The complex battle for change in tackling supply chain labor exploitation

Labor exploitation remains one of the most pressing human rights challenges in global supply chains. From child workers dangerously mining cobalt for your everyday electronic items, to factor workers in Southeast Asia being paid far less than a living wage, this issue is all around us. Closer to home, workers in your local logistics center might face dangerous, exploitative conditions and informal, domestic workers attending to your home may have far less freedom than you realize. These practices persist despite efforts from governments, civil society organizations, and multinational corporations to curb them. But why, despite all the regulations, initiatives, and awareness campaigns, does labor exploitation continue to be a part of the global economy?

Many people point to multinational corporations as the main culprits. After all, these corporations have immense financial power and a direct influence on the supply chains that they have designed and overseen. These brands are well-positioned to ensure fair labor practices and improve the conditions of the workers producing their goods. Yet, the reality is much more complicated. Supply chains today are not just orchestrated by multinational corporations but are complex ecosystems involving a multitude of stakeholders. Governments, businesses, and non-commercial organizations all have a hand in shaping these networks. But what role do the stakeholders, who are not benefiting commercially, play in this landscape? Could they be the key to reducing labor exploitation? Or do they, in some way, contribute to the persistence of these problems? These are the questions that have sparked a debate in recent years, and it’s a question that our research recently published in the Journal of Supply Chain Management set out to answer.

The role of non-commercial organizations in supply chain governance

In the study, we investigate ‘non-commercial organizations’ that are diverse in nature. They are stakeholders in the supply chain who do not benefit commercially. For instance, they include multi-stakeholder initiatives such as the Ethical Trading Initiative, non-governmental organizations (NGOs), trade unions, and intergovernmental bodies such as the International Labour Organization (ILO). Non-commercial organizations strive to improve conditions for workers across supply chains and hold corporations accountable, or at least claim to.

Non-commercial organizations employ various strategies to influence corporate practices and address labor exploitation in supply chains. They contribute by developing voluntary codes of conduct, advocating for strict regulations to hold corporations accountable, and urging multinational corporations to source products responsibly. While their efforts have made some impacts, they also encounter considerable challenges in achieving lasting change. This situation has created a debate regarding their role and effectiveness in supply chain governance.

On one hand, some researchers like Rodriguez et al., who studied NGOs’ initiatives to enhance social sustainability in the supply chain, suggest that non-commercial organizations are crucial for the social sustainability of global supply chains. They believe these groups have the power to encourage reforms, whether through legal action, corporate pressure, or grassroots campaigns. Others, however, argue that despite their best efforts, non-commercial organizations often lack the power or resources to make significant changes. For example, in the minerals sector, Diprose et al., highlighted that persistent issues with poor labor standards demonstrate the limitations of non-commercial organizations in transforming the supply chain and addressing major social problems. Their solutions might even inadvertently prolong the very issues they seek to address by being too fragmented or by relying on voluntary or semi-voluntary mechanisms that neither hold companies accountable nor challenge the underlying business models of multinational corporations. These arguments are supported by modern slavery scholars such as Lebaron and Lister who investigated the hidden costs of global supply chain solutions.

This ongoing debate has made it clear that we need a deeper understanding of the challenges non-commercial organizations face in tackling labor exploitation and why some research stresses their importance. Yet, others highlight their irrelevance to solving the societal issue of poor labor standards.

The inertia in governance: Why labor exploitation persists

Our research took a unique approach by directly engaging with 45 non-commercial subject matter experts, such as activists, trade unionists, and organizational leaders, to explore the challenges faced by those working to reduce labor exploitation. By taking a “governance-of-governance” approach, we moved beyond the influence of multinational corporations to look at the broader ecosystem of actors involved in supply chain governance. Through this lens, we identified a key issue: governance inertia.

Photo: Authors

Despite the dedicated efforts of non-commercial organizations, progress toward improving labor standards is slow. The reason for this is that global supply chains are incredibly heterogeneous, meaning they are made up of a wide range of actors with different goals, levels of influence, and capacities. These differences create a fragmented and often unmanageable landscape where accountability is inconsistent and progress is hindered by conflicting interests.

