Worker-driven Social Responsibility (WSR): A New Model Empowering Workers in the Fight to Eradicate Modern Slavery in Supply Chains

Jonelle Humphrey

There has been recent shift from Corporate Social Responsibility (CSR) to Worker-driven Social Responsibility (WSR) initiatives being utilised to combat modern slavery and forced labour in supply chains. While a plethora of definitions have been applied to the term CSR (Dahlsrud, 2008), it is generally understood to be “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (Commission of the European Communities, 2001, p. 6). The adoption of CSR initiatives by Multinational Corporations (MNCs) can be traced back to the 1970s when neoliberal policies promoting international trade and capital mobility spurred a transformation in global production practices (LeBaron et al., 2018). MNCs in the Global North began to shift manufacturing off-shore, primarily to the Global South, to take advantage of low labour costs. Off-shoring not only resulted in fissured or fragmented work places (Weil, 2017) but also in a race to the bottom in which developing countries began competing to establish themselves as the most attractive to MNCs. They accomplished this by eliminating or reducing taxes on foreign investment, lowering labour standards and decreasing wages all of which contributed to the increased precariousness of workers (ILRF, 2019).

Traditional protection for workers derived from labour laws and organising via trade unions to negotiate better standards (Gordon, 2017). However, both the state and unions have failed to keep pace with the speed at which workplaces have fissured and supply chains have grown (Weil, 2017). Transnationals supply chains cause particular problems because the laws in countries in which MNCs are located, primarily the post-industrial countries of the Global North and higher-income countries in the Global South, do not have the jurisdiction to regulate the conditions of workers employed at the bottom of chains in countries in the Global South– countries that may lack the capacity or the will to regulate their local labour markets and protect labour standards. Moreover, employment laws only apply to a corporation’s direct employees, exempting corporations from liability for labour abuses occurring within its subcontracted workforce (Gordon, 2017). MNCs therefore use the tactic of subcontracting to shift risk onto suppliers. Furthermore, labour laws provide protection for full time employees and not the casual, irregular, short term and migrant workers commonly associated with fissured workplaces. These workers are discouraged from collectively bargaining due to fear of retaliation in the form of loss of shifts or dismissal (FLEX, 2020). This is compounded in the case of migrants whose status is tied to their jobs and fear deportation (Brudney, 2016). The lack of internationally enforceable labour standards means that MNCs are wholly unrestrained in their search for lightly regulated regions.

In the late 1980s and early 1990s trade unions, NGOs and student groups began mobilizing consumers in the Global North to pressure brands to take accountability for the labour violations in their supply chains (Bair & Palpacuer, 2015). There were media exposés of exploitative conditions in Chinese and Central American factories (ILRF, 2019). Activists argued that while the law may not deem lead firms liable, they still had a moral responsibility due to the profit they derived from these workers’ labour (Gordon, 2017). There were demands for MNCs to implement changes such as higher wages and safer working conditions in contract factories (Bair & Palpacuer, 2015). There was a proliferation of corporate led initiatives in response to this negative publicity. Major brands such as Nike and Walmart began formulating codes of conduct based on international labour standards for their overseas suppliers (ILRF, 2019). Brands also began developing auditing regimes to monitor supplier compliance. Stakeholders in the field believed that CSR filled the governance gap created by the limited enforcement of labour laws in producer countries (Bair & Palpacuer, 2015). CSR proponents argue that corporate codes are efficient, flexible and offer a direct approach to addressing the violation of workers’ rights in company supply chains (ILRF, 2019). However, CSR policies are extremely problematic for various reasons.

The Pitfalls of CSR

CSR has been criticised for being purely promotional efforts designed to protect the brand’s reputation, pacify stakeholders and distract from the corporation’s unethical activities (Jackson, Doellgast & Baccaro, 2018). This is because CSR is based on voluntary commitments in which corporations design their own corporate codes, including how it is to be enforced, and face no penalties when they fail to follow the standards they outline for themselves (Gordon, 2017). These codes also lack transparency as companies rarely measure their effectiveness on the ground or report instances of non-compliance by suppliers (FLEX, 2020). Labour history has proven that improved working conditions are achieved only when there is an ongoing threat to corporate profits (Gordon, 2017).

Furthermore, voluntary compliance programs typically operate in the Global South where reputable labour standards, independent trade unions and relatively unconstrained media are sorely lacking in comparison to the Global North (Brudney, 2016). China and Bangladesh, who are at the forefront of low cost manufacturing, are among the worst offenders of Freedom of Association rights in the world (Anner, 2018). Workers are unwilling and in many cases unable to assert their rights due to inadequate regulatory systems and a lack of education and training regarding levels of pay, hours of work and other conditions of employment (Brudney, 2016). This, combined with uninterested or fearful media, contributes to low levels of transparency that makes effective monitoring difficult to achieve.

