I’m working on a longer follow-up to respond to some of the reader responses to my article, but for now, I’ll quote some people who know way more about this topic than me, on what my article got right and wrong.
First up, here’s a note I got from one of the auditors I interviewed for the article:
One thing that I hear repeatedly nowadays is that we can’t forget the role of government. We focus on CSR and what companies should be doing but we can’t forget that companies are primarily acting on these issues because local governments are failing to uphold international obligations to protect human rights, to adhere to treaty obligations, and to enforce their own national legislation, which is often much stricter than anything in any buyer code of conduct.In addition, we can’t be prescriptive about solutions. The West doesn’t have superior solutions. If we want to know what needs to be done, we need to talk to the rights-holders themselves to understand what they want and what they need. In other words, participatory solutions are critical and much more valuable than anything we can dream up in isolation. When communities are engaged holistically in developing solutions, they own that process and it can impact the outcomes much more positively than anything being imposed from the top down.…
When considering the shift of consumer power away from the global North / West, we shouldn’t forget that there is still a lot of financial influence, via organizations such as the World Bank, regional development banks like ERDB, ADB, IADB, and of course investors like state funds and SRIs [socially responsible investors].If you look at the numbers, there are trillions of dollars backed by SRIs alone. But more than that, financing options for many of these institutions are linked to ESG commitments [environmental, social and governmental]. Loans are routinely linked to compliance with things like IFC Performance Standards covering issues from environment and labor to community impact. Funding can be suspended or terminated for non-compliance. Complaint mechanisms allow communities or activists to lodge complaints with ombudsman offices, like those in the IFC and OECD.Last year, I did an investigation into a land rights issue in Asia and found myself in the field alongside a regional investor who was also investigating the issue and working with their client to bring them into compliance.
What workers in the global South need is not better international labor standards, but rather the freedom to organize themselves and demand better standards for themselves. You point out that Foxconn in Indiana is not a sweatshop. It’s not just because the US has good institutions; it’s because the US had a strong labor movement that won basic things like safety laws, weekends, the minimum wage, etc.
I think we have to ask ourselves why these same movements and institutions don’t exist in the global South. And the reason, as far as I can tell, is that the governments of global South countries have been explicitly prevented from nourishing them. The history of structural adjustment from the 1980s onward was a process of actively dismantling state institutions, forcing domestic economies open to the flux of global markets, and rolling back wages and labor standards. If global South countries did otherwise (if they bolstered state institutions, increased wages, etc), they could be sanctioned by the IMF, and have loan capital withdrawn.
Today, this pressure comes mostly in the form of investor-state dispute mechanisms, which are written into free trade agreements. Through these mechanisms, multinational corporations have the power to sue sovereign states for introducing laws (like labor and safety laws) that compromise their expected future profits. And then of course there’s the Doing Business rankings, which also actively pressure global South countries to deregulate.
I think another way to approach the issue is to ask why workers in sweatshops are willing to take jobs that are so terrible. And the answer, of course, is that they have no other choice. And, as a result, they have very little bargaining power. Let’s go back to the US again. Workers were able to successfully bargain for better conditions in factories because they had a real alternative: they could pick up land in the midwest on the cheap, and become farmers (and, later, they had a passable welfare state that allowed them the option of not taking dangerous jobs and still surviving). If they didn’t have that option, chances are we wouldn’t have the weekend today. The same can be said of global South countries. The rise of sweatshops was preceded by a long process of dispossession, of actively kicking people off of their land (and then later dismantling what little welfare mechanisms existed). Without any other options for survival, people are forced to accept sweatshops jobs. This continues today in the form of land grabs; i.e., Fred Pearce’s book.
Voting power in the IMF and WB is still terribly, absurdly skewed [basically, rich countries get more voting power]. They keep making noises about changing this in response to outrage from developing countries, but the most they’ve managed is a little bit of window-dressing.
The WB still uses structural adjustment programs. In the 1990s, they had to rhetorically back down from them because of the riots and global outcry, but all they really did is change the name to Poverty Reduction Strategy Papers. The main difference is that PRSPs must be drafted by the loan recipient, as opposed to the WB, but of course everyone knows the papers have to include structural adjustment if the loan is to be granted. The brilliance is that this allows the WB to evade liability for any disasters that might ensue as a result of the policies, since the recipient country technically offered to adopt structural adjustment policies voluntarily.
As for the WTO: it’s stalled, and for good reason… because global South countries refuse to bargain on unfair terms any longer. But now bilateral trade agreements are proliferating as a way of getting around this.
And from a friend who works at an international institution working on private-sector human rights abuses:
You rightly criticise the auditing industry as fraught with design flaws and full of suppliers who have become highly adept at fooling the auditors. But at the same time, while it’s not a silver bullet, it is one of the best approaches a company has to the issue at the moment. Sure it doesn’t fix the extire global problem. But it fixes small corners of it, and it is those small corners that the company is most worried about, because its business touches upon them.
And yes, some things do get past auditors. But many violations are caught that way, and prevented too. I often compare it to checking my kids room after I’ve told them to clean it. Just the fact that they know it will be checked, means they do a sufficient job (although they still try to fool the auditor by kicking junk under the bed and stuffing it in the back of the closet).
So I wouldn’t be overly dismissive of supply-chain auditing, although I recognise it’s not a global solution, it’s just a band-aid. Because I want companies to keep doing it and to continue to try to perfect the practice (which today is more sophisticated, and includes supplier capacity building). This continued practice will help keep the pressure up, while at the same time, it will allow us to experiment at the micro-level with various good practices, which can then be exported into a global solution.
You are right in identifying the country-challenges in supply chains, like when you compared conditions in Mexico to China. But even those country-challenges can be changed by the pressure from big business. I remember speaking with [giant apparel company] about their experience in Pakistan. They told the Govt of Pakistan that they would not allow their suppliers or licencees to source from Pakistan because the labor conditions were so poor that [the company] couldn’t afford the risk.
So the Govt of Pakistan asked the ILO for help to improve their labor conditions so that they could attract the business. That’s definitely a dynamic we want to encourage with other big buyers. And it’s a dynamic which has a positive spill-over into the really critical aspect of the problem – those suppliers which are producing for the domestic market, rather than for the big Western buyers.
Also, if you’re interested in why Nike’s approach to its suppliers hasn’t improved conditions in them, check out this great Richard Locke lecture from a few years back.