Complements or Substitutes? Private Codes, State Regulation and the Enforcement of Labour Standards in Global Supply Chains
| Date | 01 September 2013 |
| Published date | 01 September 2013 |
| DOI | http://doi.org/10.1111/bjir.12003 |
Complements or Substitutes? Private
Codes, State Regulation and the
Enforcement of Labour Standards in
Global Supply Chains1
Richard M. Locke, Ben A. Rissing and Timea Pal
Abstract
Recent research on regulation and governance suggests that a mixture of public
and private interventions is necessary to improve working conditions and envi-
ronmental standards within global supply chains. Yet less attention has been
directed to how these different forms of regulation interact in practice. The form
of these interactions is investigated through a contextualized comparison of
suppliers producing for Hewlett-Packard, one of the world’s leading global
electronics firms. Using a unique dataset describing Hewlett-Packard’s supplier
audits over time, coupled with qualitative fieldwork at a matched pair of sup-
pliers in Mexico and the Czech Republic, this study shows how private and
public regulation can interact in different ways — sometimes as complements;
other times as substitutes — depending upon both the national contexts and the
specific issues being addressed. Results from our analysis show that private
interventions do not exist within a vacuum, but rather these efforts to enforce
labour and environmental standards are affected by state and non-governmental
actors.
1. Introduction
The fragmentation and geographical dispersion of production is one of the
hallmarks of the current era of globalization. This transformation in the
locus and organization of global production has created both opportunities
and challenges for developing countries. On the one hand, contract manu-
facturers embedded in global supply chains generate employment and tax
revenues for their developing country hosts. On the other hand, low margins
Richard M. Locke, Ben A. Rissing and Timea Pal are at the Massachusetts Institute of
Technology.
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British Journal of Industrial Relations doi: 10.1111/bjir.12003
51:3 September 2013 0007–1080 pp. 519–552
© John Wiley & Sons Ltd/London School of Economics 2012. Published by John Wiley & Sons Ltd,
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and stiff competition among many of these manufacturers have led to poor
working conditions and lax environmental standards in the facilities
producing for global brands (Connor and Dent 2006; Overeem 2009;
Pruett 2005; Verite 2004). This has spurred a growing debate among policy
makers and scholars alike over how best to improve working conditions
and environmental practices in these new, globally dispersed production
networks.
To address these questions, scholars have turned their attention to private
voluntary regulatory systems implemented by multinational corporations
and labour-oriented non-governmental organizations (NGOs) (O’Rourke
2002; Seidman 2007), or to state regulation and the enforcement of national
labour and environmental laws (Piore and Schrank 2008; Pires 2008).
Although developing countries often appear to possess strong laws on their
books, in practice many of these states lack the ability (Baccaro 2001; Elliott
and Freeman 2003; Estache and Wren-Lewis 2008; Laffont and Tirole 1993)
or willingness (Bhagwati 1995) to enforce their national laws. In the absence
of strong national enforcement, a range of private regulatory efforts (i.e.
codes of conduct, monitoring programmes, certification schemes, etc.) have
emerged to address labour and environmental issues within global supply
chains in a diverse array of industries. Yet, to date, there is little evidence to
suggest that these private initiatives in and of themselves lead to significant
and sustained improvements in labour and environmental standards (Locke
et al. 2007a, 2009). More recent research has suggested that neither state
regulation nor private voluntary regulation functions effectively in isolation,
and thus a combination of private and public interventions is necessary to
effectively tackle these issues (Bartley 2011; Haufler 2001; Kolben 2007;
Locke et al. 2007b; Pessoa 2006; Trubek and Trubek 2007; Utting 2005; Weil
2005). Yet to simply stress the importance of (potentially) complementary
interventions and public–private partnerships fails to account for how these
alternative forms of regulation actually interact on the ground. As Bartley
(2011) and Trubek and Trubek (2007) have shown, under certain conditions,
these alternative approaches to regulation can either complement one
another, or contradict, and thus compromise the effectiveness of each other,
resulting in significantly different results for workers and their communities.
This article examines how private and public forms of regulation interact
through a contextualized comparison (Locke and Thelen 1995) of remedia-
tion efforts at two major electronics suppliers located in both Mexico and the
Czech Republic. We compare how distinctive features and unique solutions
both across and within national settings affect the improvement (or not) of
specific labour and environmental issues. We argue that to truly understand
how these alternative approaches to labour and environmental standards
enforcement interact, we cannot adopt a macro-level perspective but must
instead examine the processes through which specific issues are addressed on
the ground within and across national settings. When examining efforts to
enforce labour and environmental standards through this more issue-focused
approach, we observe outcomes that arise from either complementary or
520 British Journal of Industrial Relations
© John Wiley & Sons Ltd/London School of Economics 2012.
supplementary interactions between national regulatory agencies and private
forms of voluntary regulation. We find that the relevance of any particular
regulatory approach varies by issues (such as the utilization of agency
workers or the regulation of environmental pollution) and national settings
(Mexico and the Czech Republic).
This more micro-level approach to the study of labour and environmental
standards has significant implications for debates surrounding the effective-
ness of both national regulatory efforts and corporate codes of conduct. We
illustrate this argument through a case study of Hewlett-Packard (HP) and its
suppliers.
2. Data and methods
This article draws upon a unique dataset of supplier audits that HP selec-
tively administered to its network of global suppliers from 2003 through
2009. These audits assess supplier compliance with the Electronics Industry
Code of Conduct (EICC), which is discussed in-depth below. Audits are
conducted by HP employees who are explicitly trained to evaluate suppliers’
compliance with the EICC. Audits are performed on-site at supplier facilities,
and a subset of audit reports is verified by an external organization to ensure
legitimacy and accuracy of assessments. Our sample of HP supplier audits
describes 276 unique facilities, 137 of which received multiple audits. Of the
276 facilities in our dataset, only seven complied fully with all the require-
ments included in the HP Code of Conduct at the time of their last audit,
which generally occurred in 2008 or 2009. Summary data describing the
aggregate supplier audit scores by issue and by world region can be found in
Table 1.2
To increase our confidence in the supplier audit records collected by HP,
we conducted qualitative field research in several countries (China, Mexico,
Czech Republic, Hungary, Thailand, Malaysia and Singapore).3The core
of this article focuses on a pair of matched case studies examining two ele-
ctronics suppliers in Mexico and the Czech Republic. This fieldwork involved
over 70 interviews with HP managers, owners of supply chain factories, plant
managers, production managers, HR managers, Environment, Health and
Safety (EHS) representatives, and line supervisors. Interview access to sup-
pliers was negotiated through support from HP. While we were able to
interview managers (in different functions) at various suppliers, we chose not
to interview factory line workers at these same suppliers because we could not
guarantee that these workers would not be subsequently punished for sharing
information. Given our concerns for these ‘human subjects’, we chose to
forego this very important source of information. We did, however, assess
working conditions through our own on-site visits to the factories, seek out
external NGO assessments of conditions, and learn about workers’ views
through our interviews with various labour rights-oriented NGOs in both
Mexico and the Czech Republic.4
Complements or Substitutes? 521
© John Wiley & Sons Ltd/London School of Economics 2012.
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