Supply Chain

5 Steps to Building Better Working Conditions in Global Supply Chains

According to a recent survey of 287 sustainability professionals, working conditions are the most important sustainability issue in supply chains. That’s not too surprising; in the short time it’s taken to read this far, 153 people around the world have had a work-related accident.

By Cory Searcy | Published 7 years ago | About a 5 minute read

Many companies have tried hard to improve the working conditions throughout their supply chains. Tragically, however, well-documented scandals resulting in worker injuries and death continue to emerge all too frequently. Poor working conditions in supply chains are a serious moral problem that is difficult to address. New approaches accompanied by sustained effort are needed.

Clearly, improving working conditions will require tailored approaches to address the needs of different supply chains. Electronics and apparel manufacturers, for example, face diverse challenges. However, there are some building blocks that are common to any global supply chain. Here are five interrelated actions companies can take to improve working conditions in their supply chains.

1. Collaborate with the competition.

Supply chain management can be a competitive advantage. However, as Andrew Winston explains, “There are some issues that companies should not compete on, like labor conditions.” Collaborating with the competition can make business sense in such areas. The Sustainable Apparel Coalition’s Social and Labour Convergence Project, the Electronic Industry Citizenship Coalition’s Code of Conduct, and the Accord on Fire and Building Safety in Bangladesh all provide examples of joint action to improve working conditions.

2. Build local capacity.

It is not enough to identify problems; suppliers must be able to address them. Except in cases of gross violations or an unwillingness to change, companies should work with their suppliers to build local capacity. The ILO has established programs to help improve working conditions in supply chains, most prominently the Better Work initiative. Many companies, such as GE, also work with their suppliers to strengthen local capacity.

3. Measure work environment performance.

Indicators are needed to measure performance, identify problems, and eliminate root causes. Both the physical, such as lost-time injuries, and psychosocial, such as stress, aspects of working conditions should be considered. Undoubtedly, the initial emphasis must be on preventing potentially catastrophic injuries or death. However, other aspects of the work environment should also be considered. For example, workplace stress was the campaign theme of 2016’s World Day for Safety and Health at Work.

4. Explore new forms of supplier auditing.

Traditional forms of supplier monitoring, particularly third-party factory audits, have been shown to be insufficient in improving working conditions. Audits should not be abandoned, but changes are needed. For example, more attention could be placed on ongoing, direct feedback from workers, as facilitated by companies such as LaborVoices. The use of experienced audit teams unfamiliar with the factory, comprised of at least one female member, may also improve the audit process.

5. Increase supply chain transparency.

Transparency is one of the key drivers of improvement in working conditions. A number of companies, such as Patagonia and Marks & Spencer, have developed online maps of their supply chains that dramatically improve the traceability of their products. This may be further enhanced in the coming years, through technologies such as blockchain. Creative solutions, such as investing in press freedom, may also increase transparency and drive improved working conditions.

Improving working conditions in global supply chains is not easy. Regulatory standards, cultural norms, and stakeholder pressures related to work all vary widely around the world. Supply chains can also have vastly differing levels of clarity. In some cases, it can be difficult to determine who a company’s suppliers even are. Moreover, even where all reasonable precautions have been taken, accidents will happen.

Nonetheless, companies cannot and should not “shy away from knowing the conditions in their supply chain.” Improving working conditions is an ethical responsibility, but it can also be good for business. Research has shown that productivity and profitability can improve when workers are treated well. As many companies can attest, poor working conditions, even very deep in the supply chain, can cause severe reputational damage. Ignoring this problem can place enormous value at risk.

Existing efforts to improve working conditions are commendable, but they are not enough. There is a need for further collaboration between competitors to drive change throughout their industry’s supply chains. Companies must develop better ways of measuring performance, connecting audit results to real improvements, and helping well-intentioned suppliers when needed. Progress towards, or away from, improved working conditions must be proactively disclosed to the public.

Work-related accidents and diseases result in the deaths of 6,300 people every day. Companies need to rapidly accelerate their efforts to improve working conditions in their supply chains. The health and wellbeing of workers around the world depend on it.