative to solve production-related problems. “We want people here to feel
important,” factory owners reported during our interviews. In contrast, at Plant B, workers
were seen as an “input” to be controlled, a “cost” to be reduced. When we asked the head of
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operations at Plant B what would happen if he could not continue to lower labor costs in the
factory, he replied, “In that case we will move back to Asia.”
National governments—even in poor
countries—are more able to impose their
will on foreign investors than they think.
At Plant A, relations between management and Nike’s local staff were collaborative and
open. Nike managers would visit Plant A about once a month, and the owners of Plant A
were frequently spotted in Nike’s regional office. Nike staff and plant managers went out for
dinner and played golf together. Whenever an issue related to workplace standards arose,
Nike compliance specialists and Plant A management worked together to quickly remediate
it.
Nike production and quality managers also were instrumental in supporting Plant A in its
shift to lean manufacturing, a system of production that enhances productivity and quality
by reorganizing the flow of work, reducing inventory and waste, and promoting worker skill
and voice. Nike not only provided information and technical advice but also moral support
in the form of an implicit agreement to continue sourcing from the plant as it struggled
through its transition. In interviews, managers at Plant A indicated that they saw Nike as a
partner with whom they could collaborate to improve both productivity and working
conditions.
The relationship between Nike’s regional office and Plant B management was more formal
and distant. Plant B received fewer visits to its facilities (which were farther from Mexico
City) and thus much of the communication between the local Nike office and Plant B
occurred over the phone or through email. Management at Plant B saw Nike as a buyer
whose requirements and deadlines it needed to respect in order to receive future orders.
Nike’s local staff, in turn, viewed Plant B as a technically excellent manufacturer whose
commitment to labor standards was weak.
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Conditions for workers varied significantly. At Plant A, workers averaged higher wages than
at Plant B, reported a greater sense of participation in decisions affecting production goals,
and described their work experience as more collaborative. And at Plant A, overtime was
voluntary.
In their study of supplier-buyer relations in China, Stephen Frenkel and Duncan Scott
found that brands develop two distinct types of compliance relationships with their
suppliers: a hands-on, cooperative relationship or a less trusting, arm’s-length
“compliance” relationship.
The arm’s-length relationship between Plant B and Nike is the more common variety.
Brands and suppliers in compliance relationships are often locked in a low-trust trap in
which suppliers claim that brands are sending them mixed messages, insisting on shorter
deadlines, better quality, and lower prices while at the same time policing and admonishing
them for poor working conditions. Brands, in turn, argue that problems associated with
both production and labor standards are the result of their suppliers’ shortsightedness and
lack of professionalism.
The experience at Plant A shows a way out of this trap. Plant A’s model promises benefits
for everyone involved, including workers. But sustaining the model, let alone diffusing it, is
a challenge. And that challenge has as much to do with the business practices of global
buyers and large retailers as with supply chain dynamics. Until these broader practices are
reformed, Plant A will remain the exception rather than the rule.
Retailer and Consumer Pressure
Focusing interventions on the suppliers’ factories ostensibly makes sense: this is where
most labor standards violations occur. But many of those violations are in large part the
result of policies and practices designed and implemented upstream by large retailers and
global buyers. For example, an internal Nike report states:
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One of the biggest root causes of excessive overtime in apparel manufacturing is the large
number of styles factories produce. Every time a factory has to change a style, it reduces
productivity and overall efficiency, adding to the total number of hours of work requested.
Our analysis shows that, among the variables we have direct control over, asking factories
to manufacture too many styles is one of the highest contributors to factory overtime in
apparel.
Indeed, my colleagues and I often heard plant managers lament that several of their labor
problems, especially excessive working hours and mandatory overtime, were due to late or
changed orders from Nike.
This is not just a Nike problem. After years of analyzing audit reports, visiting factories, and
interviewing hundreds of company managers, NGO leaders, local officials, and union
leaders throughout the world, I have come to understand that poor working conditions and
weak labor standards are not only—or even primarily—the result of misguided managerial
practices and behavior in the plants. Rather, they stem from global buyers’ responses to
dynamic market conditions.
The consumer electronics industry perhaps best illustrates the problem. These days,
electronics brands primarily serve individual consumers rather than governments or
institutional users, and keeping consumers interested is especially tough. Brands feel forced
to constantly create new gadgets that will attract buyers, and the result has been
dramatically shortened product life cycles.
In order to maximize market share over such short life cycles, large retailers engage in
constant promotions that rapidly erode selling prices. Price erosion, along with pressure to
carry a broad product assortment, means that retailers do not like to carry large
inventories. Instead, they opt for more frequent shipments, often by air cargo, to meet
consumer demand. This reduces costly inventory and keeps their shelves well stocked with
successful, high-selling products.
At the same time, however, this practice puts an enormous strain on contract
manufacturers to deliver smaller, more customized batches of products as quickly and
cheaply as possible. This balancing act is complicated by the concentration of electronics
retail channels that has occurred in recent years. The top four U.S. consumer electronics
and computer retailers control close to 75 percent of their respective markets. Concentrated
buying power allows retailers to maintain margins, thus forcing price drops on the brands.
Retailers also seek to differentiate their own products from their competitors’ in order to
prevent consumers from shopping around for lower prices, a process facilitated by the
Internet. Again, the pressure falls on suppliers and workers.
Public-Private Partnerships that Work
The limitations of private initiatives will come as no surprise to critics of voluntary
regulation. Critics of private compliance and technocratic capability-building initiatives
have long argued that they are designed not to protect labor rights or improve working
conditions but rather to limit the liability of global brands and prevent damage to their
reputations.
Some of these critics contend that private, voluntary regulation is not simply ineffective and
self-serving but also pernicious, displacing and undermining more thorough government
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regulation. Former U.S. Secretary of Labor Robert Reich nicely summarizes this line of
argument:
A declaration of corporate commitment to social virtue may . . . forestall government legislation or
regulation in an area of public concern where one or more companies have behaved badly, such as
transporting oil carelessly and causing a major oil spill or flagrantly failing to respect human rights abroad.
The soothing promise of responsibility can deflect public attention from the need for stricter laws and
regulations or convince the public that there’s no problem to begin with.
