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Public Sector Support for the Implementation of Corporate Social Responsibility (Csr) in Global Supply Chains: Conclusions from Practical Experience

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Public Sector Support for the Implementation of Corporate Social Responsibility (Csr) in Global Supply Chains: Conclusions from Practical Experience PUBLIC SECTOR SUPPORT FOR THE IMPLEMENTATION OF CORPORATE SOCIAL RESPONSIBILITY (CSR) IN GLOBAL SUPPLY CHAINS: CONCLUSIONS FROM PRACTICAL EXPERIENCE Study prepared for the CSR Practice Foreign Investment Advisory Service Investment Climate Department By Business for Social Responsibility PricewaterhouseCoopers (Denmark) December, 2004 This report was prepared for the Corporate Social Responsibility Practice in the Investment Climate Department of the World Bank Group. The report was prepared by Peder Michael Pruzan-Jørgensen and Helle Bank Jør- gensen, both of PricewaterhouseCoopers, and Aron Cramer of Business for Social Responsibility. The report was financed by the Royal Danish Ministry of Foreign Affairs. This report had originally been intended solely for the private use of the World Bank Group, in accordance with the terms of reference dated April 21, 2004. At the request of the World Bank Group, it has been made public. We do not accept or assume any liability or duty of care for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing Table of Contents Executive Summary . 1 A Context . 1 B Summary of Recommendations . 3 C Implementing the Proposals . 5 1 Introduction . 9 The Basis of the Report . 9 Structure of the Report. 10 1.1 Scope of work, definitions and methodology . 10 1.1.1 Definitions. 10 1.1.2 Scope of work . 11 1.1.3 Research methodology . 12 1.1.4 Analytical Method . 13 2 Government’s Role . 15 2.1 Public governance challenge. 15 2.2 Why should national governments act? . 16 2.2.1 Why should national governments act now? . 18 3 A Framework for Public Sector Engagement with Labour and Environmental Standards . 21 3.1 Essential Elements for the Creation of Successful Enabling Environments . 21 3.2 Industry-focused collaborative framework . 22 3.2.1 Collaboration. 23 3.2.2 The Elements of Collaborative Initiatives. 24 4 Recommendations . 27 4.1 Standards . 28 4.1.1 Establishing Clear and Effective Standards . 28 ii Public Sector Support for the Implementation of Corporate Social Responsibility (CSR) in Global Supply Chains 4.1.2 Enforcement of Standards. 31 4.1.2.1 Public-private collaboration on enforcement of standards . 31 4.2 Capacity Building . 34 4.2.1 Capacity Building: For Whom? . 34 4.2.2 Capacity Building Initiatives . 36 4.2.2.1 Supplier Training on Labour and Environmental Standards . 36 4.2.2.2 Supplier Training on Human Resources . 36 4.2.2.3 Reorienting Inspectorates Towards Capacity Building. 37 4.2.2.4 Create Local Expert Networks. 37 4.2.2.5 Develop Centres of Excellence . 38 4.2.3 Mechanisms for Promoting Capacity Building. 40 4.3 Incentives . 40 4.3.1 Targeted incentives . 40 4.3.2 “Green Production” and “Fair Labour” Zones . 43 4.4 Worker Empowerment. 45 4.4.1 Educating Workers About Their Rights . 46 4.4.2 Removing Barriers to Worker Representation . 47 4.5 Enhancing dispute resolution mechanisms . 47 Annex A: References . 49 Annex B: List of organisations consulted . 51 Annex C: List of cases of good practice . 53 Executive Summary he World Bank Group has commissioned ble in recent years. These change factors include the Tresearch on ways in which governments of following: developing countries can create more effective enabling environments for corporate social respon- • The phase-out of apparel quotas, which threaten sibility in global supply chains. to bring about fundamental changes in the geog- raphy of the apparel industry; This paper outlines practical recommendations on how the public sector in these countries can develop • Fatigue by both buyers and suppliers with current both policy and practical initiatives to promote the approaches, and a sense that progress available social and environmental performance of local sup- through these approaches has peaked; pliers that are part of global supply chains, while • A sense that the atomized models reflected also enhancing competitiveness. in individual company codes, and competing multistakeholder initiatives cannot continue indefinitely without losing opportunities for A CONTEXT improvement; We present this paper in the context of an environ- • Initial signs that both the political will and under- ment that is simultaneously static and dynamic. On lying architecture of collaboration are emerging, the one hand there is increasing recognition that the reflected in a series of collaborations between current “system” for achieving, primarily through parties that did not even communicate effectively the mechanism of private codes of conduct and five years ago; worksite monitoring, good labor and environmen- • A greater willingness on the part of national gov- tal practices in global supply chains is not working. ernments, international institutions, and bilateral It is not sustainable, nor does it maximize progress. donors to engage with these issues, and a will- On the other hand, there are still barriers to be