As a result of globalisation and increased foreign direct investment, increased emphasis is being placed on the need for businesses to go beyond just making profits, and fulfil obligations towards economic, social and environmental issues (Idemudia, 2011). However, this task is not as easy as it may seem, because responsible business practices lack clear definitions and boundaries and are continuously evolving (Jamali, 2008). One of the main reasons for the UN Global Compact’s inception was to curb this dilemma by increasing discussions and thereby educating firms and the general public on the social and environmental obligations of businesses (Voegtlin ; Pless, 2014).
This paper will therefore consider how business has been affected due to adoption of the UN Global Compact. Consideration will be placed specifically on the aspect of labour issues and recommendations that could be presented to various business stakeholders in order to mitigate these issues.
2. UN GLOBAL COMPACT
The UN Global Compact UNGC is a voluntary global governance system that invites organisations to link their strategic business operations to the UNGC principles. The 10 principles highlighted in the UNGC fall under 4 major categories: human rights, corruption, labour issues and environmental issues (Kell, 2013).
Critiques of the UNGC highlight that despite the moral authority that is existent within the UN, adherence to the 10 principles is met with insufficient attention (Seithi ; Schepers, 2014). Further analysis has revealed that the UNGC openly acknowledges that it does not monitor, accredit or enforce its principles, but prefers to identify as an aspirational, principle-based venture (Rasche ; Waddock, 2014).
Promoters of the UNGC, however, relate that the stance that the UNGC has chosen to take provides a much-needed supplement to the “long existing and outdated regulatory motions” (Rasche, 2009). Additional researchers emphasize that the UNGC provides an “appropriate form of global organising” and “provides transnational governance that initiates the orchestration of the various networks” (Abbot ; Snidal, 2010; Scherer ; Palazzo, 2011).
3. LABOUR STANDARDS
It is reported that numerous organizations face challenges in knowing what is anticipated from them and what should be done to maintain these principles despite the labour standards presented in the UNGC being among “the most specific of the initiative’s ten principles” (International Labour Organization ILO, 2008). Due to the variation of labour laws and practices among different countries, multinational companies find it a challenge to adhere to the UN’s principles (Freeman, Kruse & Blasi, 2007).
3.1 Principle 3: Uphold freedom of association and the effective recognition of the right to collective bargaining
The ILO (2008) explains that this principle implies respecting the right of all employees and employers to freely construct and participate in groups or organizations that advance and guard their vocational concerns, without interference from any other entity. It also allows for a procedure through which employers and employees can voluntarily negotiate their terms and conditions of work through appointed employers, trade unions or spokesperson elected by the employee. (UNGC, 2011).
Application of this principle has resulted in enhanced job security for workers and the encouragement of employers to increase investment and expand employment, as shown in the case of Turkey (Dereli, 2015). However, in order to present compliance to this principle, many countries may misrepresent the measurement of trade union density or frequency of corporate strikes. Thus, it is unknown in these countries whether this principle is actually being implemented (National Research Council, 2004).
One firm working hard to apply this principle is the Adidas Group. This is evidenced in their Employment Guidelines which exhibits various forms of documentation to prove their ethical practices (Adidas Group, 2010).
3.2 Principle 4: Uphold the elimination of all forms of forced and compulsory labour
According to Phiri (2015), forced or compulsory labour is work or service that an individual has not voluntarily offered themselves for and is working under the threat of penalisation. The UNGC (2011), highlights “providing wages or other compensation to a worker does not necessarily indicate that the labour is not forced or compulsory.” It is possible for an enterprise to be affiliated with forced labour through relationships with contractors and suppliers (ILO, 2008).
Research exhibits that firms achieve much greater financial benefit from exploited labour as presented in the ILO report (2014), which highlights that within the domestic, agricultural and other economic sectors, victims of forced labour exploitation, generate an estimated US$51 billion in profits per year. However, the negative effects of forced labour on a country’s economic system are multifarious as it results in lack of investment in human capital, lower state revenues, and a hinderance to development (Faure, 2015).
An example of this issue is found within Mechanical Turk’s (a division of Amazon) maintenance of deplorable work conditions in Amazon’s warehouses as well as their ability to evade existing minimum wage laws (Kneese, et al, 2014).
3.3 Principle 5: Uphold the effective abolition of child labour
According to ILO conventions, an applicant being under age should take precedence over their admission to employment or work. The applicant should have completed compulsory education or be no younger than 15 years. In less developed countries, the minimum age is 12 years for “light work” for temporary periods of time and 18 years for hazardous work (ILO, 2008).
