What we can learn from the Rana Plaza tragedy response toward ending Modern Slavery in Japan supply chains

Steps To End ModernSlavery In SupplyChains

The Bangladesh Rana Plaza garment factory building collapse killing over 1100 workers and injuring many more was the most lethal tragedy in apparel history. Whilst the cause of the collapse was poor building structural safety, there is a lot that can be learned from business response about how other supply chain labour standards problems such as modern slavery can be remediatedRecent reports have brought to light the issue of modern slavery like conditions in Japan for some of the 100,000s of foreign contract workers from China, Vietnam, Cambodia and Burma working in manufacturing supply chains (and construction, agriculture and healthcare). Foreign contract workers in Japan, Malaysia, Taiwan and Korea often end up in forced labour conditions due to a requirement to pay agent fees (landing them in bonded labour situations), and many being made to work excessive hours and provided only poor conditions, as has been reported for many years. The salience and materiality of this issue is now though raised as Japan seeks to increase it’s workforce, and in time for the 2020 Tokyo Olympics. In one case I was told of recently Chinese workers in a garment factory in Japan were made to work from 8am to 7pm then 9pm to 4am again. There have also been many cases of workers not being allowed freedom of movement to e.g. visit the nearby shops or just leave the factory and dormitory premises, not being allowed to have bicycles, or even the basic internet access (that other factories allow) to phone home to family and children they might only see every three years (yes, every three years). There are some reports of sexual harassment or abuse given the vulnerabilities the situation creates, and many reports of foreign workers in Japan not being paid the legally due minimum wage, nor overtime rates they are legally due, and being charged unfair and extortionate agent fees.

On a more positive note, on the back of the California Transparency in Supply Chains (TISC) Act, the UK Modern Slavery TISC has been followed by a new Australia MSA with TISC reporting requirements passed in November, 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, and through corporate purchasing practises and fieldwork rather than reporting.

Toward remediation of modern slavery in supply chains such as this in Japan, similar in Taiwan, Korea and Malaysia, and even worse conditions sometimes found here in the UK (such as many Leicester garment factories), improved trade law and international law to hold business to account for complicity in human rights can help in the long run, but in the short to medium term we can take and could apply some learnings from recent successes:

1. Country level Multi-Stakeholder Initiatives bring focus:

There are some excellent supply chain labour standards 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).

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 was “social audited” for labour standards, including 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 raised 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. 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.

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 (UNGPs) 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 Chinese workers in Japan factories in such services before (run by organisations such as China’s labour standards experts the Shenzhen Institute for Comparative Organisation, the ICO) and been able to gain considerably more insight into labour law non-compliance cases workers may be facing. A new Accord type initiative in Japan 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, these 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 achieveable 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 in Japan produce for many Japanese and international brands, an initiative which shares the cost of robust social auditing between many such buyers can help improve labour conditions faster.

SupplyESChange Online Course on How To Manage Supply Chain Modern Slavery and Labour risks will review what makes audits robust, why this matters, how to go Beyond Audit, and coach appropriate steps for participant businesses.

Poor social auditing has allowed supply chain human rights violations to occur. 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 to support Chinese workers in Japan before, and can be done again.

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 in the way of the Accord or ILO Better Work we start to see many eyes monitoring driving this better governance.

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 Japan 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. Many brand buyers such as Adidas, Nike, Disney and others have collaborated on training factory management (and their agents, and licensees such as the “Soga Shosha” trading houses of Mitsui, Sumitomo, Itochu and Mitsuibishi with their “Keiretsu” investments down the value chain) 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, around 200 brand buyers, and in ILO Better Work case, around 100 aligned behind one programme to develop less duplicative, more helpful training and capacity buildings. 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 factory’s on why improvement might be needed, and how, but 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. Therefore there is value in replicating such multi-stakeholder country and sector wide collaborations.

 

 

7. Brand Buyer Accountability:

The “Better Buying” Initiative launched 2018 surveys suppliers about the fairness of buyer Purchasing Practises. This new initiative, and other emerging expectations for companies to take steps to improve their purchasing practises as part of impacting supply chain labour standards, will be reviewed in our course How To Manage Supply Chain Modern Slavery and Labour Risks. Click here for more.

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 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 initiatives, such as one toward improving conditions to remediate modern slavery in Japan should publish how the brand buyer members (and non-member buyers identified) perform. 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.

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 other brands such as M&S, Adidas and Patagonia have unfairly 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 as, 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, is believed to heavily impact poor working conditions at times. 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 corporate 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 never mention the need to reduce risk by increasing and human rights due diligence by 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.

Next Steps:

So how did the Accord and ILO Better Work programmes come about? In both cases, yes Trade Unions and the ILO played an active role, but so did brands committed to responsibly ensuring better conditions in global supply chains, and realising this needs to be done through collaboration. In the case of the Accord, early members including the US listed firm PVH (Philips Van Heusen) which manufacturers the 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. By contrast, brands such as Forever21 (which was found to have sweatshop conditions in it’s USA garment making supply chain, let alone in Asia) have not even bothered to even join yet and participate in such initiatives. Most of these corporations not only pay membership fees to the initiatives, but also have their independent Foundations provide grants towards supporting the longer-term sustainability of the initiatives. As stated at the outset, it is true that improved legal and trading policy frameworks can cause the greatest scaled improvement in corporate respect for human rights, but initiatives for that such as the proposed Convention on transnational accountability for Human Rights don’t yet 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 labour conditions for millions of workers where it operates at scale.

PRIsupplyChains
Investor increased attention to ESG (Environmental, Social, Governance) risks management by companies, has leaded to increased attention to how listed or Private Equity owned companies are managing supply chain Environmental and Social (labour, modern slavery) risks, as discussed by the PRI (Principles for Responsible Investment).

 

Investors engaging companies on ESG topics should therefore ask companies how they are advocating for and funding 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. Workers who have travelled far from their children to another country or city to work in our supply chains, and who may only see their children every few years, deserve at their very least 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.

In our SupplyESChange upcoming course on How To Manage Modern Slavery and Labour risks in Supply Chains we’ll review the existing and above emerging expectations for how companies should and can do the increasingly expected Human Rights due diligence for their supply chains and to meet expectations of Modern Slavery Acts.

How To manage Modern Slavery in Supply Chains Asia China SupplyESChange Online Course 2019

Participants will be guided through the concepts step by step in webinars each week and supported in how to improve their company approach in realistic, economic ways, but with an understanding of the wider context discussed in this article.

Click here to learn more about the upcoming course, capped to only five participants, on How To Manage Modern Slavery and Labour risks in Supply Chains.

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