Improving global working conditions requires government action, since only the state has
the authority and legitimacy to enforce labor legislation and to promote and protect
citizens’ rights. Thus, even as manufacturing stretches across national borders, the fate of
workers remains tied to their home countries’ institutions.
But private, voluntary regulatory efforts do not necessarily crowd out or undermine state
enforcement of labor laws and employment standards. Under certain circumstances,
private projects can complement and even enhance government enforcement. For instance,
Nike’s private compliance program works best in countries with more developed labor
inspection schemes and strong rule of law.
Other researchers working on both labor and environmental standards have found similar
results. According to David Graham and Ngaire Woods, governments in developed and
developing countries can enhance the effectiveness of corporate self-regulation by insisting
upon—and perhaps even legislating—greater transparency and accountability among global
buyers and their suppliers. Those governments can demand that the rights of workers to
organize and mobilize be protected. Only in these circumstances can the promise of private,
voluntary regulation be fulfilled.
Earlier I suggested that national governments, especially in developing countries, have
declined to regulate labor standards as a consequence of competition for investment.
However, recent research shows that national governments—even in poor countries with
few natural resources—have far more ability to impose their will on foreign investors than
was previously believed. Where buyers and suppliers have incentives to circumvent
regulations that increase their costs, national governments are best positioned to prevent
defections by individual firms and ensure that all producers within the same national or
regional economy adhere to common standards. Yet how does one promote this type of
government intervention in a world of global supply chains?
In explaining the features of what they call “experimentalist governance,” Charles Sabel and
Jonathan Zeitlin describe a process in which government agencies collaborate with the
private companies they regulate in order to develop broad goals and metrics. These goals
and metrics are then used to promote responsiveness to variation in local circumstances,
learning and diffusion of best practices across private and public actors, and everincreasing compliance with government regulations. Using this framework, European
governments have been able to foster enhanced environmental standards both within the
European Union and among developing countries supplying forestry products to Europe.
Matthew Potoski and Aseem Prakash describe a similar process within the United States, in
which innovative state-level policies, such as lenient penalties in exchange for transparency
and self-disclosure, have encouraged private firms to enhance their compliance with
environmental regulations. These sorts of innovations are not limited to the United States
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and Europe but have also emerged in several developing countries, including Argentina,
Brazil, Cambodia, and India.
In each of these cases, national governments were able to promote labor and environmental
standards by reconciling the competing interests of, and resolving the collective action
problems among, offending private firms. This process involved not traditional commandand-control government regulation (deterrence) but rather a mix of carrots (capability
building and technical assistance programs) and sticks (threatening sanctions and closing
off “low road” options).
We need more analysis of innovative public regulation, but we already know that laws and
government institutions are critical to the success of private initiatives seeking to improve
labor conditions in global supply chains.
This essay is adapted from Richard Locke’s The Promise and Limits of Private Power: Promoting Labor Standards in a Global
Economy, published this month.
Response:
What NGOs Can Do
Isaac Shapiro
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Isaac Shapiro
Having spent much of the past year writing about working conditions at Apple’s supplier
factories in China, I couldn’t help but read Richard Locke’s informative essay with Apple in
mind.
Using Nike as his primary case study, Locke concludes that the efforts of private companies
to improve labor standards have had little effect. This failure can be partly explained by the
mixed motivations of private companies, as their interests in improving labor standards are
often in conflict with their interests in extraordinarily tight production schedules and low
costs. Parallels with Apple abound.
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As with Nike, Apple’s intensified commitment to improving labor standards has largely
been driven by the desire to avoid further bad publicity—in Apple’s case, a series of highprofile stories in the New York Times and other publications describing the brutal living
and working conditions faced by the people making its popular and lucrative (for Apple)
products. As with Nike, Apple’s primary response has been private regulation: the company
is pushing for reform itself, through a code of conduct, audits, and direct pressure on its
suppliers.
The Nike results, according to Locke: “while some factories appear to have been
substantially or fully compliant with Nike’s code of conduct, others have suffered from
persistent problems with wages, work hours, and employee health and safety.” The Apple
results to date, according to a recent analysis of Apple’s latest supplier-responsibility report,
which I coauthored with Scott Nova of the Worker Rights Consortium: “Apple’s own data
from this and previous reports demonstrate that the rights of workers continue to be
violated on a routine basis in Apple’s supply chain, and it is not clear that the modest
progress reported shows Apple to be on a path to deeper reform.”
Locke’s article points to the underlying cause of private regulation’s failure: the conflicting
interests of the companies themselves. Locke’s general concern applies to Apple. At the
same time Apple has publicly emphasized its seriousness about improving labor standards,
it has continued to use supply chain practices, such as excessively burdensome production
schedules, that undermine such standards. And in this regard, Apple is not forthcoming. Its
recent supplier-responsibility report is silent on potential changes to its own purchasing
practices.
Apple’s recent supplier-responsibility
report is silent on changes to its
purchasing practices.
Most of Apple’s major reforms are scheduled to begin in July, so we cannot yet be sure what
progress the company will make. Will Apple deliver the decent working conditions that
Nike has failed to produce? Locke ends his essay by recommending government action as a
means of reform. But while governmental support of labor standards would be welcome,
with most of Apple’s production occurring in China, that option does not provide much
hope in this instance, particularly in the near term.
Instead, beyond Apple reforming its own supply chain practices or buying from factories in
countries that uphold labor standards, the most fruitful path is one given only modest
consideration by Locke. That is, to establish a role for workers and NGOs whose interests in
improving labor standards are not as complex as those of a buyer or supplier, nor as
tenuous as those of even a progressive government.
In China in particular, where freedom of expression is limited and real unions do not exist,
empowering independent, strong voices is a gigantic challenge. But Apple and others could
take significant steps in this direction.
Brands could insist that their suppliers establish genuine bargaining rights for their
workers and allow truly democratic elections of worker representatives at the factory level.
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Brands could participate directly in the bargaining process, ensuring that workers’
perspectives are included.
Apple and other companies could also commit to reforms by codifying them in an
enforceable, binding agreement with international worker representatives.
And brands could engage with and pay heed to NGOs such as China Labor Watch and Hong
Kong–based Students and Scholars Against Corporate Misbehavior. These NGOs are fully
independent and for years have reported on working conditions at Chinese suppliers while
also recommending reforms.
