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Better Work is better business in global supply chains

Comment | 27 September 2016
Last week, world leaders gathered at the 71st UN General Assembly in New York to review the first year’s progress in implementing the Sustainable Development Goals. Described as nothing less than a “universal push to transform the world” the goals are the world’s plan to eradicate poverty and save the planet by 2030.

As policy makers seek the smartest ways to progress, one strategy is clear to all. Almost every country on earth, especially the poorest, has a desperate need for more jobs. Jobs that transform lives because they offer an escape from poverty and fuel economic growth. Jobs that promote respect for the fundamental freedoms that underpin the development of inclusive societies. Freedom from slavery, from child labour and discrimination and freedom to form organizations such as trade unions that advance and protect the rights of the poor.

Most urgent are jobs for those without access to work including young people, women and migrants. So where are we going to find them?

One answer is the global garment industry. It provides formal employment to tens of millions of workers in less developed and emerging economies. A global garment industry that uniformly offered decent jobs could lift millions of people out of poverty and help create sustainable development.

But is this possible in a world in which our craving for cheap clothing and fast fashion can create enormous downward pressures on working conditions? Yes it is, according to new research out this week, which strongly challenges any view that there is a trade-off between treating workers well and a profitable garment industry.

A five year independent study commissioned by Better Work ‒ a joint programme of the International Labour Organization and the International Finance Corporation, a member of the World Bank Group ‒ shows that a smart mix of business incentives, training, monitoring of working conditions, and engagement by all actors in global supply chains can significantly improve working conditions.

And the good news is that it does not come at the expense of businesses’ bottom line. On the contrary, researchers conclude that improving working conditions can actually contribute to increased profitability and productivity. For example, the study shows that in Vietnam, the garment factories where workers report better working conditions are more productive and more profitable. In an industry characterized by intense price competition, evidence that improving working conditions is not a cost but a critical component of business success is ground breaking.

Significantly, women are often the major drivers and beneficiaries of this success. For example, investing in training for female supervisors was shown to improve working conditions and increase factory productivity by up to 22 per cent, in large part by reducing tensions and improving workplace communication. Researchers also credit Better Work for significantly closing the gender pay gap in garment factories that Better Work has advised in Haiti, Nicaragua and Vietnam. This is all highly relevant in the global garment industry where more than three quarters of the total workforce is female.

Research also points to the impacts of good working conditions on workers’ families and communities. As take home pay rises and working hours fall, workers’ children have significant better health; their access to education also rises.

Globalization is here to stay. The key question as the world faces up to the responsibilities of implementing the 2030 Agenda is how to ensure global trade delivers on the promise of inclusive growth and shared prosperity. These results point to the importance of improving job quality and tackling inequality as a key to economic growth that is more just and inclusive. Where does this path lead us next?

Fundamentally, this is a question of governance. We all want improvements in working conditions at the factory floor, but experience shows this must be supported by good law that is effectively implemented, with the strong participation of employers’ and workers’ organizations. This demands more political will and greater resources so that national institutions can play effective roles.

The UN Guiding Principles on Business and Human Rights also recognize the key, but separate role of private enterprise. Industry leaders play a critical role in improving working conditions and this is part of the Better Work story. The research also shows that the demand for short delivery deadlines and last minute changes to production schedules can negatively impact working hours and safety and health. This calls for innovation to ensure that the practical realities of providing decent work on the factory floor are integrated into the management of sourcing practices.

Creating jobs and improving working conditions in the global garment industry is everyone’s business. We must build collaboration and accountability between public, private and civil institutions to make it a reality.

By Mary Porter Peschka, Global Acting Director, Advisory Services, International Finance Corporation and Deborah Greenfield, Deputy Director-General for Policy, International Labour Organization.