Supply chain monitoring through social auditing models is equally ineffective. Internal auditors are problematic in terms of addressing non- compliance because both the corporation and the suppliers have a business interest in concealing labour violations (Locke, Kochan & Romis, 2007). Third party auditing is widely perceived as a conflict of interest in that the auditors are reporting to corporations from whom they hope to obtain future work. This has raised questions about the reliability of the outputs from these social audits (Outhwaite & Ortega, 2019). This dependence on future work also acts as incentive for auditors to select the cheapest inspection methods least likely to reveal violations. This includes desk audits patterned after financial audits which involves top-down examination of documents rather than more effective worker interviews (Brudney, 2016; Gordon; 2017). In the case of site visits, if suppliers are given advance notice they can falsify documents and coach workers to lie about their work conditions (Zenker, 2018). Interviews conducted exclusively at the work site also intimidates workers who fear retaliation (Brudney, 2016). Poor monitoring and enforcement has also been regarded as the downfall of Multi-Stakeholder Initiatives (MSIs) which sought to address the limitations of CSR by including civil society and various other stakeholders to develop and monitor standards (FLEX, 2020). However, it has not been any more successful than CSR in achieving sustainable change for workers.

Due to the fact that CSR initiatives are designed by corporations, they fail to address the issue of corporations’ own purchasing practices which perpetuates forced labour. Suppliers suffer a price and sourcing squeeze at the hands of brands (Anner, 2018; Anner, 2020). Brands are constantly demanding lower prices from their suppliers. Suppliers agree to these prices due to fear of losing the order to a competitor even though it does not cover their production cost (Anner, 2020). Suppliers in turn choose to operate in sub-optimal buildings and reduce wages to maintain a profit. Additionally, brands are requesting smaller orders which last on shelves for only a couple of weeks as part of the fast fashion model. Suppliers therefore struggle to find enough orders for the factory to function at full capacity. They consequently accept more orders than they can handle fearing loss of business if they turn down any orders. This leads to the production spikes which contribute to unauthorised outsourcing and forced overtime. MNCs therefore demand that suppliers comply with labour standards while simultaneously pressuring them to ignore them (Gordon, 2017). The only way to change this dynamic would be to require firms to fund better working conditions by putting more money into their supply chains.

Finally, CSR initiatives tend to offer generic solutions instead of tailoring them to the specific sector they are meant to regulate (FLEX, 2020). This is because the voices of workers and their representative organisations have been absent from CSR. Workers are the subjects of CSR activities yet they have no say in the initiatives meant for their benefit (Jackson, Doellgast & Baccaro, 2018). If workers are not actively engaged in the design and enforcement of standards then crucial issues that affect them tend to go unidentified and unaddressed (Gordon, 2017). Hence the emergence the worker-driven social responsibility model.

The Emergence of the WSR Model

The WSR Network was launched in 2017 to address the deficiencies and failures of traditional CSR models and MSIs by highlighting worker-driven alternatives (ILRF, 2019). The network was founded by organisations such as the Coalition of Immokalee Workers (CIW), the Worker Rights Consortium (WRC), Migrant Justice (MJ) and the Fair Food Standards Council (FFSC) with the aim of “expanding, promoting and replicating” the WSR model in supply chains around the world (WSR Network, 2017). The network’s first principle explains that worker-driven means “workers and their representative organisations-global, national or local labour unions, worker-based human rights organizations, or other organizations that genuinely represent workers’ interests-must be at the head of the table in creating and implementing the program, including its priorities, design, monitoring and enforcement” (WSR Network, 2017). Therefore, unlike CSR which is motivated by a firm’s desire to protect its reputation, WSR is underpinned by principles of industrial democracy, that is, the notion that worker participation in the governance of labour standards is necessary to ensure that those within the organisation can hold those in authority accountable (Donaghey & Reinecke, 2018).

There are several key features that define the WSR model. (a) The standards for suppliers are formulated by experts who are typically the workers and their representative organisations (FLEX, 2020). (b) There is a legally binding contract between the lead firm and a worker representative organisation mandating the lead company to only purchase from suppliers who are compliant with the standards. (c) Lead firms are required to support suppliers to assist them with complying with the standards. This includes making payments towards wages or building upgrades (Gordon, 2017). (d) A crucial feature is that non-compliant suppliers face tangible economic consequences such as suspension of their services. (e) Workers are educated about their rights so that they can act as monitors to enforce the standards. (f) There must be a complaints mechanism which enables workers to report violations without fearing retaliation. This mechanism is essential particularly in light of the deficiencies of social auditing (Outhwaite & Ortega, 2019). (g) There must be an independent monitoring body conducting frequent inspections, responding to complaints, determining whether the standards have been breached and if the firm should continue to source from the supplier in question. (h) Finally, consumer pressure is the essential component necessary to force corporations to negotiate with workers.

