Week 6.

Regulating Global Value

Chains

Dr Yu Zheng (yu.zheng@rhul.ac.uk)
Office: McCrea 2-31 Fridays 11:30-13:30
MN3265 Spring Term 2023-2024
The Dark Side of Fast Fashion

Source: BBC News, 1st Feb 2024 https://www.bbc.co.uk/news/world-asia-68102771

Learning Objectives

By the end of the sessions, you will be able to:

1. Explain the needs and challenges in regulating and
monitoring global supply chain
2. Evaluate competing demands on multinational firms in
sustaining their business and justifying their behaviour to
various stakeholders
3. Critically assess the challenges of introducing, monitoring and
policing on working conditions across countries
Part 1. Work and Employment in the Global Value Chains
‘Disconnected Capitalism’ (Thompson, 2003)

▪ Globalisation since the 1980s: the role of the state retreated,

corporate power rose => MNCs could not be held accountable
▪ Offshoring/reshoring to countries and locations characterised by
poor labour regulation and enforcement capabilities; attempts to
“flee” from where employment regulations are tough
▪ Increasing outsourcing and subcontracting of low-skill (but not only)
tasks: informal and indirect employment relations
The Global Value/Commodity Chain (GVC) Framework

▪ Gary Gereffi (1990; 1995; 1998; 2005)

▪ ‘[S]ets of interorganizational networks clustered around one
commodity or product, linking households, enterprises and states to
one another in the global economy’ (Gereffi et al. 1994: 3)
▪ Construction and governance of GVC are driven by large retailers
and branded marketers, regardless of their country of origin
(Gereffi, 2005)
▪ A process of upgrading towards a mix of technology- and skill-
intensive economic activities (Gereffi, 1990: 524)
Two Types of GVCs

Producer-Driven GVC Buyer-Driven GVC

 Example: The Global Value Chains of A Football
(Naz & Bögenhold, 2020)

International
Brands
Factories;
Local vendors
Local buyers
Subcontractors
Family Workers

Football Industry in Pakistan: https://www.youtube.com/watch?v=hkOiFLsCDbA

An Issues of the GVC Governance Rather Than
Developing Country

Source: The Guardian, 30th June 2022 Sourc: The Guardian, 13th June 2022
https://www.theguardian.com/uk-news/2020/jun/30/some-leicester- https://www.theguardian.com/uk-news/2022/jun/13/poor-working-
factories-stayed-open-and-forced-staff-to-come-in conditions-persist-in-leicester-garment-factories-finds-survey
Governance Issues in the GVC

▪ ‘[T]he fragmentation of many production processes and their

geographical relocation on a global scale in ways that slice through
national boundaries’. (Dicken, 2003: 9)
▪ Governance by inter-firm contracting entails ‘both social structures
and ongoing processes, which are constituted, transformed and
reproduced . . . through asymmetric and evolving power
relationships by intentional social actors’ (Dicken et al. 2001: 105)
▪ GVCs are production regimes which are transnational labour
networks (Frenkel, 2001: 531)
Three Key Strands of Thoughts on Regulation
(Baldwin et al., 1998)

Public Agency State / Multiple Actors

Government Body
Multiple Actors, Levels and Relations

▪ Regulation involves a variety of

actors such as state institutions,
trade unions, management
International Labour National State
Organisation (ILO)
networks, international state
agencies and even social bodies
such as international charities
(MacKenzie and Martínez Lucio,
2005)
Employer’s Voluntary
Associations
Trade Unions and
Worker’s Right Groups
▪ Encompasses a variety of levels and
relations between them
Debates on Regulating the GVC
▪ Debate over labour standards has shifted from the desirability to the
efficacy of various forms of labour regulation
▪ What agency is better or more effective at enforcing labour codes –
common ILO codes
▪ Compliance efficacy
▪ Beyond compliance to social upgrading of labour
▪ Role of different agencies
▪ New actors – powerful NGOs (Fair Labour Association) intervening for and
against MNCs
Part 2. Regulating Work and Employment in the Global Value Chains
State Regulations

▪ The interventionist role for the state => regulation through

legislation or other institutionalized means (Esping Anderson, 2000).
▪ Criticisms of ‘extensive state intervention’, although challenged, has
undermine structured and nationally based systems of regulations
▪ The role of regulation through the state and collective organization
become secondary to management prerogative (Whitley et al.,
2005).
▪ New forms of ‘soft regulation’ and international regulations emerged
Labour Codes of Conduct - derived from ILO
▪ Employment is freely chosen
▪ Freedom of association and the right to collective bargaining are respected
▪ Working conditions are safe and hygienic
▪ Child labour shall not be used
▪ Living wages are paid /commensurate
▪ Working hours are not excessive
▪ No discrimination is practised
▪ Regular employment is provided
▪ No harsh or inhumane treatment allowed
 Uneven and Unstable Effects of Private Regulations

‘Existing research shows that private regulation has

had uneven and unstable effects in terms
of improving labour conditions (Barrientos and
Smith, 2007, Locke et al., 2009, Locke, Qin, et al.,
2007 and Vogel, 2005). The limited effects are
ascribed to the shortcomings of private regulation,
such as weak standards in codes of conduct,
global corporations’ low commitment to
enforcing them, failures to detect and penalize
violations, and the lack of incentives for the
regulated to comply with codes (Esbenshade, 2004,
Locke et al., 2009, Ngai, 2005 and O’Rourke, 2002).’
https://www.youtube.com/watch?v=wl2CoRiosPw
Is Better Auditing the Answer?