Locke’s review of the past two decades of efforts to advance labor standards is illuminating,
but his conclusion that renewed governmental effort offers the best path to reform is
incomplete. Progress will require activity across the board. Serious private regulation and
governmental reforms, where feasible, are necessary, but unless global brands such as
Apple seriously engage with independent voices representing the interests of workers,
progress on labor standards will likely remain meager.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
Buy Slow Goods
Tim Bartley
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Tim Bartley
Bravo to Richard Locke for pinpointing the limitations of private, voluntary labor
regulation and suggesting a new way forward. Recent deadly fires in Bangladeshi and
Pakistani apparel factories, which were subject to codes of conduct or international
certification, illustrate the failure of private, voluntary efforts to eliminate basic safety
threats. Locke also shows how sophisticated auditing and capability-building projects are
undermined by sourcing practices and technocratic conceptions of upgrading. But one can
go further in diagnosing these problems and assessing governments’ roles.
Many of the pitfalls Locke documents reflect a deeper but largely ignored problem with
expectations for corporate social responsibility (CSR). Voluntary programs tend to ask for
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improved conditions within factories but bracket what goes on outside the factory walls.
This includes upstream ordering practices and the impact of the host country on factory
conditions. Little attention is paid to the rights and status of workers in particular places
and the movement of orders from one place to another. Where firms produce is important
but rarely part of the formalistic way in which social responsibility is evaluated. Brands and
retailers in some industries, especially apparel, move their orders among countries, shifting
from Mexico and Central America to China, and then back-and-forth between Asian
countries as wages fluctuate. More are going to Bangladesh and Pakistan, where working
conditions are dire and regulation is minimal. The rapid movement of orders has damaged
many local organizing efforts. Perversely, brands have been praised for their CSR programs
while simultaneously gravitating toward settings where their codes of conduct are
extremely difficult to implement.
If we want the private sector—whether on its own or nudged by public policy—to uphold
labor standards, then we must be more attentive to the places where goods are produced
and demand more patient forms of production. A “slow goods” movement would involve
both fewer changes to the products themselves, as Locke suggests, and a lower likelihood of
firms fleeing countries where reforms are underway. Some countries in Latin America and
Asia have improved labor inspection and laws, made space for unions, and helped workers
learn their rights, but these reforms are at best ignored and at worst diluted by the current
practice of CSR.
Even firms praised for responsibility flee
countries where reforms are underway.
The dual challenge is to encourage private regulation to recognize national differences and
to create public policy that effectively governs global supply chains. Locke stresses the latter
but does not consider how some public policies reproduce rather than correct the errors of
private, voluntary initiatives. The Environmental Protection Agency’s voluntary programs,
for instance, often have more carrots than sticks or rely on ineffectual commitments by
firms. The 2010 California Transparency in Supply Chains Act pressures retailers and
manufacturers to address human trafficking in their supply chains, but the law only
requires firms to report on their risk-assessment methods. It does not penalize the sale of
goods connected to human trafficking or require firms to report on the locations of their
suppliers, despite clear evidence in State and Labor Department reports that the risks are
greater in some places and for some products. In effect, this is a case of public policy
promoting the same kind of narrow CSR that Locke has found to be lacking, even if well
meaning.
A new regime to combat illegal logging provides a more promising model. Growing from an
EU project to improve forest law enforcement in developing countries, the new timber
regime allows for hard penalties against companies in the European Union or United States
if their suppliers violate laws in the countries they source from, requires these companies to
exercise due diligence in tracking their supply chains, and seeks to improve timber licensing
systems in tropical timber-exporting countries. Here, public policy leverages private risk
assessment but also wields a sizable stick and prioritizes domestic legal compliance.
Many question the calls for greater state involvement, including whether they clash with
World Trade Organization (WTO) rules. There is no doubt that the WTO limits the range of
regulatory options, but it also contains largely untested exceptions for the protection of
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human health and “public morals” and to prevent the exploitation of prison labor. And the
WTO does not prohibit bilateral projects to upgrade labor law and enforcement capacity, as
some trade agreements have done. Hopefully, Locke’s findings will spur a new round of
debate about states’ roles and capacities and help to get past technocratic, decontextualized views of CSR.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
Promoting Political Mobilization
Jodi L. Short and Michael W. Toffel
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Jodi L. Short (top) and Michael W. Toffel
Richard Locke concludes that the private regulatory efforts of multinational companies,
particularly codes of conduct, have not done much to improve labor standards. But while
these codes might not affect overall labor standards in the countries where they have been
deployed, we think these efforts should be judged in light of their own narrower objectives
and the broader role they play in the public and private politics of transnational labor
regulation.
At a minimum, codes of conduct enable multinationals to carry out audits that concretely
measure their suppliers’ adherence to international labor standards. This provides a
valuable sorting mechanism for global buyers seeking suppliers that can meet such
standards. Beyond that, codes of conduct have furnished a discourse of commitment to
improved working conditions and a potential source of legal liability that activists have used
against companies whose suppliers treat their workers badly. Taken together, these features
of codes can support the political action necessary to improve labor conditions around the
world.
Multinational companies did not create supplier codes of conduct in order to improve labor
conditions in general, but rather to align the workplace conditions of outsourced
production facilities with international standards and, in doing so, to protect their own
reputations. Multinationals can foster such alignment by using audits to identify poorly
conforming suppliers and then demanding better performance, replacing suppliers that fail
to improve. Our analysis of code-of-conduct audits at tens of thousands of factories around
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the world, across a variety of industries and on behalf of thousands of clients, indicates that
working conditions are improving in supplier factories subject to audits. On average, the
number of violations at these factories declined significantly in successive audits. This
finding holds up across regions and within industries such as apparel, and in the more
capital-intensive electronics and printing industries. So we are more optimistic than Locke
is about this dimension of the benefits of private regulation.
Codes of conduct can support the political
action necessary to improve conditions.
We strongly support Locke’s call for governance approaches that combine the different
strengths of public and private regulation, but we see codes playing an important role in
these regulatory regimes. Our own preliminary findings indicate greater adherence to
standards at factories located in countries that have assumed significant obligations under
international labor treaties, especially when those countries have enacted more stringent
domestic labor law as well. We also find greater adherence among factories in countries
where domestic political and legal regimes are mutually reinforced by robust civil society
institutions, such as a free press and a large population of international NGOs.
