Benchmarking global supply chains: the power of the ‘ethical audit’ regime

¹ Hodal, Kate, Kelly, Chris, Lawrence, Felicity, Stuart, Caz, Remy, Thibaut, Baque, Irene, Carson, Mary, and O’Kane, Maggie, ‘Globalised Slavery: How Big Supermarkets are Selling Prawns in Supply Chain Fed by Slave Labour’, The Guardian, available at: {http://www.theguardian.com/global-development/video/2014/jun/10/slavery-supermarket-supply-trail-prawns-video} accessed 10 July 2014.

² Intrafish, ‘Shrimp were GlobalGAP Certified, Aldi Supplier Says in Wake of Slavery Reports’, available at: {www.intrafish.com/news/article1392263.ece} accessed 10 July 2014.

³ GlobalGAP, ‘About Us’, available at: {http://www.globalgap.org/uk_en/} accessed 10 July 2014.

⁴ Stephanie Clifford and Steven Greenhouse, ‘Fast and Flawed Inspections of Factories Abroad’, New York Times, available at: {http://www.nytimes.com/2013/09/02/business/global/superficial-visits-and-trickery-undermine-foreign-factory-inspections.html?pagewanted=all&_r=0} accessed 10 July 2014.

⁵ Broome, André and Quirk, Joel, ‘Governing the world at a distance: the practice of global benchmarking’, Review of International Studies, 41:5 (2015), pp. 819–841.

⁶ See Davy, Stephen and Richards, Carol, ‘Supermarkets and private standards: Unintended consequences of the audit ritual’, Agriculture and Human Values, 30:2 (2013), pp. 271–281; Lee, Hau, Plambeck, Erica, and Yatso, Pamela, ‘Incentivizing sustainability in your Chinese supply chain’, The European Business Review, May/June (2012); Power, , ‘Evaluating the audit explosion’, Law & Policy, 25:3 (2003), pp. 185–202; Locke, Richard, The Promise and Limits of Private Power: Promoting Labor Standards in the Global Economy (Cambridge: Cambridge University Press, 2013); Taplin, Ross, Zhao, Yafang, and Brown, Alistair, ‘Failure of auditors: the lack of compliance for business combinations in China’, Regulation & Governance, EarlyView DOI:10.111/rego.12011. See also Sending, Ole Jacob and Harald Sande Lie, Jon, ‘The limits of global authority: How the World Bank benchmarks economies in Ethiopia and Malawi’, Review of International Studies, 41:4 (2015), pp. 993–1010.

⁷ Gary Gereffi, ‘Can Global Brands Create Just Supply Chains?’, Boston Review, available at: {http://www.bostonreview.net/forum/can-global-brands-create-just-supply-chains/host-countries-can-act} accessed 10 July 2013; Locke, Richard, The Promise and Limits of Private Power; Power, Michael, The Audit Society: Rituals of Verification (Oxford: Oxford University Press, 1997); Power, ‘Evaluating the audit explosion’, pp. 185–202; Michael Toffel, Jodi L. Short, and Melissa Ouellet, Reinforcing Regulatory Regimes: How States, Civil Society, and Codes of Conduct Promote Adherence to Global Labor Standards, Harvard Business School Technology and Operations Management Unit Working Paper 13-045, available at: {http://www.hks.harvard.edu/m-rcbg/CSRI/publications/workingpaper_65_toffel_short_ouellet.pdf} accessed 3 April 2014.

⁸ As distinct from Tony Porter who examines the incremental capabilities of benchmarking as a potentially effective ‘accelerator’ or information ‘relay’ management mechanism in improving business practice within collaborative governance networks, we focus on the broader more fundamental procedural and normative global regulatory limits of benchmarking (as the tenet of the audit regime) in blocking more transformative social and environmental change. See Porter, Tony, ‘Global benchmarking networks: the cases of disaster risk reduction and supply chains’, Review of International Studies, 41:5 (2015), pp. 865–886.

⁹ Gill, Stephen (ed.), Global Crises and the Crisis of Global Leadership (Cambridge: Cambridge University Press, 2012), p. 1.

