Unbalanced corporate power has produced a global human rights crisis
POLICY DEBATE: We have all the evidence we need that corporate self-regulation has failed. Binding regulation is the only way of challenging unbridled corporate power.
Ending forced labor and modern slavery in global supply chains requires binding legislation, rather than corporate self-regulation and self-disclosure. Yes or No?
Genevieve LeBaron and Joel Quirk
Garment & Allied Workers' Union
UN Special Rapporteur on Contemporary Forms of Slavery
Queen's School of Business
International Labour Organisation
Formerly of the Coca-Cola Company
The Freedom Fund
International Organisation for Migration
National Commission for the Eradication of Slave Labour
Anannya Bhattacharjee, President of Garment and Allied Workers Union (GAWU) and Executive Council Member of the New Trade Union Initiative (NTUI), YES.
The failure of voluntary codes of conduct to curb inhumane conditions in the global supply chains of major apparel brands is a well-established fact. This failure has been carefully documented in numerous reports for decades .One would think that this track record would be sufficient to dispel any illusions about self-regulation. However, debates over the merits of self-regulation continue – as if this were a new and exciting topic, when it is neither exciting nor new.
The voluntary and self-regulatory methods have helped to proliferate, by a conservative estimate, a third party social audit industry of $40 billion. Yet this industry has failed to benefit garment workers, and has even lost credibility amongst both garment suppliers and some major brands. In order to compensate for ongoing shortfalls in the third-party social audit industry, some brands have turned to self-auditing. Since conditions of workers have not improved, one is forced to come to the same conclusions regarding the shortcomings of self-audits.
Global supply chains serve the economic interests of transnational corporations (TNCs) and global capital.
Why has corporate self-regulation and self-disclosure failed? The simplest way of answering this question is to follow the money. Global production has come to be dominated by the structure of global supply chains and production networks. These serve the economic interests of transnational corporations (TNCs) and global capital. Capital from the Global North, aided by Northern governments and multilateral institutions, and with acquiescence from Southern governments, creates a permissive environment which enables corporations to depress wages and working conditions. Gary Gereffi’s concept of a ‘buyer-driven commodity chain’ traces this shift to the exercise of market power by TNCs in the Global North. Within a buyer-driven chain, TNCs enjoy a privileged position as lead companies, and thereby exert a decisive influence over the entire chain. As such, they have the capacity to reduce and externalise production costs, outsource risk, and secure the highest profit margin in the consumer markets that they dominate. The TNCs do not formally own overseas subsidiaries or franchisees, but instead outsource production in order to avoid the burdens and responsibilities of legal ownership.
As the ‘lead firms’ within global supply chains, TNCs can be classified as ‘primary employers’, from a labour relations standpoint. The suppliers to whom TNCs outsource production can be classified as sub-contractors within the supply chain. As primary employers, TNCs intimately control the conditions of production in sub-contracted factories. They decide what is to be produced in exact detail, how it is to made, when and in what quantity, and – most importantly – at what cost. Their power to set such precise terms and costs ultimately determines working and living conditions. As primary employers, TNCs can he held responsible whenever workers endure poverty level wage, are forced to make products at a pace that destroys their health, are forced to work inhumanly long hours to meet their targets, and are forced to keep silent for fear of losing the pitiful jobs they do have.
By forcing production to operate at the lowest possible cost, TNCs cut into the margins of sub-contracted suppliers. By having the power to simultaneously decide the cost as well as the terms of production, TNCs hold their suppliers hostage. Codes of conduct and self-regulatory efforts are primarily designed to placate consumers and to deflect calls for more effective regulation. It is on this basis that they are primarily assessed. Not whether or how they improve working conditions.
According to the 2013World Investment Report by the United Nations Conference on Trade and Development (UNCTAD), TNC-coordinated GSCs account for as much as 80 percent of global trade. Accordingly, UNCTAD has called for a “regulatory framework to ensure joint economic, social and environmental upgrading to achieve sustainable development gains”. This global regulatory vacuum has been recognised by trade unionists, especially from the Global South, along with a number of consumer activists from the Global North.
At present, the complaint mechanism established by the OECD Guidelines for Multinational Enterprises (MNEs) is the only global forum that establishes guidelines for multinational companies and provides an avenue for complaints. The International Labour Organisation’s tripartite declaration of principles concerning multinational enterprises and social policy also potentially provides a good starting point. However, this ‘MNE Declaration’ only refers to subsidiaries or franchises, so global supply chains in their current form are largely excluded. Given this major limitation, there is clearly an urgent need for the ILO to clarify and update its standards and mechanisms to protect workers employed by TNCs across their supply chains.
TNCs cannot continue to escape regulation. It is only through global regulation that the current imbalance of power can be corrected and challenged. Unbalanced power has resulted in a global human rights crisis which is manifested in events such as the death and destruction of. Rana Plaza. The only way to avoid more Rana Plazas is via binding legislation, rather than self-regulation.
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