by Elizabeth Umlas, IndustriALL Global Union

For the past eight years, the ACT initiative has brought together trade unions, global garment brands and retailers and manufacturers in supply chains to create a pathway to living wages in low-income garment production countries. A crucial strand of ACT is the establishment of legally binding agreements between global brands and IndustriALL Global Union, in which the companies commit to supporting achievement of better wages through collective bargaining agreements.

Manufacturers, labour unions, multinational buyer brands and IndustriALL Global Union have created a structure that improves workers’ lives in Cambodia, and could serve as a template for other countries. The structure is built on two tiers:

• A model collective bargaining agreement on wages and benefits that Cambodian employers and trade unions have developed through social dialogue, and
• Legally binding agreements between IndustriALL and brands in which the brands commit to supporting collective bargaining agreements at factory level in their Cambodian supply chains. The brands ensure this support through responsible purchasing practices: for example, maintaining their volume commitments and incorporating labour costs into their purchasing prices.

By underpinning collective bargaining agreements, the individual brand agreements are essential to improving conditions for workers in this low wage but key sector for Cambodia. Garment exports account for over one-third of Cambodia’s gross domestic product, and the garment, textiles and footwear sector employs almost one million workers.

But there is a problem. The ACT agreements are predicated on addressing the industry issue of low wages and poor working conditions. The more brands sign an individual support agreement, the more factories will be in a position to sign the template collective bargaining agreement. Therefore, all brands sourcing from Cambodia need to sign a support agreement now to enable tangible improvements in workers’ wages. But while 12 global brands and retailers have already signed binding agreements, many other brands sourcing from Cambodia have not done so.

In June, the Business & Human Rights Resource Centre surveyed 16 major brands (two of them ACT members), asking if they intended to sign binding agreements, and if not, why. Of the 13 that responded, none offered a concrete commitment to sign; two (Nike and Amer Sports) said they were reviewing the agreement. Although several claimed to support collective bargaining in their supply chains, most did not offer substantive reasoning for why they could not or would not sign a binding agreement at this time.

By declining to participate in this groundbreaking supply chain industrial relations framework, these major brands may be thwarting a breakthrough for workers’ rights in Cambodia. Besides the prospect of better wages, the collective bargaining template also introduces improved parental leave, dispute resolution and skills development for workers. As IndustriALL points out, “these provisions directly benefit Cambodia’s predominantly female garment workforce and contribute to sustainable industry practices.”

In undermining ACT in Cambodia, the brands are creating risks not only for their supply chain workers but also for their peers, themselves and their investors:

• Peers: Suppliers in the ACT programme produce for buyers that have signed agreements as well as for companies, like the ones surveyed by the Resource Centre, that have not. The latter still benefit from any improvements that the initiative brings about and are therefore free-riding off other companies’ commitments. This raises the burden on global buyer brands which have signed agreements.
• Themselves: programmes based on binding agreements, which incorporate meaningful stakeholder engagement and remedy, provide a way for multinational corporations to achieve robust due diligence in their supply chains. Companies that decline to participate in such initiatives could lose out on this benefit and create legal risk for themselves, given emerging mandatory due diligence laws and increased scrutiny of corporate “greenwashing”. And as H&M, which has signed a binding agreement under ACT in Cambodia, notes, these agreements “offer greater predictability for brands and suppliers”.
• Investors: to the extent binding agreements can lower supply chain risk for companies, they may also lower portfolio risk for investors. One recent analysis asserts binding agreements between global companies and trade unions or worker representatives may even serve as a proxy for investors of corporate regulatory compliance and alignment with OECD due diligence guidelines. Further, shareholders in multinational brands are clearly concerned about risks associated with low wages. These concerns were on display in this year’s round of shareholder proposals filed at multiple UK brands regarding living wages. The proposals garnered strong support, including at Next plc and Marks & Spencer, two of the companies the Resource Centre surveyed on the Cambodia agreements.

Encouragingly, binding agreements are gaining traction with investors: in 2024, over one dozen asset managers, asset owners and investment service providers formed an investor working group on supply chain due diligence under the aegis of the Labour Rights Investor Network (LRIN). The group’s work led to the launch in February by LRIN and IndustriALL of Investor guidance and expectations: Supply chain due diligence and binding agreements.

ACT’s binding agreements represent the potential to address the systemic problem of low wages paid to Cambodian garment workers. And the initiative is predicated on shared responsibility – across brands, suppliers and labour unions – to bolster an industry that is vital for the production country but also very profitable for buyer companies. No one multinational can address these problems on its own. But through binding agreements designed to drive better wages and conditions for garment workers, companies have an unprecedented opportunity to be part of the solution.