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Electronics brands and factories must commit to improve labour standards

Work
07-11-2016-Seagate-Wuxi-China-Factory-Tour-590.jpg

Workers perform final testing and QA before sending drives off to customers on its 2.5-inch notebook lines, at Seagate Wuxi Factory, China. © Robert Scoble

Poor working conditions and violations of labour standards are widespread in the electronics supply chain, and that must change, writes Dr Gale Raj-Reichert.

The global electronics industry is one of the largest industrial sectors in the world economy. It makes up close to one-quarter of globally traded manufactured products and is estimated to generate more revenue and employ more workers than any other manufacturing sector. A key feature of the industry is its extensive use of outsourcing by brand firms such as Apple to suppliers, such as Foxconn.

The outsourcing of manufacturing of thousands of parts and components, and the assembly of electronic products, has created vast and complex global supply chains. Many of the largest factories in the electronics industry global supply chain are located in developing countries. Today, China is the world’s largest manufacturer and exporter of electronic products.

Due to extreme price competition amongst suppliers and demanding production cycles, poor working conditions and violations of labour standards and regulations are systemic throughout the global supply chain. They include low wages, overuse of temporary workers, forced labour, excessive working hours, gender discrimination, health and safety risks including chemical poisonings and deaths, and weak or suppressed trade unions and collective bargaining.

The responsibility to improve working conditions must be shared equally between brands and contract manufacturers

These conditions prevent the realisation of decent work in the industry.

Regulation and governance over labour conditions – particularly in factories in developing countries – are often not implemented, effective or sustainable. Developing country governments either lack the resources and capabilities – or political will – to enforce labour regulations amongst firms. This is particularly the case when governments see foreign investments and the participation of suppliers in global supply chains as drivers of economic growth through employment and export earnings.

Private and industry standards such as the Electronics Industry Code of Conduct (EICC), adopted by brands such as Dell, Hewlett-Packard, and Apple and their largest suppliers, are normally not implemented, enforced or monitored. They are also inadequate in identifying labour violations. For example, industry audits of electronic firms in Malaysia failed to expose or help eliminate forced labour in the industry for many years.

While a lot of campaigns to improve working conditions in the electronics industry global supply chain have focused on brands, another group of firms – large, multinational contract manufacturers – have gained more relevance in recent years.

According to the European Commission, big brands outsource up to 80 per cent of their production to the top five contract manufacturers, which are Flex (formerly called Flextronics), Jabil Circuit, Foxconn, Celestica, and Sanmina-SCI. These contract manufacturers are some of the largest firms in the industry. They have very large factories and employ more workers in developing countries, where the majority of labour violations occur, than other firms in the industry. Thus, when it comes to labour violations and poor working conditions contract manufacturers, which own, run, and manage these factories, cannot be ignored.

Contract manufacturers have also gained relatively more power in global supply chains in recent years. This is due to their taking over of a greater portion of supply chain management responsibilities from brands. Because brands have passed on many of their suppliers to contract manufacturers, the latter group of firms now have their own supply chains larger than those of the brands. Contract manufacturers have over the years also gained capabilities in design and innovation and have become important partners for brands.

These changes raise the question of whether the increasing importance of contract manufacturers in their business relationships with brands is matched by an increasing responsibility over labour violations and working conditions in the industry. With increasing pressure and the creation of risk and obligation on contract manufacturers to eliminate labour violations, these firms have the opportunity to use their bargaining power with brands for better working conditions. This includes crucial negotiations on price and production deadlines and quantity.

In short, the responsibility to improve working conditions must be shared equally between brands and contract manufacturers.

Critically, these changes will require targeted pressure by civil society and trade unions as well as governments on contract manufacturers, who occupy a central link in the global supply chain, (in addition to brands) to improve working conditions in their own factories and amongst their suppliers. This will also require understanding the changing relationships between brands and contract manufacturers in the industry.

Contract manufacturers in recent years have come under increasing public pressure over dire labour violations that include forced labour and worker suicides. This has resulted in increased resources and staffing of corporate social responsibility departments amongst contract manufacturers to implement the EICC and other voluntary initiatives.

Voluntary initiatives, however, have thus far proved far from sufficient. Therefore, civil society campaigns have escalated calls for regulatory steps to be taken by governments and public purchasers in the Global North. The California Transparency in Supply Chains Act and the UK Modern Slavery Act are important steps in this direction. So too are initiatives like Electronics Watch which combine the purchasing power of public organisations in the Global North to demand improved labour conditions throughout the electronics sector and particularly in developing countries. In doing so, these demands can provide meaningful implementation of the social responsibility aspects of the European Union Directive on Public Procurement.

There is also a new generation of labour standards in free trade agreements set by the United States and European Union to be implemented by developing country governments. These include the forthcoming Trans-Pacific Partnership also includes labour standards for Malaysia, Vietnam, and Brunei, and the European Union-Vietnam Free Trade Agreement.

It is to be seen whether these new standards in public procurement legislation and trade agreements result in actual improvements in working conditions and worker rights in developing countries.

Dr Gale Raj-Reichert is a British Academy Postdoctoral Fellow and Research Fellow at The Global Development Institute in the School of Environment, Education and Development at the University of Manchester.

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