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Can Governments and International Institutions Make Corporate Social Responsibility Work? New Policy Options for Global Labour Governance Xavier St-Denis (McGill University) [co-author of the paper: Michèle Rioux, UQAM] Introduction With the offshoring of a significant share of labour-intensive production, the working conditions of workers in countries of the Global South have become an increasingly important issue. Meanwhile, the limitations of traditional instruments aimed at ensuring the respect of international labour standards (ILS), such as the ILO conventions, also became more visible. Activists and multinational corporations (MNCs) both use corporate social responsibility (CSR), an alternative strategy for the enforcement of ILS where private actors take more importance. The privileged instrument is private codes of conduct, which typically include a set of standards to be respected by the suppliers of a specific MNC, and an enforcement mechanism based on the monitoring of suppliers’ compliance with these standards by the MNC. The main reason why MNCs would adopt such codes of conduct is to react to or prevent public opinion campaigns by NGOs and civil society organizations (CSOs) pressuring them to enforce ILS across their global supply chains or highlighting cases of violation of standards (such as in the case of the recent collapse of an apparel factory in Bangladesh, or child labour at Nike’s suppliers in the 1990s). Plan and research question Private codes of conduct haven’t gone without being criticized. This paper first reviews assessments of the ability of CSR to ensure the enforcement of ILS across supply chains. Second and more importantly, it surveys recent initiatives by governments and international

• rganizations in the field of CSR. I ask whether and to what extent the initiatives effectively

contribute to make private codes of conduct a more efficient instrument for ILS enforcement. My main argument based on the analysis of four initiatives and on existing literature is that most initiatives only marginally address the core limitations of private codes of conduct. More resources and better design would be necessary for these initiatives to really have an impact. Part 1. How good are private codes of conduct? The main enforcement mechanism for private codes of conduct is the social audit, a private form

• f labour inspection used by MNCs to monitor working conditions and compliance with ILS at

suppliers’ factories. A high-quality social audit should be able to detect violations to the provisions of codes of conducts and disclose them to the stakeholders. One central problem with private codes of conduct is that in most cases, this monitoring system does not achieve these two objectives. Auditors are often inexperienced or not properly trained to detect ILS violations (Esbenshade, 2004). Audits tend to be superficial: they last less than one day and rely on written documents, cursory visits and non-confidential interviews with workers (R. Locke, Amengual, & Mangla, 2009). This often leads to the detection of workplace safety and health violations, but not of violations that are undetectable at a glance, such as anti-union and discriminatory practices (Rodríguez-Garavito, 2005). Finally, audit results are not always publicly disclosed (Fransen, 2012). This limits the ability of stakeholders to pressure MNCs whose suppliers commit ILS violations. Moreover, according to Locke (2013), MNCs should seek to ensure sustained improvement in working conditions by close and frequent cooperation between their CSR staff of the MNC and the managers of their suppliers, rather than the traditional social audit that often equates to superficial and one-time compliance with the code of conduct. Besides design and functioning problems of monitoring of private codes of conducts, there are more general limitations to the extent to which this instrument can ensure enforcement of ILS. The most important one is related to the fact that the standards and monitoring mechanisms vary greatly across codes, which do not tend to converge, although this variation is not highly

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visible to consumers (Fransen, 2012). Firms can therefore select less demanding codes while still reaping the reputational benefits. Overall, both MNCs and their suppliers have little incentives to adhere to demanding codes that lead to actual enforcement of ILS. Part 2. To what extent can new policy initiatives address the limitations of private codes

• f conduct?

Initiatives by governments and international organizations should be seen as meaningful contributions to CSR only if they address some of the limitations described in the review above. I survey four important initiatives: the non-financial reporting obligations set by national legislation, the UN Global Compact, the OECD Guidelines for MNCs, and the ILO’s Better Work program. They are the most discussed, but also the most ambitious of such initiatives. Reporting obligations require that specific firms disclose their social performance in their annual financial report, or explain why they do not disclose such information. European countries have adopted such legislation, as well as California. In Europe, the legislation remains vague and focuses on activities at the national level. The Californian legislation exclusively focuses on forced labour in global supply chains. The UN Global Compact is ambitious: it has a high membership and its objective is to lead companies to embrace 10 universal principles, four of which correspond to the ILO’s core ILS. Nevertheless, membership is not dependent on compliance with any of the principles, and firms self-report their achievements. The Global Compact is based on decentralized learning. Currently, membership cannot be withdrawn (Deva, 2006; Sethi & Schepers, 2011). The OECD Guidelines for MNCs provides a much more detailed set of standards than the Global Compact. All MNCs who are headquartered in an OECD country are automatically covered by it. They can be held accountable by stakeholders through complaints filed at the National Contact Points (NCPs) set by each OECD government. Nevertheless, the outcomes of the complaints are often a vague and concise statement with no follow-up to monitor remediation and the mechanism is still largely unknown to the greater public, which diminishes the impact of successful complaints on MNCs reputations (Oldenziel, Wilde-Ramsing, & Feeney, 2010). These elements are disincentives for the use of the PNCs’ complaints mechanism in cases of ILS violation. The ILO’s Better Work program offers more potential. It focuses on specific countries rather than