One of the biggest challenges in supply chains is the lack of attention to their diversity and the narrow focus on a few large multinational corporations. Considering the global apparel supply chains, many multinational corporations depend on the same factories and suppliers, but not all these companies are held to the same standards. The practices of larger consuming-facing corporations and their involvement in labor exploitation are often subjected to scrutiny by consumers or activists, while other companies tend to be overlooked. To give an example, many people incorrectly assume that a higher price guarantees a positive impact, ignoring the fact that many luxury garments are produced alongside fast fashion in the same factories with the same working conditions, an issue close to the hearts of Remake, a non-profit community working in the fashion sector.

Further, non-commercial organizations do not work in isolation; they operate within a broader ecosystem that includes governments, multinational corporations, and global bodies such as the World Bank and the World Trade Organization (WTO). These global actors often have competing interests, such as promoting commercial freedom and deregulation, which can complicate efforts to enact labor protections. For instance, the International Monetary Fund (IMF) has sometimes supported a flexible labor market. However, such an approach has faced criticism from organizations such as the ILO.

The uneven distribution of scrutiny and accountability, coupled with the global economic system, which favors free markets and deregulation, creates an imbalance, where some brands might face some consequences for poor labor standards while others evade responsibility. Further, this situation circumscribes the ability of non-commercial organizations. They want to protect labor rights but are often constrained by the heterogeneity of supply chains and policies of global trade organizations that promote commercial freedom.

Governance inertia is also caused by the failure of many organizations to act decisively. Often, stakeholders are consumed by endless debates and principle-based conversations. Everyone agrees that labor exploitation is a problem, but when it comes to taking real, actionable steps, there is a lack of consensus on how to proceed. The dilemma of how to move from conversation to action is a key factor in the persistence of labor exploitation in global supply chains.

The complex web of governance

Our research highlights that the governance system surrounding labor standards is highly complex and interconnected. The interaction between different governance levels creates a complicated web of relationships and dilemmas that make it difficult for non-commercial organizations to unilaterally change the system.

Some governments and international organizations are often reluctant to impose strict regulations on corporations due to concerns about economic growth and competitiveness. This leads to a situation where non-commercial organizations are caught between the pressure to advocate for labor rights while also recognizing the economic and political realities that shape supply chain governance.

Despite these challenges, our research shows that non-commercial organizations still play a critical role in improving labor standards. By acting as intermediaries between governments, corporations, and local actors, non-commercial organizations can broker change and help navigate the complex governance landscape. They may not have the unilateral power to force large corporations to change. But, by recognizing the current challenges and being open to analyzing and exploring interventions, they could instigate market changes and indirectly create positive change in a heterogeneous supply base. For instance, they can influence the broader ecosystem by advocating for mandatory legislation and pushing for more stringent corporate accountability measures. Recent legislation like the Dutch Bill on Responsible and Sustainable International Business Conduct aims to hold companies accountable for human rights and environmental issues within their supply chains. Although the effectiveness of such legislation is yet to be seen, the move toward mandatory regulations indicates a growing awareness of current challenges and could lead to a more holistic approach toward governance, prompting a shift from inertia to action.

The road ahead: Moving from inertia to action

The persistence of labor exploitation in global supply chains is a multifaceted problem that requires a multifaceted solution. The key to progress lies in breaking the cycle of governance inertia. Non-commercial organizations must push for more binding legislation, stronger enforcement mechanisms, and greater accountability at all levels of the supply chain. By doing so, they can help level the playing field and create a competitive environment where labor standards are respected, and exploitation is no longer tolerated.

For policymakers and business leaders, the message is clear: the time for half-measures and voluntary codes of conduct is over. We need bold, decisive action to eliminate labor exploitation from global supply chains once and for all. By broadening our understanding of how different actors interact and influence one another, we can adopt a holistic approach to governance that acknowledges the interconnectedness of various actors. This perspective can help us make significant progress toward a world where workers are treated with dignity and respect, and labor exploitation is no longer a reality.

About the authors:

Dr. Zahra Shirgholami is a research fellow at the Alliance Manchester Business School at the University of Manchester. Shirgholami’s research focuses on re-envisioning business as a force for good. Shirgholami has conducted research on corporate practices and the challenges of labor exploitation within both domestic and global supply chains. 

Dr. Rosanna Cole is a senior lecturer in sustainable supply chain management at the Surrey Business School, at the University of Surrey.

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