The efficacy of these governmental and private political institutions in promoting
adherence to international labor standards likewise suggests how codes might be useful
beyond their specific contexts. Multinationals deploy codes of conduct for the limited
purpose of monitoring their own suppliers, but the codes create possibilities for political
mobilization that can improve labor conditions more broadly. First, by measuring
adherence to international labor standards, codes of conduct have brought to light
problematic workplace conditions in global supply chains that were long hidden. Second,
codes of conduct provide tools that can be used to organize politically and advocate for
better labor conditions, or to enhance the efficacy of existing governmental labor
regulation. César Rodriguez-Garavito, for instance, has described how labor activists use
codes of conduct in cross-border organizing campaigns to pressure multinational
companies and governments to work together to resolve labor disputes at factories in
Central America. And Matthew Amengual has found that audits conducted under private
codes of conduct can complement state-based labor inspections, reinforcing governmental
efforts to improve labor conditions.
Finally, workers and other stakeholders have attempted to use codes of conduct as a basis
for establishing legal liability when multinationals fail to live up to the commitments the
codes embody. Factory workers from China, Bangladesh, and Indonesia sued Walmart for
violating obligations they argued were owed them under Walmart’s code of conduct. And
the University of Wisconsin has sued Adidas for failing to adhere to the terms of a supplier
code of conduct imposed at the university’s request. While such legal claims have thus far
been unsuccessful, they are important tools in the political struggle for international labor
rights, and they are made possible by multinationals’ embrace of codes.
Governments and international organizations have failed for decades to improve working
conditions in global supply chains. Even if private codes of conduct likewise fail to improve
labor standards overall, they can promote the kind of political mobilization that may
eventually improve labor conditions. And, for now, they can help conscientious companies
identify suppliers that meet their standards.
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To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
Host Countries Can Act
Gary Gereffi
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Gary Gereffi
Richard Locke highlights the many challenges of trying to improve working conditions and
labor standards in a world dominated by global supply chains. Using sophisticated research
designs and unparalleled access to corporate audit reports, Locke shows how both the
compliance model of private, voluntary regulation and the alternative capability-building
approach have serious limitations. And he advocates a renewed emphasis on government
intervention and public regulation to transform the situation of workers in a more
sustainable way.
I largely agree with Locke’s conclusion that the most effective way to better global working
conditions probably requires linking public, private, and social forms of governance. But his
analysis tends to shortchange the shifts that have been occurring in both global supply
chains and the private governance regimes to which they have given rise. These need to be
taken into account more fully.
Today’s leading multinational firms are doing things differently than they used to. They are
seeking a much smaller number of larger, more capable, and strategically located suppliers.
Supply chain production hubs are concentrating in big emerging economies, both because
of their abundant supply of workers and local manufacturers and also because of their
expanding domestic markets. And South-South trade, especially since the 2008–2009
global economic recession dramatically slowed exports to advanced industrial markets, is
growing.
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Governments in big emerging economies
can pressure foreign companies.
Because of these trends in the structure and dynamics of global supply chains, the
information and power asymmetries that characterized “buyer-driven” chains have
diminished. In addition, the principal countries in which these supply chains are
concentrated—such as China, India, Brazil, Indonesia, and South Africa—now have greater
capacity to pressure foreign companies for changes that benefit local interests.
The private governance regimes that Locke discusses have also taken on new characteristics
over time. Corporate codes of conduct have evolved since the early 1990s, when companies
such as Levi Strauss and Nike unilaterally declared their own. We no longer need rely on
that “first-party certification.” There are now more elaborate mechanisms, including
second-party certification led by industry or trade associations, such as the chemical
industry’s global Responsible Care program; third-party certification, involving an external
group, often an NGO, imposing its rules and compliance methods on a particular firm or
industry; and fourth-party certification, in which government or multilateral agencies, such
as the United Nations’ Global Compact or the International Labour Organization’s Better
Work Program, list environmental, labor, and human rights principles for companies to
follow. Each of these private governance regimes has in turn given rise to monitoring and
reporting schemes that incorporate a broad range of NGOs, public auditing firms, and other
civil society organizations. Host countries are now better able to identify and respond to
problems raised by global supply chains operating within their borders.
In the context of these changes, a new wave of research is exploring how economic and
social upgrading in global supply chains might come together and be mutually reinforcing.
This work clearly shows how in today’s highly competitive global economic environment,
socially responsible behavior requires government willingness and capacity to act, along
with sustained social pressure.
A telling example is the Apple and Foxconn case in China. Despite repeated complaints and
several exposés about the treatment of workers in Foxconn’s giant assembly plants for
Apple’s iPhones and other products, Apple refused to act. Then, in early 2012, Foxconn
announced significant wage increases, opened its factories to a camera crew from
ABC’sNightline, and brought in the Fair Labor Association to audit and report on working
conditions. This change did not come about because of corporate codes of conduct or any
other single factor, but rather through what could be termed “synergistic governance.”
Codes of conduct by Apple and Foxconn were supplemented by the active involvement of
the Chinese government, which has mandated minimum wages; the persistent pressure
exerted by international NGOs; and, not least, a more aggressive stance by Chinese workers
in Foxconn’s factories who asserted their demands in multiple ways, including a wellpublicized spate of worker suicides.
While extreme, the Foxconn experience is not unique. It speaks to the kind of coordinated
efforts that are required to improve labor standards in the global economy.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
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Response:
A New Conversation on
Responsibility
Hannah Jones
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Hannah Jones
The world today is more complex and volatile than ever. The cadences of uncertainty and
need have increased around the world, affecting communities, employers, governments,
workers, and economies in new ways. Change has never happened so fast in some
respects—and yet not fast enough in others.
That matters because, today, we must have a new conversation. For too long, our
conversations have been confined to silos. An environmental conversation. An economic
conversation. A labor-rights conversation.
Now, we need to expand the conversation to cover the issue of labor rights in supply chains
within the context of rapid shifts in economics, politics, human capital, the environment,
and technology.
