Beyond Trafficking and Slavery

Supply chains roundtable: Shelley Marshall

Shelley Marshall
26 June 2016

Question 1 – do we need a binding international convention on corporate responsibility for labour standards in global supply chains?

A binding international convention on corporate responsibility for labour standards in global supply chains is desperately needed. The International Trade Union Confederation estimates that around 60% of global trade in the real economy depends on the supply chains of 50 corporations, which employ only 6% of workers directly and rely on a hidden workforce of 116 million people. These obscure employment relations mean that labour exploitation is rampant and can flourish un-detected.

Without placing obligations on the real power-holders in global supply chains, nation-states will remain relatively powerless to improve the conditions of workers.

A binding international convention should not only create positive duties for parties within supply chains who may be contractually far removed from workers, but it should also provide a means of bringing claims against supply chain parties such as financiers and buyers. These claims should be possible where sufficient evidence can be shown that business practices undermine the capacity of direct employers or principle contractors to pay workers adequately and provide fair labour conditions, or where there is evidence of these players undermining the capacity of state labour inspectorates to enforce labour standards.

Question 2 – what should global supply chain governance look like?

We need a multilateral instrument – an ILO convention, for instance – which creates an international enforcement mechanism to promote living wages throughout supply chains. This would allow unions and other interested parties to bring claims, at an international level, against states on behalf of worker-citizens for failing to enforce living wage laws, and be awarded a portion of any of the funds recovered. The primary remedy would be the recovery of unpaid remuneration. The state would be ordered to pay unpaid entitlements to those workers who had not been paid the living wage.

The state would then be able to recover these funds from the relevant employers or other parties within the supply chain, who are found to have practices that affect the employer’s or contractor’s ability to provide a living wage, legal remuneration, or related conditions to the worker.

Question 3 – how can we promote business accountability for labour standards in supply chains?

The time has passed for voluntary initiatives alone. Mechanisms are required for the enforcement of core labour standards where there is evidence that business practices are undermining the capacity of direct employers or principle contractors in supply chains to provide living wages and fair conditions. These mechanisms can be both national and transnational in character.

Some nation states have legislated for such supply chain regulation and their laws are a useful model that any future transnational mechanism could follow. In Australia, for example, legislation has been enacted in the clothing industry and the transport industry, where supply chain practices are particularly egregious. Pressure for fast deliveries from buyers in the transport industry, for instance, was leading to deaths on the road as drivers drove dangerously fast or for too long. It was not enough to hold the direct contractor who gave the work to the driver responsible. Action had to be taken higher in the supply chain, and the only way to ensure that this happened was by giving workers the right to make claims against parties higher up in the supply chain. The Australian Road Safety Remuneration Act 2012 (Cth) provides one excellent example of a way that business accountability can be promoted within supply chains.

Question 4 – in the absence of extra-territorial legislation to ensure and enforce business accountability, how can workers best be protected in international supply chains?

The creation of supply chain collective agreements is an important corollary to extra-territorial legislation. Even if extra-territorial legislation was enacted that created positive duties for parties within supply chains and rights of enforcement, collective agreements would still be vital. There are a number of these agreements in place today that have been negotiated between global unions and global brands. Such agreements provide a flexible means for the creation of industry-specific terms and conditions which recognise the needs of parties within the supply chains. Collective agreements can be seen as a ‘reflexive’ model of regulation: a negotiated outcome that is more sensitive to industry conditions than legislated outcomes. Ideally, a transnational regulatory body would have the power to mediate disputes concerning these agreements and enforce their terms when breached. This could be a crucial new role for the International Labour Organisation for the 21st century.

Question 5 – what, more generally, are the benefits and drawbacks of global supply chains as a 'model' for production and development?

Global supply chains have many benefits. From the perspective of workers they can provide a means to industrial upgrading and better quality jobs. Producers can learn from those higher in the supply chain about how to improve production methods and, perhaps, how to move into new, value-added areas of production. This can lead to safer and better paid jobs for workers. Likewise, supply chains can provide important points of leverage for workers. There are many occasions when pressure placed on brands and buyers who are sensitive to reputational damage has led to improved conditions.

On the other hand, global supply chains can have dire consequences for workers. In particular, supply chain dynamics have undermined the capacity of states to hold direct employers responsible for the conditions of workers. State-based labour regulation is floundering because it has failed to respond to new patterns of production and control. State capacity to regulate work around the world has been weakened by the increased intricacy of post-Fordist processes of capitalist development – the shift from large-scale mass-production methods pioneered by Henry Ford towards the use of small, flexible manufacturing units overseas that is a feature of production in supply chains.

Supply chains take many different forms: they involve assorted and often fluctuating numbers of parties, have diverse governance structures, and span distinct geographical and political spaces. The structuring of supply chains in organisationally complex, which can make it very difficult for state-based regulators to identify a clear locus of power and control, and thus to determine appropriate regulatory subjects and agents. Who should be held responsible for the poor conditions of workers, when so many parties are involved in passing work down the supply chain? Where production occurs in integrated supply chains, control is wielded in a diffuse, multipolar manner. This is a consequence of a number of characteristics of integrated supply chains, including spatial dispersion, functional specialisation, separation of ownership and control, asymmetries in information, and responsiveness to international and national institutional arrangements.

These five factors require new regulatory strategies aimed at targeting diffuse, geographically disparate and shifting loci of control. Only regulation that targets the dynamics within global supply chains can achieve this, and thus improve the conditions of workers.

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