Week 3: Combating labour exploitation in supply chains

It is now widely accepted that forced and precarious labour are common within global supply chains. According one study, "71% of companies believe there is a likelihood of modern slavery occurring at some stage in their supply chains". However, there continues to be heated debate regarding who should be held responsible when forced labour is found to have actually taken place. Existing regulations governing supply chains frequently suffer from a combination of legal loopholes and failures of enforcement. National laws rarely extend beyond national borders or citizens, creating ‘governance gaps’ between different legal systems. Corporations are only legally responsible for workers they employ directly, so any abuses that take place at the hands of companies to whom they have subcontracted fall outside their legal obligations. In addition, governments routinely fail to enforce their own labour laws without consequences.

The key question is therefore not whether or not there should be any regulation of supply chains. Supply chains are already regulated to some degree. Instead, the key challenge is to update and globalise worker protections for the 21st century. One of the most high profile responses to this challenge is corporate social responsibility (CSR), which has dominated the field for over two decades now. The main principles of CSR are self-disclosure and self-regulation. The basic idea is that responsible corporations – working hand in hand with responsible consumers – can play a transformative role in cleaning up (or keeping clean) their supply chains. Established regulations remain on the books, but are also argued to be supplemented via voluntary action by good corporate citizens. Thousands of different initiatives have recently been introduced to bolster labour and environmental standards in supply chains, covering products such as bananas, tea, cocoa, t-shirts, and computers. Some CSR initiatives are specific to individual corporations, such as Apple, Microsoft or Coca-Cola. Others take the form of industry coalitions, such as the International Cocoa Initiative and the Ethical Trading Initiative.

The most common application of CSR principles involves the publication of policies, principles, reports and stories relating to the treatment of supply chain workers. In some cases, these publications are little more than general statements of principle that outline the values to which corporations aspire, but contain little or no information on how these values will be realised in practice. Others contain detailed material on codes of conduct, internal audits, and budgets. A good example of the latter is Apple’s annual supplier responsibility reports. Despite these variations in practice, there is nonetheless a common strand linking together most CSR initiatives. As a general rule, they are voluntary, so there are no automatic or direct penalties for non-compliance or poor performance. Companies determine their own standards, policies and associations, and decide when and how much to disclose about their overall performance to the public.

In recent years, a coalition of workers, civil society groups, investors, trade unions, and some industry and government representatives have argued that the current model of CSR-based solutions isn’t working. They have argued that a fresh approach is necessary, where global supply chains are regulated by global laws. The basic idea is for established regulations to remain on the books, but to supplement current models via expanded regulation at the national and international levels to close down ‘governance gaps’. This means introducing a new regulatory framework with global reach that would legally curtail corporations’ ability to outsource liability for the working conditions associated with the production of the goods that they sell. In other words, holding corporations legally accountable for serious labour abuses across their entire supply chains. Much the same logic applies when it comes to improving pay and conditions for all workers.