How business can better reduce modern slavery in supply chains risks: Learnings from a supply chain tragedy

New law and soft law requires business to undertake human rights due diligence.

How to deliver business human right due diligence for complicated shifting global supply chains, and affordably?

The Bangladesh Rana Plaza garment factory building collapse in 2013 killing over 1100 workers and injuring many more was the most lethal tragedy in apparel history. The response to this tragedy offers a case study in what business, investors, and policy makers can learn for how business supply chain human rights due diligence can better be realised. Whilst the cause of the collapse was poor building structural safety, there is a lot that can be learned for considing how other supply chain labour standards problems such as modern slavery can be remediated.

Cases have been reported for years, and continue, of foreign contract workers in supply chains in UK, middle East, Malaysia, Japan, Taiwan, Korea and Italy and the USA ending up in forced labour due to being made to pay agent fees (landing them in bonded labour situations), and many being made to work excessive hours in poor conditions. Companies are increasingly, through new laws and lawsuits, being called to account for having undertaken Human Rights Due Diligence to influence respect for the human rights of workers in their global supply chains, as called for by the UN Guiding Principles on Business and Human Rights launched 2011.

UNGPs, UN Guiding Principles on Business and Human RightsHow To manage Modern Slavery in Supply Chains Asia China SupplyESChange Online Course 2019

SupplyESChange are launching a course “How To manage Modern Slavery & labour risks in supply chains” taught by an experienced practitioner.

On the back of the California Transparency in Supply Chains (TISC) Act, the UK Modern Slavery 2015 TISC has been followed by a new Australia MSA with TISC reporting requirements passed in November 2018, and Canada now has a bill tabled for a similar Act. Nevertheless the real work to remediate modern slavery in our global supply chains will need to happen on the ground in the field in collaborations, and through corporate purchasing practises and fieldwork rather than reporting.

This article reviews 9 steps for how those collaborations can work to reduce risk and deliver change.

1. Country level Multi-Stakeholder Initiatives bring focus:

There are some excellent supply chain labour standards collaborative initiatives such as the UK based Ethical Trading Initiative (ETI), Danish and Norwegian ETIs, and the USA based Fair Labor Association, but neither the ETIs nor the FLA have been seen to cause improvement in labour conditions across an entire sector in a country (although an FLA and ETI collaboration in Turkey may be an exception: a lack of transparent reporting means it is hard to see results: see pt5 below).

By contrast, the ILO Better Work programme and Bangladesh Accord on Fire and Building safety have shown that tracked improvement can be rapidly caused at scale (i.e. across most of a sector in a country), when stakeholders collaborate in an official initiative. This has been shown in Cambodia where under the Government and Manufacturers Association agreement with the ILO, all garment factories with an export license must be monitored by ILO Better Factories Cambodia, and the Bangladesh Accord on Fire and Building Safety which has monitored and caused improvements in over 2000 of the 3-6000 garment factories in Bangladesh.

2. Multi-Stakeholder Initiatives bring in the Voice of Workers:

The Rana Plaza building factories were “social audited” for labour standards, including for fire safety in the weeks and months before the collapse. Despite Social Audits by multiple audit firms for buyers from the factories in Rana Plaza, structural safety issues were not picked up. Workers raising the issues though, and harrowing videos on youtube show workers asking management to fix the causes of building cracks before requiring workers to work in such an unsafe building. This leads us to lesson number two: workers voices in supply chains need to be respected (and given protected channels).

The many eyes of many more workers than management will often notice unsafe conditions before management. For this reason, the Accord on Fire and Building Safety which over 200 international brand buyers were caused to join in the months following the tragedy, is a multi-stakeholder initiative (MSI) with trade union worker representatives on it’s Board and partnering in all aspects of the Accord’s work to improve and monitor factory safety. Furthermore, stakeholders clearly ask business to respect workers voice as demonstrated by the Worker-driven Social Responsibility (WSR) Initiative here.

