[Expert's view] Managing and protecting post-pandemic social compliance standards
For the past 25 years, a core tenant of supply chain social compliance programs has been the foundation tied to applicable local laws. Fundamentally, there was a generally held belief that to hold factories in developing-world sourcing regions to standards from market regions would create expectations that were beyond the capacity of the source countries and would essentially be tantamount to regulatory imperialism.
The argument was generally that while not perfect, the expectations on elements like the minimum age or minimum wage in a country operating lower on the development ladder needed to be aligned with the conditions in the country and the efforts by the government to find a balance between protecting citizens and creating business opportunities, jobs and economic advancement. To require a wage in Bangladesh that was equivalent to a wage in Britain would eliminate incentives to create opportunity and support development. With a limited number of exceptions – such as the performance of pregnancy tests as a condition of employment or the use of monetary fines as a disciplinary mechanism – companies and collaborative programs have generally found the applicable local laws to provide a workable foundation for the requirements for working conditions in the supply chain. Interestingly, in those instances where the local laws and regulations did not prohibit actions and activities that were inconsistent with the values of the brands and retail companies for whom products were being produced – the laws were changed in most instances.
One very troubling development in the wake of the COVID-19 pandemic is a rollback of legal requirements relative to working conditions in an effort to create incentives and opportunities for the return of business. An example of this is the relatively recent legislation in the state of Uttar Pradesh in India, which essentially created a 3-year holiday for compliance with virtually all dimensions of the law related to working conditions including minimum wage, right to form trade unions, and limits on terminations. While this specific legislation was not finally implemented – similar legislation has been put forward in other states in India and such changes are being actively debated in other jurisdictions. Ironically, the suspension of some of these statutory provisions – which would include elements such as participation in and contribution to social insurance systems – occurs at a time where there are significant, on-going efforts to establish some of the same types of social protection programs in countries where those programs did not exist prior to the pandemic.
Fundamentally, proposals to rollback or temporarily suspend provisions of law create a real challenge for brands, retailers and multi-stakeholder initiatives – for which requirements of suppliers are generally grounded in applicable local law both in the expressed standards and in the standards for measurement and remediation. To the extent key elements of the laws and regulations – which are the subject of on-going engagement by stakeholders in an effort to continue to increase protections and benefits for workers – are essentially voided, if even temporarily – the requirement that factories meet the applicable local law could be viewed as no longer a requirement or standard. While there could be an effort to further increase standards in light of the suspension of requirements, a more logical expectation could be that regardless of the current local law ‘requirement’ – manufacturers are required to meet all pre-COVID19 statutory requirements. Such expectations, while not entirely consistent with the foundational approach of the last 25 years, would be consistent with other cases of local law provisions that are not aligned with the values and expectations of buyers. Given the significant business disruption to all elements of the value chain, it is logical to expect some manufacturers will look for any opportunity to reduce costs and recover losses – even if such actions come at the expense of the rights of workers, and it is paramount that companies – particularly brands, retailers and multi-stakeholder initiatives – take a clear and concise position with respect to any revisions to applicable statutes that create ‘opportunity’ for companies at the expense of the rights and protections for workers.
As countries begin to emerge from the business catastrophe that has been the COVID-19 pandemic, it is clear that there will be winners and losers at all levels within the value chain. This occurs at a time where there are voices suggesting that there is a need to redouble efforts on all dimensions of sustainability – including social performance.
In a recent AAFA webinar entitled The Global Game Changer and What the C-Suite Does Next, Robin Lewis, renowned retail observer and expert, noted that he expects consumers – particularly the large Gen-Z group – to have new found concentration and determination to not buy products from brands and retailers who do not make all elements of sustainability – both environmental and social – a priority. It is clear that response to the catastrophic impacts of the pandemic on factories will depend in part on consumer expectations and requirements, and it remains to be seen how the shopping habits and values of consumers will evolve. However, there should be real hope that experiences of the last several months will drive or even accelerate progress toward improved worker protections and benefits.
Ideally, none of the participants in the value chain will look to drive the return to business or the recovery of losses – or allow such to occur – at the expense of workers through changes to previously established statutory requirements.
