In January 2002, OECD provided the following responses to questions asked by journalists concerning labour standards.
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Companies are influenced by a number of factors when they set up their own "standards" (actually, OECD work shows that there are such wide divergences among companies' commitments and practices in the area of labour relations that it is not strictly accurate to describe them as "standards"; see Corporate Responsibility: Private Initiatives and Public Goals, Figure 5, page 38, for example; which shows wide divergences with respect to such basic issues in labour relations as child labour and freedom of association).
The need to comply with laws and regulations which are often quite strict, even in developing countries, is a major consideration. Pressure from customers and civil society is also a factor in some sectors (those where assets such as corporate brand and reputation are important and need to be protected; or those that are vulnerable to and wish to deflect hostile regulation).
A WTO Declaration on labour certainly would have had an impact -- but there are serious concerns about whether the WTO is really the right forum for dealing with labour standards. The ILO has played a central and constructive role in this field for decades. The OECD Guidelines for Multinational Enterprises, a code of conduct covering many issues including labour standards, provides companies with a multilaterally-endorsed benchmark for assessing their responsibilities, commitments and labour management practices. The follow up institutions of the Guidelines provide what might be called a "soft whistleblowing" facility that can and has been used by stakeholders as a means for discussing, with companies and governments at the table, specific instances of alleged shortcomings in labour management practices.
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Our research indicates that, among the top 100 multinational enterprises, over 95 per cent have issued codes of conduct.
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There has been considerable experimentation with independent audits. This has shed light on both the advantages and the disadvantages of such audits. The advantage of social audits is that they can, if properly done, provide an valid source of information on factory conditions and treatment of workers. This information definitely has a role to play in any company programme for complying with internationally agreed norms for labour practices.
The disadvantages are pretty obvious. First, the independence of the auditor can be (and often is) questioned. Second, aside from a few general principles set forth mainly in ILO conventions (on child labour, forced labour, freedom of association, etc.), nobody agrees on exactly what "appropriate conditions" are (especially when these have to be translated into an specific factory setting). Third, the cost can be high, especially for companies that have hundreds of supplier factories. Fourth and perhaps most importantly, workers may be unwilling to talk frankly to auditors for fear of loosing their jobs or because they are subject to physical intimidation. Thus, the audit doesn't resolve and is subject to the same basic problem that makes labour standards so hard to raise in many developing countries -- workers in these countries often have little or no competitive strength vis-a-vis their employers.
Ultimately, the solution to raising labour standards does not lie with companies, though they cancertainly make an important contribution. The solution will stem from broader efforts by developing country societies to strenthen the bargaining position of their workforces. This means creating the conditions for robust economic growth and job creation. It also means establishing systems of labour market regulation (e.g. effective protection of freedom of association) and social protections that are appropriate to these countries' income levels (e.g. more comprehensive basic primary and secondary education and the provision of social services for the protection of at-risk children).
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Governments have an essential role to play in these arrangements. One of the main problems companies face is that many governments -- in the OECD and elsewhere -- have not been playing them well. Corporate responsibility goes hand-in-hand with government responsibility.
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As noted above, there are some international norms (Universal Declaration on Human Rights, ILO Conventions, etc.) that help companies and others determine what is "far enough". The OECD study of codes addressed to suppliers in the apparel industry show that there is considerable disagreement as to how these international norms should be translated into individual company commitments. However, since most OECD-based MNE's employ their workers in the formal sectors of host countries, they tend to respect higher standards than domestic companies (especially relative to those of companies operating in the informal sector). Most of the "slippage" in actual behaviour (as opposed to written commitments by companies) of OECD-based MNEs probably occurs in their supply chains.
The supply chain can be thought of as the "weak under-belly" of the corporate responsibility movement. It is for this reason that the OECD Guidelines institutions will be taking up the issue of supply chain management at the annual meeting on the Guidelines to be held in Paris in June 2002.
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