"The independent republic of the supply chain" and the International Labour Conference

by Sarah Labowitz, NYU Stern Center for Business and Human Rights
Wednesday, 22 June 2016 11:57 GMT

A hand of a labourer pushes bricks at a traditional brick factory in Cairo, Egypt, May 14, 2015. REUTERS/Amr Abdallah Dalsh

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The question for governments, workers, and employers should be how to ensure that employment represents decent work with dignity

By Sarah Labowitz

Though the International Labour Organisation (ILO) is almost 100 years old, its annual International Labour Conference which convened earlier this month was the first time global supply chains were on the agenda. Supply chains are ubiquitous in the global economy and a major driver of global employment, so it’s telling that it took so long for them to appear on the ILO’s formal agenda.

The ILO has a tripartite structure that includes governments, employers, and workers. The employers have been reticent to formally discuss global supply chains as a unique transnational entity that potentially requires new forms of global regulation. But the unions have been pushing hard to elevate global supply chains in the conversation, and have been successful in getting them on the agenda at the G7, G20, and the OECD. Last year’s G7 leaders’ declaration included a section on responsible supply chains.

Here are three key takeaways from the ILO conference:

First, a debate has been settled about whether supply chains contribute to weak governance. The employers’ opening position was that “there is no new regulatory gap that needs to be bridged at the international level because of cross-border supply chains.” The unions, on the other hand, were clearly seeking new, formal rules. Sharan Burrow, General Secretary of the International Trade Union Confederation, wrote that “there are serious global governance gaps concerning [global supply chains].”

By the end of the conference, the employers conceded on this essential point, acknowledging that global supply chains contribute to governance gaps (whereas they had initially argued that governance gaps were simply incidental to weak legal enforcement at the national level). The concluding text of the conference included what was surely a hard-won line for the workers: “The expansion of global supply chains across borders has exacerbated these governance gaps.”

Of course, individual firms have long acknowledged that their supply chain activities can erode already weak governance. There are any number of initiatives in which multinational companies participate (see for example the Electronics Industry Citizenship Coalition or the Fair Labor Association) that have been established to address exactly this problem, and most major firms regularly audit their suppliers for labor rights issues in response to the governance gap. The language in the final report is an indication that the question of whether supply chains exacerbate weak governance is finally settled.

Second, the conference opened the door to expand the role of the ILO itself in working on global supply chains, including through the development of new standards. The final text includes a charge to the ILO to establish a process or body that would assess the nature of the problem and consider what “guidance, programmes, measures, initiatives or standards are needed to promote decent work and/or facilitate reducing decent work deficits in global supply chains” (emphasis added). The inclusion of standards was another victory for the workers. In their opening statement, the employers expressed their “firm position that no new standard setting on supply chains is required.”

Any actual standard-setting will take years. The ILO works on an annual cycle of Governing Body meetings, International Labor Conferences, and committee work that mean that developing a new standard would take the better part of a decade, assuming it garners sufficient support from governments. But the fact that ILO staff now have a mandate to conduct research and propose new mechanisms means that the ILO can reassert itself in the global debate about labor in supply chains. This debate has become more and more politically relevant as voters in the United States and Europe are expressing doubts about global integration and global trade.

Finally, the conference gives us a preview of the shape of the debate about global supply chains going forward, while leaving some important questions unresolved. To be sure, workers won some significant victories, especially with the acknowledgement of the role of global supply chains in exacerbating governance gaps, carving out a mandate for the ILO on supply chain issues, and opening up the possibility of standards development.

But it is unlikely that the employers will take the development of new binding standards lightly. They may be banking on the lengthy and bureaucratic process toward new standards. I can imagine that the employers are now developing a defensive strategy to ensure that any progress is painstakingly small and incremental.

Most importantly, the theory of global, cross-border supply chain governance remains unsettled. The premise of the ILO (and almost all international organizations and regulation) is that it rests on national-level enforcement. The bread and butter work of the ILO is setting standards to which national governments agree to adhere, then helping boost their capacity to implement them.

From a regulatory standpoint, the problem with cross-border supply chains is that they cross borders. There has never been an ILO convention that defines trans-national responsibilities for governments. The space to watch going forward is how the workers characterize their demands for new standards. Will they look to establish an ILO complaint mechanism modeled on the WTO’s, wherein governments can seek adjudication of claims that labor agreements have been violated? Or will the standards-development process create more room and leverage for the creation of non-governmental processes, such as global collective bargaining agreements or the Bangladesh Accord on Fire and Building Safety?

At the end of the day, the question for governments, workers, and employers should be how to ensure that employment in the many facets of global supply chains represents decent work with dignity. New approaches are clearly in order. What shape these solutions take is the thing to watch in the coming decade.

Sarah Labowitz is co-founder and co-director of the NYU Stern Center for Business and Human Rights.