Perspectives in Responsible Sourcing

The New Wave of Worker Strikes in China

In the last quarter of 2011, China saw many more worker strikes than ever before. In October 2011 a massive walk-out at a watch factory appeares to have initiated another wave of worker strikes in China. In November thousands of workers walked off the job in a shoe factory. And this month, it is reported that nearly 1,000 workers put down their tools in protest at a hard-disk manufacturing factory.

The above news is particularly poignant, as these strikes are now becoming quite typical. As a matter of fact, during the last quarter of 2011, there were many more worker strikes reported by local and international media. These strikes demonstrate a common theme.

First of all, the worker strikes in China have become a cross-sector movement. These strikes affect industries from consumer products and beverages to information technology, which indicates that the workers in the manufacturing sectors are gaining better awareness of their legal rights.

Secondly, it appears that the worker strikes have grown in scale and appear to be well-organized. Among these reported strikes, the smallest one exceeded 100 workers and the largest involved 7,000 workers. In addition, banners and slogans can be seen at protests indicating that the workers are well-prepared for their actions. 

The third observation is related to the factors that trigger these strikes. In addition to the traditional reasons of excessive overtime hours and wage issues, business decisions made by the company’s senior management is seen as a new trigger that causes workers to fight for their rights. For example, workers may feel insecure following acquisitions by other companies or talks of relocating factories, all of which increase the workers’ fears of losing their benefits and jobs.

Given the current wave of worker strikes, factory owners may ask: “Will my factory in China face worker-strikes someday in the future?” It’s possible, especially if worker concerns are not properly addressed or if their complaints, legitimate or not, are completely ignored. In these cases management might need to improve communication. If  details of issues affecting employees had been properly communicated to the workers in these factories the strikes might not have happened. In addition, if the factory's internal grievance mechanisms had functioned properly, then perhaps workers’ complaints over low wages or excessive working hours might not have escalated to the level of that which occurred at the watch factory in October 2011.

Looking ahead, 2012 may bring more challenges to the manufacturing sector, especially when it comes to handling employee-management relationships. 

 

Brazil’s Amazon Rainforest: Grounds for corruption and debate

Reports continue to surface in the Para region of Brazil around the issue of deforestation in the Amazon and its link to illegal sourcing of dry wood charcoal, a resource commonly used by the global steel industry.

Charcoal tends to be more popular than the use of coal in pig iron production due to its low sulfur content, increased reactivity, and purity during processing. As a result, there’s a higher demand for dry wood charcoal by the steel industry, which organizations like the Instituto Observatori Social (Social Observatory Institute - SOI) in their February 2011 SOI issue would argue, are contributing to collective corruption and deforestation facing the Amazon region. Business people, politicians, public servants, and in some cases environmental protection agencies have reportedly worked together to circumvent environmental and local laws making charcoal laundering an on-going environmental challenge for the Amazon. 

REDD-Monitor (a group that facilitates discussion about the concept of reducing deforestation and forest degradation) reports that currently, Brazil’s forest code limits the percentage of land that farmers and ranchers can clear. In the Amazon rainforest, 80% of the forest must be left intact, 35% in tropical savannah zones and 20% in the rest of the country. However, despite a reported reduction in deforestation by the National Institute of Space Research between August 2010 and July 2011, environmental codes/laws are not strictly enforced and ranchers and agribusiness corporations ignore them resulting in a huge amount of illegal deforestation. Nevertheless, the government continues to take a firm stance on illegal logging certificates and un-authorized clearings.

A recent piece from The Economist, “Fiddling while the Amazon burns”, from December 3, 2011 discussed the controversial and political bill currently being reviewed by the Brazilian Senate surrounding the suggested implementation of legislative safeguards and a revision of the country’s Forest Code, a debate that’s been running for over 15 years. The proposed revisions would allow farmers in the Amazon to cut down a larger percentage of trees on their property and re-define the type of land that can be legally cleared.

However, environmentalists argue that the changes and loopholes in the proposed legislation pose a big threat to the Amazon rainforest. As it stands, the bill remains to be re-approved by Brazil’s congress and President. Until then, those beneficiaries in the global steel industry (ex: manufacturers of steel car parts or  home appliances, to name a few) caught sourcing illegal coal run the risk of  environmental violations found in their supply and value chain, negative press, and a possible consumer backlash, in turn impacting their company or brand’s reputation. 

A Precautionary Approach to Human Rights

What if every product you buy was required to come with a label that said, ‘WARNING! This product or its parts may have been produced in a facility or extracted from an area known for human rights abuses’, unless the manufacturer could prove its supply chain was devoid of unethical practices?

Human Rights labelling of products as a consumer’s “Right to Know” was one of several ideas put forward at a conference hosted by George Washington University, the UN Global Compact US Network, and the US Institute of Peace last month that brought human rights advocates, practitioners, and academics together to discuss how companies are implementing the Guiding Principles on Business and Human Rights (the GPs).

One of the overarching questions raised by the conference organiser, Professor Susan Ariel Aaronson, Ph.D., was how governments could promote business uptake and implementation of the GPs, in addition to fulfilling their own responsibilities to protect human rights through regulation.

One delegate, presenting on her company’s efforts to address Human Trafficking, noted that the US State Department had asked the company to sign onto the Code of Conduct for the Protection of Children from Sexual Exploitation in Travel and Tourism. While the GPs are voluntary and are currently not set up to receive signatories, a request from a government body for a company to sign on would likely not go unheeded, especially as the GPs do not contain specific performance requirements on human rights. What about positive incentives? Could the State Department extend its Corporate Excellence award to include a category for corporate leadership on human rights, for example?

Other ideas included incorporating the GPs into government procurement guidelines to make implementation of the GPs a requirement for federal contracting; creating incentives through bilateral and multilateral trade agreements; establishing disclosure laws in line with the California Supply Chains Transparency Act or SEC filing rules like Dodd-Frank Section 1502 to mandate disclosure of whether and how companies are identifying human rights risks and undertaking human rights due diligence in their operations; and, more controversially, developing a Foreign Human Rights Abuses Act, mirroring the Foreign Corrupt Practices Act with sentence or fine reductions for companies having implemented a ‘culture of human rights’ to include human rights due diligence, reporting, and grievance mechanisms similar to US sentencing guidelines on corporate ethical misconduct (just replace the terms “compliance and ethics program” with “human rights program”, and “criminal conduct” with “human rights abuses” – it works quite well).

Questions around methods and resources for enforcement, monitoring, and verification naturally abounded and most participants agreed that more regulation was not the answer. Instead, policymakers can play a role in raising awareness about the GPs through providing tools, conducting trainings, and establishing public-private-partnerships directly with companies or through industry associations. In fact, the European Commission is doing just that. The EC recently announced that it will support the “development of sector-specific guidance on the corporate responsibility to respect human rights” as well as “work to build the capacity of small and medium-sized enterprises in the field of human rights” through partner organisations.

The announcement is in line with the EC’s relatively new policy on corporate social responsibility, which acknowledges that “human rights…have become a significantly more prominent aspect of CSR” and “expects all European enterprises to meet the corporate responsibility to respect human rights, as defined in the UN Guiding Principles”. Under the policy, EU Member States are invited, but not required, to develop national plans for the implementation of the GPs by the end of 2012.

Will other governments adopt similar measures to promote the GPs? Professor Aaronson will shortly publish a policy brief on how policymakers can develop incentives to encourage firms to implement the GPs that, in the right hands, may help move the needle of corporate accountability in the “rights” direction.