The companies that have benefited from the growth in outsourcing over the past few decades now dwarf their buyers, and have suppliers and sub-suppliers themselves. Foxconn, which makes some 40 percent of the world’s electronics, has hundreds of thousands of employees at sites around the world.
Even the biggest buyers comprise only a tiny percentage of these companies’ business, which means individual companies have little leverage to enforce labor standards or environmental controls, violations of which are rarely visible in the final product. It’s much easier to hold a supplier to account for using the wrong kind of paint than for cheating workers out of overtime.
Since the 1990s many companies have hired staff to focus on improving labor conditions in supply chains. But tragedies like Rana Plaza show that they’re not even close to fixing the problem.
Part of the challenge is that the people managing these issues in the supply chain report to the people managing, well, the supply chain. If a corporate-responsibility specialist writes an email to the production manager eight weeks before Christmas flagging the fact that an underage worker was found in a factory, that email is likely to get ignored until (at least) after the holiday rush. Occasionally, the staff who focus on labor rights have the power to cut off a supplier, but that is the exception rather than the rule.
Some companies have realized that one effective tool is the incorporation of human rights and environmental protections into contracts. Disney does this. As Laura Rubbo of Disney’s international-labor-standards team told me: “If you don't put an obligation to adhere to certain requirements in your contracts with suppliers, then there's not a whole lot to hang your hat on when you’re talking to them about what they have to undertake and demonstrate.”
Once vendors are selected, though, there is still too much emphasis on audits. Walking through factories with checklists is a good idea but has become the end rather than the means: As the saying goes, you don’t fatten the pig by weighing it. Companies aim to maximize the number of audits without assessing whether any of the underlying root causes have been addressed—for example, repeated excessive overtime violations could be due to faulty or outdated equipment, or to buyers placing orders with unrealistic deadlines.
Verité’s Viederman thinks that the focus has wrongly been on activity rather than outcomes, whereas companies should be setting goals and working backwards from there. He cites Apple’s securing the return of nearly $21 million in recruitment fees to factory workers since 2008 as a good example (which Verité worked with them on):
Had they taken the usual approach, they would have conducted some social audits, identified the problem of debt bondage, ordered the suppliers to fix it, and waited for the next audit to demonstrate that the problem hadn’t been solved.
Instead they set out a clear vision of success: the elimination of fees paid by workers to labor recruiters. Then they didn’t simply pay the fees or address the symptoms, but worked to address the root of the problem, which is an over-reliance on unregulated and unexamined recruiters.
They spent money and staff time working with suppliers to help them understand the issue and develop a timeline and plan for them to comply. Then Apple held everyone accountable to the new standard, and continues to do so.
It is worth noting that “suppliers” are companies in their own right, and cannot be allowed to violate human rights because they don’t have a brand that’s a household name, or because they’re small, or because they’re in a country where the government is failing to enact and enforce laws that protect its people.