Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards

Key Insights for Managers

When looking for new global supply chain factories from which to source, a threshold criteria is often whether they will meet a brand’s supplier code-of-conduct defining minimally acceptable working conditions. This paper by Jodi L. Short, Michael W. Toffel, and Melissa Ouellet reveals several factors associated with better working conditions. First, better working conditions were found among suppliers that were serving buyers in countries with wealthier and more socially conscious consumers, so asking suppliers about their other clients can be helpful. Second, better working conditions were found in factories located in countries that exhibit greater press freedom (perhaps due to the greater risk of having poor conditions exposed) and in countries that have adopted more International Labour Organization (ILO) standards and have more stringent domestic labor law. 

These results are based on a regression analysis of over 44,000 code-of-conduct audits of nearly 22,000 factories in 12 industries across 47 countries (mostly Asia), all conducted by a single major social auditing firm during 2004-2009. Supplier compliance with labor codes of conduct was measured as the number of labor-related violations of supplier codes-of-conduct in the areas of child labor, forced or compulsory labor, working hours, occupational health and safety, minimum wage, disciplinary practices, treatment of foreign workers, and illegal subcontracting.