¹⁰ Secondary data collection for this article involved a desk-based review of the audit industry, with a focus on audit programmes, protocols and retail companies’ codes of conduct for suppliers. Primary data collection involved semi-structured elite interviews. A total of 23 in-person interviews and 2 telephone interviews were conducted in China, North America, and the United Kingdom with retail buyers, auditors, consumer goods suppliers, factory managers, NGO representatives, trade unionists, and CSR managers and experts. A site visit to Guangdong province, China, took place in April 2012 and interviews and factory visits were conducted at and around the China Import and Export Fair (‘The Canton Fair’). The UK interviews were conducted in March 2013, in and around London. The North American interviews were conducted in Vancouver (Canada) and Seattle (US) between May 2012 and July 2013. The interview and factory visit data presented here is intended to be illustrative, rather than comprehensive.

¹¹ We are indebted to Michael Barnett and Raymond Duvall’s conception of productive power as ‘the constitution of all social subjects with various social powers through systems of knowledge and discursive practices of broad and general social scope’. See Barnett, Michael and Duvall, Raymond, ‘Power in international politics’, International Organization, 59 (Winter 2005), pp. 55–57. We are indebted to neo-Gramscian global political economy scholarship for our conception of the structural power of business and audits. See, for example, Gill, Stephen (ed.), Power and Resistance in the New World Order (New York: Palgrave, 2003); Gill, Stephen (ed.), Gramsci, Historical Materialism, and International Relations (Cambridge: Cambridge University Press, 1993).

¹² Osborne, David and Gaebler, Ted, Reinventing Government: How the Entrepreneurial Spirit is Transforming the Public Sector (New York: Plume, 1993); Power, The Audit Society.

¹³ Black, cf. Julia, ‘Decentering regulation: Understanding the role of regulation and self regulation in a “post regulatory” world’, Current Legal Problems, 54 (2001), pp. 103–146; See, for example, Büthe, Tim and Mattli, Walter, The New Global Rulers: The Privatization of Regulation in the World Economy (Princeton: Princeton University Press, 2011); Cutler, Claire, ‘Private transnational governance and the crisis of global leadership’, in Stephen Gill (ed.), Global Crises and the Crisis of Global Leadership (Cambridge: Cambridge University Press, 2012), pp. 56–70.

¹⁴ For an overview of neoliberal globalisation’s discursive and material characteristics, see Jamie Peck, Constructions of Neoliberal Reason (Oxford: Oxford University Press, 2012).

¹⁵ Gill, Stephen, ‘Globalisation, market civilisation, and disciplinary neoliberalism’, Millennium Journal of International Studies, 24:3 (1995), pp. 413. See also Claire Cutler, Virginia Haufler, and Tony Porter, Private Authority and International Affairs (Albany: State University of New York Press, 1999). See also Harrison, James and Sekalala, Sharifah, ‘Benchmarking human rights at the United Nations: Self-reporting by states and corporations’, Review of International Studies, 41:5 (2015), pp. 925–945.

¹⁶ Cutler, , Haufler, , and Porter, , Private Authority and International Affairs, pp. 3–4.

¹⁷ The recent wave of audit-based approaches to ‘modern slavery’ and forced labour – developed by multi-stakeholder coalitions of NGOs and retail and brand corporations – are illustrative. In 2012, California passed the ‘Transparency in Supply Chains’ (TISC) Act, which requires large companies to report on what they are doing to verify their global supply chains against forced labour, trafficking, and slavery. The TISC Act institutionalises audit-based approaches to dealing with severe labour exploitation, requiring companies to report on their voluntary efforts to detect and address severe exploitation, rather than mandating specific standards or benchmarks and requiring companies to demonstrate compliance. Similarly, in the United Kingdom, the draft Modern Slavery Bill currently before Parliament deepens the ‘light-touch’ approach to business regulation in that country, and includes only a cursory treatment of supply chains. In a recent press release entitled, ‘Government Asks Retailers to Lead the Way on Transparent Supply Chains’, the government announces plans to work with retailers on a ‘best practices’ report, centered around ‘ethical audit programmes, outlining some of the main certification schemes and collaborative initiatives’. See UK Department for Business, Innovation & Skills, ‘Government Asks Retailers to Lead the Way on Transparent Supply Chains’, available at: {https://www.gov.uk/government/news/government-asks-retailers-to-lead-the-way-on-transparent-supply-chains} accessed 4 August 2014.

¹⁸ Bignami, Renato, Casale, Giuseppe, and Fasani, Mario, Labour Inspection and Employment Relationship (Geneva: International Labour Organization, 2013).

