19.8.2016   

EN

Official Journal of the European Union

C 303/17

Rapporteur:

Ms Emmanuelle BUTAUD-STUBBS

1.1

The issue of decent work in global supply chains (GSCs), such as textile-clothing and footwear, electronics, minerals, and agro-industries is indeed a critical issue for all public and private actors involved at national and international levels in supply chains management.

1.2

The European Economic and Social Committee (EESC) has adapted its internal proceedings in order to be in a position to give its opinion before the 105th session of the International Labour Conference (ILC) in Geneva on the issue of decent work in GSCs.

The EESC recommends:

1.3

That the European Commission adopts a comprehensive and ambitious strategy in order to promote with all its internal (access to EU public procurement, labelling etc.), and external policies (trade, development, neighbourhood policy etc.) the decent work in GSCs.

1.4

To adopt a common language, common definitions, and to assess the statistical data between the various stakeholders — OECD, ILO, WTO, IMF (1), European Commission and the World Bank — in order to avoid confusion and misinterpretation, and to elaborate a coherent policy between the public bodies involved in this field, with various competences.

1.5

Taking into account the UN Guiding Principles on Business and Human Rights, we need to recognise and promote the available best practices and initiatives in the existing ‘tool box’: the OECD Guidelines for Multinational Enterprises, OECD sectorial due diligence guidance (textile and garment, minerals, agriculture and finances), trade aid, financial schemes to compensate damages, codes of conduct, labels, standards and self-assessment tools. The aim is to put in place gradual, consistent and sustainable policy in the responsible management of GSCs.

1.6

To promote practical and suitable, risk-based approaches that will take into account the specific nature of the global value chain and the GSC (linear or modular, simple or complex, short or long organisation).

1.7

Based on an assessment of existing practices, to promote the format of multi-stakeholders, involving public and private actors, social partners, NGOs, experts etc., in order to develop the best portfolio of actions inspired by the OECD guidelines to identify risks, to prevent and to mitigate them, to communicate and report on the action plan. The measures involved in the action plans could include both, legislative and non-legislative measures, best practices, financial incentives, access to training, and capacity building for social dialogue and the trade unions.

1.8

To push for a specific reflection on the kind of transparency tools that could be put in place in order to inform the final consumers about the social conditions of production.

1.9

That the upcoming ILO conference should consider the possibilities for the ILO to play an active role in securing decent work along the global supply chains, including exploring the development and future adoption of any relevant and suitable instruments, that with the commitment of all the stakeholders will contribute to an effective improvement of working conditions.

2.1.1

Global value chain (GVC): this concept emerged in the mid-90s in order to describe ‘the full range of activities that are required to bring a product from its conception, to its design, its sourced raw materials and intermediate inputs, its marketing, its distribution and its support to the final consumer’ (2).

GVCs are supposed to favour ‘process upgrading’ (the producer adopts better technology to improve efficiency) and ‘functional upgrading’ (the ability for a producer to develop design, branding and marketing abilities). However, a number of examples show that it is not always the case.

The issue of achieving a sustainable and responsible management of GVCs is at the top of the international agenda (OECD, ILO, G7, G20, EU, the UN) given that the increasing amount of trade and investment world-wide occurs through GVC and that outsourcing and cross border coordination of global production by lead firms have significant social impacts. Some of them are positive, e.g. better paid jobs, greater female employment, job creation enabling access to employment, skills development and dissemination of knowledge and technology. Others are a matter of concern, such as precarious work, poor working conditions (including in the area of health and safety at work), lack of social rights (including lack of social security coverage), and infringement of human and fundamental labour rights.

This leads to development and implementation of diverse instruments at the national and international level, such as ILO conventions, OECD Guidelines or UN Guiding Principles on Business and Human Rights (see also paragraph 2.3.3), and policy frameworks, such as 2030 Agenda for Sustainable Development (3) and the accompanying Addis Ababa Action Agenda on Financing for Development (4) supporting respect for labour standards and promoting decent work, as well as further development of trade, investment, private sector and supply chains.

2.1.2

Global supply chain (GSC): a GSC is made up of the interrelated organisations, resources and processes that create and deliver products and services to end customers. As such, it is a part of GVC dedicated to the sourcing and not to the conception, or distribution of the goods or the services.

2.1.3

Decent work: concept formulated by the ILO’s constituents and adopted by the ILC in the Declaration on Social Justice for a Fair Globalisation (5) — covers national and local programmes put in place in order to achieve four strategic goals:

As the world-wide standard setting body, the ILO has adopted a number of conventions being of relevance for global supply chains. These include fundamental (core) labour standards (i.e. promotion of freedom of association and the right to collective bargaining, promotion of non-discrimination at work, and prohibition of forced and child labour), as well as conventions in the area of health and safety at work, labour inspection and others. The countries ratifying them are obliged to bring their legislation and practice in line with the conventions. Moreover, based on the ILO 1998 Declaration on Fundamental Principles and Rights at Work (6), all ILO member states are obliged to respect and realise in the legislation and practice the core labour standards, even if they have not ratified the relevant conventions.

