21 March, 2024With increasing recognition that voluntary, corporate self-monitoring of factories is a failed mechanism comes growing interest in binding agreements between global companies and trade unions as a more reliable route to effective human rights due diligence in supply chains. On 14 March, IndustriALL co-organized, with the New York City Comptroller’s Office, the third in a series of investor roundtables on the subject.
Momentum is building to ensure proper human rights due diligence in supply chains. As IndustriALL continues to work to expand and strengthen binding, negotiated agreements with multinationals, it is also raising investor awareness of why these agreements are key to ending serious human rights violations in global supply chains as well as bringing about positive systemic and sectoral change.
On 14 March, IndustriALL co-organized, with the New York City Comptroller’s Office, the third in a series of investor roundtables on binding agreements. Participating asset managers and asset owners represented several trillion US$ of assets under management. An investor working group has also formed to take this work forward.
With increasing recognition that voluntary, corporate self-monitoring of factories, or social auditing, is a failed mechanism comes growing interest in binding agreements. An emblematic example is the International Accord for Health and Safety in the Textile and Garment Industry, formed in the wake of the 2013 Rana Plaza factory collapse in Bangladesh, which left over 1,100 workers dead and thousands more injured.
The Accord demonstrates some of the fundamental differences between binding agreements and commercial auditing, including: governance (worker participation is built in, increasing stability and buy-in); accountability (both a worker complaints mechanism and binding arbitration provide “teeth” and consequences for non-compliance); transparency in the form of public reporting; and independence (factories are inspected by qualified, independent experts). The Accord has helped drastically reduce OSH-related violations in participating factories, brought OSH training to over 1.7 million workers and provided a robust grievance mechanism and remedy to affected workers.
Social auditing, however, continues to be big business. By some estimates, the auditing industry is worth US$80 billion per year. Many multinational brands and retailers appear unwilling to relinquish it despite its poor track record on human rights and its inability to reduce risks faced by companies with unsafe supply chains, whether these risks are reputational, legal, financial or operational.
Binding agreements are not only more likely to prevent and mitigate serious human rights violations in global supply chains and bring genuine remedy to workers whose rights have been violated. They may also be a better proxy for supply chain due diligence, as called for in multiple jurisdictions by emerging legislation. This means they are more likely than social auditing to reduce risk in supply chains and therefore in the portfolios of investors holding shares in these global companies.
Says IndustriALL textile director Christina Hajagos-Clausen:
“This is why IndustriALL is working with institutional investors to raise their awareness of the stakes involved. Shareholders are an important player in changing corporate behaviour, and conversations with them indicate their impatience with the inertia around social auditing. They’re also looking for alternatives to the model and ways to engage their companies.”
New York City Comptroller’s Office
The Comptroller’s Office manages the assets of five public pension funds, which constitute retirement savings for over 700,000 current and former New York City employees. It is the fourth largest public pension fund in the United States.