Neither technology nor traditional compliance measures will prevent the mistreatment of factory workers in the global supply chain.
So said Greg Distelhorst, assistant professor at the University of Toronto’s Centre for Industrial Relations and Human Resources.
“I don’t believe technology is going to save us in the quest for worker well-being,” he said at a recent conference on responsible supply chains at Stanford University’s Graduate School of Business. “Even new tools can be defeated by low trust or misaligned incentives.”
Nor is mere compliance with labor standards a guarantee that workers will be compensated fairly and treated humanely. Distelhorst cited the example of a factory that was audited six times. The first few audits resulted in a marked improvement in meeting standards. After that, performance leveled out.
In a first audit, only 20 percent of factories are found to comply with labor standards. After that, the number tops out at 35 percent, with no subsequent improvement. “Having auditors come through for a day or two is not effective,” Distelhorst said.
Compliance should not be equated with worker well-being, he said. Existing models for auditing factory practices are fine for measuring elements such as wages, verbal and physical abuse, and access to food, water and bathrooms. But they don’t address the larger question of whether workers are both financially secure and experiencing positive social relationships in the workplace.
Distelhorst examined the question of whether Lean practices improve labor standards, in a 2016 paper co-authored with Richard M. Locke, provost and professor of political science at Brown University, and Jens Hainmueller, professor in Stanford’s Department of Political Science, and published in Management Science. Their hypothesis was that a well-run factory, adhering to Lean principles, would also uphold good working conditions.
The conclusion of the study came as something of a surprise to the authors. They assumed that Lean factories would show more improvement on the health and safety side than on wage and hour policies. The opposite turned out to be true.
Analyzing efforts by Nike, Inc. to apply Lean manufacturing principles to its apparel supply chain in 11 developing countries, the study revealed a 15-percent reduction in non-compliance with labor standards related to factory wages and work hours. Yet it found a “null effect” on health and safety standards.
“This pattern is consistent with a causal mechanism that links Lean to improved social performances through changes in labor relations, rather than improved management systems,” the study said.
Clouding the issue is the challenge of obtaining accurate data on wages from factories, which serve as gatekeepers of information. Even a well-managed factory can have trust issues. Some manufacturers in China report inaccurate numbers in order to pass audits. “There are still significant obstacles to collecting these basic indicators,” Distelhorst said.
The solution lies in questioning the workers themselves. LaborVoices is a survey platform that asks them directly about their experience in the workplace. The information is used to inform workers of the best job opportunities, according to founder and chief executive officer Kohl Gill.
The data results both in better working conditions and “peace of mind for brands, suppliers, governments and NGOs,” Gill said at the Stanford conference. “So they know where they stand with respect to their peers.”
Distelhorst believes that no technology solution can solve the problem of worker mistreatment when the underlying data is inaccurate or unobtainable. Nor is constant policing the answer. A better approach, he said, is to undertake coaching to increase worker engagement, along with promoting programs for developing multiple skills on the production line.
When it comes to strategies for improving the lot of factories workers, money talks. Patamar Capital is a social venture capital firm that targets investments in low-income communities within Asia, such as India, Sri Lanka, Vietnam and Indonesia. The idea, said managing partner Beau Seil, is to “use market-based solutions to deal with traditionally philanthropic solutions.”
Patamar’s platform, dubbed CompanyIQ, links workers with the company so that they can be informed of corporate policies, request time off and communicate directly with Human Resources. Employee training and manuals are delivered through “gamefied” content that’s relayed to workers’ smartphones.
Seil has a more optimistic view of technology’s ability to improve workers’ quality of life. CompanyIQ provides them with a voice through the use of real-time audits. A manufacturer, for example, can access a sample size of employees by pinging them through the app.
Seil says Patamar intends to expand the app’s functionality beyond auditing and reporting, to address “the things [workers] want in their lives.”
EcoVadis is another entity to employ technology to monitor factory conditions. It provides an online platform that enables buyers and suppliers to collaborate around performance monitoring and corrective action, said Michael Smith, senior corporate social responsibility analyst. Information culled from supplier questionnaires is combined with outside supporting documentation to create a score for each manufacturer.
Even with technological aids, the problem of worker mistreatment in global supply chains is far from solved. Smith said illegal practices, including recruitment fees paid by workers and documents retained by employers, are still prevalent. At the same time, regulators are cracking down on companies that violate humane labor standards. A rash of new laws and regulations enacted in the U.S., U.K., France and Australia, to name a few, is training a harsh spotlight on violators.
Beyond the fear of penalties for non-compliance, businesses need to embrace human workplace policies to enhance efficiency within the factory. Worker turnover, Seil noted, remains a huge problem. On paper, the fair treatment of workers would seem to impose an additional cost burden on employers. In the long run, however, it could be the only path to profitability.
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