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19 Jul 2021

Judy Gearhart, Accountability Research Center

The corporate accountability paradox

Maruf Rahman

The pandemic has unmasked the charade of so many supply chain accountability initiatives as dozens of global corporations, especially apparel brands, stiffed workers by not paying for orders completed, demanded deep price cuts from their suppliers, and failed to ensure workers received their legal severance when fired as a result of these cuts. Leaving workers without pay and local communities without income raises the fundamental question of what corporate accountability commitments to workers’ rights really mean. This is important to examine as the EU and other nations develop mandatory human rights due diligence (MHRDD) laws.

Voluntary corporate accountability commitments have proliferated in the apparel industry since the 1990s. Yet these corporate promises have created a paradox: the more assurances workers get, the more vulnerable they become. Brands promised to uphold higher standards in countries where national governments failed to protect workers’ rights. The more workers and their communities rely on transnational corporations, however, the less they are covered during any external shocks. The pandemic has shown how brands are not taking their responsibilities for workers around the world seriously and governments, meanwhile, have not upheld their regulatory responsibilities.

The apparel industry response, along with the lack of unemployment guarantees and other social protections, illustrates how brands’ initiatives have failed to fill the gap in government protections and might even have prevented the gap from getting filled by better laws. Given how cash-strapped apparel workers are, it’s outrageous they have had to mobilise pressure on Northern corporations to pay up at a time when they also needed time to advocate for their governments to provide better solutions to the pandemic’s broader effects in their community.

One thing the growing calls for both government and corporate accountability have shown is how much the concept of accountability is at risk of overuse and manipulation, an issue being examined in depth by the Accountability Keywords Project. It is often hard to know who is accountable for what to whom and, most importantly, how rights-holders can demand legal recourse. Corporate accountability was meant to signify a higher level of commitment to human rights than those previously made under corporate social responsibility (CSR) programs. Yet many corporate accountability initiatives, relying on “soft law” strategies, have spawned a parallel universe of oxymorons such as “non-binding commitments” and “voluntary compliance standards.” Such strategies were said to lay the groundwork for advancing the rule of labor law, but corporate resistance to stronger regulations or any other binding agreements makes progress elusive.

In the late 1990s, analysts critiqued corporate social responsibility (CSR) initiatives for their lack of rigour and reliance on self-evaluation. Dozens of brands joined multi-stakeholder initiatives (MSIs) and pledged to have their suppliers uphold standards based on International Labour Organization (ILO) norms – even if local laws were weaker or government enforcement lax. Yet most later refused to negotiate a resolution once a complaint was being heard in the courts.

The definitional strength of these rights-based standards had the potential to guide worker complaints and resolutions, but without whistle-blower protections and union-management dialogue workers rarely speak up for fear of reprisals or the knowledge they might lose their jobs if the brand walks away. Most MSIs have not adequately defined how rights-holders can secure justice. Yet for human rights advocates, the “how” is paramount. If rights-holders are to hold corporations to account, they need access to information, legal protections against reprisals and assurances the brand won’t walk away from the factory prior to the resolution.

Ironically, initiatives meant to increase global corporations’ accountability to the workers in their supply chains have often served as an early warning signal for avoiding scandal. Brands are not actually accountable for workers’ welfare, something the stampede to cancel orders during the pandemic has made abundantly clear. Although many corporations joined supply chain accountability programs to mitigate the risk of human rights scandals in places where governmental enforcement and protection was lacking, most have assiduously avoided making any legally binding commitments.

In order to escape the accountability paradox, accountability initiatives need a clear and protected role for rights-holders and a means for them to secure legal recourse. Accountability without transparency around the enforcement process and full participation of rights-holders is hollow. It’s not accountability at all. Enforceable brand agreements, like the Bangladesh Accord which require brands make a binding commitment to ensure reforms are made, have proven effective in managing grievance and remedy systems and in giving worker representatives a meaningful role in the governance of the programme. Some academics have criticized the Accord for not covering a broader range of workers’ rights issues, but brands have resisted even basic expansions to its scope. And although negotiations continue, brands’ initial resistance to renewing the Bangladesh Accord signals the need for greater incentives so that enforceable agreements will be seen as necessary, not optional.

The EU Parliament’s support for mandatory human rights due diligence could help advance such incentives, especially if the forthcoming legislation takes up the recommendations to include effective deterrents and enable victims in third countries to hold EU parent companies liable under EU law. As the Biden Administration aims to champion international human rights, it will be important the U.S. moves legislation that requires due diligence reporting and risk mitigation on the full scope of human rights risks in corporate supply chains. Such a law must include meaningful fines for corporations found repeatedly failing to address rights violations and clear policies to ensure those fines are used to support the protection and remediation of workers whose rights were violated. Given how weak corporate accountability commitments have proven during the pandemic, it is time to strengthen avenues of legal recourse for workers.

Written by Judy Gearhart, Accountability Research Center

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