Supply Chain

Working Conditions in Global Supply Chains:
What and How to Measure

Despite decades of intense media and business attention, poor working conditions persist in global supply chains. Even Apple, recently announced yet again as the world’s most admired company by Fortune magazine, has struggled to address this issue.

By Cory Searcy | Published 6 years ago | About a 6 minute read

Despite decades of intense media and business attention, poor working conditions persist in global supply chains. Even Apple, recently announced yet again as the world’s most admired company by Fortune magazine, has struggled to address this issue.

Do any companies want to have poor working conditions in their supply chains? Probably not. It is unethical to subject workers to unsafe conditions, inhumane treatment or excessive overtime. Moreover, the business case for improving working conditions is strong: Poor conditions can result in reputational damage; good conditions can help improve quality and productivity.

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SB'18 Vancouver program!The first step in correcting poor working conditions is identifying them. To do this, companies need credible, usable indicators. Unfortunately, creating indicators tailored to any one supply chain is difficult. Here are five guidelines companies can apply to increase their chances of getting the indicators right:

Safety first. Preventing accidents causing injury or death is a clear priority. No one producing shoes or smartphones should be expected to put their physical safety at risk. Safety should be considered from a short- and long-term perspective. Both acute and repetitive strain injuries, for example, must be a core part of any measurement system. Indicators focused on occupational injuries, facilities and exposure to hazardous materials, among others, are all clear possibilities.
Safety is only the beginning. Physical safety is a minimum, but not sufficient for good working conditions. Psychosocial aspects of work, such as worker autonomy, mental demands and work-life balance, are also essential. Inattention to psychosocial aspects can yield a number of adverse impacts, such as stress and burnout. Companies also need indicators addressing human rights in the workplace, such as no discrimination, forced labour or child labour.
It’s not all relative. Indicators show whether performance is getting better or worse. But, they must also show whether it is acceptable or not. For example, a goal is not to have less forced labour; it is no forced labour. Satisfying legal requirements is a minimum threshold of acceptability, but there are opportunities to go further. The Sustainable Development Goal on decent work and the Guiding Principles on Business and Human Rights provide reference points.
Focus on outcomes, not process. Well-designed codes of conduct, management systems and audit programs all play important roles in improving working conditions. However, process-oriented indicators should be viewed as preliminary efforts to enable the outcomes companies, employees, customers and the general public care about most. Indicators focused on the existence of policies or number of audits completed, for example, are relatively easy to measure, but may say little about actual performance.
Focus on what matters most. The difficulty of obtaining reliable data rapidly increases with the number of suppliers, supply chain tiers and indicators. To keep things manageable, companies need to focus on the critical few. This could include positive aspects of the work environment that go beyond reducing harm. Since each indicator matters, remember that strong performance on one does not compensate for poor performance on another.

Many examples are available. In the apparel industry, for example, PUMA reports on several key social indicators, including the gross wage paid above minimum wage, overtime work, and workers covered by a collective bargaining agreement. H&M tracks progress on numerous initiatives related to working conditions, such as implementing fair living wages, interviewing workers, and extending its focus to second-tier supplier factories. It also pays close attention to human rights in its supply chain.

Developing supply chain indicators is challenging, as Patagonia acknowledges in its efforts to quantify living wages. Ongoing multi-stakeholder initiatives, such as those at the Fair Labour Association, provide insight into what and how to measure. Companies can also turn to research on disclosures of work environment indicators, guidelines on developing decent work indicators, and research on measuring long-term health for inspiration.

In designing indicators, companies should consider perspectives other than their own, particularly employees and key suppliers. First-tier suppliers will be critical in driving expectations deeper into the chain. Their commitment to effective measurement could be undermined if they perceive the indicators as unfair or if the relationship has been short or adversarial. Companies may also need approaches to prioritize lower-tier suppliers, including determining when site-specific data is truly needed.

Companies are increasingly being held responsible for the actions of their suppliers, even those very deep in their supply chain. Working condition indicators won’t prevent all problems but can help proactively identify key risks and opportunities. Physical safety is a clear priority, but truly improving working conditions requires far more.

Apple, for example, has reported rapid progress in its supplier responsibility program. Conditions aren’t perfect in Apple’s supply chain and new problems are sure to emerge, but the company’s ability to recognize what’s going well and what isn’t continues to improve. Other companies would be well-advised to improve their own measurement capability for the benefit of both themselves and the workers in their supply chains.