This model therefore addresses the power imbalance between not only lead firms and supply chain workers but between lead firms and suppliers as well. It does this via a legally binding contract which places primary responsibility for labour violations on the MNCs who are the most powerful party in the chain (Gordon, 2017). However, MNCs benefit as well because they have an “insurance policy” against any findings of slave labour in their supply chains (FLEX, 2020, p. 17). WSR agreements also empower outsourced, subcontracted, migrant and other precarious supply chain workers who typically lack protection. Suppliers, although not a part of negotiating the standards, also benefit because corporations are obligated to only source from suppliers in the program. This means that brands cannot simply switch to suppliers who are more lightly regulated without facing repercussions.

The WSR Network promotes the development and adoption of WSR largely based on the success of the Fair Food Program (FFP). The FFP was launched in 2011 by the CIW, a human rights organisation mainly composed of farmworkers in Florida’s tomato industry. America’s agricultural sector has a long history of being low wage and exploitative and growers tend to recruit workers from the vulnerable Mexican migrant population (Brudney, 2016). Court rulings have revealed workers being held captive by threats and violence, sexual harassment, beatings and shootings (Asbed & Hitov, 2017). The CIW realised that it was the brands creating the downward price pressure on suppliers who in turn imposed downward pressure on working conditions and wages. After four years of campaigning and boycotting Taco Bell, the original Fair Food Agreement was signed in 2005 by Taco Bell’s parent company Yum! Brands who agreed to improve working conditions in tomato fields.

Today, the FFP operates in multiple states across America and its signatories include the CIW and 14 buyers including McDonald’s, Subway and Walmart (FFP, 2014; FLEX, 2020). The Fair Food Code of Conduct negotiated between workers, growers and buyers sets out practices participating growers must follow including no subcontracting of employment and the prohibition of forced labour and sexual harassment (Brudney, 2016). The Fair Food Agreements between the CIW and participating buyers are legally binding and include two crucial provisions. Firstly, buyers must pay the Fair Food Premium on every pound of produce purchased, 87% of which is passed on to workers and reflected as a bonus on their payslips (Brudney, 2016; Asbed & Hitov, 2017). The FFSC tracks premium payments through the supply chain until their final distribution. Premiums have added over $30 million to the payrolls of participating growers since the FFPs inception (FFP, 2014). This not only alleviates the historic economic hardship endured by farmworkers, but the 13% retained by growers offsets their increased administrative and payroll taxes costs (Brudney, 2016). Secondly, growers are to be suspended for non-compliance with the code. This latter provision ensures that there is enforcement of the code through market consequences for growers who fail to comply.

Peer to peer education occurs by CIW staff informing farmworkers of their rights. Workers also receive the Know Your Rights and Responsibilities booklet and watch the accompanying video upon being hired (FFP, 2014). Furthermore, the FFSC operates the FFPs complaints mechanism whereby workers can call 24/7 with complaints which are investigated by the FFSC. The FFSC also audits growers by reviewing records, interviewing all levels of management and over half the number of workers at a farm. Extensive worker interviews are conducted in various locations including in worker buses and accommodations (Brudney, 2016). The FFSC has stated that it was able to overcome the inherent limitations of auditing by deputising 30,000 workers as monitors (Brudney, 2016). The FFP has not only transformed Florida’s tomato industry from “ground zero for modern slavery” to “the best working environment in American agriculture” but it has also significantly reduced incidents of sexual violence and harassment (Asbed & Hitov, 2017, p. 509).

The Bangladesh Accord on Fire and Building Safety (The Accord) is another successful WSR agreement. The Accord was signed in 2013 after the collapse of Rana Plaza which killed 1, 138 garment factory workers and attracted international outrage (WSR Network, 2017). Signatories included two Global Union Federations (IndustriALL and UNI Global), eight Bangladeshi unions and over 200 brands such as H&M and Adidas (Donaghey & Reinecke, 2018). Four NGOs including the WRC served as witnesses to the agreement. The Accord was governed by a Steering Committee which included three brands, three unions and a neutral chairperson from the International Labour Organisation (ILO). This legally binding agreement committed signatories to a five-year program of factory safety audits and remediation for 1646 Bangladeshi factories. Companies were obligated to cease sourcing from non-compliant factories, provide remediation support to suppliers such as increased prices or direct payments for renovations and to maintain sourcing relationships with the factories being remediated (FLEX, 2020).

