Responsible business conduct – now!

Textile workers at the Dulal Brothers Ltd. garment factory in Dhaka, Bangla Desh.
Article as analysis
The corona crisis has brutally exposed the profound inequalities in global supply chains. At the same time, the crisis is a test of how seriously corporations take their responsibility.

According to an estimate by the International Labour Organization (ILO) made in early April 2020, some 2.7 billion workers worldwide were being affected by measures brought in by governments across the globe to counter the spread of the covid-19 pandemic. Hardly any other assessment commanded as much attention as that issued by the International Monetary Fund (IMF), to the effect that the world economy is facing the worst recession since the Great Depression of the 1930s.

The corona crisis has clearly shown how one-sidedly the opportunities and risks are currently distributed in global supply chains: social costs and economic risk are being unilaterally offloaded on to workers and subcontracting firms in developing countries. To be able to turn any profit at all, many companies in those countries are neglecting their corporate social responsibility (CSR) and their human rights obligations. The consequence is the well-known precariousness of our global production and consumption systems. In the garment industry, for example, the immediate reaction of many global brands to the onset of the pandemic was unilaterally to cancel or annul orders for goods already produced or in production. Over 70 per cent of subcontractors in Bangladesh who lost contracts suddenly and without compensation said that they could no longer afford to pay their workers’ wages, and over 80 per cent that they were unable to offer a settlement to workers being laid off as a result of order cancellations. Over 95% stated that they received no support from big brands and retail traders to cover these costs. In numerous industries, companies are experiencing catastrophic losses that are jeopardising their very solvency. Small cap companies in particular are facing the prospect of bankruptcy, while countless millions of workers risk losing their income or even their jobs.

In the light of this dramatic situation, the OECD, the UN Working Group on Business and Human Rights, and several international NGOs have again pointed to the normative standards that define Responsible Business Conduct (RBC). This time of a global covid-19 pandemic and the resulting economic crisis constitute an unprecedented test of the degree of seriousness, both past and present, of governments and companies in this regard. RBC recognises the potential adverse human rights impacts of the redesign of company operations. And RBC underscores the responsibility of enterprises to minimise or prevent these adverse impacts. Under the relevant UN and OECD guidelines, enterprises disengaging from their business relations are expected to do so responsibly and as far as possible without additional negative impacts on workers and affected communities.

Responsibility is not just for the good times

In its analysis the OECD lays out concrete measures that enterprises should take so as to ensure responsible business practices in the face of the crisis. Should there be demand-side disruptions and consequently the cancellation or annulment of orders, a company must also carefully weigh up the implications for the environment or the society, in the same way that it must clarify what is needed to revive a business after the crisis. The findings – which also include the preparation of alternative solution scenarios – must be communicated not just to business partners and governments but also to trade unions and worker representatives. The goal must be to work together in the crisis jointly to test feasible options for mitigating the consequences of the crisis to the extent possible. Innovative solutions such as managerial pay cuts or the cancellation of dividend pay-outs should be explored, so that wages can be funded and layoffs or furloughs avoided.

In the current phase of the crisis it is vitally important that the economic repercussions do not lead to a lowering of standards. On the contrary: it is now time for responsible enterprises to provide proof that the international instruments laying out responsible business conduct are not just programmes for the good times and which are cast aside as soon as they encounter the first major bout of turbulence. The UN Working Group on Business and Human Rights is therefore right to demand that any financial support or corporate bailouts funded with taxpayer monies must be contingent on their clear commitment to respecting standards of responsible business conduct.

The observance of human rights during and after the crisis must be a key task for companies as a way of contributing to a sustainable recovery. Human rights due diligence calls for risks to people to be identified and mitigated. This also encompasses taking appropriate precautionary measures in order to safeguard the health and safety of workers, among other things.

"The new normal"

The pandemic will eventually come to an end. Like the UN Working Group, Alliance Sud is also convinced that both States and economic players should learn from this crisis. It cannot be a matter of returning as quickly as possible supposedly to normal, but rather of forging a new normal on the basis of international instruments for responsible business practices. The recovery phase should be an opportunity to create resilient and robust global supply chains of which the priority must be to minimise the vulnerability of workers. Specifically, this means that decent working conditions and sustainable social security systems must be created and wages paid that are worthy of the 21st century. The goal must be for this new normal to enable us better to prepare for the next crisis and afford us the space in which to focus our collective attention on the climate crisis and other human rights challenges stemming from growing inequalities.