3. Worker Helplines apply modern tech to support Worker Voice:

Independent Trade Unions representing workers play an incredibly important role in causing the improvements needed for decent working conditions, as is their remit. Some cynics complain though of the corruption which has been occasionally reported in some areas of the trade union world, or lack of female leadership at senior levels. To their credit the leading trade union federations are active on improving governance and gender representation, and ITUC is currently led by the female Sharon Burrows. Nevertheless, the biggest challenges can come in places where labour standards are poorest. Trade Unions should continue initiatives to improve their governance, but in the short term, one step the Bangladesh Accord took to ensure any such challenges didn’t block worker reports on factory level concerns from reaching Accord Board level was the implementation of an effective, transparent and modern worker helpline process.

The UN Guiding Principles on Business and Human Rights stress that “to make it possible for grievances to be addressed early and remediated directly, business enterprises should establish or participate in effective operational-level grievance mechanisms for individuals and communities who may be adversely impacted”. Western brand buyers have trained foreign workers in factories in such services before (e.g. as run by organisations such as China’s labour standards experts the Shenzhen Institute for Comparative Organisation, the ICO for Chinese workers in Japan) and been able to gain considerably more insight into labour law non-compliance cases workers may be facing to influence remediation as a requirement for continued long-term business. New Accord type initiatives should include a modern mobile (text, SMS, wechat, app) based worker helpline service, as is these days offered by organisations such as Handshake China, LaborVoices, LaborLink-ClearVoice, and Ulula. Wherever possible, tech based helplines can be set up with trade unions who know the most about the labour standards compliance required in factories in supply chains.

4. Robust Monitoring is needed and better achieve-able in collaboration:

The Bangladesh Accord has improved safety of labour conditions in 1000s of factories through bringing 200 brand buyers together to collaborate in sharing the cost of more expensive robust conditions audits and monitoring of the improvement needed. As most manufacturing sites produce for many international buyers, initiatives which shares the cost of robust social auditing between many such buyers can help improve labour conditions faster.

ILO Better Work

Poor social auditing has allowed supply chain human rights violations, including modern slavery in supply chains (much more than many admit) to occur. the WSR states that “Verification of Workplace Compliance Must Be Rigorous and Independent“. Collaboration, when direct pre-competitive peer engagement and not only through accessing a report in a database, pools resources and attention toward ensuring a higher quality of audits (and less wasteful duplicative auditing). This has occurred in many places around the world, and in programmes such as ILO Better Work, and should be intensified if we are serious about remediating and ending modern slavery.

5. Transparency:

What has made factories improve conditions faster after a Bangladesh Accord audit or the ILO Better Factories Cambodia and ILO Better Work programme Vietnam and Indonesia social audits has been that, after a fair chance for improvements, the audit results by factory are transparently published on a website like this Accord page run by FairFactoriesClearinghouse or this ILO Better Work Transparency database. When everyone can see if a site violates the law, we start to see improvements happening. Obviously it is important that rigorous governance inside the monitoring/reporting organisations ensures no corruption, but when many stakeholders come together with transparent public reporting in the way of the Accord or ILO Better Work we start to see the many eyes monitoring driving better governance, and social impacts for workers.

6. Capacity Building helps and collaboration aligns & splits costs:

Many factory managers, including not only those in Bangladesh with safety issues, but also those in many other countries with so-called “modern slavery” conditions for foreign contract workers genuinely want to improve, but sometimes don’t even realise what is a violation, or how to improve it. Brands such as Adidas, Nike, Disney and many other companies have collaborated on training factory management (and their agents, and perhaps licensees) to understand what is a violation, what good looks like, the benefits from better working conditions (such as healthy, happy engaged workers being more productive), and how to improve conditions.

What the Accord and ILO Better Work have done well, is get (in the Accord case) 200 brand buyers, and in ILO Better Work case, around 100 aligned behind one programme to develop less duplicative, more helpful training and capacity building. Whilst this is one area that should be as subject to continuous improvement as many factories are taught to work on too, many Accord stakeholders and observers of the initiative are on record in agreeing that 1000s of improvements in factory physical safety, and fire safety systems have been caused in Bangladesh, and studies have shown considerable improvement in labour standards in many factories monitored and trained by ILO Better Work.

Many buyers such as the leaders Nike and Adidas, and others such as Patagonia, Columbia, VFCorp, PVH, etc will also run their own, or collaborative training for their supplier factories on why improvement might be needed, and how. The risk of factory time being wasted in having to attend three of the same training on fire safety from three buyers is reduced when buyers work together through initiatives such as the Accord and ILO Better Work. Efficiencies and other value are gained in replicating such multi-stakeholder country and sector wide collaborations.

