The Corporate Accountability Paradox

Author(s): Judy Gearhart
Date: July 15, 2021
Country: Multi-country
Language(s): English

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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 and responsible global citizenship really mean.

Corporate accountability commitments have proliferated in the apparel industry since the 1990s. For workers however, 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.

Some might argue that corporate accountability commitments made some brands more likely to pay or at least more vulnerable to campaign attacks pressuring them to pay. Yet a year into the pandemic and brands like Amazon, Walmart, H&M, Nike, and Target which have continued to turn healthy profits or even grow, are still implicated in cases of unpaid severance – essentially wage theft, as the Workers’ Rights Consortium documents in their recent report. The industry response and the lack of unemployment guarantees and other social protections illustrate how badly 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 mobilize pressure on Northern corporations to pay up at a time when they also needed more time to advocate for their governments to provide better solutions to the pandemic’s broader effects in their community.

For destitute workers, accountability delayed is accountability denied.

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 the distinction has become increasingly blurred by the number of corporate accountability initiatives overly focused on the “soft law” strategies, which have spawned a parallel universe of oxymorons such as “non-binding commitments” and “voluntary compliance standards.” Such strategies are meant to lay the groundwork for advancing rule of labor law, but corporate resistance to stronger regulations or any other binding agreements makes progress elusive.

Corporate accountability spawned a parallel universe of oxymorons, such as “non-binding commitments” and “voluntary compliance standards.”

In the late 1990s some analysts began to critique corporate social responsibility (CSR) initiatives for their lack of rigor and an over reliance on corporate self-evaluation against internally developed standards, such as Sara Lee Corporation’s code, which was “actively discouraging union representation”. The lack of clearly defined standards, drove many groups to look for a stronger approach. “Corporate Accountability” signaled a more rigorous set of demands on companies that could be tested and verified through third party oversight and some basic public reporting. However, levels of transparency and third party verifiers’ independence have varied widely, rarely providing workers any additional leverage.

As brands increasingly faced worker rights abuse scandals in their global supply chains, they sought a more effective approach. Several multi-stakeholder initiatives (MSIs), including Social Accountability International (SAI) and the Ethical Trading Initiative (ETI), moved beyond CSR to define corporate duties according to International Labour Organization (ILO) Conventions, particularly the core Conventions protecting workers’ rights to freedom of association and collective bargaining and prohibiting child labor, forced labor, and discrimination. These initiatives converted the duties defined for governments in human rights norms into minimum requirements and recommendations for employers. Brands pledged to have their suppliers uphold these standards even if local laws were weaker or government enforcement lax. Yet in several cases brands later refused to negotiate a resolution once a complaint was being heard in the courts.

Rights-based standards only work when unions are able to guide and protect workers against reprisals.

The definitional strength of these rights-based standards had potential to guide worker complaints and resolutions. Over time, however, it became clear this only worked when unions were engaged and able to provide guidance and some protection against reprisals. Absent such protection or established union-management dialogue, workers rarely spoke up either from fear of reprisals or the knowledge they might lose their jobs if the brand walked away.

Although many MSIs helped raise up and secure corporate commitments to promote the application of international human rights norms in their supply chains, most MSI contributions to advancing corporate accountability plateaued due to weak grievance resolution systems and a lack of transparent and independent impact reporting. Most have not adequately defined how rights-holders can secure justice. Yet for human rights advocates, the “how” is paramount.  Human rights are about protecting the agency of rights-holders against suppression by those more powerful. If rights-holders are to hold corporations to account, they need access to information and legal protections against reprisals. Ensuring safe access to remedy is where many corporate accountability initiatives fall short.

Most multi-stakeholder initiatives have not adequately defined how rights-holders can secure justice. Yet for rights advocates, the how is paramount.

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 really accountability at all. Enforceable brand agreements and Worker-driven social responsibility initiatives which require a binding commitment, such as the Bangladesh Accord or the Fair Food Program, have proven effective in managing grievance and remedy systems as well as improving workplace safety and workers’ welfare. Both have given workers a meaningful role in the governance of the program and include legal recourse for workers. Brands’ initial resistance to renewing the Bangladesh Accord, signals the need for greater incentives so that brands see such agreements as necessary, not optional.

Accountability without transparency around the enforcement process and full participation of rights-holders is hollow. It’s not really accountability at all.

The next wave of advocacy for corporate accountability thus needs to advance international laws and regulations that can levy meaningful penalties and hold corporations liable for their complicity in human rights abuses worldwide. The EU Parliament’s support for mandatory human rights due diligence gives cause for hope, 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. The U.S. currently has a strong deterrent in the Tariff Act of 1930, which has a punitive enforcement mechanism in Section 307 that can block the import of goods if they are reasonably suspected of being made in whole or in part with forced labor. Yet the scope of the Tariff Act remains narrowly focused on forced labor and implementation requires a more rigorous system of fines and greater transparency so that other actors can monitor its implementation and help ensure protection and adequate remedy for victims. The EU is now also considering a similar law to ban forced labor imports, which could learn from the U.S. experience.

As the Biden Administration works to reclaim a U.S. leadership role as champions of international human rights, it will be important to move legislation that requires global corporations conduct due diligence on the full scope of human rights risks in their supply chain and publish what mitigation steps they take to address those risks. 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 focus more on strengthening avenues of legal recourse for workers.

ABOUT ACCOUNTABILITY KEYWORDS

Key terms in the accountability field often have different meanings, to different actors, in different contexts – and in different languages. This project addresses “what counts” as accountability, analyzing the meanings and usage of both widely used and proposed “accountability keywords” – drawing on dialogue with dozens of scholars and practitioners around the world. The project includes both an extensive Accountability Working Paper and more than 30 invited posts that reflect on meanings and usage of relevant keywords in their own contexts and languages. To share a post about a keyword that interests you, send us a proposal at arc@american.edu.

AUTHOR INFORMATION

Judy Gearhart

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Judy Gearhart is a visiting scholar at ARC and an adjunct professor at Columbia University. Previously she served nine years as the executive director at the International Labor Rights Forum and twelve as the programs director at Social Accountability International. She has worked for the UN and grassroots NGOs in Mexico and Honduras on trade, labor rights, and democratic participation.

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