The work of the past two decades by unions, some business leaders, academics, NGOs, and
institutions such as the International Labour Organization has positively affected factory
conditions. But as Richard Locke demonstrates, and as we at Nike are the first to
acknowledge, the industry as a whole is still a long way from supply chains qualifying as
consistently good. The gains we’ve made are fragile, especially considering that these supply
chains were not built to cope with the volatility and pace of change we now see across the
world.
Change has a ripple effect. That means the factory worker is more vulnerable. She became
vulnerable in the 2009 recession when, practically overnight, factories closed their doors,
and severance and health laws failed to protect her. She became vulnerable when severe
weather flooded factories and drove cotton prices up nearly 300 percent in just two years.
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When human capital is valued, labor rights
are not far behind.
But these changes also make her more valuable. In many countries labor is no longer a
plentiful resource; it’s a competitive market. The demands of innovation mean trained and
skilled workers are more valued by factory owners. Workers are now better informed and
have access to technology, and a choice of jobs.
Change occurs unevenly. Many apparel and footwear manufacturers still don’t think about
the hidden costs of a poorly managed, disempowered workforce or a factory reliant on
wasteful processes that can result in higher operating costs, lower product quality, and
excessive worker turnover. Many manufacturers remain wedded to a model of low-cost,
transactional, commoditized production. In the face of rapid changes and stressed systems,
and in countries that may not adequately enforce the rule of law, labor rights are most
vulnerable.
At the same time, another pathway is emerging. Informed factory managers and brand
leaders are recognizing that the future of competitive, successful supply chains depends on
higher-skilled and valued workers, and on manufacturing processes and new technology
that eliminate water, energy, and waste. This transforms the relationship between the buyer
and supplier, leading to joint investments in innovation and a fundamental shift from a
transactional relationship to a collaborative one. When human capital is valued, labor
rights are not far behind.
That is our vision of Nike’s supply chain. We expect to work with mature, well-governed
companies running lean, green, and empowered factories. The people who run our contract
factories all know this now.
As part of that vision, Nike has spent three years building a new approach to measuring
factory performance starting with a clear set of performance indicators. We’re now beta
testing our Manufacturing Index, which elevates the importance of sustainable
manufacturing practices. According to the Index, a factory’s labor and environmental
performance is equal in importance to quality, on-time delivery, and cost. The Index
enables us to reward contract factories that score consistently well across all categories with
investment in areas such as innovation technology, management capability building, and
environmental programs. As we test and learn from the implementation of such new tools,
we are committed to transparency in our work to help improve, scale up, and accelerate
change across the industry. We voluntarily report on our progress and our challenges in our
sustainability report available at nikeresponsibility.com.
Advocates for change approach labor-rights challenges from different perspectives. But
whether we are pursuing growth, profits, flows of capital, freedom of association, jobs,
equitable income, or economic development, here’s the reality: only innovation will make
the difference because these issues are simply too big and complex for Nike or any one
business to address on its own. We need coalitions to drive systemic change at scale. We
also need to redesign the incentives to create changes that benefit workers, factories,
communities, and companies.
Let’s start by having a new conversation.
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To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
Fighting Corruption
Pamela Passman
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Pamela Passman
Over the past three decades, international commerce has jumped sevenfold. As Richard
Locke suggests, government and industry must work both independently and together to
drive improvements in working conditions and create a culture of compliance that benefits
all.
But labor standards are not the only ethical challenge that global supply chains create for
governance. The organization I lead—the Center for Responsible Enterprise and Trade
(CREATe.org)—works with global companies and their supply chain partners on two
different but related issues: protection of intellectual property (IP) and the prevention of
corruption. Companies face increasing challenges due to trade-secret theft, piracy,
counterfeiting of goods, and incorporation of counterfeit components into products.
Corruption increases liabilities and costs for companies. IP theft and corruption both
contribute to an unethical business environment that can have implications for workers and
companies alike.
Over the past eighteen months, we’ve worked on these issues with contributors from more
than a hundred global companies, think tanks, and academic initiatives. We have launched
a pilot program of best practices—CREATe Leading Practices—with participating
companies and suppliers in China, India, Brazil, the United States, and Europe. These
experiences yield insights relevant to Locke’s research.
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First, I agree with Locke that the kind of collaboration and management techniques in place
at Nike Plant A are fundamental to capability building: management had ongoing dialogue
with workers, invested in training, and provided advice and a framework for improvement.
At CREATe, we take the same approach to protect IP and prevent corruption. Suppliers who
have participated in the pilot have welcomed our approach because it helps position them
competitively and enables them to build management systems in line with leading
practices. We found, as Locke did, that focusing on evolving management systems and
employee engagement, rather than strict compliance, is key. This creates more
transparency and dialog among the companies, which is critical to progress.
The collaborative approach is especially useful for combating IP theft and corruption.
Historically, labor compliance has been focused on upstream suppliers, with buyers seeking
to mitigate their risk by asking their suppliers to comply. Thus labor-compliance programs
took shape around buyers’ initiatives. In the cases of IP protection and corruption
prevention, the challenges are both upstream and downstream.
Corruption and intellectual property theft
also pose challenges in global supply
chains.
Indeed, SCM World’s 2012 Chief Supply Chain Officer Report points out that the best way
to improve compliance among suppliers is “not more compliance audits, but to collaborate
with suppliers so that they benefit from [social and environmental responsibility]
improvements.”
Second, industry has an important role to play by providing expertise and leverage. Global
companies have spent decades building management systems and best practices for IP
protection and anti-corruption. Sharing these approaches with suppliers in regions with
weak rule of law and where business systems are still evolving provides benefits for both
sides. It enables companies to reduce the risk of IP theft and corruption, and suppliers gain
competitive advantage. Becoming a more trusted partner also paves the way for highervalue collaborations.
Ultimately, the challenge for industry is creating more collaborations like Nike’s with Plant
A—in a scalable and cost-effective manner. Sharing best practices on management systems
and employee engagement needs to be central to this effort, whether the concern is labor
standards, IP protection, or corruption safeguards.
