The power of the sewing machine: A masterclass in building alliances for workers’ rights and sustainability in global production networks

By Aarti Krishnan and Corinna Braun-Munzinger

The ESRC project on ‘Rising Powers, Labour Standards and the Governance of Global Production Networks’ and Global Production Networks, Trade and Labour research group at the Global Development Institute, University of Manchester, on 14 October 2016 hosted a talk by Karamat Ali, executive director of the Pakistan Institute of Labour Education & Research (PILER).

“In life there are a few things worth doing, saving lives is one of them”

Karamat Ali‘s moving words were imprinted in the minds of everyone seated in the room. Based on 40 years of experience as a labour and development activist in Pakistan, Karamat Ali gave his audience in Manchester a masterclass in building alliances for workers’ rights and sustainability in global production networks. The talk focused on Pakistan Institute of Labour Education & Research (PILER) campaign work for compensation for 254 workers families who died and 55 who were injured in the aftermath of one of Pakistan’s most devastating factory fires, at Ali Enterprises in Karachi in September 2012.

Ali enterprises supplied jeans to German clothing retailer KIK. At the outset, it seemed hard to imagine that it would be realistic to achieve compensation for workers and their families. Would it be possible to hold those responsible locally to account? And was there any way of reaching KIK’s headquarters far away in Germany? Karamat Ali took us all through this emotive and arduous journey of how after four years of struggle, workers’ voices resonated across the country and beyond.

At the start, PILER began to mobilize locally. This was not easy, because unionisation in the apparel industry was low and thus strikes were not an option to make workers’ demands heard. To get around this problem, PILER decided to look for an alternative way to create public awareness about the loss of lives and injuries of workers sustained in the fire. PILER along with family members of the victims teamed up with a famous Pakistani singer (Jawad Ahmad) to create an evocative you tube video that asked workers to unite.
.

The video was aired by local TV stations and garnered widespread local attention in support for workers’ demands. Parallel to the public campaign, PILER relentlessly pushed for judicial action in Pakistan by calling for a detailed inquiry in court into the causes of the deaths of the workers and to press criminal charges on those responsible for the incident.

PILER also built international alliances to initiate a dialogue with KIK and stakeholders in Germany (where the jeans produced by Ali Enterprises were sold). To start reaching out beyond Pakistan, PILER drew on earlier contacts from the European Clean Clothes Campaign. Building on this cooperation, a range of additional NGOs and trade unions in Germany became active on the issue. Initial success was achieved in December 2012, when KIK signed an agreement with PILER to pay an initial US$1 million into a relief fund for victims and agreed to providing long-term compensation. However, reaching agreement on how this compensation should look like took further scaling up of the initiative, not only involving global unions like IndustriALL, but also the German government (which had just launched a new initiative on sustainable textiles) and the ILO. Thus successful partnerships with the German government, global partners, and effective local mobilisation (including national legal procedures), resulted in the disbursement of not only US$ 1 million but a new negotiated amount of US $5 million by KIK in 2016. Against all odds, PILER provided a platform for workers’ voices, in Pakistan, creating ripple effects from Berlin, to the ILO, to the headquarters of KIK, which 4 years ago seemed unreachable.

Karamat Ali’s talk speaks of hope, of victory in the face of adversity and to never give up fighting for what is right. Heroes really do exist and we were lucky enough to meet one. He showed us that there is a need to build ‘real alliances’ , – alliances in which those who buy the clothes take responsibility for how they are produced and for those who sit at the sewing machines. This stands testament that improving working conditions of workers leads to sustainable, resilient and conflict-free production networks... something every major retailer needs to hear!

Call for papers: Workshop on ‘Rising Powers and Labour Standards in Global Production Networks’, 19-20 June 2017, Manchester

The ‘Rising Powers’, especially China, India and Brazil, have now become key players in the global economy. Yet, we still know too little about how these economies are engaging with and potentially shaping, the rules that govern international trade and global production, in particular global labour and social standards. For producers around the world, meeting international standards on social and environmental sustainability is increasingly critical. We are now more aware about the food we eat and how it came to our plates, or whether what we wear implied sweatshop labour. Nonetheless, gains from social compliance – especially for workers and poor producers – remain unclear. Expanding trade between the Rising Power economies, their growing domestic consumer markets and the emergence of leading firms from China, India and Brazil raise questions on how global standards will be shaped in the future, who the key drivers will be, and what implications arise for workers in both these emerging economies and throughout the global economy.