7. Brand Buyer Accountability:

One area which didn’t receive enough attention in these good practise models was buyer purchasing practises. The impact of last minute changes on causing supplier factories to make workers do excessive overtime is well documented and notorious in the fashion sector, and initiatives such as the Ethical Trading Initiative (ETI) and Fairwear seek to train their international brand buyer members such as M&S, NEXT, H&M, Primark and others to improve their internal systems. These initiatives, and the Fair Labor Association, regularly assess brand buyers internal management systems and Responsible Sourcing programmes and give feedback and training as how practises can be improved.The weakness of all these initiatives though is that none has been courageous yet in being willing to publicly and transparently report on how their members perform on this Human Rights Due Diligence (despite reporting on how factories perform). Future collaboration initiatives, such as ones toward improving conditions to remediate modern slavery in supply chains should publish how the brand buyer members perform (and non-member buyers identified). Such an approach rewards those large Multi-National Corporations who are making an effort to respect human rights in their supply chains by causing the laggards making less effort to be held to account publicly and also to be less able to undercut sourcing costs. This is a particularly useful leaver for change, as shown by KnowTheChain, Fashion Revolution “Transparency Index” and the Corporate Human Rights Benchmark as investors applying ESG (Environmental Social Governance) principles look to reward listed companies for their performance on these “social” issues of due diligence in respecting human rights in supply chains. The earlier mentioned WSR (Worker-driven Social Responsibility) Network Statement of Principles also calls for this stating that “Obligations for Global Corporations Must Be Binding and Enforceable“.

PRIsupplyChains ESG

8. Diverse Funding Sources to ensure Accountability:

One reason the FLA, ETI & Fairwear haven’t publicly ranked their members for their efforts, which is admitted privately, is that significant funding comes from these corporate members, and laggards and new members oppose having to invest as much as leaders have done to “catch-up” as it’s an unexpected new line on their balance sheet (which, unfairly, other brands such as M&S, Adidas and Patagonia have invested in for years). Therefore, the more independent funding which can be provided to initiatives for supply chain labour standards, as well as the stronger the voice on their boards from trade union partners, the more chance of more transparency into not just which factories improve conditions and don’t, but which brand buyers are making efforts to monitor and reward factories which improve conditions. In fact, to be truly effective, such initiatives should note all brands produced in factories and report publicly on the names of all buyers from those factories. That would require some new contracting though.Whilst progressive brands like Levis, Nike, Puma, Patagonia and Adidas have published their factory lists for many years, other brands hide from being held to account for the conditions in their supply chain which they are unwilling to invest in improving, and require factories to sign confidentiality clauses. A sector and country wide new Accord could roll out that it becomes industry standard that no supplier would sign agreement to such an agreement. Collaboration creates leverage for change.

9. Align Executive Targets and Incentives:

Brand buyers purchasing practises, such as driving down pricing without taking into account where wage increases may be legally required or other working conditions factors, are believed to heavily impact poor working conditions. Therefore, the Bangladesh Accord tested wording to hold buyer members to account to price their purchasing in a way which would allow suppliers to realise compliance. Any new initiative should learn from and build on this important aspect. The next step though, is to cause buying companies to start to improve their executive targets and incentive programmes to better align to targets for supply chain labour standards compliance.When quarterly reports to investors merely talk about driving down margins but rarely mention anything about the need to reduce risk by increasing human rights due diligence and increasing social compliance in the supply chain, incentives are not aligned. Targets and incentives for all executive team members from the CEO down to junior purchasing officers need to reward buyers who place more business with suppliers who are publicly reported to have better labour standards compliance. The data is increasingly publicly available, and can be more so, meaning stakeholders can hold leadership to account, albeit with respect for where a team charged with sourcing higher risk goods or from higher risk countries may face greater challenges in the short term. This is also described by the WSR who state that “Buyers Must Afford Suppliers the Financial Incentive and Capacity to Comply“.

