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Learning station: Global supply chains
and labour rights
This learning station will provide you with a basic
understanding of global supply chains and the implications for
labour rights.
Remember Rana Plaza?
Remember the Rana Plaza, which was considered the “the smoking gun” of what
could go wrong in the terms of labour rights and global supply chains. It brought to
the attention of the world, that almost everything we consume, from clothing to
electronics, are the result of complex production chains which encompass the
globe. These are often called global supply chains, sometimes also referred to as
Global Value chains or Global production networks.
What is a supply chain?
...the term “global supply chains” refers to the cross-border organization of
the activities required to produce goods or services and bring them to consumers
through inputs and various phases of development, production and delivery. This
definition includes foreign direct investment (FDI) by multinational enterprises
(MNEs) in wholly owned subsidiaries or in joint ventures in which the MNE has
direct responsibility for the employment relationship. It also includes the
increasingly predominant model of international sourcing where the engagement of
lead firms is defined by the terms and conditions of contractual or sometimes tacit
arrangements with their suppliers and subcontracted firms for specific goods,
inputs and services. (ILO 2016, p.1)
Lead companies and buyers
Lead companies engage in global supply chains in both direct and indirect ways,
which often results in complex relationships or ‘arm’s length’ relations with the
suppliers. Direct relations are formed through foreign direct investment, purchase
of a specialist supplier or by establishing a new production facility in another
country, where the task that is performed abroad remains within the ownership of
the lead firm. However, increasingly, these tasks are carried out through
outsourcing. This creates a contract relationship with an independent supplier,
which can also occur indirectly, through the purchase of a production input from a
domestic supplier that, in turn, receives some of its inputs from abroad.
In these kinds of supply chains – which are very common in apparel and many
other consumer goods – the responsibility to comply with legislation related to
worker welfare and rights lies with the employing factories. However, the power to
set prices, and to ensure they are high enough to allow decent working conditions,
lies in part with the (clothing) brands. All factories have to comply with national
labour laws and standards. Lead factories, however, have the power to influence
labour conditions throughout their supply chains, by among others, through
changes in price settings, corporate social responsibility (CSR) practices and
adherence to ethical codes of conduct.
Global supply chains do matter for our global economy….
In fact:
• 80% of global trade linked to GSCs of MNEs
• 21% of global labour force is active in GSC - 453 million jobs in 2013 (296
million in 1995)
• More than 50% of global FDI in developing economies
• Emergence of Regional Supply Chains for countries which lower the
barriers for global supply chains operations.
And they have created opportunities for economic growth and creation of
employment:
Now, although we started maybe with a bad example (Rana Plaza) of a global
supply chain, participation in global supply chains has created opportunities for
countries and certain groups in the population to enter the global and national
economy
 Opportunities for economic growth through Foreign Direct Investment
 Opportunities for economic upgrading (meaning more advanced and
complex tasks and production) and higher value added activities
 Job creation and skills development
But, as with everything there is also a downside to the Global supply chain
story, one we have to carefully monitor:
 In order to stay competitive on the global level, and attract as much FDI and
trade as possible, there is the risk of what we can a «race to the bottom»
which creates a downward pressure on wages, working conditions and
rights at work
 Although economies can scale up the value chain ladder (Economic
upgrading) this does not necessarily mean that social upgrading (better
working conditions/salaries) is happening!
 The issue of responsibility is in a very grey zone. Are brands responsible for
labour rights issues happening in their supply chain?
Are we all clear on the idea of global supply chain?
What are the opportunities, but also risks involved, especially concerning
labour rights?
Case study: The Nutella Global Supply
chain
Some facts about Nutella:
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Originated in Alba, Italy after WWII
350,000 tonnes of Nutella consumed globally annually
One jar every 2,5 second purchased
Distributed in 100 countries
25% of global hazelnut production used by Nutella
Ferrero employs 25.000 employees
Now have a look at the list of ingredients
Questions to discuss in group
1. Where can possibly be sourced the following key ingredients of Nutella? Have a look at the map
2. What could be the risks of sourcing your ingredients from these countries in terms of respect for labour rights?
3. Any CSR or industry initiatives you are aware of?
Where sourced? (Country)
Hazelnut
Pam oil?
Cacao?
Labour risk assessment?
CSR initiatives
Where sourced? (Country)
Labour risk assessment?
CSR initiatives
Hazelnut
Pam oil?
Round table on sustainable
palmoil
http://www.rspo.org/about
www.cocoainitiative.org
Cacao?
Solution key!
Please have a look at the following Nutella Global value Chain
Cacao
The Cacao industry, especially in the west African region has been in the spotlight for many years concerning child labour and cases of forced labour.
http://www.cocoainitiative.org/
Based on the training material developed by ICI and formally approved by national authorities in Côte d’Ivoire and Ghana, ICI
regularly trains different supply-chain actors on child labour in the cocoa sector. ICI’s training packages range from two-day
workshops for cocoa supplier staff who need to be competent on the legal framework surrounding child labour, to five-day training
of trainers for lead farmers who will conduct awareness-raising sessions amongst their peers. Over the past few years, ICI has
trained thousands of supply-chain actors, thus increasing the understanding of child labour in cocoa and reducing its risk.
Child labour monitoring systems
The second pillar of ICI’s engagement along the cocoa supply-chain is the setting-up and management of Child Labour Monitoring
and Remediation Systems (CLMRS). As a structure embedded in the supply chain of chocolate and cocoa companies, it aims to
identify and remediate cases of child labour. The system is based on the presence of facilitators within cocoa-growing communities
who raise awareness on the issue of child labour, identify cases and request remediation actions that are implemented by ICI
together with the chocolate company and cocoa supplier. All the information is collected via smartphones and gathered on a
database from which systematic analysis can be conducted and remediation strategies refined. Started as a pilot in 2012, the
system currently monitors over 24 000 cocoa farm
Hazelnuts
Turkey amongst other is one of the top producing countries in terms of hazelnut. In fact 25% of the global production of hazelnuts is being used by Ferrero
as one of their main entry points in
Paml Oil
Round table on sustainable palmoil
http://www.rspo.org/about
In 2008, the RSPO developed a set of environmental and social criteria which companies must comply with in order to produce Certified Sustainable
Palm Oil (CSPO). When they are properly applied, these criteria can help to minimize negative impacts.
One of the most important RSPO criteria states no primary forests or areas which contain significant concentrations of biodiversity (e.g. endangered
species) or fragile ecosystems, or areas which are fundamental to meeting basic or traditional cultural needs of local communities (high conservation
value areas), can be cleared.
Other RSPO principles stipulate a significantly reduced use of pesticides and fires; fair treatment of workers according to local and international labour
rights standards, and the need to inform and consult with local communities before the development of new plantations on their land. You can learn
more about RSPO's Principles and Criteria here.
Only by being RSPO-certified by an independent auditor approved by the RSPO can producers claim that they produce, use and/or sell sustainable
palm oil.