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Self-Regulation Won't Protect Workers from Exploitation

Business best practice and industry self-regulation could prove useful in improving working conditions, but they will never be enough. There are three main reasons why.
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Working in a lumber yard in Ghana. Photograph by Curt Carnemark/World Bank.

The past two decades have seen governments around the world steadily reduce their ability to protect their workers from exploitation. In the place of labour inspectorates enforcing stringent labour standards, we instead see a plethora of private initiatives centred on industry self-regulation or the promotion of business best practice.

The logic behind this shift has been one of promoting economic dynamism and capitalist integration by ‘freeing business’ from the cumbersome weight of legislation. The mantra has been that the market, if left to itself and given the right incentives, can and will sort it out.

There is undoubtedly a place for such efforts. The voluntary codes of conduct, the ethical trading schemes, and the various industry oversight bodies, all have a role to play in securing worker protection in supply chains as long and complicated as those characterising many contemporary international operations.

But for all these welcome additions, self-regulation alone can never be enough. Here are three main reasons why:

Passing the buck

The first is intuitive. Although scrupulous employers may take their legal and moral obligations seriously, unscrupulous ones may not. And in the absence of stringent legislation and rigorous state enforcement to prevent them from abusing their workers, there is little to stop them from doing so.

As the International Labour Organisation has argued recently, "corporate social responsibility...cannot be a substitute for properly resourced and implemented statutory enforcement mechanisms."

The second reason involves what I term ‘transfer of the cost of compliance’. This idea is well demonstrated and explained by Susanne Freidberg's research on the European Retailer Fresh Produce Working Group, which adopted a protocol of ‘good agricultural practice’. The policy aims to bring supermarkets’ agricultural suppliers into compliance with standards covering worker welfare and environmental protection. European supermarkets demand that their suppliers produce organically, provide crèches for working parents, offer workers the latest protective clothing, and pay workers relatively high wages.

The problem, however, is that these improvements would come at a cost to European retailers, except that those retailers − by virtue of their size, market domination and price-setting power − are able to avoid absorbing these costs by transferring them onto the primary producers themselves.

Responsibility thus gets passed down all the way to primary producers such as African horticultural firms. And the consequence is often that labour standard gains are offset by the fact that fewer workers are now employed as suppliers have to compensate for the new costs and ‘rationalise’ production.

This has also meant that whereas once African export horticulture was a domestic cottage industry providing income for thousands of peasant farmers, now supermarkets are relying more and more on large-scale, often foreign-owned, mechanised operations, taking business from precisely the poor communities who would most likely benefit from it.

Ethical exploitation

The third problem with self-regulatory strategies is their failure to address wider, and arguably more important, questions of political economy. This can be illustrated by looking at cocoa production and the chocolate industry.

The start of the last decade saw a spate of media reports on the exploitation apparently rife in the cocoa plantations of West Africa. Though these reports have since been debunked by academics, they are still taken as true by US legislators, and those US legislators have pressured the chocolate multi-nationals into setting up an industry oversight body to ensure proper labour standards amongst their cocoa suppliers.

The issue, however, is that while the International Cocoa Initiative spends a few million dollars raising awareness of apparent child labour and forced labour, and about what makes a plantation community vulnerable, it does next to nothing to address that vulnerability.

That contradiction has even been acknowledged by chocolate industry executives. In her exposé, Orlà Ryan recalls one telling her that: "The only way it works and something the chocolate manufacturers will never tell you ever – they do all know the truth, they just don’t say it – [is that] if you didn’t get families with free labour, it doesn’t work."

It is thus particularly ironic that the major chocolate manufacturers focus on changing farmer behaviour without helping farmers out of the economic insecurity that shapes their behaviour. In this regard, it is worth noting that despite being worth an annual $75 billion to companies such as Cadbury and Hershey, only around 4% of the price of chocolate makes its way down to African cocoa farmers.

The danger, then, with these self-regulatory mechanisms, is that they offer companies the chance to market themselves as caring or moral, while simultaneously distracting attention from the political economic injustices for which those companies are, in part, responsible.

While self-regulation is therefore a potentially useful added string to the bow of worker protection, alone it will never be enough. It needs always to be backed by robust, well-enforced labour rights, and a redistributive political economy that addresses basic inequalities.

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