I. Introduction

Employee safety in the global supply chain received international media attention when Rana Plaza, an eight-story building containing an apparel manufacturer, collapsed in the Greater Dhaka Area of Bangladesh on 24 April 2013, resulting in 1,129 people killed and 2,515 injured. Just six months earlier in a less publicized fire at the Tazreen Fashions Ltd. factory in Dhaka at least 117 people were killed and over 200 injured (Ahmed, 2012).Footnote ¹ The Rana Plaza fire has galvanized international attention on factory conditions in the global supply chain. In October 2015, the G7 member countries (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) declared ‘the joint responsibility of governments and business to foster sustainable supply chains and encourage best practices’ and pledged to ‘take action to promote better working conditions by increasing transparency, promoting identification and prevention of risks and strengthening compliant mechanisms [and] strengthen multi-stakeholder initiatives’, to build on ‘good practices learned from the Rana Plaza aftermath.’Footnote ²

Even before the Rana Plaza tragedy, a number of international efforts focused on promoting corporate responsibility throughout the global supply chain. In May 2011, the Organisation for Economic Co-operation (OECD), an international economic organization whose membership includes 34 high-income countries, issued its updated Guidelines for Multinational Enterprises (OECD Guidelines). Under the Guidelines, multinational enterprises (MNEs) headquartered in OECD countries are required to conduct ‘due diligence’ to ensure that they and their suppliers abide by agreed upon standards of ‘good corporate behavior’.Footnote ³ A new section on human rights drew heavily from the United Nations Guiding Principles on Business and Human Rights unanimously endorsed by the UN Human Rights Council in June 2011.Footnote ⁴

This note describes two distinct emerging approaches to the socially responsible global supply chain. The World Economic Forum (WEF) has recently advocated a ‘shared responsibility’ approach that attempts, among other things, to coordinate industry initiatives and costs of compliance with local governments and other international actors. By contrast, Nike has opted for a strategy that emphasizes individual company responsibility and sourcing in countries and factories where it can control and, if necessary, remediate factory conditions.

II. The World Economic Forum’s ‘Shared Responsibility’ Paradigm

The WEF, an international economic organization of government, business and non-governmental organizations has emerged as a leading force in efforts to assure a socially responsible global supply chain. The emergence of the Geneva-based WEF as a driving force in the global supply chain should come as little surprise given its most recent forays into social responsibility and human rights issues. The WEF bills itself as ‘the international organization for Public-Private Cooperation’ and ‘engages the foremost political, business and other leaders of society to shape global regional and industry agendas’.Footnote ⁵ Its membership comprises 1,000 of the world’s major corporations, including its Strategic Partners, a select group of 100 leading global companies.Footnote ⁶ Other international organizations, such as the Fair Labor Association, formed in the late 1990s, and the United Nations Global Compact, have contributed significantly to establishing a foundation conducive to integrating social responsibility (and specifically human rights and working conditions) into the challenges of global supply chains. The WEF has the focus, resources, and convening power to develop a powerful international “platform” to engage all of the relevant institutional actors that can help create a socially responsible global supply chain.

The WEF’s efforts have developed in fits and starts with shifts in strategic approach and locus of responsibility within its organization. In 2011, the WEF charged its Global Agenda Council on Logistics & Supply Chain Systems to conduct a Supply Chain & Transport Risk Initiative.Footnote ⁷ In 2013, the WEF released a report introducing the concept of a ‘resilience framework’ to manage systemic supply chain risks.Footnote ⁸ In 2014, the re-named Global Agenda Council on the Future of Logistics and Supply Chains began a two-year (2014–16) project focusing on the crucial relationship between major global purchasers and the local suppliers and governments in countries in which they operate. The WEF’s 2014 White Paper on Business Sustainability declared that:

In early 2015, the WEF released a paper—Beyond Supply Chains: Empowering Responsible Value Chains—which argues that leading companies, whether primarily focused on cost or product differentiation, have evolved from compliance-driven to holistic, high sustainability “triple advantage” strategies with a strong stakeholder focus—increased revenue, reduction in costs, and improved brand value.Footnote ¹⁰

The WEF’s most recent supply chain effort has emerged from its Global Agenda Council on Human Rights which in late 2015 released a discussion paper: A New Paradigm: Shared Responsibility in Supply Chains outlining a proposal for a new ‘shared responsibility’ paradigm addressing human rights issues and promoting comprehensive institutional responsibility in global supply chain operations.Footnote ¹¹ The ‘shared responsibility’ framework was developed to address the perplexing issue of ‘how to ensure that jobs at the farthest ends of the supply chain are safe and dignified’.Footnote ¹² The shared responsibility model was formally introduced and discussed at the October 2015 WEF meeting in Dubai. The effort was led by Professor Michael H. Posner, co-director of the Center for Business and Human Rights at NYU’s Stern School of Business (Prof. Posner is also Chair of the WEF’s Global Agenda Council on Human Rights).

