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Rethinking due diligence practices in the apparel supply chain

24 April 2015
by Guest author
Human Rights Watch spoke to Rana Plaza survivors

Human Rights Watch spoke to Rana Plaza survivors

In the run-up to the Third Global Forum on Responsible Business Conduct in June, today’s post is by Jennifer Schappert of the OECD’s Responsible Business Conduct Unit (@J_Schappert).

Two years ago today, the Rana Plaza building in Bangladesh’s capital Dhaka collapsed, killing over 1,100 people and injuring another 2,500. The dead and injured were garment workers, ordered to go back to work even though shops and a bank in the same building had closed immediately the day before when cracks appeared. The garment factories were indirectly supplying international retailers, highlighting the debate on whether multinational enterprises (MNEs) can make the apparel supply chain safe and healthy. Ensuing recommendations to MNEs have often focused on MNEs strengthening existing compliance mechanisms with individual suppliers. However, to transform the sector, we need to question whether the current approach to supply chain due diligence is the right one to begin with.

In the absence of strong regulatory frameworks in many producing countries, the traditional approach to compliance is for enterprises themselves to take on the role of monitoring and assessing each supplier against international standards, developing corrective action plans, and then using their leverage (for example through the incentive of future contracts) to influence suppliers to mitigate risks. It sounds fine in theory, but in practice the system breaks down.

The OECD Guidelines for Multinational Enterprises advocate an approach where the nature and the extent of due diligence correspond to risk. However, the short-term nature of contracts between MNEs and their suppliers and the sheer size and complexity of apparel supply chains means that MNEs often struggle to know where to prioritise risk assessment and mitigation. Within this context an enterprise’s compliance system becomes reduced to ongoing assessments of (almost) all suppliers across all risk areas. This leaves few resources for tailoring risk assessments, identifying root causes of risks, and effectively managing risks when adverse impacts are identified.

Effective monitoring of individual suppliers is further complicated by the well-documented shortcomings of social audits, such as factory visits announced well in advance; fraud; inconsistent quality across audits and auditors; lack of alignment with international standards; audit duplication and resulting fatigue; and the limited scope of social audits which seek to identify adverse impacts but rarely root causes. Efforts to improve the system, for example through long-term contracts and close collaboration with suppliers have led to better results in certain cases and should be encouraged. However, this alone will not transform the sector because improvements are isolated to a few strategic suppliers and may fail to adequately address risks which cannot be tackled at the individual supplier level.

A multi-stakeholder project underway at the OECD is questioning current due diligence practices in the apparel supply chain on matters covered by the OECD Guidelines (human rights, employment and industrial relations, environment and bribery) and, among other questions, asking whether trade unions and other representative worker organisations could play a role in helping MNEs take a risk-based approach to due diligence.

Historically, unions and other worker organisations have helped government regulators direct inspections towards high-risk workplaces. For example, in the United States, trade unions helped regulators direct occupational safety and health inspections towards high-risk workplaces by requesting inspections as risks arose. This enabled limited government resources to appropriately target the most risky workplaces. By contributing to inspections, trade unions also ensured that inspections targeted the most salient risks at each individual workplace.

Within the apparel supply chain, workers’ representatives could act as an on-the-ground monitoring mechanism to trigger third-party inspections by multi-stakeholder initiatives. Such a process would potentially reduce the duplication of broad social audits and facilitate the targeting of technical assessments to specific risks. By contributing to the assessments, workers would likewise help to improve the quality and conformity of assessments and provide important context in identifying root causes of adverse impacts and corresponding solutions. Furthermore, unions and worker organisations have a role to play in promoting the long-term sustainability of solutions by increasing worker awareness of their rights, offering assistance in the actual exercise of individual rights, and protecting the rights of individual workers through collective bargaining.

The focus of an enterprise’s due diligence would then shift from the seemingly impossible task of monitoring suppliers for all risks to focusing on targeted assessments and risk remediation. The primary role of the MNE would be: to actively promote freedom of association amongst suppliers; create or participate in a system by which workers can request inspections; support timely and targeted technical assessments at the site level when requested or when operating in high-risk contexts (e.g. building integrity); and contribute to the mitigation of risks by addressing root causes (where feasible) in collaboration with suppliers, trade unions, and other buyers.

Freedom of association therefore becomes the enabler of risk-based due diligence across an entire supply chain. In countries where legal or political constraints prohibit or limit this fundamental right, the sector should use its leverage broadly, in collaboration with trade unions, government and international organisations, to influence government to reform the regulatory framework and its implementation in producing countries.

This broader approach to due diligence applies to other salient risks in the sector, low wages for example, that cannot be effectively addressed at the individual supplier level. The Bangladesh Accord on Fire and Building Safety and the Alliance for Bangladesh Worker Safety are demonstrating how a paradigm shift is feasible.

To date, supply chain due diligence in the apparel sector has predominantly focused on direct suppliers. However, according to the OECD Guidelines, it should be applied across the full length of the supply chain. Effective due diligence of risks linked to upstream production should build on the lessons of the last 20 years: an individual and bilateral approach to due diligence will not transform the sector. Due diligence is the responsibility of all enterprises in the sector. It should therefore be carried out by enterprises operating at each segment of the supply chain and be mutually reinforcing.