¹⁹ For an overview, see Newell, Peter, Globalization and the Environment: Capitalism, Ecology, and Power (Cambridge, UK: Polity, 2012).

²⁰ Dauvergne, Peter and Lister, Jane, Eco-Business: A Big-Brand Take-over of Sustainability (Cambridge, MA: The MIT Press, 2013); Dauvergne, Peter and LeBaron, Genevieve, Protest Inc.: the Corporatization of Activism (Cambridge: Polity, 2014); Newell, Peter, ‘Managing multinationals: the governance of investment for the environment’, Journal of International Development, 13:7 (2001), pp. 907–919; Pattberg, Philipp, ‘The institutionalization of private governance: How business and nonprofit organizations agree on transnational rules’, Governance, 18:4 (2005), pp. 589–610.

²¹ Dauvergne, and LeBaron, , Protest Inc., p. 2.

²² As Robert Falkner explains, ‘“private governance” emerges at the global level where the interactions among private actors or between private actors on the one hand and civil society and state actors on the other, give rise to institutional arrangements that structure and direct actors’ behavior in an issue-specific area.’ See Falkner, Robert, ‘Private environmental governance and International Relations: Exploring the links’, Global Environmental Politics, 3:2 (2003), p. 72.

²³ Seligmann, Peter, ‘Conservation international’s CEO: Why Walmart gives me hope’, GreenBiz (9 May 2014), available at: {http://www.greenbiz.com/blog/2014/05/09/retail-giant-walmart-asks-suppliers-shrink-environmental-impact} accessed 8 April 2015.

²⁴ Given corporate, NGO, and state involvement in the audit regime, within André Broome and Joel Quirk’s typology of global benchmarking practices (this Special Issue), audits can be situated at the cusp of type III (private market governance) and type IV (transnational advocacy). They can involve both profit-based and civil society organisations as monitoring agents, but seek to actuate transnational market governance.

²⁵ Extractive Industries Transparency Initiative, ‘EITI Validators’, available at: {http://eiti.org/validation/validators} accessed 4 August 2014.

²⁶ Fair Labor Organization, ‘FLA Accredited Monitoring Organizations’, available at: {http://www.fairlabor.org/transparency/fla-accredited-monitoring-organizations} accessed 4 August 2014.

²⁷ Nestle, ‘Annual Report 2011’, available at:{http://static.globalreporting.org/report-pdfs/2012/537fc4b7fef52936fc433f1f6a77a496.pdf} accessed 4 April 2014.

²⁸ Fair Labor Organization, ‘FLA Accredited Monitoring Organizations’, available at: {http://www.fairlabor.org/transparency/fla-accredited-monitoring-organizations} accessed 4 August 2014.

²⁹ See ‘Greenpeace Electronics Guide Cracks the Whip’, BlueChannel 24, available at: {http://www.bluechannel24.com/?p=7749} accessed 8 April 2015.

³⁰ United Nations Global Compact, ‘Analyzing Progress’, available at: {http://www.unglobalcompact.org/COP/analyzing_progress.html} accessed 5 November 2013.

³¹ Soederberg, Susanne, ‘Taming corporations or buttressing market-led development? A critical assessment of the global compact’, Globalizations, 4:4 (2007), p. 503. Significantly, like other global transparency programmes that encourage and facilitate corporate voluntary reporting, the Global Compact allows companies to set their own measures and report on progress towards these, rather than setting universal benchmarks. Performance comparisons between companies are therefore difficult.

³² Global Reporting Initiative, ‘The External Assurance of Sustainability Reporting’ (2013), available at: {https://www.globalreporting.org/resourcelibrary/GRI-Assurance.pdf} accessed 8 April 2015.

³³ Vogel, David, ‘The private regulation of global corporate conduct: Achievements and limitations’, Business & Society, 49:1 (2010), pp. 68–87.

³⁴ Falkner, , ‘Private environmental governance’, p. 77.

³⁵ United States Climate Action Partnership, available at: {http://www.us-cap.org/} accessed 4 August 2014.

³⁶ Milberg, William and Winkler, Deborah, Outsourcing Economics: Global Value Chains in Capitalist Development (Cambridge: Cambridge University Press, 2013); see also: Mosley, Layna, Labor Rights and Multinational Production (New York: Cambridge University Press, 2011).

³⁷ Walmart, ‘Walmart Announces Sustainable Product Index’, available at: {http://news.walmart.com/news-archive/2009/07/16/walmart-announces-sustainable-product-index} accessed 4 August 2014.