Governments, too, have a role to play. Existing laws in many countries already cover these
issues. As Locke points out, the reason industry has stepped in is that enforcement is
inconsistent. Governments from many emerging economies are starting to get serious
about IP protection and anti-corruption, in part due to global pressure, but also in response
to local companies trying to protect their own innovations and hoping to compete on a
global scale. Through research and investment, governments can support the cultural shift
toward ethical and responsible business practices.
Supply chains are part of the vast global web that supports trade, economies, and
companies. Each player involved—governments, brands, suppliers—can promote more
ethical and responsible business practices.
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To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
The Second Sweatshop Century
Drusilla Brown
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
We are now well into the second sweatshop century. As with the first, we have horrific
human rights violations in global supply chains, consumer boycotts, and corporate codes of
conduct. Our responses to and understanding of sweatshops at the start of the 21st century
bear a striking resemblance to those at the start of the 20th.
I share Richard Locke’s view that consumer-product labels, corporate codes of conduct,
capacity building, technical upgrading, and buyer-funded humanitarian interventions have
had limited effect. In a perfect world (albeit, one with sweatshops), the proper place to seat
the protection of labor would be with unions and local law. Yet, being the incurable optimist
that I am, I would like to offer a somewhat more hopeful spin on the current, seemingly
bleak state of affairs.
Locke rightly focuses on a deficit in managerial capital in sweatshops. Powerful evidence of
these deficits comes from a recent study of Indian textile factories. An improvement in
basic managerial practices—removing information barriers concerning inventory
management and production-floor organization—increased profits by 17 percent. When it
comes to managing workers in particular, the most obvious efficiency gains occur when
firms begin to pay workers as promised rather than engaging in deceptive pay practices.
High-powered pay incentives are effective in motivating improved work effort.
Consider a second example: sexual harassment. Harassers weaken firm performance by
lowering morale, inhibiting communication, and increasing workforce turnover. Sexual
harassment arises most commonly in factories with multiple management failures.
Misaligned incentives and a lack of organizational awareness are significant contributing
factors. Misalignment occurs when workers are paid based on a production quota, while
production supervisors are paid by the hour. In such a situation, the supervisor has both the
opportunity and the motivation to extract bribes or sexual favors from subordinates in
exchange for positive performance evaluations.
The threat of trade sanctions improved
labor conditions a century ago, and it can
again today.
The capability-building theory fails to rectify such deficits in firm performance because
corporate compliance personnel do not have the expertise to diagnose and remedy humanresource management defects. The quality-upgrading theory fails because the managerial
skills required for producing good products are only weakly related to the managerial skills
necessary to create a humane work environment.
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Which brings us to enforcement. During the 19th century, a country could force compliance
with labor standards by threatening a trade war with any partner that used weak labor
protections to gain an export advantage. Today the threat of retaliation is limited for
members of the World Trade Organization (WTO) by the 1996 Singapore Ministerial
Declaration. However, there is a loophole in the WTO Charter. By invoking Article XXIV of
the Charter, covering special and differential treatment, countries establishing preferential
trade agreements can require that trading partners comply with labor standards.
Operating under this Article, the United States managed to enforce International Labour
Organization (ILO) standards in the 1999 U.S.-Cambodia Bilateral Textile Trade
Agreement. The United States provided Cambodia access to U.S. markets by offering
expanded apparel and textile quotas conditional on improved working conditions in the
garment sector.
In an analysis of the ILO’s Better Factories Cambodia (BFC) program, my colleagues and I
have found that BFC assessments increased compliance significantly beyond that achieved
by the private efforts of reputation-sensitive buyers. After four assessments, lowcompliance factories caught up with high-compliance factories. The threat of public
disclosure deterred any retrogression in compliance, even at factories that were not selling
to a reputation-sensitive buyer. And BFC-induced compliance lowered the probability of
plant closure.
Our research supports the conjecture that the ILO has the capacity to enforce labor
standards when they are accompanied by the threat of trade sanctions. And it appears that
assessments encourage factories to experiment with human resource–management
innovations that are both humane and profitable.
So we have come full circle. Our understanding of sweatshops is perhaps more nuanced
now than it was during the first sweatshop century, but the fundamental lessons from that
era are still true today. The labor compact that arose across Europe at the end of the 19th
century was the product of internationally coordinated labor standards enforced through
the threat of trade sanctions, which had the remarkable effect of driving technological
change and raising labor productivity enough to justify the higher wages and better working
conditions required by domestic labor law. Hence my optimism.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
The World Is Not Scandinavia
Aseem Prakash
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
26
Aseem Prakash
Richard Locke’s balanced and thoughtful commentary on improving labor standards in
global supply chains correctly identifies the shortcomings of private regulation—both the
overemphasis on the compliance model and a naïve belief in capability-building solutions.
And he recognizes the roles of upstream pressures and customers in creating challenges for
downstream suppliers. Locke has a “renewed appreciation for the older idea that ensuring
fair treatment of workers—including real rights of association—is a public responsibility,”
and he believes that public regulation is required to ensure fair treatment of workers in
developing countries.
In an ideal world, I would completely agree with Locke’s prescription. If every country were
a well-functioning democracy, where the government had the will and capacity to enforce
labor laws, where public corruption was low and social equality prevailed, and where the
labor force largely worked in the formal economy, this would be the right approach.
But the world is not Scandinavia. Across developing countries, governments tend to grossly
underperform in terms of providing public goods, including environmental and labor
protections. Corruption is rampant. Only a small portion of the labor force works in the
formal sector and could plausibly be protected by unions. Should we then rely on public
regulation to deliver labor protection? Structural conditions suggest that we should not.
It is tempting to compare a poorly functioning private regulatory regime with an ideal
government. But, as the economist Ronald Coase reminds us, we ought to compare an
imperfect private regime with an imperfect governmental one. Private regulation arose in
response to governmental failures.
I believe the potential for private regulation needs to be carefully explored. We should aim
to improve public regulations, but at the same time it may be easier to enlist private
regulation as a conveyor of global customers’ egalitarian preferences and also to use the
power of importing firms to improve labor standards abroad. While poorly functioning
governments protect the interests of corrupt elites in developing countries, global firms
with huge investments in brand images are susceptible to stakeholder pressure to improve
labor standards.
We need to know more about what kinds of
private regulation work best.
