In a recent blog post, a large sportswear manufacturer spoke of how addressing labour risks and human rights has moved from being a burden (read: cost) to a source of innovation. According to this post, this switch has:
- Opened up the space for more innovative approaches to addressing risks.
- Reduced the environment of fear that stops companies talking about these issues.
This is commendable – more companies should be talking openly about their struggles to find innovative solutions – but it left me thinking about how much the benefits of innovation are actually felt by the workers down at the bottom of the supply chain. I have a sneaking suspicion that ideas often get stuck in the offices of the clever and creative management types and the writers of corporate reports.
Unfortunately, the reality is that we see time and time again a huge disconnect between a company’s innovative visons, and the reality of workers’ lives.
Yes, more of the world’s biggest brands are now talking openly of inclusivity, fairness and creating happy lives for their workers. It is also undeniable that production pressures, price reduction, shareholder expectations and customers clamouring for ever more ever cheaper stuff remain a powerful countervailing force to the new narrative of innovation.
At Impactt, we are picking up this challenge. No matter the company, the product or the business model, we know what a supply chain looks like, how it works and the types of innovation that would reduce systemic vulnerabilities. We have real, in-depth knowledge of the realities in factories and farms globally, through our fabulous field teams who spend their days talking to workers. We are in a privileged position to talk with companies day in, day out to understand their needs. It’s not just work for us but a passion. We spend our spare time reading about company practices and being asked by friends, colleagues and acquaintances which brands they should or shouldn’t be spending their money on. It’s in our blood 24/7, we live and breathe to reduce inequalities and improve the lives of the most vulnerable.
On the basis of this knowledge, I believe that if companies want to truly innovate to reduce vulnerabilities whilst still addressing risk, two key areas need to be addressed:
Procurement practices must run in tandem with and not in opposition to better jobs for workers.
Commercial teams are pushed buy ever cheaper, ever faster. This forces transactional supply chains, where things move too fast, and are just too commodified to enable buyers to take human rights and labour standards into account. The incentives are pointing in the wrong direction. I once spoke to someone at a large garment retailer who told me that if they didn’t get 5% off the base price offered by suppliers, it would affect their personal Christmas bonus. Of course there is innovation in procurement – but it is the sort of innovation which drives margin and competitiveness, not better quality jobs.
Too often, ethical trading departments are separate from the rest of the companies, reactively addressing concerns rather than proactively engaging in the sourcing conversation. This needs a re-think – we’ve known for ages that long-term, stable supplier relationships, shared responsibility and partnerships drive better labour practices – all of which are a far cry from the realities we see. Hard-wiring ethical innovation into the procurement process so as to get the win:win of more efficiency and better job quality is a must.
It is crucial to pin down responsibility for human rights and job quality in today’s hyper-flexible supply chains.
Modern supply chains are fluid, global and adaptable. It can take over 700 suppliers in 31 countries to produce a single IPhone 6. This is good for business – these supply chains allow companies to react and act quickly, expand, contract, and feed consumer requirements. Further, they promote networks of SMEs, providing jobs around the world.
However, this hyper-flexibility means that risk and responsibility are fluid. In the more visible supply chain layers, closer to HQ, risk and responsibility are fairly well defined. But the further an enterprise is from HQ, the more risk is offset. As supply chains become more complex and flexible, the lines of risk and responsibility become blurred, resulting in workers being put into ever more vulnerable positions with less access to remedy. Added to the challenge are the enormous numbers of migrant workers who are part of the human supply chain providing labour to the various layers of the chain. These people commonly pay hundreds or thousands of dollars to recruitment agents to get what they hope will be lucrative jobs abroad. These are the most vulnerable of all.
Each additional supply chain layer sucks the momentum out of innovation. Innovation rarely has sufficient energy put behind it (read: time, money and resources) to reach workers in the very first layer, let alone those making the fabrics, chips or plastic components contributing to the finished product. Or indeed to reach those migrant workers paying exorbitant fees. Saying “the employer must pay” is one thing – having the momentum to deliver a real change for those at the bottom of the chain is quite another.
However, it does not have to be this way.
We at Impactt believe that innovation can bring benefits for workers, manage risk and build competitiveness. However to do this, and to avoid either no impact, or adverse impacts on the weakest, innovation must be based on empiricism, real on-the-ground experience, rather than on the c-suite vision workshop. Our solution is threefold:
- Diagnose: thoroughly understanding the issues from the perspectives of workers, employers and supply chain actors – what are the problems, for whom, and why are they happening?
- Innovate solutions, still at workplace level, which deliver tangible benefits to workers and employers – whether this be through developing skills, building quality and productivity or improving management systems – and test and re-test these approaches to make sure they tackle the problems to the satisfaction of workers and management.
- Then and only then, develop macro-policy and strategy, rooted in successful experiments at ground level to make a real difference at scale.