The essential elements of the shared responsibility model include:Footnote ¹³

• ∙ Tackling the most difficult areas of business and policy at the root of poor working conditions. In Bangladesh, for example, these include: the close relationship between business and government; the role of the trade associations in regulating their members; lack of a dedicated ministry of garments; challenges in clarifying property rights and gaining access to usable industrial land; funding for major infrastructure upgrades in power and transport; high interest rates; limits on access to capital; legitimizing the role of small and medium-sized, sub-contracting factories; setting and enforcing standards for safety and working conditions in small and medium-sized factories; and closing and moving factories in high-risk areas.

• ∙ Establishing a process to develop a roadmap with recommendations. The White Paper calls for a taskforce to be formed with working groups dedicated to each of the most urgent challenges for fire and building safety in Bangladesh, including local and international experts charged with developing recommendations for practical actions within a set period of time (ideally less than a year).

• ∙ Putting a price tag on the recommendations and developing a formula for shared responsibility for paying for them. The objective here is to develop a formula, based on export volumes and other factors, to share these costs among local manufacturers, international buyers, development agencies, philanthropic organizations, the government of Bangladesh, and governments from buying countries.

• ∙ Developing metrics to allow consumers to reward brands with sustainable supply chains. The Consumers Union and the Fair Labor Association would be charged with developing indicators to help consumers make informed decisions about where to shop for clothes.

The WEF White Paper suggests a number of practical questions that will determine the success or failure of the ‘shared responsibility’ approach.Footnote ¹⁴ What is the threshold for implementing the shared responsibility model? How can stakeholders equitably divide costs? How do stakeholders ensure that the resources raised are delivered to the intended beneficiaries, and that the system is accountable? It is also worth noting that the WEF’s shared responsibility approach ‘aims, in part, to contribute to work now being done on supply chain issues by the G7, International Labour Organization, and the Organisation for Economic Co-operation and Development (OECD)’,Footnote ¹⁵ although it is unclear what role, if any, the UN Guiding Principles will play or how existing OECD initiatives are in general meant to be integrated into the shared responsibility approach. Those issues seem destined for future discussion and debate among the various parties involved.

III. The Nike Way: Institutional Responsibility and Action Based on Economic ‘Footprint’

Nike, Inc. is pursuing a distinctively different approach to the WEF to attempt to achieve a socially responsible global supply chain. Whereas the ‘shared responsibility’ paradigm being advocated by the WEF emphasizes coordinated action among various actors, including local governments, the Nike way emphasizes individual company responsibility and the use of its leverage as a global apparel powerhouse where it can make a difference.

After an inauspicious early history where the company became synonymous with irresponsible global sourcing policies and indifference to worker rights and safety,Footnote ¹⁶ Nike has spent the last two decades evolving into a company genuinely concerned about sustainability, corporate social responsibility, and the impacts of its operations on workers and local communities. In 1999 the company was instrumental in creating the Fair Labor Association (FLA), a nonprofit organization whose membership includes business, human rights and labor organizations and established independent apparel factory monitoring regimes.Footnote ¹⁷ Since 2005, Nike has published a complete list of its suppliers and posts its commitments, standards, and audit data as part of its corporate social responsibility reports,Footnote ¹⁸ and regularly conducts extensive responsible leadership training programs for managers at its contracted, Asian supplier factories.Footnote ¹⁹ Nike also actively supports the United Nations Global Compact’s ten universal principles addressing the areas of human rights, labor, the environment and anti-corruption.Footnote ²⁰

Nike executives avow that its growth strategies are built upon the interconnections among four “pillars”: sustainability, brand enhancement, capital efficiency and profitability.Footnote ²¹ In the words of CEO Mark Parker, Nike:

Nike (along with the FLA) has played an important role in the recent development of the Sustainable Compliance Initiative (SCI) methodology and assessment tool.Footnote ²³ The company has implemented an advanced Manufacturing Index, a single evaluation system (which covers all products and brands) that it uses to assess and improve performance of its contract factories.Footnote ²⁴ Nike has also facilitated discussions between the Sustainable Apparel Coalition and the FLA on collaboration between the two organizations regarding these assessment tools.Footnote ²⁵