As Locke correctly points out, the unorganized worker eventually bears the costs of
accommodating changing consumer fashions. Private regulation can alert consumers to the
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political implications of their buying decisions. Yes, the extent to which social labeling has
succeeded varies. But if over-consumption, fickle fashions, and addiction to discount
pricing contribute to poor labor standards, private regulation can have a constitutive effect
on consumer preferences.
Private regulation empowers developed-country stakeholders—who often work with local
actors in developing countries—to influence labor and environmental practices in supply
chains. The World Trade Organization (WTO) prohibits importing countries from imposing
process standards, such as labor laws, on foreign firms, but private regulation is outside the
purview of the WTO and allows transmission of desired social standards from importing to
exporting countries.
We need to consider which types of private regulation work best. One way is to focus on two
aspects of program design: the severity of social obligations imposed on program
participants and the mechanisms used to enforce those obligations. We need to assess the
efficacy of private regulatory efforts and sort the credible ones from the shams.
All governance systems fail. Looking for the silver bullet that will solve our governance
problems probably will not lead anywhere. We live in mixed economies with multiple and
overlapping regulations. Institutional monoculture—which is pervasive in both public and
private regulation—is neither desirable nor possible. As Locke makes clear, cooperative
measures drawing on the expertise of public and private actors have a lot to contribute.
Much of the developing world is not like Scandinavia, and that is not likely to change in the
near future. Governance solutions must be devised to fit the messy reality. Locke has
challenged us to find creative, efficient, and equitable ways to understand which
governance systems work, why they work, and whether they can be scaled up across sectors.
This is an exciting area for future work.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
Rights Outside the Factory Walls
Layna Mosley
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Layna Mosley
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Richard Locke brings to light many of the challenges associated with private governance
and capability-building initiatives. The demands of contemporary global production create
obstacles even for multinational firms genuinely concerned about labor conditions and
labor rights. While firm-level governance may be part of the solution, the protection of
workers’ rights requires collaboration with national government authorities and perhaps
across national boundaries. Indeed, Locke’s essay is yet another reminder that, contrary to
the “world is flat” narrative, government actors and policies still have important roles to
play.
Under what conditions, then, might we expect governments to work collaboratively and
flexibly with companies that want to protect workers’ rights? Where the electorate includes
a broad swath of working-class citizens, governments are more likely to attend to their
concerns. And where transnational advocacy groups have the capacity to operate freely,
they can publicize global norms and standards—including those stemming from
International Labour Organization (ILO) conventions—and hold firms accountable for
supply chain problems. We know that democratic governments are, all else equal,
associated with better protections for workers. And those governments will be particularly
inclined to protect workers if organized labor groups offer real representation for workers’
interests. But workers in new democracies can’t always count on legacy unions, which tend
to be elite-driven.
Therefore, improving working conditions often requires economy-wide change.
Governments must have incentives to reform their domestic laws and to ensure that laws
are enforced. Their incentives are stronger where independent labor unions serve as
effective civil society participants. Hence, collective labor rights may be an important part
of improving individual working conditions. Here, Locke’s argument about the limits of
efforts by individual multinational firms rings true: it is not enough for corporations to
allow or require collective labor organization at their subsidiaries or suppliers. Those
companies also should press host-country governments to enable freedom of association
and collective bargaining.
Companies should press host-country
governments to enable freedom of
association and collective bargaining.
In addition, pressures from abroad can encourage national governments to protect labor
rights throughout their economies. My colleagues and I have found evidence for the
diffusion of labor laws via trade relationships: collective labor rights in low- and middleincome countries are influenced by the labor laws of their major trading partners. The more
a country trades with labor-protecting economies, the better its labor laws become. This
effect also can go in the opposite direction, however: if one’s trade partners have weak labor
protections, labor rights are likely to deteriorate over time. Recent research suggests that
when low-income countries shift from exporting commodities to Western markets and
instead focus on shipping to China and India, their regard for labor standards diminishes.
Therefore governments in North America, Europe, and beyond can promote labor rights
abroad by ensuring the protection of those rights at home.
Moreover, trade agreements under the United States’ Generalized System of Preferences
offer opportunities for linking an exporter’s market access with the treatment of its
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workers. Certainly, there is reason for cynicism about the aims of these agreements: the
inclusion of some form of labor-rights requirements in all U.S. trade agreements since 1984
was likely an attempt to mollify American labor unions rather than the product of real
concern for workers’ rights abroad. Yet the inclusion of labor-related conditions in such
trade instruments nonetheless could provide openings for savvy activists to bring additional
pressure to bear on foreign governments. Likewise, the United States has recently revised
its model bilateral investment treaty—which governs direct investment in and by partner
countries—to include labor conditions, possibly offering another means of linking economic
exchange with workers’ well-being.
Finally, many would argue that individuals, no matter where they live or work, ought to
have certain basic rights and opportunities, such as the core labor rights expressed in the
ILO’s Declaration on Fundamental Principles and Rights at Work. Beyond those—which
include freedom of association, the right to collective bargaining, and freedom from
employment discrimination—many would add protection from health-and-safety risks and
from excessive working hours. The factory audits Locke discusses allow us to consider how
well several multinational firms do at providing such rights across a variety of locations and
over time.
But these audits do not tell us about conditions elsewhere in an economy. Workers who are
not hired by globally involved suppliers and subcontractors may face more precarious,
informal, and unregulated employment. I suspect that, for such individuals, labor
conditions are often more difficult and hazardous. This is not to suggest that we ought to
abandon efforts to improve conditions in global supply chains, but rather to point out that
we know even less about how to improve conditions for workers disconnected from the
global economy. Where the spotlight of corporate social responsibility does not shine, the
contribution of governmental actors—both national and international—is likely even more
important.
To comment on this forum, click here to return to the lead article by Richard M. Locke.
Response:
A Fairer Distribution
Richard M. Locke
This article is part of Can Global Brands Create Just Supply Chains?, a forum on corporate responsibility for factory workers.
Richard M. Locke
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I’m grateful for the respondents’ thoughtful comments on private, voluntary regulation and
its capacity to improve conditions for the millions of workers currently employed in today’s
global supply chains. Despite our differences, we all agree that enforcing labor standards in
our global economy requires more than one strategy (private vs. public) or one lead actor
(global brands vs. nation-states). We need multiple approaches and parties to tackle the
problem. The question remains: What is the best mix?
