Written by Elizabeth Umlas

April 26, 2023

This week marks 10 years since the collapse of the Rana Plaza factory complex outside Dhaka, Bangladesh. Over 1,100 garment workers were killed and more than 2,500 others were injured in this industrial disaster. A decade after this preventable tragedy, where are we in addressing persistent human rights violations in global supply chains? This blog will flag just three things.

First, many multinational corporations (MNCs), whether garment and footwear brands and retailers, consumer electronics companies, supermarkets, or others, still rely heavily on the method called “social auditing” to inspect their global supply chains for labor rights violations. The problem is that this decades-old approach, in which MNCs hire private inspectors to check their suppliers and issue a certification, has been shown repeatedly not to work – even some auditors share that conclusion – and workers have continued to suffer egregious harms and rights violations in inspected facilities. (1) And yet social auditing, also called private voluntary regulation, continues to be a multi-billion-dollar industry.

Second, multiple jurisdictions are passing laws requiring MNCs to undertake human rights due diligence in their supply chains; some of these laws even carry civil liability implications for failure to comply. Although it is too early to evaluate the human rights impact of the laws (some of which remain proposals), this wave of legislation will bring needed pressure on – and increase the financial and legal risks for – corporations that fail to address serious violations in their supply chains. Importantly, those creating the laws are also under pressure not to allow third-party auditing to substitute for due diligence.

Third, there is an alternative to social auditing. Global company-trade union agreements (GC- TUAs), negotiated and often binding agreements between global companies and trade unions to jointly tackle systemic human rights violations in supply chains, have been proving their worth for years. The International Accord for Health and Safety in the Textile and Garment Industry (the Accord), whose predecessor, the Bangladesh Accord, was created in reaction to the collapse of Rana Plaza, is one such agreement between global clothing brands and international unions. The Accord has led to significant and undeniable progress in safety for garment workers in the Bangladeshi factories producing for signatory brands. The International Bargaining Forum (IBF), an agreement between the International Transport Workers’ Federation, shipping vessel owners and shipping management companies, is another example of a successful GC-TUA. (2)

In response to investor queries about how to get beyond the inertia surrounding social auditing, IndustriALL Global Union commissioned Due Diligence Design to produce a brief that takes a deep dive into GC-TUAs. The brief, which was the subject of an investor webinar co-hosted last week by IndustriALL and LAPFF, makes the case that, besides reducing human rights risks to workers, these agreements can mitigate business risk for investors in the new regulatory landscape. It explains how emerging EU legislation will impose new requirements on investors regarding human rights performance of garment portfolios. The brief also outlines how GC- TUAs may mitigate these risks due to their alignment with OECD due diligence guidance, their provision of effective access to remedy for supply chain workers, and their good governance (e.g. binding contracts, accountability through dispute resolution mechanisms, trade unions as equal partners and transparency) – elements which are missing in private voluntary regulation.

Social auditing prevails in part because it is big business, and for many years it has given (false) cover to companies using it. But regulators and investors (3) are coming around to what labor and human rights activists have pointed out for years: social auditing does not constitute true due diligence, and it carries more costs and risks than benefits.

In this period of reflection around the Rana Plaza tragedy, there should be a strong push, once and for all, beyond private voluntary regulation and towards a new model for supply chain industrial relations. It is time to support global company-trade union agreements as the promising alternative that they represent.

The webinar recording is available here; speakers included Kalpona Akter, executive director of the Bangladesh Centre for Worker Solidarity; Jennifer Schappert, Due Diligence Design; Vaidehee Sachdev, Aviva Investors; and Elizabeth Umlas, IndustriALL Global Union and Croatan Institute.

Liz Umlas is a senior fellow at Croatan and senior advisor to IndustriALL Global Union.