³⁸ See, for example, Milberg and Winkler, Outsourcing Economics.

³⁹ See, for example, Stanley James and Adam Satariano, ‘Apple Opens Suppliers’ Doors to Labor Group After Foxconn Worker Suicides’ (13 January 2014), available at: {http://www.bloomberg.com/news/2012-01-13/apple-opens-suppliers-doors-to-labor-group-after-foxconn-worker-suicides.html} accessed 1 September 2014; Susan Adams, ‘Apple’s New Foxconn Embarrassment’, Forbes (9 December 2012), available at: {http://www.forbes.com/sites/susanadams/2012/09/12/apples-new-foxconn-embarrassment/} accessed 1 September 2014.

⁴⁰ O’Rourke, Dara, ‘Monitoring the monitors: a critique of corporate third-party Labour monitoring’, in Rhys Jenkins, Ruth Pearson, and Gill Seyfang (eds), Corporate Responsibility and Labour Rights: Codes of Conduct in the Global Economy (London: Earthscan, 2002), pp. 196–207; Locke, The Promise and Limits of Private Power.

⁴¹ Personal communication with auditor, London, 6 March 2013.

⁴² Personal communication with audit firm Director of Sustainability, London, 13 March 2013.

⁴³ Personal communication with a former Director of CSR, US retail company, 12 July 2013, Seattle.

⁴⁴ Richard Locke at MIT’s 4-year analysis of Nike’s audit programme (2001–5) found that workplace conditions in almost 80 per cent of suppliers remained the same or worsened over time. Nike states in their 2012 Sustainable Business Report, ‘… we have learned that monitoring does not bring about sustainable change. Often, it only reinforces a pattern of hiding problems.’ Similarly, HP concludes in their 2013 CSR report, ‘although audits can be an excellent measurement tool, they only provide a snapshot of performance and do not lead to lasting performance improvements on their own’. See also Allain, Jean, Crane, Andrew, LeBaron, Genevieve, and Behbahani, Laya, Forced Labour’s Business Models and Supply Chains (York: Joseph Rowntree Foundation, 2013).

⁴⁵ Personal communication with labour NGO representative, London, March 2013.

⁴⁶ Personal communication with auditor, London, 6 March 2013.

⁴⁷ Coslovsky, Salo and Locke, Richard, ‘Parallel paths to enforcement: Private compliance, public regulation, and labour standards in the Brazilian Sugar Sector’, Politics & Society, 41:4 (2013), pp. 497–526.

⁴⁸ Personal communication with Sustainable Brands, 2 September 2014.

⁴⁹ Sarfaty, Galit, ‘Regulating through numbers: a case of corporate sustainability reporting’, Virginia Journal of International Law, 53 (2011), pp. 580–581.

⁵⁰ See Barnett, and Duvall, , ‘Power in international politics’, p. 56.

⁵¹ André Broome and Joel Quirk, ‘Governing the world at a distance’.

⁵² Ibid.

⁵³ International Organic Accreditation Service (IOAS), ‘Certification Body Database’, available at: {http://www.ioas.org/certification_body/} accessed 4 August 2014.

⁵⁴ See the recent study of 44,383 social audits in 47 countries by Michael Toffel and colleagues at the Harvard Business School that finds ‘evidence suggesting that violations recorded in audits might indeed be influenced by financial conflicts of interest and by auditor competence’. (Michael Toffel, Jodi Short, and Melissa Ouellet, ‘Codes in context: How states, markets, and civil society shape adherence to global labor standards’, Regulation & Governance, doi:10.1111/rego.12076 (2015), p. 16.

⁵⁵ Lister, Jane, Corporate Social Responsibility and the State (Vancouver: UBC Press, 2011).

⁵⁶ Nike, ‘Sustainable Business Report’ (2013), available at: {http://www.nikeresponsibility.com/report/files/report/NIKE_SUSTAINABLE_BUSINESS_REPORT__FY10-11_FINAL.pdf} accessed 3 April 2014.

⁵⁷ A labour supply chain ‘consists of the sequence of employment relationships that a worker goes through in order to be deployed in a productive capacity’. See Allain, Crane, LeBaron, and Behbahani, Forced Labour’s Business Models.

⁵⁸ Personal communication with auditor, London, March 2013.

