Question 1 – do we need a binding convention on corporate accountability for labour standards in supply chains?
We do. Sitting on top of global supply chains (GSCs), multinational corporations (MNEs) coordinate complex webs of subsidiaries, subcontractors, and suppliers. Lead firms choose where they operate and from whom they source, and as a result have a great deal of power within the GSC model. However, traditional legal frameworks have proved insufficient to hold MNEs to account for the abuses taking place in their own supply chains. Victims of severe exploitation – including human rights violations – are often left unprotected, without justice or compensation.
A binding international convention would represent an opportunity to address some of the key governance gaps that are currently letting corporations ‘off the hook’ for the negative human rights impacts of their conduct. In particular, it could address:
• Jurisdictional issues: while MNEs source and operate across national borders, the laws applicable to their conduct are limited to the jurisdiction of each individual country.
• Inadequate protection of workers’ rights at the local level: responsibility for labour regulation and enforcement is national. Many countries, however, lack adequate legal frameworks, or the capacity – or political will – to effectively enforce labour standards.
• Traditional corporate liability: the structures created in supply chains (subsidiaries, subcontracting, outsourcing, offshoring) pose major legal challenges for holding lead firms accountable. Violations often occur at the bottom of the chain, and the limited scope of traditional corporate liability ignores the responsibility of lead firms for the factors driving exploitation in their supply chains.
Question 2 – what should supply chain governance look like?
Any model for effective supply chain governance should seek to shift the cost-benefit balance driving exploitative business and employment practices through a combination of national and transnational accountability mechanisms. Mandatory legal mechanisms for transparency in supply chains should be developed and enforced to give visibility and clarity to the actions, relationships, and obligations of the different actors involved in complex supply chains. Corporate accountability should be strengthened at the national and international levels, and human rights due diligence should be mandated by national legislation across the supply chain.
Adequate labour standards should be adopted and vigorously enforced at the local level through a combination of labour inspection and a process of worker organisation and empowerment. Supply chain governance mechanisms should not only define the obligations of employers, but should also recognise and engage workers in GSCs as right bearers. In that context, the protection and promotion of fundamental labour rights such as freedom of association and the right to collective bargaining in GSCs is key. Access to justice for workers should be enhanced at the national and international level, both as a way to provide remedy to workers who have seen their rights violated, and to hold exploitative businesses – not just employers – accountable for the abuse taking place in their supply chains.
Due to the transnational nature of this problem, we need a strong global response in order to ensure decent working conditions for workers in GSCs. Only a joint and concerted international response, which includes the development and implementation of a binding international legal framework, will prevent the competition-induced ‘regulatory race to the bottom’ that we have seen in the past.
Question 3 – how can we promote business accountability for labour standards in supply chains?
A number of countries are taking positive steps in this area. Belgium, for example, is one of the few countries where companies have been successfully prosecuted for their involvement in human trafficking for labour exploitation. In 2012, Belgium also introduced a system of joint and several liability for the payment of workers’ wages. This system creates a chain of successive responsibility, linking outsourcers, subcontractors, and contractors of tasks within a supply chain, all the way up to the main contractor or principal placing the order. If a business repeatedly fails to pay its employees’ wages on time or severely underpays workers below the minimum wage, Belgian labour inspectors will notify its clients, contractors, and subcontractors. Lead firms can then be held responsible for the underpayment or non-payment of wages to workers by a subcontractor located at the base of the chain. Additionally, this official notification is used as evidence in the prosecution of companies that turn a blind eye to the exploitation of workers by their subcontractors.
In Brazil, employers who have been found guilty of exploiting workers in slavery-like conditions are named in the ‘dirty list’. The list has the potential to reach entire supply chains, as it applies to those who directly and indirectly benefit from slave labour. The companies and individuals on the list cannot receive government funds, and their access to private financing is limited. They also feel the impact on their profits, as the members of the National Pact for the Eradication of Slave Labour use the dirty list to identify dishonest suppliers. Over 400 corporations, accounting for over 35% of Brazil’s GDP, had signed onto the pact by early 2014.