Global Policy Forum

Global Compact 2.0: Multinationals to the Rescue!

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By Albert Sales i Campos*, translation by Tamara Slowik

Global Compact Critics
February 5, 2009

We are saved! In Davos, the heads of the developed world have designed the new strategies to confront the crisis and achieve that this zero-sum game that capitalism is alleged to be continues benefiting humanity and, of course, multinational companies. Heading this avantgarde of messiahs, Ban Ki-moon (Secretary-General of the United Nations) proposes to initiate a new phase of the Global Compact that channels "a new constellation of international cooperation — governments, civil society and the private sector, working together for a collective global good."

During the World Economic Forum's Annual Meeting in 1999, Kofi Annan launched the Global Compact as a response to multinational companies' willingness to demonstrate their commitment to the values embodied by the United Nations and to become an agent of international development. Since then, companies of all sectors and sizes have adhered to this commitment. They have accepted its principles and account for their progress in the field of corporate social responsibility (CSR) in large, onanistic events sponsored by the most distinguished partners of the Global Compact.

The Compact has become a tool that institutionalizes CSR mechanisms. It proposes the concept of CSR – originated in North American and European business schools and think tanks – to evade control by the public sector and organized civil society. It is not surprising that the champions of CSR are heavily criticized for the environmental devastation they cause, their anti-union practices, their involvement in the exploitation of workers or their oligopolistic behavior. For instance Nike, harshly criticized during the 1990s after Life magazine published photographs of Pakistani children sewing the company's footballs. The international boycott promoted by activist groups worldwide caused some damage to the brand's image, forcing its managers and marketing experts to seek creative formulas to overcome the situation and prevent new scandals. The new "responsible" policies omitted to consider the problem's root causes (relocation of production in search of deregulated labor markets, complex supply chains, intense pressure on suppliers for lower prices, and delivery deadlines), as becoming the sports industry's pioneer in CSR was (and will continue to be) more profitable than questioning the business model. In general, all large companies in the global apparel industry have followed Nike, and there is no company today wishing to link its products to a brand image that lacks a CSR plan.

However, workers in the apparel industry are not better off at the start of 2009 than they were in 1999. Most of these 30 million workers globally live and work in conditions of misery as pictured in Dickens' novels. The sector's average salaries in Bangladesh are below 28 euros per month, they hardly reach 40 in India, and in China they are about 60 euros per month.1 Individuals leading a strike or a trade union movement are persecuted, sometimes by the authorities - as in China or Burma - and other times by company hitmen, like in Morocco, Turkey or Colombia.2

 

Companies in the apparel industry have built their CSR policies on three tools: sustainability reporting, codes of conduct and social audits. Business schools insist that companies should be transparent about their triple bottom line: people, planet, profit. Sustainability reports represent the basis of transparency and are the annual documents through which the company offers the information it considers relevant to its stakeholders. These reports should clearly explain the ways in which the company accounts for its environmental and social externalities as well as how it deals with conflict. However, most sustainability reports continue to provide the public with a catalogue of good practices in the form of corporate philanthropy, social actions and sponsorship.

Developed and endorsed by companies, codes of conduct are aimed at establishing a framework with their suppliers and all workers involved in the productive process. In general, these codes compel suppliers to comply with domestic labor legislation and occasionally establish higher standards. The two most relevant limitations of corporate codes of conduct are obvious: their unilateralism and the verification of compliance. What is the need for these codes if collective bargaining really exists? The root of the problem lies in the lack of international respect for freedom of association.

When we look at the verification of compliance with corporate codes of conduct, we enter the third pillar of CSR. The need for verification and for credibility have, respectively, generated and fertilized the ground for auditing companies to include environmental and social or labor audits in their business, previously limited to certifying companies' good financial management. These audits consist in visiting suppliers and examining both work environment and documents related to remuneration and working hours, as well as interviewing workers individually to gather their opinions on working conditions. There are diverse labor audit methodologies, and the effectiveness of these methods depend on whether audited companies are previously informed of the auditors' visit, and whether the workers to be interviewed are selected randomly or by the company's directors. Regardless of the procedure in place, the workers of factories and workshops producing for big brands are continuously warned of the risks associated with negative assessments by auditors: complaints result in decreased orders and contracts, and thus in job reductions.3 The consequence is resignation among the legion of individuals who prefer a precarious job to no job at all.4

 

The limitations of CSR for companies in the global apparel industry are similar to those for companies in other sectors. There are campaigns, NGOs and social movements that condemn the behavior of multinational companies. Several distinguished Global Compact members with headquarters in Spain face well-founded accusations concerning the exploitation of workers, the violation of indigenous populations' rights, environmental disasters of all kinds, corruption and bribery.5

CSR has not been a corporate response to criticism by activists groups, but rather a strategy to justify production policies to the larger public and to leave social movements out of the game. In this sense, putting pressure on companies to make them "more responsible" or "to relocate production in a responsible way" is to play the game of the Global Compact and to follow the post-colonial paternalism of those who still believe that the poor are waiting for us to lead them to development. What workers in poor countries need is not more social responsibility, but respect for freedom of association and their right to organize themselves and defend their dignity. Neither do they need multinational companies to defend them against the "cruel boss" that enslaves them; instead, they demand that these companies' policies are not focused on transferring business risks to the supply chain's weakest link. Finally, there is no need for voluntary regulation but rather for international commitment to both enforce the law and generate a normative context that restores the capacity of public authorities, trade unions and organized civil society to negotiate with large corporations.

It should not be surprising that companies seek maximum benefits at any costs. In the end, the capitalist system rewards capital accumulation and demands competitiveness. The vast majority of companies are organizations created to generate profit for their owners. Denouncing companies for making a profit through labor exploitation should go hand in hand with condemning the democratic deficit of international financial institutions and the power of multinational companies to impose the law of the strongest. That is, a "strongest" who is responsible, kind and philanthropic.

In this context, Ban Ki-moon's proposal to "initiate a new era" with the "Global Compact 2.0" seems ironic or a bad taste jokeâ.  But no! It is serious! The United Nations will continue to encourage "development" based on responsible multinational companies, as will most rich countries' development agencies, whose strategic planning includes the importance of multinationals for the "development of the countries in the Global South".

(1) http://www.asiafloorwage.org/
(2) http://www.cleanclothes.org/appeals.htm
(3) For a thorough analysis of the deficiencies of social audits in the textile sector, we recommend the report Looking for a quick fix, available at www.cleanclothes.org/publications/quick_fix.htm
(4) Many workers in the apparel industry in recently industrialized countries have been driven out from rural areas by agro export policies driven by rich countries' large corporations and international financial institutions.
(5) Those interested in the impact of Spanish multinationals' activities may find contrasted information and documents in the following websites: http://collectiurets.wordpress.com/, http://www.noetmengiselmon.org/, http://repsolmata.ourproject.org/, http://supermercatsnogracies.wordpress.com/, http://www.unionpenosa.org/, http://www.turismo-responsable.org/, http://www.finanzaseticas.org/

About the Author: Albert Sales i Campos is an associate professor at the Department of Political and Social Sciences of Universitat Pompeu Fabra in Barcelona. He is also an activist of the Clean Clothes Campaign.

 

 
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