The signatory companies funded an independent inspection program in which Corrective Action Plans (CAPS) were developed after factories were inspected by building, electrical and fire safety engineers. All inspection reports and CAPS were made public. Factory Safety Committees made up of elected workers along with managerial representation held all-employee meetings to educate workers about their rights and workplace safety. A complaints mechanism was also set up for workers to report any safety concerns (FLEX, 2020). The Accord’s success is evidenced by the fact that by October 2018, 90% of the safety hazards identified in the initial round of inspections were reported to be fixed (WSR Network, 2017). The binding arbitration process was a key enforcement mechanism which put pressure on brands to comply. The unions brought arbitration proceedings against two unnamed brands which failed to ensure their suppliers renovated facilities within the required deadlines. The cases were settled in 2018, one of them for $2.3 million (Croucher et al., 2019). The agreement was renewed for an additional three years and is known as the 2018 Transition Accord.

Another example is the Milk with Dignity (MD) agreement made in October 2017 between the Vermont dairy farmworker-led organisation Migrant Justice (MJ) and Ben & Jerry’s. The ongoing economic hardship of Vermont’s dairy farmworkers is a result of the downward pressure on wages caused by suppliers not being paid sufficiently to cover the cost of milk production. Recognising the parallels to Florida’s tomato industry, MJ leaders adapted the core elements of the FFP to Vermont’s dairy industry (Mares & O’Neill, 2019). Participating farms are required to comply with a Code of Conduct regulating wages, working time, housing and health and safety for workers. Ben & Jerry’s pays a premium to farm owners which not only enables workers to have a bonus reflected in each payslip but also offsets the cost farmers incur by complying with the standards (FLEX 2020). The Milk with Dignity Standards Council (MDSC) investigates worker complaints, audits farmers and may suspend farmers for non-compliance.

The MD program has proven to be successful with 72 farms across Vermont and New York enrolled. Over 300 workers from these farms have attended educational sessions teaching them about various rights and responsibilities under the program. In October 2018 the MDSC received approximately 70 enquiries on the 24 hour worker support line leading to the investigation and resolution of 39 complaints of MD Code violations (Mares & O’Neill, 2019). However, Ben & Jerry’s is just one buyer and its supply chain comprises under one tenth of the approximately 750 dairy farms in Vermont. Although there are plans to expand the program traceability of the milk is problematic. Milk from different farmers gets mixed together before being sold making it difficult to effectively monitor supply chains (FLEX, 2020). Ben & Jerry’s was a suitable brand because they already had a program to identify their supply chain. This key difference from the tomato industry may make it challenging for the MD program to match the scale of the FFP but the program has nevertheless demonstrated promise.

The most recent WSR agreement announced in 2019 is the Agreement to Combat Gender based Violence in Lesotho’s garment sector. It is the second example of a WSR Agreement regulating a cross-jurisdictional supply chain in the garment industry following The Accord (FLEX, 2020). It covers more than 10,000 workers in five factories. The agreement includes a complaints mechanism modelled after the FFP’s mechanism, which has been “uniquely successful in addressing a culture of sexual harassment and gender-based violence” (WSR Network, 2017). However, the Lesotho Agreement is unique. Unlike other programs it not only features legally binding agreements between worker organisations and the brands (Levi Strauss & Co., The Children’s Place and Kontoor) but it also includes a legally binding agreement between the worker organisations and the supplier, Nien Hsing Textile Co. (FLEX, 2020). The reasoning for this is that the brand agreement is meant to enforce the supplier agreement. If the supplier does not comply each brand will then reduce its orders in a bid to force compliance (FLEX, 2020). Furthermore, any of the brands can be subject to legal action for program violation. The results of this agreement remains to be seen.

The WSR model is therefore a promising method for negotiating improved working conditions. However, existing applications show that the model is particularly suited to sectors where companies at the top of supply chains have the market power to influence working conditions at the bottom. More importantly, the model thrives in mainly consumer-facing sectors where brands fear reputational risk. Can a model dependent on campaigning and consumer outrage to fuel negotiations be considered sustainable? Furthermore, can this model be scaled up, that is, modified to be more widely used in sectors which do not fit this criteria? Finally, can the model be expanded or even survive in countries such as Bangladesh where brands are leaving to seek out even cheaper production sites in countries like Ethiopia? These are important questions which merit further research when considering the viability of this model.

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