over- ingness on the part of other actors to engage with come for this recognition to be turned into action for the public sector in developing countries; and change. • A growing sophistication in the understanding of The dynamism in the debate is borne of several fac- the policy, market, and social drivers for the tors, many of which are unrelated, and which debate. together present the opportunity to develop more— and more systematic—change than has been possi- 1 2 Public Sector Support for the Implementation of Corporate Social Responsibility (CSR) in Global Supply Chains It is also important to acknowledge the static nature likelier to bring sustainable improvements when of the elements of this debate. The factors that con- implemented within a comprehensive, public sec- tinue to hinder progress include the following: tor–governed framework. • Highly politicized debates in exporting countries, Governments have good reasons to invest in devel- in which labor and management in particular oping such frameworks. First, such efforts are likely often seek conflict first, and conciliation second; to deliver economic and social spin-offs that con- tribute positively to national competitiveness. Sec- • Lack of resources, especially on the part of ond, these frameworks provide a level playing field exporting-country governments, which do not for enterprises active in the country. Third, they view export sector workplaces as the highest pri- insert into the debate over supply chains an opportu- ority for social and environmental interventions; nity for governments to have greater influence over • Continuing cynicism on the part of suppliers, outcomes than they have to date, as “solutions” have who do not believe that investments in better often been presented from outside these economies. social and environmental conditions will bring Thus, this report presents recommendations that improved economic performance or greater identify ways in which the public sector can mobi- access to markets; lize not only its own resources, but also the • Concerns that China’s presence in the global resources, skills, and capacities of different actors in market risks rendering noncompetitive efforts in areas such as capacity building, training of workers, other countries to secure social and environmen- collaboration with other actors, and the strengthen- tal improvements; ing and diversification of inspection systems. • Ongoing holes in the system, owing to very This report proceeds on the assumption that contin- patchy enforcement by governments and uneven ued and enhanced efforts on the part of business, enforcement by companies seeking to ensure both by multinational buyers and local suppliers are good practices by their suppliers; and essential, and should in no way be seen as letting such actors “off the hook.” Furthermore, it proceeds • Lack of internationally accepted principles on on the assumption that one essential role for gov- environmental matters, as is the case with Inter- ernment is to create enabling environments that national Labour Organisation (ILO) core labor envision strong contributions from civil society standards. (nongovernmental organizations (NGOs) and trade The authors of this report believe that now is the unions in their respective roles), and also from time to capitalize on some of the emerging oppor- workers and communities. Such collaborative tunities, and that some of the barriers can be over- efforts are at the heart of the approach outlined here. come by catalyzing greater action by governments, In fact, the importance of all these actors underlines which have a pivotal role to play. the need for government efforts since it is only gov- Indeed, this report takes as an underlying premise ernment that can create or ensure an environment in the notion that codes of conduct to a large extent which the main pillars of an enabling environ- emerged as a corporate policy solution (though often ment—drivers, capacity, and tools—point each of triggered by public criticism) to a public governance these actors in a common direction. failure. In addition, the current code of conduct tra- Our recommendations arise from six months of jectory, which emphasizes individual solutions, has work involving desk research; outreach to numer- exhausted its potential for further progress, in no ous government officials; and contacts with buyers small part because it does not acknowledge the in the apparel and agriculture sectors, NGOs and important role governments play in creating the trade unions in the United States and the European enabling environment for the achievement of good Union, similar organizations in exporting countries, labor and environmental standards. and donor agencies, both bilateral and multilateral.1 Accordingly, although codes of conduct are a force for positive change in terms of labor and environ- 1 A full report of the parties with whom we consulted is in mental performance, current approaches are far appendix C. Executive Summary 3 We considered and analyzed the results of these ture collaborative governance, common standards consultations and the information generated by based on local laws and consistent with interna- other means.
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