10. Women and Gender

In February 2019 Human Rights Watch (HRW) reported on continuing sexual harassment of women workers in supply chains: “In (an) Indian factory, Roja, a married woman in her 30s… described how her supervisor stalked and repeatedly called her cell phone after work asking for sexual favors……. When she complained to the factory’s administration, they said that he was a supervisor who had high productivity and told her such harassment was “normal.” The report stated that “These are not isolated cases. Recent studies by nongovernmental organizations and news reports show that sexual harassment is rampant in garment factories in India;…… Nor is India the only country where this is a pervasive and serious problem.” HRW reported that “In Cambodia, women workers said factory management’s harassment extended to situations outside the workplace. Women workers also complained about inappropriate sexual comments and advances, pinching, and other bodily contact by male managers and co-workers. Workers from different countries described being humiliated with many insults such as “dog,” “donkey,” “prostitute”…..(and worse)”. Women workers reported verbal abuse when they made as simple requests as regarding anyone’s right to a hygienic workplace. For example, “a group of women workers in Burma said that …..when they asked for clean toilets managers hurled verbal abuses at them“. Human Rights Watch has also documented similar humiliating treatment in Bangladesh.

Firstly, a factory tour by a buying company’s Sourcing team member or Quality Officer well almost never be a sufficient assessment to find issues and therefore help protect a buying company from risk of being accused in lawsuits of lack of sufficient human rights due diligence. The HRW report describes how even many commercial social audits “are not equipped to capture and address sexual harassment or other forms of gender-based violence at work for numerous reasons.” It says that “Learning about women’s experiences of sexual harassment at work requires care and attention to designing a safe space for those willing to participate in interviews, including measures such as the option of workers to be accompanied by support persons into such interviews….. Some auditors Human Rights Watch interviewed said that it was difficult to conduct good interviews with workers on-site and that it was….preferable to interview workers off-site.” Human Rights Watch interviewed two brand representatives who acknowledged that “incorporating off-site interviews was more expensive and that the quality of a social audit was as good as the time given to it by auditors. Workers who have participated in (onsite) audit interviews say that the management knows precisely who is being interviewed.”

Human Rights Watch analyzed 50 third party audit reports of factories—most from Bangladesh, India, and Pakistan—issued between 2016 and 2018 where six large auditing firms had conducted the audits. Several auditors HRW spoke with said that it was difficult for them to investigate or write about issues like violence, discrimination, and harassment at work, including sexual harassment.

What should companies do to support women’s rights to freedom from harassment in their supply chains?

Unless significant investment is made by buying companies in allowing experienced social audit teams properly paid time to conduct unannounced interview workers offsite (which many buyers have in fact arranged), not enough can be known about the true risks in suppliers. Companies are under new UN Guiding Principles on Business and Human Rights related laws expected to properly assess and understand risks then use their buying leverage to influence remediation, and reward improvement.

Some steps Human Rights Watch recommend companies take include:

  • Publicly support the drive towards a binding ILO convention to tackle violence and harassment at work.” There have been calls by Unions and rights groups representing workers from different sectors, including factory workers, teachers, health workers, for a new binding International Labour Organization convention, accompanied by a recommendation, to address violence and harassment at work. HRW state that “The advocacy for such a convention started before the 2017 and 2018 #MeToo waves but has been bolstered by that movement. Governments and business leaders committed to workplace equality should back these workers’ call.” Companies could take this step through collaboration initiatives, or their own public statement.

  • Publish the company’s global factory lists in accordance with the Transparency Pledge.” Companies such as Columbia Sportswear, Clarks shoes, Tesco, Marks & Spencer, and NEXT plc, now publish their regularly updated supplier factory lists as have Levis, Nike, Puma, Adidas, Patagonia, H&M for in some cases well over 10 years. HRW state that “Publishing supply chain information builds the trust of workers, consumers, labor advocates, and investors, and sends a strong message that the apparel company does not fear being held accountable when labor rights abuses are found in its supply chain.”

  • Design brand-level grievance redress mechanisms with the participation of workers, unions, and labor advocates, ensuring that these mechanisms are also equipped to tackle sexual harassment at work.” For smaller companies, this may more easily be implemented through participation in relevant collaboration initiatives. One tool can be the worker helplines discussed in pt 3 above, although again best delivered in multi-stakeholder collaborations which companies can participate in. This, and the following steps, will be trained and coached in the upcoming SupplyESChange Course on How To Manage Modern Slavery and Labour Risks in Supply Chains in China and Asia.

