International Organisation of Employers

1. International Organisation of Employers NEW CHALLENGES IN THE DEBATE ON SUPPLY CHAINS GIRN MeetingVevey, 12th November 2013 Roberto Suárez Deputy Secretary-General, International Organisation of Employers

2. International Organisation of Employers OVERVIEW • Supply chains and MNE: reasons for the debate. • Four ingredients for reputational risks on supply chains. • Recent trends: UN and OECD Guidelines. • Policy response: future debate in ILO. • Practical approach: what companies have been/could be doing. • ILO Betterwork program. • Lessons from Bangladesh • Conclusions: hints for reflection and action

3. International Organisation of Employers Workingconditions globally considered: a long debate • Accelerated economic integration with global economic actors increasing their (positive) impact on local economies. • Growing fears of “social dumping” (beginning of the 90’s) . • Global campaigns by Global Trade Unions and NGOs. • Increased mass media focus on specific sensitive social issues. • Growing sensitivity of: • consumers • international community • business on responsible

4. International Organisation of Employers Four ingredients for reputational risks on supply chains • Weak governance areas: weak/deteriorated or corrupted institutions/non enforceable legal frameworks. • Huge informal economies with non compliance culture • Emerging countries experiencing an intense growth in short periods as a consequence of foreign investment or trade. • Reputational risks on specific working conditions. • Forced labour • Child labour (Uzbekistan) • Health and Safety (Bangladesh) • Working conditions (wages) (Qatar..) • Labour rights (Cambodia) Strong diversity and complexity: Asia/Latin America/Africa.

5. International Organisation of Employers Situation for MNEs • Companies found themselves much more open to public scrutiny on how they operate, where they operate, and who their partners are. • They unilaterally began to approach working conditions of supply chains a long time ago because of their potential impact in the minds of consumers. • This is irrespective of whether there is a legal liability or not on the supply chains. • And irrespective of whether this activity is actually impacting consumer purchasing behaviour patterns or not.

6. International Organisation of Employers HumanRights and GuidingPrinciples for Business: Duty to respect/accountability • The UN Guiding Principles on Business and Human Rights : state in GP 13 that the responsibility to respect humanrights requires that business enterprises seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.

7. International Organisation of Employers UN HumanRights and GuidingPrinciples for Business: Duty to respect/accountability • Similarly, the OECD Guidelines for Multinational Enterprises require that enterprises should seek to prevent or mitigate an adverse impact where they have not contributed to that impact, when the impact is nevertheless directly linked to their operations, products or services by a business relationship. The Guidelines stresses, however, that this is not intended to shift responsibility from the entity causing an adverse impact to the enterprise with which it has a business relationship. In addition to addressing adverse impacts in relation to matters covered by the Guidelines, enterprises should furthermore encourage, where practicable, business partners, including suppliers and sub-contractors, to apply principles of responsible business conduct compatible with the Guidelines. • Qualitative change towards a non legallybinding obligation?

8. International Organisation of Employers Business community first policy responses • Business are not reactive but willing to give an answer, an EFFICIENT answer. • Measuring impact on the supply chain always entails a comparison. Whether the impact is positive or negative: Are the working conditions (or child labour situation/ in the supply chain of MNEs DIFFERENT or equal to those not linked to their activities. Is there a positive or negative impact of MNE?

9. International Organisation of Employers Businesscommunity first policy response (cont.) • Dealingwithsupplychain issues effectivelymeansassumingthat this is part of the overall complex challengeof informal economies(48% of non-agricultural employment in North Africa, 51% in Latinamerica, 65% in Asia, and 72% inSub-Saharan Africa. If agricultural employment is included, the percentages rises up to 90 % in sub-Saharan African countries). • Subsequently, it means multi-stakeholder approach dealing with educational aspects, reinforcement of institutions, legal compliance, attractive legal frameworks, compliance culture raising, etc. This affects the entire international community and of course national institutions and actors (including NGOs and Trade Unions).

10. International Organisation of Employers Business community first policy response • Business are not reactive but willing to give an answer, an EFFICIENT answer. • Investment and weathcreationisatstake: the way the international community deals withsupplychains issues shouldbecarefullyhandled. Nothingworsecouldhappen to these countries thatdeterringinvestment and theircapacity to growth in a sustainblemanner. The social situation wouldworseninmediatly . • Feasibility: defining accurately the reality of supply chains is somehow an impossible task. Shifting reality :the supply chains concept tries to integrate an enormously heterogeneous reality which is not just completely different depending on the region, sector of activity or specific local context, but constantly changing.

11. International Organisation of Employers Business community first policy response (cont.) • To add more complexity to this issue, it is simply not realistic to understand supply chains as a vertical relationship, as it is very often the case that the interaction is horizontal with several providers at the same time. • challenge overestimates the limited capacity of companies to effectively influence the entire supply chain in informal economies.