Based on the findings of the multi-stakeholder project, the OECD will develop a practical guidance to support the development of a common understanding of risk-based due diligence in the apparel and footwear sector supply chain. We welcome you to join us on 18-19 June 2015 as we carry this debate forward at the Global Forum on Responsible Business Conduct.

Useful links

Remembering Rana Plaza Institute for Human Rights and Business

OECD Guidelines for Multinational Enterprises

Global forum on Responsible Business Conduct

Responsible supply chains in the textile and garment sector

Corporate leaders: Your supply chain is your responsibility Roel Nieuwenkamp (@nieuwenkamp_csr) Chair of the OECD Working Party on Responsible Business Conduct, in the OECD Observer

Can we predict happiness?

23 April 2015
tags:
by Guest author

BLI InitiativeToday’s post is by Robb Rutledge, Max Planck University College London Centre for Computational Psychiatry and Ageing Research

What makes us happy? Well-being researchers have identified many variables related to happiness, but we still don’t know exactly how the events of our daily lives combine to influence how we feel from moment to moment. People should get happier when good things happen, but clearly this is not the whole story.

We designed a study to investigate the relationship between rewards and happiness. We brought people into the lab and asked them repeatedly about their happiness as they chose between safe and risky monetary options. Risky choices were gambles with equal probabilities (like a coin toss) of a better or worse outcome. If they chose to gamble on a given trial, they then found out whether they won or lost. Based on the data, we developed a mathematical equation to predict how self-reported happiness depends on past events. We found that happiness depends not on how well things are going, but whether things are going better or worse than expected.

Happiness equation

Happiness depends on safe choices (certain rewards, CR), expectations associated with risky choices (expected value, EV), and whether the outcomes of risky choices were better or worse than expected. This final variable is called a reward prediction error (RPE), the difference between the experienced outcome and the expectation. The neurotransmitter dopamine is thought to represent these signals which might explain how people learn about rewards (if you get more than you expected, next time you should expect more).

How do our findings translate to real life? As soon as you make a plan to meet a friend for dinner, your happiness should increase in anticipation. If you manage to get a last-minute reservation at a popular new restaurant, your happiness might increase even more. If the meal is good, but not quite as good as expected, your happiness should actually decrease. Our equation predicts exactly how much happiness will go up and down, and our results reveal just how important expectations are.

Happiness is a difficult thing to measure, and one concern is that something about being in the lab is important for our findings. Working with a team of researchers at University College London, we developed a smartphone app called the Great Brain Experiment. The app is free and available in the Apple and Android app stores. We invite everyone to download the app and to play the different games. By playing the games, you contribute to ongoing research on important questions in psychology and neuroscience. In the game ‘What makes me happy?’ players choose between safe and risky options to win as many points as they can.

Using our mathematical equation, we could predict the happiness of over 18 000 people worldwide playing our game. Our results demonstrate that something as complicated as happiness can be studied using smartphones. As more people play the game, we can start to look for differences between groups, like players of different ages and cultures.

To better understand the link between rewards and happiness, we also had people play our game while having their brains scanned. We found that neural activity in an area of the brain called the striatum was closely related to reported happiness. When activity was high, we could predict that happiness would increase. Because this area has many connections to dopamine neurons, one interesting possibility is that dopamine levels help determine happiness. Our equation provides predictions that we can use to study the neural circuits involved in happiness. We can ask questions like whether factors that matter for happiness in young people differ in an important way from happiness in adults. The equation also gives us a tool for identifying differences between people that may help us better understand mood disorders like major depression.

As a researcher studying happiness, people often ask me how they can be happier. Our equation might make it seem like low expectations are the secret to happiness, but that’s not the case. Low expectations do make it more likely that an outcome will exceed expectations and positively impact happiness, but expectations also affect happiness before we find out how a decision turned out. We often don’t know the outcome of major life decisions for a long time, whether taking a new job or getting married, but our results suggest that positive expectations about those decisions will increase happiness. In general, accurate expectations may be best. Our expectations help us decide where to go for dinner and tell us whether a new restaurant is as good as everyone says it is. Although we all want to be happy, being happy all of the time is probably not a good idea. If you were ecstatic after every meal, you would never be able to decide which restaurant to go to. Our happiness tells us whether things are going better or worse than expected, and that may be a very useful signal for helping us make decisions.

Low expectations may not be the secret to happiness, but being able to predict happiness based on past rewards and expectations bring us one step closer to understanding happiness. By studying how happiness depends on the interaction between our brains and our environment, we hope to yield insights that contribute to the important goal of improving human well-being.

Useful links

These findings were reported in R. B. Rutledge, N. Skandali, P. Dayan & R. J. Dolan (2014) “A computational and neural model of momentary subjective well-being” Proceedings of the National Academy of Sciences USA (PNAS). Vol. 111, No. 33, pp. 12252-12257.

Life satisfaction on the OECD Better Life Index

 

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