Making supply chains more ethical

We live in a world where global supply chains have become increasingly flexible and complex. Outsourcing has enabled big business brand names to get their goods made in several different countries to lower costs and increase profit margins. While outsourcing provides business and employment opportunities within developing countries, the competition of producing cheaper products combined with laxer regulation in poorer countries can also unleash major problems.

Several media and civil society reports have been documenting labour exploitation and environmental damages caused at low-cost overseas production sites over the past two decades. The lack of concern for the safety of garment workers which led to the Rana Plaza tragedy in Bangladesh was one glaring consequence of unethical production practices. There are multitudes of exploitative informal sector workshops littered across developing countries which are providing items needed for brand name products. Serious water and air pollution is also being caused by factories producing denim and other products for big labels.

The concept of social compliance auditing has been developed to contend with such problems by trying to promote supply chain transparency, accountability, and improvements. Many big brands have adopted social audit practices to address potential violations in outsourced production sites. There is now a proliferation of voluntary compliance standards and certification processes. Big brands are also hiring independent audit firms to monitor supplier factories.

Audit firms, which work as non-profits, and charge factories fees for their auditing process, can maintain greater independence. They can hence avoid reliance on industry for defining the benchmarks and metrics for social compliance certification. Consider for instance, the work of Worldwide Responsible Accredited Production (WRAP), which has become a known compliance mechanism focused on the sewn products industry. The WRAP programme is recognised by nearly 300 buyers worldwide and has over 2,400 factories, employing over two million workers, across more than 40 countries.

WRAP uses 12 principles, based on generally accepted international workplace standards endorsed by the International Labour Organisation. Its auditing processes also pay heed to local laws and workplace regulations. Facilities certified by WRAP cannot use involuntary, forced or trafficked labour or child labour. They need to provide a safe and healthy work environment, free of supervisory or co-worker harassment. They must at least pay the minimum wages required under local law, and allow their workers the right of free association and collective bargaining.

WRAP uses local auditors which have been trained in its certification process, and it also has full-time staff in the countries where it works to conduct post-certification audits. Once a factory is certified by WRAP, it needs to maintain its standards or it risks being decertified.

While the creation of independent auditing firms is encouraging, preventing supply chain exploitation is still difficult. First-tier factories which pay to obtain social compliance certifications are only the tip of the iceberg of supply chains, and these factories are not the sites where major labour and environmental abuse are likely to take place.

In the garment sector alone, there is need to go beyond the first tier of brand name garment exporting factories, and look at what is happening in dye houses, in workplaces where garment accessories are being made, and even where the cotton used for making brand name garments is being sourced from. This is obviously a Herculean endeavour, which requires an extensive mapping of producers, spread across different sectors and regions of one or more countries.

To push the culture of accountability and compliance further down the supply chain also requires greater awareness. The media and NGOs can help raise this consumer awareness, and nudge big brands to devise and adopt mechanisms to ensure that their first-tier producers are taking concrete steps to ensure that exploitation is not happening beyond their factory gates. The rapid development and penetration of technology is creating newer possibilities of paperless audits and real-time audits, which can help deepen social accountability.

One hopes that the above-described confluence of factors will enable social compliance mechanisms to deepen, not just for garment production, but for a range of other products as well which rely on outsourcing. That is when more meaningful change will begin taking place within existing global supply chains.

Published in The Express Tribune, March 30^th, 2018.

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