In 1991, Nike began a supplier relationship with a factory in Bangladesh. The company has never had supplier relationships with more than ten factories in Bangladesh.Footnote ²⁶ In January 2013, a five-person team of Nike managers, including Hannah Jones, vice president of sustainable business and innovation, and Nick Athanasakos, vice president of global sourcing and manufacturing, spent four days visiting Nike suppliers, including Lyric Industries, a supplier for over a decade.Footnote ²⁷ After speaking with Lyric managers, workers and people in the neighbourhood, the team was able to compile a list of manufacturing code of conduct violations, including rolls of fabric strewn across the production floor and windows that were bolted shut, all clear-cut hazards in the event of a fire, and noted it was located in a multi-story, multi-use building difficult to make safe for employees.Footnote ²⁸ The team recommended to Nike executives that the company end its supplier relationship with Lyric and another Bangladesh supplier after its pending production orders were filled.Footnote ²⁹ Nike management concurred. Today, Nike maintains four Bangladesh supplier relationships—all located in modern, safe facilities in Bangladesh’s export-processing zone.Footnote ³⁰ According to CEO Mark Parker:

Nike has not joined either the Accord on Fire and Building Safety in Bangladesh or the Alliance for Bangladesh Worker Safety, drawing criticism for not signing a binding safety agreement.Footnote ³² Hannah Jones says Bangladesh ‘isn’t the company’s fight’.Footnote ³³ With 744 supplier contractor factories world-wide, the company argues it can better use its resources in countries where it has a bigger contractual “footprint”.Footnote ³⁴

IV. Conclusion: Shared or Institutional Responsibility for a Socially Responsible Global Supply Chain

Is the Nike decision to limit its operations to countries and factories where it can assure that worker conditions meet international labour and human rights standards a reasonable and morally acceptable policy?Footnote ³⁵ Not according to NYU’s Professor Posner, who argues that Nike’s decision does not ‘address the real challenges, which require a commitment by big global brands to stay in places like Bangladesh and be part of a collective effort to protect the well-being of factory workers’.Footnote ³⁶ The hard work to be done to improve worker conditions in Bangladesh includes, for example, the harmonization of industry-initiated fire, electrical, and building safety standards. The resulting standards need, moreover, to be incorporated into the Bangladesh government’s national fire, electrical, and safety codes. The release of the new ISO 45001 comprehensive framework for management systems addressing occupational safety and healthFootnote ³⁷ provides yet another piece of the puzzle, providing major apparel brands and retailers the possibility of establishing a transparent “due process” for subcontractors, clearly stating that, if such standards are not maintained, termination as an apparel subcontractor will result.

There is some evidence that the Bangladeshi government is gathering the political will to do its part. On 15 July 2013, Bangladesh’s parliament amended its Labor Act to include several provisions on workplace safety. The government also issued a National Tripartite Plan of Action on fire safety and structural integrity that identified issues relevant for governing apparel production, with many of its targets remaining unmet.Footnote ³⁸ In November 2013, the Bangladesh government attempted to improve operating standards of subcontracting facilities by requiring them to join one of the country’s two apparel trade associations; but concerns about low levels of compliance reportedly caused the trade associations to restrict membership.Footnote ³⁹

Political corruption in Bangladesh continues, however, to be an issue. According to Transparency International, its Corruption Perceptions Index (CPI) for 2014 ranks Bangladesh at 145 among 175 countries, with a CPI score of 25 out of 100. Given Bangladesh’s issues with bribery and corruption, third-party auditors, such as the FLA, will be necessary for the maintenance of fire and building safety standards. Under its Workplace Code of Conduct,Footnote ⁴⁰ the FLA explicitly addresses ‘Health, Safety and Environment’ issues, and in 2013 set up a Fire Safety Initiative aimed at ‘preventing fires and saving lives by empowering workers and factory managers’.Footnote ⁴¹

Nike has made the determination that it can have the greatest positive social impact on the global supply chain by controlling where and with whom it does business and sources its product. But is this the right approach from a practical and moral approach? Looking to the future, the question will be whether an ambitious and complex ‘shared responsibility’ model, even with the support of a powerful global actor such as the WEF, can be successfully implemented and maintained in Bangladesh and other emerging markets.