Some respondents raise important questions about the role of private compliance programs
(Short and Toffel, Prakash, Gereffi); others about whether—and how—developing-country
governments can improve the regulatory function I advocate (Bartley, Mosley, Prakash,
Brown, Passman); still others point to different actors who might improve this effort
(Shapiro) and to the need for a less fragmented conversation (Jones).
The objections in these responses are very important. Still, I remain convinced that key
challenges to fair labor standards in global supply chains can only be tackled by state
bureaucracies operating in and legitimated by their home countries.
I start with the charge that I am overly critical of existing private compliance programs.
Several respondents argue that these programs work well—or at least better than the
alternatives—and are especially important in countries with weak institutions. Jodi Short
and Mike Toffel rightly point out that monitoring schemes have generated important
information about workplace conditions that could mobilize consumers, socially conscious
buyers and brands, and even public policy. Yet there is little evidence that these schemes in
and of themselves actually lead to the improvements that Short and Toffel claim. Other
mechanisms such as NGO pressure, capability-building initiatives, and government
regulation also need to be at work.
Gary Gereffi points out that global value chains have been evolving in important ways and
that several large host countries (China, Brazil, India) are also becoming large consumer
markets. I share his belief that this creates possibilities for reshaping governance patterns
in those countries. But the troubles that continue to plague Apple and its lead supplier
Foxconn are evidence that even when most of the assembly work is done in a country—
China—that is tightening its labor regulations and raising its minimum wages, private
compliance efforts alone are not enough to enforce labor standards.
Aseem Prakash defends private, voluntary regulation as a crucial tool in countries with
weak institutions and rule of law. Let me be clear: I don’t suggest throwing out private
regulatory initiatives. I argue that they need to be complemented by strong public
regulation in both well-established democracies and developing countries. Prakash’s own
work has shown that “voluntary” regulation often works best in countries with strong public
authority and rule of law. And while I would like to agree with Prakash on the importance of
social labeling schemes and ethical-consumption initiatives in driving positive change, the
evidence simply does not support this claim.
Other respondents argue that I am insufficiently critical of private compliance programs.
Tim Bartley makes an excellent point that most private compliance programs are focused
merely on changing behaviors within the factories. They do nothing to change
behaviorsoutside of the factories: for example, where and how multinational corporations
source their products. Private compliance also does nothing to address the proliferation of
new product types, consumer and retailer demands for rapid product upgrades, and even
some forms of lean manufacturing that undermine labor standards among suppliers.
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Bartley advocates public policies that encourage patient sourcing and shape where global
brands manufacture their products. This is a useful strategy, which can build on nascent
efforts by some global brands to modify their sourcing practices along these lines.
Until the costs and benefits of doing
business are shared among everyone
involved, innovation will produce at best
limited results.
Are there actors other than governments and firms that can improve labor standards? Isaac
Shapiro makes an important case for bringing workers’ voices into discussions about poor
conditions in supply chain factories. Shapiro argues that where workers are unable to form
independent unions, labor-rights NGOs can speak for them.
I agree that workers’ voices are important, and I acknowledge the central role NGOs
continue to play in the anti-sweatshop movement. But we need realistic expectations about
NGOs. They vary greatly in technical expertise and resources, which limits their
effectiveness. The failure of the Joint Initiative for Workers Rights and Corporate
Accountability—a project of several NGOS, which sought to improve working conditions in
Turkey—speaks to NGOs’ unreliability. And NGOs are not always legitimate worker
representatives. As the sociologist Gay Seidman has shown, transnational NGOs sometimes
crowd out local labor activists and focus on the concerns of consumers and institutions in
the global North rather than the challenges facing workers in developing countries.
Layna Mosley and Drusilla Brown also argue for the importance of external actors. They
focus on the threat of ILO and trading-partner sanctions, which may compel local suppliers
and host-country governments to enforce labor standards. Drawing on the experience of the
Better Factories Cambodia (BFC) program, Brown shows how trade access to the United
States can serve as both a carrot and stick to drive improved standards compliance. But
once the Multi Fiber Arrangement ended in 2005, the threat of sanctions in Cambodia
came from the state, not from external sources. Cambodia refused to grant export licenses
to apparel companies that did not participate in the BFC program. At the same time,
reputation-conscious buyers could look to improved working conditions in order to
determine which factories to source from. BFC was effective thanks to an innovative
combination of state and private regulation.
Mosley also argues that trade with countries that respect labor standards can foster
improvements in developing countries, especially those that lack the basic institutions of
democracy required for effective public regulation.
I agree that trade, under certain conditions, can yield positive changes, though this is by no
means the only mechanism that can work. Even “weak” states with a long history of
authoritarian rule and corruption can build new regulatory capabilities and promote
improved labor standards. In the Dominican Republic, for example, reform efforts were
instigated in part by pressure from external trading partners (including the United States)
and in part by a local group of reformist politicians and labor activists. In Brazil, India, and
Cambodia, a combination of public and private actors pushed labor standards that external
trading partners were not demanding. And, as Mosley points out, for the millions of
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workers who are employed in domestically focused, often informal workplaces, public
regulation may be the only hope.
Pamela Passman and Hannah Jones rightly suggest breaking out of our highly segmented
discussions of standards—be they labor or environmental or even commercial—and instead
looking at how these different spheres inform one another. Passman describes capabilitybuilding efforts geared at protecting intellectual property and preventing corruption, efforts
that mirror those focused on labor and environmental standards. Can initiatives from one
sphere spill over into others, thereby creating a “culture of compliance”? Perhaps. But we
have not yet seen that.
Jones is right about the need for a new conversation that does not pit global corporations
against labor-rights NGOs. And I share her conviction about the importance of creative,
sustainable, ethical business models.
But we cannot simply innovate our way out of our current situation. New technical and
managerial solutions are not sufficient. Until the costs and benefits of doing business are
shared among everyone involved—large retailers, global brands, lead suppliers, and
workers—innovation will produce at best limited results. Real change indeed requires a new
conversation. But the heart of that conversation needs to be about a more equitable
distribution of the gains from globally dispersed business models.
To comment on this forum, click here to return to the lead article by Richard M. Locke.