Improving Work Conditions in a Global Supply Chain

TitleImproving Work Conditions in a Global Supply Chain
Publication TypeJournal Article
Year of Publication2007
AuthorsLocke, Richard M., and Romis, Monica
JournalMIT Sloan Management Review
Keywordschild labor, developing countries, global brands, globalization, labor standards, Nike, supply chain, wages, workers’ rights, working conditions

[Excerpt] Globalization and the diffusion of industry supply chains to developing countries have provoked a fierce debate over how best to improve labor standards in these emerging centers of production. Child labor, hazardous working conditions, excessive working hours and poor wages continue to be a problem at many factories in developing countries, creating scandal and embarrassment for the global brands that source from those factories. Given the limited capacity of many developing-country governments to enforce their own labor laws, multinational corporations have developed their own “codes of conduct” for suppliers, as well as a variety of monitoring mechanisms aimed at enforcing compliance with these codes. Monitoring for compliance with codes of conduct is currently the principal way that both global corporations and labor rights nongovernmental organizations address poor working conditions in global supply chain factories.Corporate codes of conduct and various efforts aimed at monitoring compliance with these codes have been around for decades. While initially these efforts focused primarily on corporate or supplier compliance with national regulations and laws, over time they have become increasingly concerned with compliance with private, voluntary codes of conduct, especially as they apply to labor and environmental standards. Information is central to this model of private, voluntary regulation. The underlying assumption is that information collected through factory audits will be used by labor rights NGOs to exert pressure on global brands to reform their sourcing practices and by the brands themselves, which rely on this information to police and pressure their suppliers to improve standards within their factories. Should these factories fail to remediate workplace problems, brands are expected to switch their orders to other producers. This model of workplace change has provoked debate over not only the particularities of the codes of conduct and compliance efforts but also their relation to other forms of regulation, especially government regulation. Critics of corporate codes of conduct argue that they displace more thorough government and union intervention and are not designed to protect labor rights or improve working conditions but to limit the legal liability of global brands and prevent damage to their reputations. Others, however, argue that private codes and monitoring are not attempts to undermine the state but rather are appropriately flexible responses to the reality of global production networks and the low capacity of developing-country governments to enforce labor laws and regulations fully. How well do corporate monitoring systems measure actual workplace conditions? And how effective is this system of private, voluntary regulation at improving labor standards? To gain more insights into these questions, we conducted a structured comparison of two factories in Mexico that supply the same global brand — NIKE Inc. (See “About the Research.”) Although these factories had very similar scores on one of Nike’s principal monitoring tools, the two factories in some ways had quite different working conditions. One plant paid higher wages, limited workers’ overtime and gave them greater discretion over their work on the shop floor, and the other plant paid workers less, worked them longer hours and employed more traditional, hierarchical work systems. Our findings suggest that interventions aimed at reorganizing work and empowering labor on the shop floor in global supply chain factories can lead to significant improvements in working conditions.