⁵⁹ See Apple, ‘Supplier Responsibility: Empowering Workers’, available at: {http://www.apple.com/supplier-responsibility/labor-and-human-rights/} accessed 1 September 2014.

⁶⁰ Kortelainen, Ketty, ‘Global supply chains and social requirements: Case studies of labour conditions auditing in the People’s Republic of China’, Business Strategy and the Environment, 17 (2008), p. 433.

⁶¹ Porter, Michael and Linde, Claas Van der, ‘Green and competitive: Ending the stalemate’, Harvard Business Review, 75:5 (1995), pp. 120–151.

⁶² Allain, Crane, LeBaron and Behbahani, Forced Labour’s Business Models.

⁶³ See, for example, Gethin Chamberlain, ‘How Poverty Wages for Tea Pickers Fuel Indian’s Trade in Child Slavery’, The Guardian, available at: {http://www.theguardian.com/world/2013/jul/20/poverty-tea-pickers-india-child-slavery} accessed 20 July 2013.

⁶⁴ Lister, Jane and LeBaron, Genevieve, Shopping for Sustainability at the Canton Fair: The Political Economy of Transnational Retail Governance in China, Liu Institute for Global Issues Working Paper Series 12-001 (Vancouver: University of British Columbia, 2012).

⁶⁵ Personal communication at Chun Wo Ho factory, Shenzen, China, 27 April 2012.

⁶⁶ Bluesign, ‘About’, available at: {http://www.bluesign.com} accessed 4 August 2014.

⁶⁷ Haley Wrinkle, Elin Eriksson, and Adrienne Lee, Apparel Industry Trends: From Farm to Factory, available at: {http://www.free2work.org/trends/apparel/Apparel-Industry-Trends-2012.pdf} accessed 4 August 2014.

⁶⁸ International Labour Rights Forum and Warehouse Workers United, ‘The Walmart Effect: Child and Worker Rights Violations at Narong Seafood’s Thailand Model Shrimp Processing Factory’, available at: {http://www.laborrights.org/publications/walmart-effect-child-and-worker-rights-violations-narong-seafood} accessed 5 November 2013. See also Walmart, ‘Making Seafood More Sustainable’, available at: {http://www.walmartgreenroom.com/2013/03/making-seafood-more-sustainable-one-fishery-at-a-time/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+walmartgreenroom%2FlJlQ+%28The+Green+Room%29} accessed 3 August 2013.

⁶⁹ Van Zuylen-Wood, Simon, ‘Penn State Cuts Off Adidas Over Sweatshop Complaint’, available at: {http://www.phillymag.com/news/2013/03/14/penn-state-2/} accessed 4 August 2014.

⁷⁰ Plambeck, Erica and Taylor, Terry, ‘Motivating Compliance with Labour and Environmental Standards’, Working Paper No. 3176, Stanford Graduate School of Business (March 2015), available at: {http://www.gsb.stanford.edu/faculty-research/working-papers/supplier-evasion-buyers-audit-implications-motivating-compliance} accessed 10 April 2015.

⁷¹ Kortelainen, , ‘Global supply chains and social requirements’, p. 441.

⁷² See Broome and Quirk, ‘Governing the world at a distance’; Liam Clegg, ‘Benchmarking and blame games: Exploring the contestation of the Millennium Development Goals’; Harrison and Sekalala, ‘Addressing the compliance gap?’; Alexandra Homolar, ‘Human security benchmarks: Governing human wellbeing at a distance’; Caroline Kuzemko, ‘Climate change benchmarking: Constructing a sensible future?’; Porter, ‘Global benchmarking networks’; Leonard Seabrooke and Ducan Wigan, ‘How activists use benchmarks: Reformist and revolutionary benchmarks for global economic justice’; Sending and Lie, , ‘The limits of global authority’: all of the articles listed here in Review of International Studies, 41:5 (2015), pp. 813–1010.

⁷³ Broome and Quirk, ‘Governing the world at a distance’.

⁷⁴ Ibid.

* We are grateful to the Social Sciences and Humanities Research Council of Canada for research funding and to Peter Dauvergne for many inspiring conversations. Thanks as well to Helen Turton, Benjamin Richardson, Joel Quirk, André Broome, and the participants in the Benchmarking in Global Governance workshop held at University of Warwick in March 2014 for comments on an earlier draft of this article. All remaining shortcomings are our own.