2.2.1

The weight of GVCs in the world trade has increased rapidly and, according to the WTO, OECD, ILO and UNCTAD 2013 (7), represents between 60 % and 80 % of the international trade and over 20 % of jobs globally (8). The sectors covered by such interrelated organisational components as conception, production, distribution and consumption, driven by multinational enterprises (MNEs), include agriculture, industry (e.g. automotive, aeronautics, textile-clothing, toys, electronics) and services (e.g. call centres, information technologies).

2.2.2

The shapes and structures of those GVCs vary as well: some of them are rather short (small number of activities) while others are longer, implying economic, social and financial ties between companies established in numerous and remote countries (from the US, to the EU and Asia). According to Gary Gereffi (9), there are three dominant types of governance: buyer-driven GVCs and, in most cases, cost-driven (this is the case of the garment and footwear GVCs) and producer-driven GVCs with some technological competences of the suppliers in developing countries including design and innovation (electronics).

2.2.3

The GSC being a component of the GVC is based on the relationship between buyers and suppliers and potential sub-contractors. This ‘chain’ can be shaped in various ways: vertically integrated, captive chain, modular chain governance (the major suppliers are able to operate independently of the lead firm) or market chains for the commodity markets.

2.3.1

The EU definition of CSR recognises the ‘responsibility of the enterprises for their impacts on society’ (10).

2.3.2

On the basis of a certain number of problems occurring over the last twenty years, particularly in sectors like electronics, sports goods, and garments, the following issues have been identified, in particular by the OECD, as critical for a sustainable management by a MNE, as a lead firm, of its GVC and its GSC:

2.3.3

A wide range of actors: numerous public and private, national, European and international organisations and bodies are currently working on those issues particularly after the drama of the Rana Plaza (Bangladesh) that killed more than 1 100 employees in 2013:

Various private initiatives have been put in place either on a permanent or a temporary basis, e.g. for improving health and safety in Bangladeshi garment factories following the Rana Plaza catastrophe (Bangladesh Accord on Fire and Building Safety) (20).

2.3.4

All these public and private actors are engaged in development and implementation of various tools and instruments aimed at improving working conditions, and rights at work:

3.1.1

The garment and footwear industry GSC covers various actors and production processes. The Asia-Pacific region accounted for $601 billion of global exports of garments, textiles and footwear, which represents 60 % of the total world trade, China having the lion’s share. Countries such as Bangladesh or Cambodia increase their specialisation in the production and export of garments and footwear with respectively 89,2 % and 77,4 % of total merchandise exports in 2014 (22). This is mainly due to the sharp increase in wages in the Chinese garment and textile industry, which led international buyers to seek out new suppliers in Asia.

According to the ILO (23), in 2014 average earnings were less than $200 a month in the majority of countries. Monthly minimum wages for unskilled garment workers apply in China (up to $297), the Philippines, Malaysia, Indonesia ($247), Thailand, Vietnam ($145), India ($136), Cambodia ($128), Pakistan ($119), Bangladesh ($71) and Sri Lanka ($66).

The major risks are the lack of a living wage, forced or child labour, poor industrial relations due to weak protection of freedom of association and limited collective bargaining, poor occupational health and safety, insufficient labour inspection, underdeveloped occupational injury schemes, water pollution, exposure to chemical substances, and exploitation of the female workforce.

3.1.2

On 24 April 2013, the collapse of the Rana Plaza building in Bangladesh occupied by garment factories caused the death of 1 136 employees, mainly female. The magnitude of the accident, arising from the very poor state of repair of the building and the absence of fire exits, has led to an exceptional mobilisation of governments (the EU and Member States, USA, Canada, Norway), international organisations (ILO, OECD and World Bank), international and local stakeholders with an ambitious set of actions aimed at encouraging national short-term measures (compensation for families of victims, inspection of garment factories and remedy actions, new auditing methods, revision of the Labour Law), national medium-term measures (e.g. development of independent trade unions and strengthening of labour inspection), and systematic measures in order to promote responsible management of global supply chains.

3.1.3

The OECD is preparing a Due Diligence Guidance on Responsible Supply Chains in the Garment and Footwear Sector.

3.1.4

The ILO, in cooperation with international donors, governments, workers and employers, implements projects in the garment sector (e.g. in Asia) aiming at increased access to information on wages, working conditions and industrial relations to improve the quality of social dialogue on labour standards, strengthening social partners capacity and collective bargaining mechanisms, as well as assuring labour standards at the factory level (25).

3.1.5

The European Commission is working on a flagship initiative on a sustainable garment supply chain including joint planning, coordinated funding, joint implementation of programmes, awareness raising among consumers, and so forth.

3.1.6

EU social partners from textile and clothing sector have developed a joint initiative, supported by the European Commission, with a CSR Risk Assessment Tool relevant for GSCs. They are currently finalising it to prepare for dissemination amongst SMEs and other stakeholders.

3.1.7

The Dutch EU Presidency wishes to explore means of reinforcing synergies between the EU’s development and trade policies in order to contribute to the sustainability of GVCs.