Child labour is known to adversely affect children’s education, mental and physical development as children are often verbally and physically abused in their places of work (Rahman & Khanam, 2012). On the other hand, as evidenced in a case study of Delhi, India, child labour presents financial assistance to poor families and seems better to families and children than the lack of opportunity that exists in the village (Bourdillion, 2016).
Nestle, which uses cocoa as an integral part of many of their products, created a Child Labour Monitoring and Remediation System in order to contest child labour. This has allowed Nestle “to drill down into the part of the supply chain covered by the Nestlé Cocoa Plan and identify all children actively engaged in child labour or perceived to be at risk of it” (Nestle Group, 2017).
3.4 Principle 6: Uphold the elimination of discrimination in respect of employment and occupation
Workplace discrimination transpires once a prospective candidate is treated differently or less favourably due to attributes that are not associated with their calibre or the fundamental requirements of the position. National law underscores these characteristics as: race, sex, religion, age, political opinion, HIV/AIDS, national or social origin, sexual orientation, etc. (ILO, 2008).
Henry & Evans (2007) highlight that multinational companies that properly manage diversity in the workplace create competitive advantage and gain higher creativity and innovation, improve marketing to ethnic minorities and better distribution of economic opportunity. However, Klagge (2013) maintains that specific communication related burdens result from diversity within the workplace such as “increased ambiguity, complexity and confusion due to miscommunication”. In addition, diversity adversely affects problem-solving and basic leadership.
An example is found within Google. Although Google displays multiple benefits for its employees, there is a very visible division between employees that receive benefits and employees of African-American or Latino descent which are unable to make enough money to get by due to their low wages and lack of benefits (Kneese, Rosenblat & Boyd, 2014).
The Ethical Trading Initiative (2013), suggests a six-step strategy to assist companies in the implementation, development and monitoring of the third principle of the UNGC. This strategy is very efficient in theory; but may be faced with active opposition from anti-union groups, government intervention and legally supported monopoly unions. A predominant factor in the lack of implementation of this principle is that historically, the ILO has often framed the protection of labour conditions as “principles and standards” instead of human rights (Hutchinson, 2010).
Thus, the UNGC and ILO need to advocate for collective bargaining and freedom of association to be viewed as fundamental human rights (Voegtlin & Pless, 2014). This would then compel employers to adhere to this principle. However, compelling an employer to negotiate with unions deprives the bargaining of its ‘voluntary’ character (Hutchinson, 2010). Therefore, it is advised for the UNGC to revisit its definition of this principle to curb “loopholes” that certain stakeholders can take advantage of.
In relation to the 4th principle of the UNCG; LeBaron & Howard (2015), state that eradicating forced labour cannot be accomplished by just the consumers because too many products depend on severe forms of labour exploitation and it would be impossible to “simply ask consumers to keep slavery out of their shopping carts”.
It is therefore recommended that policymakers and industry place more emphasis on the proper implementation of this principle and consider governmental responsibility for the part they play (International Trade Union Confederation, 2009). However, this may prove challenging as governments often refuse to impose new responsibilities on multinational companies and retailers as demonstrated in the UK’s 2015 Modern Slavery Act which allowed companies to report that forced labour issues are “too far down their supply chain for them to reach” (LeBaron ; Howard, 2015).
In relation to the 5th principle of the UNCG, the ILO (2016), highlights “immediate actions” that multinational companies should take against child labour. One of these actions is to “stop hiring children below the minimum age”. However, this recommendation does not consider the adverse effect that such an action would have on the livelihood of the employed children and their families. For example, the ban on underage children working on tea farms in Zimbabwe resulted in many children left unable to afford education and having to wait until the age of 15 before they could start secondary school—which was not beneficial to them and not the intended result of the policy (Bourdilion, 2014).
This example illustrates that more concern should be placed on the nature and conditions of work, rather than the age of child workers (Bourdillion, 2016). It is recommended that businesses and the civil society must ensure just and favourable work conditions. Governments must have clear accountability and liability regulations for recruiters and employers, incorporating this into supply chains to avoid harmful work being imposed on children. (Sorrentino ; Jokinen, 2014).
In association with the sixth principle of the UNCG, to counter discrimination within the workplace, it is prescribed that managers and supervisory staff, should gain an understanding of the various forms of discrimination and how it affects the workforce. Thereupon, management can institute policies and strategies that will place qualifications, skills and experience as the premise for recruitment, placement and progression of employees (ILO, 2008). However, such policies could be met with hostility as not every member of staff would be willing to cooperate; as was the case in Airbnb when management attempted to implement anti-discrimination policies (Murphy, 2016).
It is recommended that firms provide their staff with training on non-discrimination policies and practices and government is encouraged to play their part by building an atmosphere of equal opportunity for all that are fit and able to work (UNCG, 2011).