The Promise and Perils of Private Compliance Programs

Abstract

This chapter analyzes efforts by private firms – and at times, entire industries – to enforce labor standards in global supply chains through corporate self-regulation. In the wake of several well-publicized scandals involving child labor, hazardous working conditions, excessive working hours, and poor wages in the factories that supply major global brands, numerous multinational corporations developed their own “codes of conduct” and “monitoring” schemes aimed at promoting “compliance” with these codes. In fact, given the limited ability (perhaps even willingness) of many developing country governments to enforce their own laws, private compliance is currently the principal way both labor rights nongovernmental organizations (NGOs) and global corporations address poor working conditions in global supply chain factories. The underlying assumption of this model of “private voluntary regulation” is that information collected through factory audits will be used both by labor rights NGOs and consumer groups to exert pressure on global brands to reform their sourcing practices as well as by the brands themselves, who rely on this information to police and pressure their suppliers into improving standards in their factories. Should the factories fail to remedy various workplace problems, brands are expected to switch their orders to supposedly more “ethical” producers. Given their widespread use, we might expect these private compliance programs to be highly effective, but do these initiatives actually lead to better working conditions and enforced labor rights in global supply chains? If so, under what conditions? This chapter addresses these questions by first reviewing the various debates and controversies surrounding private compliance programs, then assessing the underlying assumptions and key features of this model of corporate self-regulation, and finally illustrating how these programs work in practice by analyzing the compliance efforts of two major global corporations – ABC and Hewlett-Packard – both seen as leaders in corporate social responsibility and pioneers in developing corporate codes of conduct and private monitoring schemes.