Social Risks in Transnational Supply Chains: Interlinking Migration and Development

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Migrant workers in the South East Asian market

©Manishankar Prasad

In the past few years, “sustainability”, at least in ethos and rhetoric, has crept into the everyday conversation regarding globalized private sector companies, especially those with fragmented yet structurally tightly-knit supply chains, who source materials and products from across continents.  Meanwhile, social and environmental safeguards have become a critical aspect of lending by multilateral financial institutions, such as the International Finance Corporation and the Asian Development Bank. These safeguards are enforced as part of financial packages agreed between lenders and borrowers.  But despite such progress, labor protection in the developing world is a crucial chink where legal and voluntary corporate drivers falter in the globalization discourse.

The focus of this article is on social (labor) safeguards. Compared to environmental performance, which can be quantified by verifiable instruments of science, social performance is less easily measured. In my personal experience as an Environmental & Social Supply Chain Auditor in India and the Middle East, the EHS Manager of a facility doubles up as the Labour/Social Compliance focal point, and most supply chain audits insert social compliance as a passing mention, and lay far more emphasis on environmental elements of the audit program.

I am currently based in South East Asia, where the palm oil plantation sector has received plenty of negative press for not checking thoroughly the hiring practices of third party sub-contractors, especially on the serious charge of employing trafficked manpower.  Labor-intensive sectors such as electronics manufacturing and palm oil form the economic spine of the region. These sectors employ migrant workers en masse from the Asian Subcontinent at a fraction of what the employer might pay a local citizen.

Malaysia, Thailand, and Singapore are major magnets for migrant workers, with Bangladesh, Nepal and Myanmar the leading manpower exporters who plug the gap. The majority of migrant workers are hired by third-party contractors, from whom major conglomerates procure materials and services. The social risk is therefore relegated to the sub-contractor, who may hire the worker from a hierarchy of labour brokers extending right down to the village of the migrant worker, which is hidden from the view of the ‘principal employer’ .

In Singapore, the globally-renowned infrastructure is built and maintained by hundreds of thousands of migrant male construction workers. Real Estate and Construction is a prime economic driver in the global city-state, where land is at a premium. Recently, a story in the Straits Times quoted a National University of Singapore study stating 9 out of 10 Bangladeshi male migrant construction workers do not receive clean food to eat.  The construction industry representative association or major industry players in Singapore could surely engage with ecosystem partners such as dormitory owners, food caterers, sub-contractors and government agencies to come to a solution regarding this basic food access issue.  When the industry is labor-intensive, it makes long-term business sense to take care of workers.

The migration story for the worker is, however, nuanced and textured with detail that is hardly evident to Western companies. The local and the global often intersect and erupt only when there is an accident resulting in a PR disaster such as the 2013 factory collapse in Rana Plaza, Bangladesh. The social accountability regime has underperformed and needs to be strengthened at an institutional and industry level. The weakness lies in the current assessment regime, the “social audit”, which relies on heuristics, like indicators and checklists, rather than depth.

Behind every social datapoint generated in an audit lies a human story. But such detailed qualitative data plays no role in the current social performance evaluation paradigm, whose culture of audit and evaluation is meant only to tick a box in an organizational compliance document.  When day-long social audits are missing a dedicated time slot to either interview workers or conduct focus groups (a mandatory requirement in the SA8000 Social Accountability Standard), no meaningful evaluation will be sent back to corporate headquarters.

In order for the social performance to make a difference on the ground, businesses ought to invest in resources far beyond the mandated CSR/social compliance programme. They must specifically invest time and money not only in running elaborate checks and balances across their third-party suppliers but in having the heart to engage with migrant workers and the local communities for the longer term.

Social compliance that works for businesses and communities results in a sweeter bottom line.

(Manishankar Prasad)

(The article was originally published by Corporate Citizenship (London) and can be found here )

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