• firms. In some cases, all suppliers in a given country are covered, while in others, participation is
• voluntary. The program is designed like a regular private code of conduct. However, the social

audits are made by the program staff, which is qualified for it. This increases detection of trade union rights violation (Anner, 2012). There is an important focus on remediation. Nevertheless, audit results are only made available at the aggregate level for each participating country, which does not allow stakeholders to pressure specific firms. The program also addresses the limitation of private codes of conduct by including a strong cooperation and expertise component that aim at training managers at upgrading their human resource management practices to become more compliant with ILS. All three first initiatives put forward a set of labour standards with the aim of ensuring their respect by the greatest number of MNCs, either through membership or through legal coverage. Nevertheless, this does not equate to convergence around a common set of standards, nor do the initiatives contribute to promoting ambitious monitoring and enforcement mechanisms. No attention is granted to social audit quality. In other words, my argument is that these three initiatives would need to be greatly improved in order to be able to address any of the limitations faced by private codes of conduct as describes above. However, Better Work addresses most of the concerns related to social audit quality, including cooperation. In the case of countries where participation is made mandatory, they also address the problem of firms’ ability to select a

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private code of conduct with less demanding provisions. The lack of disclosure of specific audit results undermines the leverage stakeholders should have to pressure MNCs and their suppliers to respect ILS. This leads me to conclude that overall, the only initiatives by governments and international organizations that really address the limitations of private codes of conduct are those with sufficient resources, that disclose MNCs compliance or violation with ILS visible, and that set clear and ambitious standards (including regarding monitoring and cooperation). References Anner, M. (2012). Corporate Social Responsibility and Freedom of Association Rights The Precarious Quest for Legitimacy and Control in Global Supply Chains. Politics & Society, 40(4), 609–644. http://doi.org/10.1177/0032329212460983 Deva, S. (2006). UN Global Compact for Responsible Corporate Citizenship: Is It Still Too Compact to Be Global, The. Corporate Governance Law Review, 2, 145. Esbenshade, J. L. (2004). Monitoring sweatshops: workers, consumers, and the global apparel

• industry. Philadelphia: Temple University Press.

Fransen, L. (2012). Multi-stakeholder governance and voluntary programme interactions: legitimation politics in the institutional design of Corporate Social Responsibility. Socio- Economic Review, 10(1), 163–192. http://doi.org/10.1093/ser/mwr029 Locke, R., Amengual, M., & Mangla, A. (2009). Virtue out of Necessity? Compliance, Commitment, and the Improvement of Labor Conditions in Global Supply Chains. Politics & Society, 37(3), 319–351. http://doi.org/10.1177/0032329209338922 Locke, R. M. (2013). The Promise and Limits of Private Power: Promoting Labor Standards in a Global Economy. Cambridge: Cambridge University Press. Retrieved from http://ebooks.cambridge.org.proxy2.library.mcgill.ca/ebook.jsf?bid=CBO9781139381840 Oldenziel, J., Wilde-Ramsing, J., & Feeney, P. (2010, June). 10 Years On ‰: Assessing the Contribution of the OECD Guidelines for Multinational Enterprises to Responsible Business Conduct. OECD Watch. Rodríguez-Garavito, C. A. (2005). Global Governance and Labor Rights: Codes of Conduct and Anti-Sweatshop Struggles in Global Apparel Factories in Mexico and Guatemala. Politics & Society, 33(2), 203–333. http://doi.org/10.1177/0032329205275191 Sethi, S. P., & Schepers, D. H. (2011). United Nations Global Compact ‰: An Assessment of Ten Years of Progress. Achievements. In S. P. Sethi (Ed.), Globalization and Self-Regulation: The Crucial Role That Corporate Codes of Conduct Play in Global Business (pp. 249– 275). New York: Palgrave Macmillan.