better jobs in better supply chains

Better Jobs in Better Supply Chains

Why decent labour standards are good for business

Key messages for purchasing professionalsStrategic Supply Chain Group, 9th December 2010

Rachel Wilshaw, Oxfam GB

A fair and decent approach to labour


Business stakeholders want decent labour standards• Consumers demanding more ethical goods and services

• ‘72% of British consumers think that ‘ethical production’ of the clothes they buy is important, up from 59% in 2007. Last year UK sales of Fair Trade goods reached £800m’ TNS Worldpanel 08.

• Staff want to feel comfortable with employers’ behaviour• ‘Two thirds of final year students have to feel happy with the ethical behaviour of a prospective

employer before accepting a job’ Harvard University undergraduate survey 08.

• Investors care about companies’ ethical credentials• ‘Labour issues are frequently a material concern for investors’ Aviva Investors, Nov 09.

• Opinion-formers are scrutinizing corporate behaviour• ‘Trust in NGOs is higher than other institutions. Trust in global business is low’ Globescan 2009.


Better Jobs in Better Supply ChainsBusiness stakeholders want decent labour standards• Consumers demanding

more ethical goods and services

• Staff want to feel comfortable with employers’ behaviour

• Investors care about companies’ ethical credentials

• Opinion-formers are scrutinizing corporate behaviour

Campaigning by Oxfam and partners has been instrumental in driving change.



Fair or Ethical Trade What’s the difference?

• Fairtrade guarantees fair treatment for small producers

• Ethical trading is about the responsible behaviour of buying companies in protecting workers’ rights throughout a supply chain

• Fairtrade has a recognised label linked to specific licensed products. There is no ethical trade label.

• Complementary approaches starting at opposite ends of the supply chain



The ETI Base code

1. Employment is freely chosen

2. Right to Freedom of Association and Collective Bargaining

3. Working conditions are safe and hygienic

4. Child labour shall not be used

5. Living Wages are paid

6. Working hours are not excessive

7. No discrimination is practised

8. Regular employment is provided

9. No harsh or inhuman treatment is allowed

Ethical Trading Initiative members 2010

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http://www.btcgroup.co.uk/

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http://www.dccdirect.co.uk/Index.php



Why labour standards matter to Oxfam

• To support Millennium Development Goal 1: eradicate extreme poverty and hunger.

• Part of national and international law.

• Globalisation has created millions of jobs; progress on extreme violations.

• But jobs at a cost, especially for women

• 60-90% of workers in labour-intensive manufacturing and fresh produce supply chains (80% in garments)



Why does this matter for procurement professionals?

1. Risks to your business: brand; hidden problems with quality and security of supply in your supply chain

• Westinghouse effect in paying attention to workers’ needs.

2. Competitive advantage: a way to get a foot in new doors and negotiate on something other than price.

3. Increasingly part of supplier selection criteria; include it or explain why it’s excluded.

4. Right thing to do. We can all do something in our organisations to make a difference.



Oxfam’s Analysis in 2010

2 labour issues to address

Precarious work and poverty wages

Weak relations between management and workers

2 behaviours that hinder rather than help

Purchasing practices that undermine standards

Over-reliance on audits



Precarious work and poverty wages What’s the problem for employees?

• Work is unpredictable and insecure

• Extreme hours cause injury and shorten working lives

• Wages barely reach the legal minimum.

• Bangladesh min wage <$1 a day (absolute poverty)

• Women are disproportionately affected



Precarious work and poverty wages What’s the problem for employers?

• Direct labour costs kept low by pushing costs and risks onto workers

• Indirect costs rise as rapid employee turnover leads to high recruitment and training costs

• Absenteeism and lack of commitment harm quality and productivity



Precarious work and poverty wages Making change happen

• Adidas committed to increase in ratio of permanent to temporary jobs

• M&S undertook capacity building with 3 garment factories in Bangladesh

• wages increased >12%, productivity increased >20%; 85% reduction in absenteeism & 65% in worker turnover



Weak relations between management and workers

What’s the problem?

• Ingrained mistrust between companies and unions

• Voluntary codes can weaken the manager-worker relationship by giving buyers a key role in compliance

• Workers have no means of raising issues in a ‘safe space’ and little bargaining power



Low bargaining power and awareness of rights



Better workplace relations Making change happen

• Beyond audit: global garment union supporting Gap and

Next to develop mature industrial relations in factories

• Inditex, Danone and Chiquita have signed company-wide agreements with unions

• Cambodian supplier to Inditex: 30% productivity increase and no days lost to strikes, which are common


Poor purchasing practices that undermine labour standards:

What’s the problem?



Aligning purchasing practices and ethics Making change happen

• ASDA George set up quarterly meetings with top 15 suppliers to drive change

• Lead time increased for core lines

• Buyers given traffic light system to guide order placement

• Gradual increase in business with better factories

• Suppliers rewarded with longer contracts

• Other tools: training, buyer incentives, ‘balanced scorecards’, open communications, better IT systems



Over-reliance on audits What’s the problem?

• Lack of enforcement a major obstacle to ethical trade

• Audits used to fill the vacuum in labour enforcement

• Audits don’t drive change and findings are unreliable

• Duplicate audits add unnecessary costs




Challenges in China

• 73% of factories don’t pay the minimum wage

• In 58% of factories workers work over 350 hours a month

• Child labour found at 24% of sites

• Health and safety problems found at 100% of sites

Data from Impactt 2009


Going ‘beyond audit’ Making change happen

• Fewer, better audits that are worker-centred

• More mature systems of industrial relations – support to workers 24/7

• Help suppliers improve human resource management

• Work with others – companies, NGOs, industry bodies

• Like Nike, speak up for effective labour regulation




What can purchasers do to get beyond a ‘tick-box’ approach to ethics?• Build your buyers’ awareness: ‘buyer be aware’, including of audit

fraud.

• Ensure your approach to auditing is informed by good practice and takes into account ethical risk and leverage.

• Build ethics into the purchasing cycle: PQQs,ITTs.

• Longer contracts with progress report at mid-term review.

• Integrated communication with your suppliers.

• Re-word T’s and C’s to emphasise openness and continuous improvement over instant compliance.

• Confidential supplier surveys, eg using Zoomerang.



Considerations for Council members • How to promote good practice amongst members?

• Is there common ground between good procurement practice and ethical sourcing practice?

• Does CIPS have a role as a professional body? If so, what?

• Would a formal association with ETI be beneficial, promoting membership, tools, learning?


Where to go for information & support

• Ethical Trading Initiative: tools, briefing papers, news, training courses, business case DVDs.

• Other initiatives: Social Accountability International; Fair Labor Association; Fair Wear Foundation.

• Sedex, Impactt, Acona, Verite, Traidcraft, Africa Now, BITC; BSR - and Oxfam

• Tools, advice service, workshops.

• Traidcraft and CIPS, ‘Win/Win: Achieving Sustainable Procurement with the Developing World’.



Thank you!

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