Rich and developed nations are falling embarrassingly behind on protecting workers' fundamental rights, according to research by the International Trade Union Confederation (ITUC). The research claims multinational employers are failing to adequately protect workers' rights through thei supply chains, and this can translate into commercial disaster as ethical supply chains become more important to consumers. In this article, Lewis Silkin looks at the ITUC's Global Right's Index to consider how international businesses can mitigate their risk and influence supply chain management.
A global economy
Globalisation has had a profound impact on the economic, political and social order in most countries in the world. An increasingly global economy has opened up opportunities for organisations to conduct business across borders and prompted a rise in multinational companies.
However, for companies managing a globally diverse workforce, these opportunities have also brought significant challenges, such as getting to grips with varying legal and ethical labour relations standards in different jurisdictions.
Of help in this area, therefore, is the recently published Global Rights Index, a survey undertaken by the International Trade Union Confederation (ITUC) which ranked countries across the world on the basis of which offer the best and worst protection to workers.
Workers rights
The Global Rights Index ranked 139 countries based on 97 international recognised indicators of workers’ fundamental rights to assess where workers’ rights are best protected, in law and in practice. The results are, in some cases, surprising, with some of the world’s most developed nations evidencing serious failures to protect their workers’ rights.
Countries were ranked from 1 to 5+, with 1 for countries which demonstrate full compliance with collective labour rights and 5+ for countries where there is no guarantee of rights because there has been a breakdown in the rule of law. Countries falling in the 5+ category are primarily war-torn states, such as Libya, Palestine, Somalia and Ukraine. Arguably worse is a rating of 5, which indicates that, despite a functioning government, there is no guarantee of workers’ rights (whether or not those rights have been set down in statute). It is no surprise that China, Zimbabwe and India fall in this category. It is perhaps more surprising that this category also included Greece and Turkey – developed countries with strong links to overarching international standards.
The UK scored 3 – the same as the developing economies of Ethiopia and Sri Lanka. The USA scored 4, indicating that there are “systematic violations” of workers’ rights by the government and corporate entities. Switzerland, Russia and Burkina Faso all scored 2. France, known for its powerful tradition of protecting workers’ rights through strikes and collective bargaining, scored 1, as did South Africa. What this “global leader board” shows is that a very high proportion of ranked countries could improve their treatment of workers – only 18 of the 139 surveyed countries received a score of “1”.
The report also highlights a number of alarming global practices. In at least 9 countries, murder and the disappearance of workers were commonly used as intimidation. In 35 countries, governments arrested workers demanding democratic rights, decent wages and safer working conditions. By far the most common violation of rights relates to strikes, with at least 37 countries imposing fines or imprisonment for strikes which were, legally, legitimate.
Treatment of workers
The results highlighted in this report are worrying for multinational companies which operate in some of the high-scoring jurisdictions and/or operate geographically far-flung supply chains.
Even if those companies are complying with black letter labour relations law, the scores in most countries suggest that that is no guarantee that labour rights are actually being enforced. Failure to ensure that workers are properly protected can translate into commercial pressure, since customers and consumers increasingly expect products and services to be provided ethically throughout the supply chain.
For example, potential sponsors of the World Cup in Qatar (which scored 5 on the Index) will no doubt be concerned by that country’s treatment of workers and the negative publicity surrounding migrant deaths. The ITUC has said that it will organise a boycott of the 2022 World Cup unless the nation improves conditions for migrant workers. A failure to safeguard acceptable labour standards can therefore translate directly into lost profits.
So how can companies protect themselves from the potential ramifications of using labour in countries which have poor practices?
International legal and HR standards
In an increasingly globalised economy, multinational companies have considerable potential to influence labour law across borders. For example, Unilever – the world’s third largest consumer goods company – sells its products in 190 countries. This gives them considerable ‘soft power’. Unsurprisingly, Unilever is a member of high profile multinational bodies such as the UN High Level Panel on global development. It, and other such companies which sit on decision-making or lobbying committees, can try to use their membership to lobby labour law legislators. This could lead to international standards for worker protection, making it easier to achieve legal compliance.
There are other ways this can be achieved. The British Standards Institution (BSI) is currently in the early stages of developing an international standard for HR practice, and the Society of Human Resource Management in the US has been working on three international global HR standards (for cost-per-hire, prevention of workplace violence and performance management) since 2011. If a global methodological framework is adopted widely, it will promote good practice across borders as well as allowing multinational companies to operate more efficiently.
Whilst lobbying and standard setting have the benefit of creating a “level playing field” for all businesses which operate in specific jurisdictions, both are longer-term solutions.
Another approach is for organisations to set their own internal standards which apply to group companies and, in so far as is possible, their suppliers - essentially, an “internal” labour law. Some UK-based companies already do this, requiring international suppliers and local offices to adhere to corporate-mandated minimum standards of fair treatment and remuneration. There are a number of benefits to this approach.
Firstly, a single coherent internal standard enables management at all levels to understand the terms on which a company engages with its staff, wherever they are in the world. This promotes efficiency of decision-making. Secondly, it allows companies to express and enforce their desired brand culture more powerfully through the application of universal minimum standards. Thirdly, it can give a competitive recruitment advantage to attract valuable workers in jurisdictions in which the organisations working culture and remuneration is significantly higher than domestic companies. Lastly, if third party suppliers are required to adopt a certain code of ethics in order to do business with the organisation, over time this can lead to a virtuous circle of levelling up labour standards.
The down-side is, of course, that competitive advantages in specific jurisdictions may be lost if multinationals are, on aggregate, operating less flexibly and more expensively than their competitors in the short to medium term.
The impact of globalisation on labour rights
Globalisation has a mixed impact on labour rights. In some respects, direct foreign investment can positively impact on worker rights and there are obvious advantages in implementing high labour standards. On the other hand, increased competition between developed and developing countries (and between developing countries themselves) can create short-term incentives for some countries to compete primarily on labour cost and generate significant downward pressure on the rights of workers. Will standard-setting increasingly shift away from state mechanisms to increased “privatisation” of labour rights and protections? Or will a more coherent global legal system governing labour rights emerge. How this develops will, to a large extent, be heavily influenced by the role multinational companies play in the future.
By Richard Miskella and Sarah McWhinney, Lewis Silkin
Do you think we'll see a "levelling up" of employment law, with national rules playing second fiddle to corporate ones? Would this be a bad thing or not? Share your thoughts about the labour rights using the comments section below.
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