  • Carry out periodic studies to examine gender-based violence and harassment at work in every production country. Ensure that women workers, unions, and local women’s rights groups with experience in tackling workplace harassment are actively involved in designing the studies and are able to provide information safely. These studies should allow women and union leaders to give confidential feedback about any complaints systems at work, ease of access and use of such mechanisms, and anti-retaliation protection measures.” Again, many companies may not be at the stage to dedicate resources to this, but may be able to support such processes through initiatives like ILO Better Work, then report on how they utilise the research in cost-effective ways to improve their ESG and Modern Slavery statements efforts they report on to their stakeholders. The ILO Better Work programme has put significant focus on working to set up or improve supply chain factory complaints systems and grievance mechanisms, and reports on this for buyers, guiding buyers in how to engage suppliers to encourage continuous improvement. How companies can participate in this will be reviewed in SupplyESChange courses and coaching.

  • Brands should ask and map out as part of sourcing and compliance information, whether the factory they are placing orders with has” sister companies owned by the same parent company. This would go a long way to help detect retaliation against workers.” There are cases of where brands have used their voice with one factory, to encourage and ultimately help cause improved worker treatment in sister factories. Case studies can be share in SupplyESChange courses and coaching.

  • Take steps to examine and redress brands’ purchasing practices to prevent and mitigate risks of abusive practices in the supply chain. In particular, examine all practices that reduce a factory’s time available for bulk production. These include brand approvals for materials and samples, producing technical packs for designs on time, and tracking the difference between projected and actual orders.” This was discussed in point 7 above.

 
 

Next Steps:

So how did the Accord and ILO Better Work programmes come about? In both cases, Trade Unions and the ILO played an active role, but so did brands and other businesses committed to responsibly working to cause better conditions in global supply chains, and realising this can often best be done through collaboration. In the case of the Bangladesh Accord, early members including the US listed firm PVH (Philips Van Heusen) which manufactures Calvin Klein and other brands. Levi Strauss was an early funder and supporter of the ILO Better Work programme, joined shortly after by Nike, then Adidas, and eventually H&M. Most of these corporations not only pay annual membership fees to the initiatives, but also have their independent Foundations provide grants towards supporting the longer-term sustainability of the initiatives due to the positive social impact caused for women workers and ultimately families of the people who make our things.

As stated at the outset, improved legal and trading policy frameworks can cause the greatest scaled improvement in supply chain human rights, but efforts toward that such as a proposed Convention on transnational accountability for Human Rights don’t yet (as of early 2019) have many countries support, and are likely to take some years to come into effect. In the meantime, the Bangladesh Accord on Fire and Building Safety caused safety improvements across 1000s of factories in a less than five-year period, and the ILO Better Work programme is achieving similar results for supply chain labour conditions for millions of workers where it operates at scale.

Investors engaging companies on ESG topics should therefore ask companies how they are participating in, advocating for and funding (perhaps through membership and/or buying the reports on suppliers) the expansion of such initiatives to hot spots where supply chain labour standards improvements are needed, and how they are reaching out to stakeholders such as Trade Unions, the ILO, and local governments to encourage, and offer to fund such initiatives.

Governments should support such initiatives, and consider asking companies to report on to what extent they participate in them where their footprint has risks, through future laws such as perhaps potential amendments to the Modern Slavery Act Transparency in Supply Chains reporting laws.

For now, business can take the lead to reduce the real risks they may face in their supply chain, through creating the support and cost sharing and increased, verified and reportable improvements which transparent multi stakeholder initiatives can deliver. People who have travelled away from their children to another country to work in our supply chains, and who may only see their children every few years, deserve at their very least our businesses to act responsibly in assessing and using their leverage to ensure such people are paid the legal minimum wage they are due in safe and fair conditions.

Business risks can be reduced and Sustainable Development Goal (SDGs) social impacts realised faster through improved collaborations.

Learn more about how to get involved in these approaches, or if any collaborations might be right for your business, on the “How To manage Supply Chain labour standards risks, especially China and Asia” course here, or read more and contact us at http://supplyeschange.com/dev/

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