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Supply Chains and Labour Rights

- December 20, 2012

The “fire in Bangladesh”:http://www.nytimes.com/2012/12/18/world/asia/bangladesh-factory-fire-caused-by-gross-negligence.html has spurred a broader political controversy over whether large US firms such as Walmart have a responsibility to improve safety conditions in their subcontractors. This feeds into a broader set of questions over the extent to which international labor rights are observed. Most of the research (including Beth Simmons’ “important recent book”:http://scholar.harvard.edu/bsimmons/mobilizing-for-human-rights) has focused on a narrower range of human rights. However, a chapter for the new _World Bank Development Handbook_, “Margaret Levi”:http://siteresources.worldbank.org/EXTNWDR2013/Resources/8258024-1320950747192/8260293-1320956712276/8261091-1348683883703/WDR2013_bp_Aligning_Rights_and_Incentives.pdf and a group of her colleagues provides an overview of labor rights, arguing that they are apparently being violated more rather than less over time in most regions of the world. Nor are efforts to counteract the deficiencies of formal institutions through supply chain management notably effective.

bq. [Richard] Locke’s (forthcoming) remarkable access to several major corporations has allowed him to conduct the most serious evaluation to date of the possibilities and limits of corporate schemes. Using Nike’s internal audit data, he shows that Nike’s private compliance initiatives “are not producing the significant and sustained improvements in workplace conditions that many had hoped for.” He reaches similar conclusions after examining audit data for Phillips Van Heusen and Hewlett-Packard. The supply chains of all three companies improve in specific areas, such as health and safety, deteriorate in labor standards, and cycle in and out of compliance over time. Locke concludes that researchers and policy makers have often inappropriately specified the power relationships between brands and suppliers and under-theorized the conflicted incentives inherent in CSR initiatives in the competitive global economy. In spite of non-compliance with brand codes of conduct, Locke finds it is rare for a company to fire the supplier or pull out of a factory, especially if there is strong demand for turnaround on a particular product. Moreover, suppliers who are in full compliance seem to receive little reward, such as increased orders for suppliers, for full compliance. Asking suppliers to compete on price and simultaneously raise labor standards gives them fundamentally conflicting signals.