Corporate Social Responsibility and the Failure to End Labour Exploitation

3 September 2019
Research Innovation

Genevieve LeBaron  | Professor of Politics at the University of Sheffield
Andrew Crane  | Professor, University of Bath
Laura Spence  | Professor of Business Ethics, Royal Holloway, University of London
Vivek Soundararajan  | Associate Professor, University of Bath
Michael Bloomfield  | Lecturer, University of Bath

There is growing evidence that after 20 years of voluntary corporate social responsibility (CSR) initiatives, companies are failing to meet their long-standing goals of ending labour exploitation and achieving decent work in global supply chains. Our new study of the global garment supply chain, funded by the United Kingdom’s Department for International Development (DFID) and the British Academy, and introduced last year in a column on this site, contributes to this evidence base. You can read about and watch a short film about the project on our website.

We have spent the last 18 months investigating business initiatives to combat exploitation and promote decent work in Tirupur, a major garment hub in Tamil Nadu, India, which supplies knitwear to major brands and retail chains like Nike, Walmart, Adidas, Primark and H&M. We have found that while action by brands has led to some improvements to working conditions, CSR has largely failed to eradicate labour exploitation.

Our interviews with more than 135 business actors, workers, NGOs, unions and government agencies in Tamil Nadu during 2018 uncovered considerable evidence that top-down CSR initiatives are failing. By top-down CSR initiatives, we mean the supply chain policies related to social and labour standards set by businesses at the top of the supply chain (e.g. brands and retailers), which then become a requirement for businesses along the supply chain. These might include, for instance, the prohibition of forced and child labour within the supply chain or the requirement for suppliers to pay living wages. Top-down CSR initiatives tend to be “enforced” by social audits and ethical certification schemes. However, these measures are falling short. Social audits are being systematically manipulated and cheated to conceal exploitative labour practices. Ethical certification systems are unaffordable for most suppliers. And brands and retailers are undermining their own initiatives to promote decent work through irresponsible sourcing practices, including short production windows, cost pressures and constant fluctuations in their orders.

Brands often seek to deal with this by ramping up coercive forms of monitoring—such as by heightening social audit frequency, the results of which can carry commercial penalties or even lead to termination of contracts in the case of non-compliance with standards. Brands also impose costly fines and penalties, such as for late orders. But we know this doesn’t work. Many manufacturers we interviewed were open about the reality that this only makes it more challenging for them to meet laws and expectations around labour standards. In a meeting with spinning mill owners, we were told that certification schemes often take a similarly coercive approach, which can reinforce problems. As one industry leader described, “the certification systems are the mafia”, in that they involve high costs, are necessary to stay in business, but ultimately add little in terms of value. As we document in our report, while some business actors also emphasized the benefits of top-down CSR in focusing attention on labour standards in the cluster, manufacturers explained that while brands are growing louder in their demands for an end to bad labour practices, they are unwilling to alter their commercial practices—such as low prices and tight lead times—to support improvements.

Given these faults, labour exploitation persists. Workers within our study reported restricted freedom of movement, incidents of child and bonded labour, restricted freedom to speak, routine disregard for health and safety standards, unfair pay, verbal abuse, limited freedom of association, the lack of labour contracts and gender discrimination, among other violations of their rights. As we document in our report, these practices are not random, but are driven by structural conditions within the supply chain that create a predictable demand for labour exploitation, as well as dynamics that give rise to a supply of vulnerable workers, including gender inequality, high costs of living and limited economic choices.

So, does the failure of top-down CSR mean that business should sit on the side-lines and let workers, government and civil society solve the problem? Definitely not.

Our research investigated the role of different types of businesses in addressing labour exploitation and promoting decent work in the garment industry. We found that businesses at the base of the supply chain—especially mill owners, exporting factories, and factories geared towards production for domestic Indian markets—are experimenting with strategies to eradicate exploitation, despite entrenched structural conditions. For instance, business actors are pursuing economic upgrading, which can lead to higher labour standards. They are also changing their recruitment strategies, including providing free transportation services to pick up and drop off workers as a strategy to avoid the risks of hostels, which tend to restrict workers’ freedom of movement. They are also relocating manufacturing so that workers can remain closer to home, where they often have lower living costs and support from their families and communities. All of these are innovative strategies for change and could represent major steps forward in securing decent labour standards.

Further work is needed for the industry to hone these strategies, align on the most promising pathway for change and ensure that the benefits are distributed in ways that empowers workers, especially the most vulnerable workers within the industry. Workers need to be front and centre in that conversation. But the bottom-up initiatives that these business actors are already pioneering are worth paying close attention to. They open up the possibility of a very different role for business than is typical within discussions of labour exploitation in global supply chains—one that flips the usual approach to industry solutions on its head. Our research suggests that rather than being coercively imposed by brands at the top of the chain, solutions driven by leadership and innovation from the bottom of the supply chain are far more promising and likely to be effective. They may represent a means of navigating beyond the failures of CSR and towards a worker-driven social responsibility model to achieving decent work in the garment industry.

This doesn’t mean, however, that brands don’t have a role. Indeed, they have a very important role to play. Brands and certification schemes tend to respond to gaps exposed in their standards by either cutting and running, or by ramping up penalties and pressure on suppliers, which often makes it even harder for them to comply. This needs to stop. Brands should ensure that their purchasing policies and practices do not contribute to the structural drivers of labour exploitation. And they should cooperate towards multi-stakeholder efforts to address freedom of movement, health and safety, and worker-driven social responsibility within the sector.

Genevieve LeBaron is Professor of Politics at the University of Sheffield. Follow her on Twitter: @glebaron

Andrew Crane is Professor of Business and Society in the School of Management, University of Bath. Follow him on Twitter: @ethicscrane

Laura Spence is Professor of Business Ethics in the School of Management, Royal Holloway, University of London. Follow her on Twitter: @Prof_LSpence

Vivek Soundararajan is Associate Professor in International Management in the School of Management, University of Bath. Follow him on Twitter: @Vivek_Soundar

Michael Bloomfield is Lecturer in International Development in the Department of Social and Policy Sciences at the University of Bath. Follow him on Twitter: @mj_bloomfield

This article has been prepared by Genevieve LeBaron, Andrew Crane, Laura Spence, Vivek Soundararajan and Michael Bloomfield as contributors to Delta 8.7. As provided for in the Terms and Conditions of Use of Delta 8.7, the opinions expressed in this article are those of the authors and do not necessarily reflect those of UNU or its partners.

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