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New Research and Webinar: Worker-Driven Social Responsibility – solving labour exploitation in supply chains?

February 28, 2020

Worker-driven social responsibility (WSR) is a new model for tackling labour abuse and exploitation in supply chains. Recognising its success in the US and elsewhere, FLEX has been scoping the adaptability of the model to the UK context. This research aims to provide useful insights on transferability of WSR to new contexts and sectors.

A Changed World of Work

How people are employed has fundamentally changed in the last few decades, and the usual mechanisms for protecting workers’ rights, such as state labour market enforcement and trade unions, have struggled to keep up. The manufacturing of products and the delivery of services is increasingly happening through longer and more complex supply chains as work that would previously have been done in-house by directly employed staff is increasingly outsourced, subcontracted and offshored.

This fissuring of workplaces has led to lower pay and poorer conditions for many workers, as suppliers and contractors compete for work from lead companies based on price and flexibility, squeezing workers’ pay and conditions to maintain their profit margins.

The downward pressure on wages and conditions is made worse by the fact that the fissuring of workplaces complicates trade unions’ ability to organise workers and collectively bargain. Instead of dealing with one employer with direct control and responsibility for workers’ pay and conditions, unions now have to negotiate with multiple smaller employers who are under pressure from their client companies to deliver services at the lowest possible cost.

State labour market enforcement has also struggled to keep up with these changes. Outsourcing creates an environment where lead companies, through their purchasing practices, have disproportionate influence over their supply chains, including the terms and conditions of work, but reduced legal responsibility. Lead companies are let off the hook by national labour laws that are designed to regulate direct employment relationships, not the multi-tiered labour supply chains created by outsourcing. This picture is further complicated by offshoring – the moving of work to countries with lower labour costs and less regulation – and the lack of efforts being made to regulate companies operating across borders.

The Problem of Corporate Self-Regulation: Too Little Change on the Ground

Instead of introducing new regulations, such as joint and several liability or mandatory due diligence, that would make lead companies liable for labour abuse and exploitation in their outsourced and offshored functions, most countries have left companies to regulate themselves. In the UK, Section 54 of the Modern Slavery Act 2015 provides a key example of this corporate self-regulation. It requires businesses over a certain size to report on what steps they are taking, if any, to tackle human trafficking and forced labour in their supply chains. It relies on companies to set the agenda against which they report and, with no current state-level monitoring of the quality of company reports nor sanctions for non-compliance, consumers and civil society are expected to act as the main watchdogs to ensure meaningful corporate action.

The UK government has recently undertaken a welcome consultation to explore how to enhance this part of the law, such as by introducing sanctions. FLEX has long called for these and has provided advice and input to the consultation. We hope to see firm commitments soon. Nonetheless, it remains the case that Section 54 is purely a transparency mechanism and does not tackle the structural power imbalances inherent in today’s economic system.

In response to this legislation, the UK’s corporate social responsibility (CSR) industry is booming. Industry-led initiatives are growing their clientele, with programmes, toolkits and auditing schemes presented as solutions for companies to tackle abuses in their supply chains. However, research by FLEX and others has shown that current corporate accountability initiatives are not serving to bring about change for workers on the ground. This is because they are largely based on voluntary commitments by companies and their suppliers, broad standards that rarely go further than local labour law, and ineffective or non-existent monitoring and enforcement.

Investigating an Innovative Response: Worker-driven Social Responsibility

Industry-led initiatives allow corporations to dictate the metrics by which they are judged to be responsible or not. As a result, companies can score highly in ethical audits while continuing to enable conditions that drive exploitation. A new model of supply chain regulation, worker-driven social responsibility (WSR), is looking to challenge this system.

The defining feature of WSR compared to other models for protecting workers’ rights is that it is specifically designed to tackle labour abuse and exploitation in supply chains. It provides a way of addressing the power imbalance not only between workers and their direct employers, but also between buyers and suppliers.

As one research participant put it: “the essence of WSR is that you contract with the party that has much more power to also be responsible”. It does so by creating a legally binding contract between a workers’ organisation and the company at the top of the supply chain. This contract obliges the lead company to only work with suppliers and contractors who are compliant with standards designed by experts, usually workers and their representatives – experts by experience. Lead companies must help suppliers comply with the standards, for example through direct financial incentives or better purchasing practices. Furthermore, there are real economic consequences for non-compliant suppliers: if they do not comply with the programme’s standards, the lead company stops buying from them.

In addition, WSR increases workers’ power through peer-to-peer education on their rights and what to do if they experience problems or know their employer is in violation of the standards. There are clear pathways for workers to report abuses alongside thorough monitoring carried out by an independent body. Workers can report violations without fear of reprisal and in the knowledge that their complaint will trigger an immediate and effective response.

Examples of WSR include the Fair Food Program (FFP) and Milk with Dignity in the United States, The Accord on Fire and Building Safety in Bangladesh and, since August 2019, an agreement for gender justice in the Lesotho apparel sector.

Scoping WSR as a model for the UK context    

In recognition of what the WSR model has achieved, FLEX has been scoping the adaptability of the model to new contexts, using the UK hotel sector as a hypothetical case study. We have conducted interviews with experts involved with existing WSR programmes, and representatives of UK trade unions, labour market enforcement bodies, and hotel sector stakeholders. The interviews covered the transferability of WSR to new sectors and country contexts; the differences between the existing models; and the potential for trade unions and the state to learn from and implement WSR in the UK context.

The scoping has, as research often does, raised as many questions as it has answered, which we hope will provide nuance and depth to discussions around how to best protect the rights of workers and tackle non-compliance issues in company supply chains, including forced labour and human trafficking for labour exploitation. The biggest questions arising from the research have been: 1) When and in what contexts should we turn to private sectors models like WSR and what are the implications of doing so?; and 2) Are there aspects of WSR that could be applied by trade unions or state labour market enforcement bodies in the context of increasingly fissured workplaces?

To answer these crucial questions, our research has examined the structures, processes and principles at the heart of the WSR model. We have listened to a wide range of stakeholders from the UK, USA and elsewhere on how the model could – and whether it should – be adopted to the UK or other contexts where labour market characteristics differ to places with already established WSR schemes. We will be publishing our full research findings in March and are co-hosting a webinar with the WSR Network for those interested in discussing WSR as a model for preventing labour abuse and exploitation in corporate supply chains.

If you are interested in hearing more, sign up for our webinar on 25th March 2020 at Eventbrite here.

FLEX is grateful to the Freedom Fund for supporting this work.