Workplace Wire

The tragic collapse on April 24, 2013 of the Rana Plaza garment-manufacturing facility in Bangladesh may contribute to significant developments in the realms of corporate social responsibility (“CSR”) and global labour relations.

Since April 24, approximately 40 global fashion companies that work with suppliers in Bangladesh have signed on to the Accord on Fire and Building Safety in Bangladesh, an agreement that addresses workplace safety standards and monitoring in Bangladesh’s Ready-Made garment industry.  The other main parties to the Bangladesh Accord are UNI Global Union and IndustriALL, two large global union federations that have, for some time, been pushing multinational corporations generally to negotiate and apply “global” workplace standards across their supply chains.  Until now, UNI and IndustriALL’s success in this regard has been mixed.

In some ways, the Bangladesh Accord resembles an International Framework Agreement (often called an “IFA”), which is the type of agreement that some multinational companies and global unions like UNI and IndustriALL have used in the past to set out global standards on working conditions and dialogue between the company and worker representatives.  However, certain features of the Bangladesh Accord appear to go much further than IFAs or similar agreements.  These features may set the stage for significant changes in how global companies and global unions interact.

Key Features of the Bangladesh Accord

In essence, the Bangladesh Accord requires signatory companies to take certain steps to implement and maintain safety standards within their Bangladeshi suppliers’ workplaces.  In broad terms, the agreement relies on a regime that involves workplace inspection, reporting, and remediation and training to ensure suppliers’ adherence to acceptable workplace safety standards.

However, the Bangladesh Accord differs from existing CSR regimes in several potentially important ways:

• It is a legally enforceable agreement between companies and global unions federations on workplace standards in those companies’ global supply chains;
• Not only is the agreement enforceable on its face, but it actually incorporates a strong legal mechanism to resolve disputes over the interpretation and application of its terms – this mechanism is the UNCITRAL Model Law on International Commercial Arbitration, which is a well-established binding arbitration system backed up by a significant body of case law.  Arbitration awards made under this procedure are often upheld and enforced by courts in Europe and North America.
• The agreement explicitly states that the workplace standards that must be adhered to include “internationally recognized workplace safety standards,” but it leaves this term undefined.
• The agreement establishes a permanent bilateral “Steering Committee” to monitor implementation of the agreement.  The representatives on the Steering Committee are appointed in equal numbers by, on one hand, the signatory companies, and, on the other hand, the global unions who signed the agreement.  The neutral chair of the committee will be appointed by the International Labour Organization, the UN agency responsible for establishing and monitoring compliance with global labour standards.

Implications for CSR and Global Labour Relations

The parties to the Bangladesh Accord are still in the process of developing an implementation plan that will set out the precise details of how the agreement will be implemented.  As a result, it is far too early to make any definitive conclusions as to its implications.  However, it is possible to make a few preliminary comments on the agreement’s place in the broader landscape of global labour relations.

First, the fact that the Bangladesh Accord includes a strong binding arbitration mechanism is notable in itself.  In fact, I’m not aware of an IFA or other global agreement between a company and global union that includes an arbitration scheme of this nature.  In light of this, it’s possible that the Accord may contribute to the development of an entirely new foundation for formal legal relations between companies and global union within the context of global supply chain management.

At the same time, however, it is important to highlight that the alarmism concerning the “legal liability” that may flow from the Bangladesh Accord is, at least at this stage, probably unwarranted.  Indeed, it is not at all clear that the existence or content of the agreement could serve as the basis for liability for a signatory company in the event of an accident at a Bangladeshi supplier’s workplace.  Rather, the legal status and practical implications of the agreement remain unclear, and will probably depend largely on how the agreement is implemented by the parties in practice.

Another aspect of the Bangladesh Accord that has significant implications for CSR and global labour relations is the speed with which almost 40 companies have agreed to sign on to the agreement despite the fact that it has a “strong” enforcement mechanism.  This is especially striking in light of the fact that global unions have had fairly significant difficulty convincing companies with global supply chains to agree to IFAs, which generally do not include arbitration provisions, over the course of the past two decades.

To be sure, companies’ willingness to sign on to the Bangladesh Accord may have something to do with the scale of the Rana Plaza tragedy.  However, it is notable that that agreement is limited to a specific sector (the Ready-Made garment industry) in a specific country (Bangladesh), while most IFAs proposed by global unions to date have been global in scope, and cover all aspects of a company’s global supply chain.  In light of this, the success of the Bangladesh Accord may spur UNI, IndustriALL, and other actors in the global union movement to shift their focus away from IFAs and towards agreements like the Accord that are less comprehensive in scope, but that establish far more detailed standards and processes in respect of a specific workplace issue and/or geographic location.  Notably, by “layering” agreements of this nature on top of each other, global unions could build a comprehensive relationship with a specific company in an incremental fashion.

While the Bangladesh Accord is clearly still in its formative stages, these and other features of the agreement have significant implications for the ways in which global companies interact with global unions at the international level.