12. International Organisation of Employers What companies have been doing in practical terms Progressive approach/continue process • Awareness/guidance with suppliers: awareness campaigns/guidance tools/ warnings of risks(child labour/working conditions/right of workers to associate/migrant workers/forced labour/non discrimination campaigns) • Involvement of suppliers with specific project/initiatives: eradication of child labour (IPEC)/identification of non desired practises on working time/ assuring proper health and safety. • Preferences/stimulus to some suppliers proving a “responsible” behaviour when selecting them

13. International Organisation of Employers What companies have been doing in practical terms (cont.) Progressive approach/continued process • Requirements …sometimes these requirements come from a legal obligation (it is very common in the health and safety area, in some countries also with Social Security Obligations) • Social auditing (not very often) • Code of conducts (it is sometimes the case that they refer to supply chain aspect) • International framework agreements with trade unions? : not by now...until Bangladesh

14. International Organisation of Employers What companies have been doing in practical terms (cont.) • What they know better and the area where they often act. Product and service quality:appropriate skills to workers and coaching to SMEs on how to handle a good production process... • In any case: It is very rare that companies act beyond the first line of suppliers....despite what many NGOs and Trade Unions expect

15. International Organisation of Employers Betterwork program • Betterworkis an partnership programme between the International Labour Organization (ILO) and the International Finance Corporation (IFC). The programmeaims at improving both compliance with labour standards and competitiveness in global supply chains. • Betterworkis focused in the garment sector, and in seven countries (among which are three Asian countries) and it is more known for its impact with Assessment Services provided to buyers. This assessment intends to assess compliance with core international labour standards and national labour law.

16. International Organisation of Employers Betterwork program (cont) • Growing weight and impact • Growing financing • Growing interest from some MNEs • Risks/challenges: • Replacing inspectors with no transferability of knowledge. • Uncertainty of ILS interpretation • Weak involvement of the local business community. • No improvement of productivity link with workers. • Weak link with improvement of business opportunities for suppliers.

17. International Organisation of Employers What companies have been doing in practical terms. • Main challenges: • Prevent or mitigate adverse “human rights impacts”: Four fundamental principles and rights at work/right of indigenous populations. • Second line/third line of the supply chain in huge informal economies? • How to use ILS standards (IOE guidance) • How to measure progress « social ». Risk of using ambiguous concepts such as « living wages ». • Are these actions enabling the environment for a future legal general obligation?

18. 24 A International Organisation of Employers 24 April Rana Plaza: Bangladesh and the supply chain debate

19. International Organisation of Employers Reasons for the collapse • Poor quality construction • 6 floors approved • 3 floors added without any permission • Built for commercial space • Used as factory space • Heavy generators placed on the terrace • Thousands of machines

20. International Organisation of Employers • Unprecedentedcommitments in the country • Tripartite Joint Statement 4 May • EU/GOB/ILO/USA Compact- 7 July • Accord • Alliance • NTAP on Fire and Building Safety • US 15 point Action Plan on GSP

21. International Organisation of Employers Bangladesh and the supply chain debate • Accord: The result of a very powerful and immediate global campaign of Industria against a number of MNEs left with little room to manoeuver. First Global IFA? First (among the first) IFA dealing with the supply chain? • Alliance: Different approach with the same aim. • Initial ambiguous role of the ILO with these two agreements: independent and neutral chair of the Accord which created confusions in companies. • Risks: • Lack of involvement of local actors! (ownership/interference) • Lack of full institutional national and international support • No tripartite approach • Collective engagement: legal nature

22. ILO International Organisation of Employers Tripartite Joint Statement 4 May 2013 • Ministry of Labour • Bangladesh Employers Federation (BEF) • Bangladesh Garment Manufacturers and Exporters Association (BGMEA) • Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) • National Coordination Committee for Workers Education (NCCWE) • Industrial Bangladesh Council (IBC)

23. International Organisation of Employers Tripartite Joint Statement 4 May 2013 (cont.) • Amendments to Labor law • Assessment of all factories • Strengthening Labour Inspection • Implementation of National Action Plan on Fire Safety • Rehabilitation of injured and disabled • Betterwork

24. International Organisation of Employers Conclusions: hints for reflection and action. • Companies should be prepared to lobby with stronger and intelligent communication strategies. • Companies should be better prepared to anticipate campaigns and assess risks. • Action on the supply chain needs a progressive approach, continuous and well communicated. • It is key to count on valuable information and guidance on where not to go/with whom not to get involved/what criteria should be used to show progress on the social field. • Involving local actors could make the difference

25. International Organisation of Employers THANK YOU

26. International Organisation of Employers • 1. 1998 Declaration as a basis: Fundamental Principles and rights at work. • 2. Certainty in International Labour Standards. Overview of the ILO supervisorymachinery. • ILO supervision consists of legal assessment, tripartite scrutiny, direct contact and technical assistance; there is no provision for “real” sanctions and a legally binding “final interpretation” mechanism, even if foreseen (art 37, ICJ) has never been used • The system is mainly based on “regular supervision”, which is complemented by a number of “special supervisory procedures” • Regular supervision has a “promotional” nature, while special procedures are “contentious” in character: it’s more like a dialogue approach. • The lack of consensus on some controversial points led to consider in an non legitimate way the opinion of a Committee of Experts as the final say: misleading and problematic and has practical consequences. • Some examples: right to strike/ overtime and forced labour/ decentralised collective bargaining/exact limit to consider fair the compensation for anti-union dismissals, etc.

27. International Organisation of Employers Overview of ILO Supervisory System (continued) The limitation: issues of non consensus • More and more the “extensive interpretation of the Experts prevails” • Many examples: right to strike/overtime and forced labour/ decentralised collective bargaining/exact limit to consider fair the compensation for anti-union dismissals, etc. • Increasingly considered by Supreme Courts, legislators, academics as the “final say” • The system entered into crisis last year and there is a process now in place to fix it - clarifying the nature of the CEACR report