This workshop will present findings from work undertaken in Brazil, China, India and the EU, as part of an ESRC funded project on labour standards and the governance of global production networks. It also aims to bring together a wider community of academics and practitioners working on labour and sustainability standards in the global economy, but with a particular interest on the ‘Rising Powers’ and how they might sustain, challenge, or change the global discourse on labour and sustainability standards. Hence, we particularly invite proposals for papers around the following themes:

• The emergence of rising power MNCs, their engagement with CSR and social standards, and the implications for global labour and social standards in global value chains
• The role of innovation, CSR, and human rights in global value chains
• The engagement of civil society actors in the rising powers with local and/or global CSR initiatives and social standards
• Public labour regulation in Brazil, China and India and the engagement of these countries in the international institutions where trade rules on labour and social standards are defined
• The implications of the rise of Brazil, China and India for labour and social standards in OECD and developing economies

Deadlines:

• Abstract submission: 24 February 2017. Please send your abstract (max. 300 words) to khalid.nadvi@manchester.ac.uk and natalie.langford@manchester.ac.uk

• Full paper submission: 12 May 2017 (max. 8,000 words excl. abstract, notes, references etc.) Papers will be circulated to discussants prior to the workshop.

Accommodation costs in Manchester will be covered for authors of accepted papers.

Giving workers employment rights increases productivity and profitability

By Boni Sones, University of Cambridge

Image by Stuart Miles. FreeDigitalPhotos.net

We live in a globalised world and buy products produced by workers’ from all over the World. Increasingly consumers are demanding that those who produce our goods are employed on decent terms and conditions whether they work in Europe, Africa, India, Russia, China or South America. Sweatshop labour used in one continent is often named and shamed in another and these reputational effects can affect demand for goods. But as consumers ask for more fairtrade goods from the developing world, workers in the so called global North are finding that their employment is more insecure, as greater numbers are employed on zero hour contracts, while all workers are finding it harder to access employment tribunals to enforce their employment rights.

The Centre for Business Research at the University of Cambridge has turned conventional wisdom on its head, and through a series of quantitative research projects over a number of recent years, has constructed a new database that reveals how improvements in labour rights can lead to increased productivity and employment as well as greater equality in society. These datasets are now online for others to access and use.

International organisations are taking note of these findings and national governments would do well to consider them. Globalisation, rather than inducing a so called ‘race to the bottom’ as many commentators predicted, is making governments more aware of the need for improved protections for workers, and of the importance of enforcement. Better informed and discerning consumers who are switched on to the web and social media where they can check the sourcing of the products they buy, along with campaigning civil society groups and NGOs, are helping to enforce these values.

The statistical studies carried out by the CBR complement qualitative research carried out by the Global Development Institute at The University of Manchester.

In a recent CBR workshop held in Cambridge in September 2016 researchers from both Universities discussed the findings from ESRC-funded research on labour law reforms, labour standards and corporate social responsibility (CSR) practices in Rising Powers, including China, India, South Africa and Brazil.

Many commentators have doubted that worker-protective labour laws can be made effective in developing countries with high levels of informal work and weak states. This has led to interest in alternative modes of regulation including codes of practice and consumer boycotts focused on global supply chains. But this focus neglects important changes on the ground in low- and middle-income countries in Africa and Asia which over the past decade have been implementing systematic reforms to their labour laws and codes, sometimes after much publicised strikes.

Admittedly the aims of these reforms are diverse: they include promoting industrial peace, encouraging employers to invest in training, and cushioning the effects of labour migration. Often these interventions have had the effect of encouraging formalisation of work and building state capacity. They have also operated in conjunction with, rather than in opposition to, voluntary measures and soft-law initiatives aimed at improving labour governance in value chains.

Encouragingly, while there are still many difficulties associated with the operation of labour standards in emerging markets, empirical work is revealing a more complex and differentiated picture than that frequently presented. There is good reason to be optimistic about these trends.

The two day workshop presented findings of two main types:

• Results from quantitative research analysing a unique dataset of labour laws around the world, constructed at the CBR in Cambridge. 
• Research from fieldwork conducted in case study countries, including China, Brazil, India, and South Africa, by teams based respectively at the Universities of Cambridge (Simon Deakin and colleagues) and Manchester (Khalid Nadvi and colleagues). 