3.1.8

The German Federal Minister for Economics, Cooperation and Development, Mr Gerd Muller, put in place a specific alliance for ‘sustainable textiles’ involving the major partners. At the last G7 he made a very concrete summary of the situation: ‘It would cost one euro to take responsibility, one single euro per dress, per jacket or pair of trousers, to ensure that hard work in Bangladesh, Cambodia or in Africa pays off and children and seamstresses have opportunities in life’ (26).

3.1.9

A proliferation of private initiatives has brought experience and help in sharing best practices. Among them, ICS (Initiative Clause Sociale) with 22 major retailers such as Monoprix, Carrefour or Casino, representing more than EUR 243 billion of turnover, sharing a similar methodology for their social audits; and BSCI (Business Social Compliance Initiative), launched in 2003 by the FTA (Foreign Trade Association) located in Brussels, with more than 1 700 retailers and importers from 36 countries in business relations with 30 000 plants.

3.2.1

According to the study on GVCs by Sturgeon and Kawakami (27), ‘intermediate inputs to the apparel industry appear to be far less important in terms of the value of the intermediate goods trade than inputs to the electronics and passenger vehicle industries.’

3.2.2

The electronics GVC is one of the most important in the goods sector with more than 17 % in total Manufactured Intermediate Goods in 2006, compared to 2,7 % in chemicals and plastics and 1,9 % in aircraft parts. The two leading countries in the export of electronics intermediates are China/Hong Kong and the United-States.

3.2.3

The three firm actors running the ‘value chain modularity’ are the following:

The modularity of this specific value chain lies in the codification and standardisation of key business processes like computer-aided design, production planning and inventory and logistic control.

3.2.4

Consumer electronics have short product life cycles, ranging from three to 18 months, with a quick end-of-life time frame. As a result, suppliers of these products face increasingly fast time-to-market orders. For example, when the Apple iPhone was introduced in 2007, the time to market was six months; in 2012, it had shrunk to less than two weeks (28). For the manufacturers and workers this is a challenge and there is need to develop and implement solutions to address it.

While in some companies agreement has been reached on working overtime or in shifts in the peak season and to compensate it over the rest of the year, others record a substantial increase in temporary contracts and hiring agency workers or migrants (e.g. in Mexico in 2009, 60 % of the workforce in the electronics industry were temporary agency workers rising to 90 % in the peak season) (29). This often means reduced workers’ rights, e.g. lower wages, lack of social security coverage or prohibition to join trade unions. The solutions could include, in addition to national legislation, agreements at the enterprise level, as well as a better coordination and information sharing between buyers and suppliers, thus enabling a better production planning and recourse to the permanent workers rather than temporary ones.

3.2.5

The questions of respect for human and labour rights relate the electronics industry also with the issue of minerals sourced in conflict affected and high risk areas, such as Africa’s Great Lakes Region (30). Further to adoption of the US legislation (Dodd-Frank Act), the European Commission presented in 2014 a proposal for a Regulation establishing a self-certification mechanism for importers of tin, tantalum, tungsten and gold onto the EU market to ensure that proceeds from extraction and trade in these minerals do not support local armed conflict. Instead, due diligence accompanied by other measures should contribute to transparency along the supply chain, and have positive impacts on job creation and working conditions in mines, such as health and safety at work, income levels or turning their activity into a formal one. This would also allow for a continued sourcing in Africa instead of turning towards other regions in the world, not affected by the conflict (31).

3.2.6

The OECD has developed Due Diligence Guidance for Responsible Supply Chains in Minerals from Conflict Affected and High Risk Areas (32).

3.3.1

The EESC would also like to emphasise that GVCs and GSCs in other sectors, such as services and agro-industry could face problems of working conditions, in particular health and safety at work.

3.3.2

The ILO’s support for decent work in the rural economy (33) focuses on 3 priority areas for action: decent work for disadvantaged and marginalised and vulnerable rural populations, decent work for rural workers in supply chains, decent work for rural workers in plantations.

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Governments are in charge of elaborating, implementing and enforcing the national labour and social law, ratification and effective implementation of the ILO conventions, and in the case of the EU Member States also transposition and implementation of EU directives; it is also their duty to provide all the administrative and financial resources, including for labour inspection, to ensure compliance with the legal framework.

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International organisations set standards and develop global initiatives in order to promote international labour standards and responsible business conduct. In this context, documents, such as the UN Guiding Principles on Business and Human Rights (‘protect, respect and remedy’ framework) provide guidance as to the roles and responsibilities of the main actors.

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Social partners are encouraged to engage and to promote social dialogue on labour standards and working conditions, including in the sector and cross-border context, and governments should ensure that freedom of association and collective bargaining is effectively protected and promoted.

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MNEs should be in compliance with the laws applicable in countries in which they operate; they are also encouraged to commit themselves to CSR and due diligence approaches.

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NGOs complement other actors’ efforts and play a key role in awareness raising related to the labour rights, as well as in denouncing abuses.

Given the complexity and the obvious overwhelming risks involving these key players, the EESC makes a plea in favour of structured, transparent and inclusive stakeholder platforms to tackle such complex issues.