Corporate Sustainability Challenged by Labor Law Deregulation

Countries around the world are responding differently to the economic and social disruption brought about by COVID-19. As some countries alter their employment regulations, how can businesses ensure they do not accidentally benefit from changes that could result in brand damage?

RESPONSES TO COVID-19

It is difficult to underestimate the disruption COVID-19 has had on global supply chains. As an example, in June the UK Office of National Statistics reported a fall of 20.4% in Gross Domestic Product (GDP) in April 2020. This pattern is being replicated all around the world. Countries along the supply chain are not only having to deal with their own lockdowns but also the impact of falling demand from end consuming countries. There are estimates that around 24.6% of the US population could be unemployed during this pandemic.

COVID-19’s impact is different in every country and there is little consistency between responses. Some countries are seeing an opportunity, they wish to attract new manufacturing investment as a way to mitigate the negative impacts of COVID-19. To achieve this, they are looking at ways to make their regulatory landscape more attractive to investment. In some countries, less scrupulous authorities are also seeing this as an opportunity to deregulate labor laws.

It must be remembered developing countries are on an economic journey that has often seen rapid growth. Many countries have focussed on improving ‘income’ and this has often resulted in less than exemplary laws relating to hiring and firing, contract work, unionization, and strikes. In effect, the authorities have chosen to swap short-term income for security . The disruption caused by COVID-19 means some countries that had not previously taken this route are now looking to relax their labor laws to allow them to compete, to the detriment of workers.

NEGATIVE IMPACT ON WORKER RIGHTS

Some states are looking to exempt several provisions relating to labor rights for a set period. These changes would remove rules relating to the settling of industrial disputes, trade unions, contract workers, and migrant laborers. In addition, they may also allow employers to ignore welfare provisions relating to cleanliness, disposal of waste, lighting, drinking water, urinals, canteens, rest rooms, crèches, and holiday pay, etc.

A principle source of concern is the relaxation on limits relating to the working week. Laws that restrict daily and weekly working limits have been relaxed, allowing employers to increase the working day from 10 hours to 12, and the working week including overtime from 60 hours to 72 even in countries that have endorsed the ILO Conventions on this topic.

While there is no consistency in the way deregulation is being implemented, there is a general note of concern being expressed by trade unions and advocates for better labor standards. The changes being brought in by one state led to one advocate equating the changes to turning labor laws “back by more than 100 years. It will lead to slave-like conditions for workers. It’s unacceptable, and in violation of human and fundamental rights.”

ISSUES OVER WORKERS RIGHTS

The International Labour Organization (ILO) has advised authorities considering implementing such changes to initiate a proper consultation process. It warns that changes may mean manufacturers no longer adhere to international standards, which could have a profound and negative impact on the economic viability of the business on the global stage. In addition, it warns, these changes could be counterproductive in terms of efficiency, as they may encourage a reduction in the number of workers, who are then required to perform multiple functions.

There is also concern that these changes could lead to increased strife, poor industrial relations, and loss of production, as workers and unions begin to fight back. If the industrial climate in the country becomes negative, the very objective, creating a more attractive investment environment for manufacturers, will fail.

With end consumers, and the authorities in which end consumption takes place, increasingly looking for evidence of sustainable working practices along the entire supply chain, manufacturers will have to think carefully before investing in areas that are seeking to deregulate labor laws. If they do, they will want firm and independently verifiable proof that global standards are being upheld. In today’s competitive market environments, ensuring operators in your supply chain comply with your requirements and your customers’ expectations should be a standard part of any company’s due diligence.

SGS SOLUTIONS

SGS operates a range of independent services to help brands and retailers ensure their supply chains are complying with national, international, and corporate specifications in relation to environmental, social, and corporate sustainability. With a global network of highly experienced inspectors, brands and retailers can be assured audited companies in their supply chain are compliant with their requirements.