What’s in this tool?
An overview for buyers on why supporting decent work in supply chains is important. It also answers some frequently asked questions.
Why is decent work important?
The risks and benefits
An important objective for all buyers is to create savings through their purchasing decisions. However, the cheapest option may be more costly to an enterprise and its overall brand as it can be exposed to greater reputational and financial risks.
On the flip side, working with suppliers on labour and human rights will affect how employees, customers, Governments, investors and other stakeholders perceive a brand and company. Considering decent work in your buying decisions — including through cost-neutral measures like working to avoid short lead times or last-minute changes — can benefit and strengthen your business while at the same time contributing to better societies.
One important note: procurement practices that demonstrate respect for workers’ human and labour rights are part of business responsibility regardless of the existence of a business advantage.
The risks for your company could be:
- Poor quality or product failures
- Inconsistencies in the supply of products or services
- Poor working conditions which could lead to
- Reputational impacts and increased stakeholder pressure if poor practices are found
- Production stoppages due to worker unrest or strikes
- Increased management costs to deal with any issues that arise, e.g. a third-party or media report
- High employee turnover cost for suppliers
- Increased compliance costs or legal liabilities, e.g. in the case of injuries to workers or consumers
- Potentially losing out on Government contracts
- Potential loss of contracts to other suppliers that can offer decent working conditions to purchasers
- Withdrawal of project financing by lenders if social (or environmental) requirements associated with a loan are not met (ESG — Environmental, Social, Governance-criteria are critical as they are considered together when it comes to accessing finance and reporting on loans)
- More frequent audits and supplier monitoring to check conditions or address concerns about poor quality of work and products, which may increase costs
Understanding why buying the cheapest option may not cost the least for your business.
The benefits for your company could be:
- Securing consistent and reliable suppliers
- Making you a customer of choice, accessing new markets and increasing business opportunities as a result of responsible practices
- Building resilience into your supply chains through longer-lasting and productive supplier relationships
- Protecting your company’s brand image and reputation
- ‘Doing good’ in line with your company’s values and sustainability goals
- Attracting better job applicants
- Helping to build healthy and prospering societies – which are good for business
- Strengthening your social license to operate by promoting responsible employment in developing countries
- Improving compliance with international and national laws, principles and standards by ensuring alignment of company operations with international labour standards
- Attracting additional loans from financing institutions by reducing project risk and complying with social (and environmental) standards
- Increasing trade and business opportunities worldwide
- Meeting internal and external stakeholder expectations
- Remember: workers are also consumers and having decent working conditions is a key component of achieving sustained economic growth
Understanding how buying responsibly makes business sense.
Decent work considerations in practice
Two decades ago, Nike came under major fire for the labour practices in its Indonesian and Vietnamese factories, to the point where it badly tarnished the company’s image and hurt sales. In 1998, they changed their business strategy by becoming transparent about the labour issues, and improving oversight of labour practices. This approach boosted public sentiment toward Nike.
Primark is seen as one of the biggest fashion retail success stories of the past decade. However, in spite of its achievements, Primark gained a reputation as an unethical and unsustainable fast-fashion brand following the tragic collapse of Rana Plaza, the deadliest accident in the garment industry’s history. Since then Primark has gradually implemented a series of strategies to improve the livelihoods of its workers, and to reduce its environmental impact. It was also one of the first retailers to sign the Accord on Fire and Building Safety in Bangladesh — earning it awards for its ethical labour practices, and status as a more ethical company.
Finnish forest industry company, UPM, received positive feedback from Chinese supplier Asian Sage, after a joint audit process which identified opportunities for improvement. “Our business relationship with UPM gives us an excellent opportunity to develop our own practices as well,” says Asian Sage owner and CEO Mr. Meng Xiang Feng.
The UPM audit process aims to continuously improve relationships with suppliers by strengthening company management processes, product quality, employee health and safety, and environmental and social responsibility. UPM Quality and Supply Development Manager Petri Riihinen notes: “Unsafe working practices such as a lack of personal protective equipment or excessive working hours have been the most common findings in the audits. The positive and continuous improvement demonstrated by Asian Sage brings mutual benefits for partners, employees and society in general.”
In order to move beyond compliance and auditing in their supply chain, and with the intent to normalize good practice across their industry, C&A has developed a supplier and worker engagement program. Their approach includes building suppliers’ capability to assess and strengthen their performance and empowering workers to act.
Meanwhile, Marks and Spencer has taken further steps to embed human rights into their business in order to support their company’s commitment to upholding decent work. They have developed a forced labour toolkit to support their suppliers and partners to implement a strategy for their business and their supply chains to tackle modern slavery. The toolkit also allows M&S to clearly communicate their expectations to suppliers.