▪ Responding to the criticism that social audits and workplace

certification failing to protect worker rights (Short et al, 2016)
▪ Specialist NGOs can improve their audits by following outcomes of
Short etc. al (2016) recommendations – more women, more training
and separation of interests between clients and suppliers
However, using private NGOs to conduct private auditing
underestimates the capacity for workers to regulate themselves; also
undermines trade unions and local NGOs to police the supply chain
Incorporating Social Responsibility to Business
Strategy in MNCs
▪ An interface between corporate
social responsibility (CSR) and
human resource management
(HRM)
▪ Oriented to create not only
organizational value but also
individual and societal value
▪ A lack of consensus about the
specific actions that it
encompasses and how it is
implemented in different contexts
Source: Diaz-Carrion, López-Fernández & Romero-Fernandez, 2018
Firm’s Voluntary Associations

▪ Sustainable supply chain management initiatives

▪ Features of fast fashion:
▪ Responsive to market demands
▪ Competitive – low cost and low price
▪ Neglecting environmental (e.g., carbon emissions, water usage) and labour issues
(modern slavery)

▪ Based on the assumption that self-interests of global brands will

drive compliance
NGOs: Fair Labour Association (FLA)

▪ Advocates MNCs self-regulating

supply chains because MNCs are
global and efficient
▪ Assumes that MNCs need to
maintain their ‘reputations’, hence
have an interest in ethical supply for
customers
▪ Assumes that ‘self-interest’, efficacy
and efficiency will be the dominant
force regulating the fairness of
labour conditions in supply chains
FLA: How does it work?

▪ Over 4,000 companies are members of FLA

▪ Companies that join the FLA agree to uphold the FLA Workplace
Code of Conduct throughout their entire supply chain.
▪ The Code of Conduct is based on International Labour Organization
(ILO) standards, and defines labour standards that aim to achieve
decent and humane working conditions.
▪ Random audits and publishes reports
FLA and Transparency in GVCs
▪ Random audit and reports exposing suppliers where ‘Immediate
Action Required’ and ‘Sustainable Improvement Required’

▪ Labour conditions in visible supply chains and reputation-conscious

buyers tend to be better than conditions in less visible supply chains
(Lund-Thomsen & Nadvi, 2011)

▪ Buyers closely engaging with suppliers, then working conditions can

substantially improve (Frenkel and Scott 2002; Locke and Romis
2007; Locke et al. 2009)
Limitations to FLA
▪ Weak statistical evidence that FLA process works --
global corporations’ power does not necessarily ensure code
compliance (Locke, et al.,2007)

▪ Impacts on workers’ rights to organize is limited (Human Rights

Watch, 2014)

▪ Limited impact on creating a living wage (Anner, 2015)

▪ Expelling companies from FLA not apparent, and labour violations

remain. Why?
Local Unions - Developing Union Power Critical
to Improving Labour Conditions

Source: The Guardian, 11th June 2010 Source: The Guardian, 23rd Nov, 2022
https://www.theguardian.com/business/2010/jun/11/honda- https://www.theguardian.com/world/2022/nov/23/protests-
workers-strike-china-pay break-out-at-covid-hit-iphone-factory-in-china
Independent Unions

▪ 2010 Strikes at Honda factories in China resulted in 25% wage

improvements
▪ Action of workers at local level – not those acting ‘for’ workers
increasingly seen as critical to social upgrading – importance of
workers’ self-organisation
▪ Studies emphasize that developing independent labour organization
at the local level is an important condition for effectively countering
the power of multinational corporations and improving the lives of
workers (Cumbers et al. 2008; Gregoratti and Miller 2011; Helfen and
Fichter 2013).
Competing or Complementing between State and
Trade Unions in Regulating Labour Conditions
China Cambodia
Although all Chinese factories in the survey
had a branch of the ACFTU on their premises,
the workers were largely unaware of this.
Not only did 70.3% of the Chinese workers
not know whether there was a union in
their factory – 56% had no clue even
whether they were union members –
but also, when asked if they knew what a
trade union was, 50% of them stated that it
was “not clear,” to them, with an
additional 28% saying that they had never
heard the word “trade
union” (gonghui) before.
In their factories, where multiple unions were
competing for membership. 96.9% knew
for certain that there were unions in the
factory, 78.7% declared that they were union
members, and 63.6% claimed to know what
a trade union was (with a further 6.9%
claiming to “know a little”). Even if only
22.3% of the Cambodian workers had
taken part in the election of
union representatives – which hints at a lack
of union democracy – 84.4% believed that
the factory unions were able to represent
the interests of the workers.
-- Franceschini, 2020
Altering Power Asymmetry between Workers and
Factory Management
▪ 70 per cent of managers interviewed cited
avoiding problems with unions and pre-
empting strikes as one of the main
motivations to improve compliance;
▪ Improving conditions beyond minimum
compliance: To get workers to cooperate,
the management gives the minimum wage
straight to probationary workers, provides
extra food allowance for overtime, and
offers attendance bonus of US$5 despite
some unauthorized absence, all of which
exceed the legal requirements
Conclusions

▪ Disappointing outcomes of private regulation of labour standards

has meant more attention to the role of worker organization
▪ Voluntary and peer-monitored regulations are built on
complementarity with union-driven and buyer-driven regulations;
▪ Regulatory interventions, rather than relying on voluntary
compliance, are needed to improve the labour standards;
▪ National legislation and soft regulations at national and international
levels provide a minimum level of protection to workers when
effectively enforced.
The Clean Clothes Campaign

https://www.payyourworkers.org/stolen-futures