The research undertaken by the Cambridge team deploys a unique dataset, the CBR Labour Regulation Index, which codes for labour laws in 117 countries over the period 1970 to 2013 (43 years). It is the first time that the laws of so many countries have been coded in this way and the dataset will be of very considerable interest to research users and policy makers.

The fieldwork research also breaks new ground in offering in-depth analyses of the implementation of labour law reforms in such contexts as Guangdong province in China, and on the interaction of labour laws with private labour standards operating in global supply chains.

The qualitative case studies undertaken by the Manchester team explore how lead firms in the rising powers engage with labour standards and CSR practices in their now increasingly global supply chains, and investigate the influence of civil society actors as well as the state in the development of private regulatory initiatives and in framing the discourse on labour standards.

For more details:

Listen to our CBR podcast series that features interviews with speakers at the workshop on Labour Standards and Labour Law Reforms in the Rising Powers, held in Cambridge on 5-6 September 2016.

Publications from the two projects are also available here:

• output from the Manchester project on the Rising Powers website 
• output from the Cambridge project on the Rising Powers website and on the University of Cambridge website

Professionals from across sectors meet to discuss and deliberate on India and Sustainability Standards

By Centre for Responsible Business (CRB)

Hon’ble Minister for Micro, Small and Medium

Scale Enterprises, Shri. Kalraj Mishra,
inaugurating the conference

The Centre for Responsible Business (CRB) along with its partners organised a three-day international conference on Sustainability Standards at Hyatt Regency, New Delhi, from 18th - 20th November, 2015. With 50 partners, 23 sessions and 500 plus delegates & speakers, India and Sustainability Standards: International Dialogues and Conference 2015, was a landmark event that succeeded in achieving its goal of convening international and Indian stakeholders to initiate dialogue, build understanding, and exchange proposals centered on paths forward on sustainability across a range of industry sectors, commodities and themes. Some of the key partners of the three-day event included the Ministry of Environment, Forests & Climate Change, Government of India, Ministry of Consumer Affairs, Government of India, ISEAL Alliance, UNICEF, UNDP, C&A Foundation, OECD, GIZ and Alliance for Integrity.

Dr. Bimal Arora, Chairperson, Centre for Responsible Business (CRB) setting the context for the conference said, “Sustainability standards offer the frameworks for businesses to set their sustainability agendas and provide tools to drive sustainable processes within their organization. Business community must play a proactive role and overcome challenges to take leadership roles in supporting these processes. Voluntary Sustainability Standards (VSS) provide these guiding frameworks to businesses and complement government policies. For Standards to be credible, however, multi-stakeholder engagement is required, especially with businesses which are expected to implement these standards. Hence we found it useful to put together this platform to bring together policy makers, businesses, standard setting bodies, civil society and the academia to address challenges and design way forward for standard setting and their implementation in the Indian context.”

Dr. BimalArora, Chairperson, Centre for Responsible Business, 
welcoming the gathering to the 3-day conference

The conference agenda was meticulously designed and structured in three parts to enable active exchange and learning, as well as space for developing roadmaps across themes and sectors. Plenary Sessions of the conference with high profile Indian and international business leaders and policymakers and international speakers set the context on issues around the development and implementation of sustainability standards in India. A series of thematic and sector-specific Roundtables and Workshops were planned over 19th and 20th November and occupied the majority of the conference agenda. These roundtables and workshops were convened by interested international and Indian organizations and standard setters, as conference partners and co-hosts, to focus on specific issues, opportunities, challenges, and needs for the given sector, theme and topic. The final section of the conference returned to plenary and offered an opportunity to share, learn about and engage on the outcomes of the roundtables and workshops and set the agenda for way forward to be followed through in 2016 and beyond, and take stock in a conference annually.

Chief Guest of the Inaugural function, Hon’ble Minister Shri. Kalraj Mishra lauded CRB and Bimal Arora for the pro-active role being played by the organization in defining the contours of the discussions on sustainability standards in India. The Minister further mentioned that he would extend all possible support to the organization in its efforts to scale up business sustainability in India. Guest of Honour, Hon’ble Minister Shri. Suresh P Prabhu said, “When we talk about sustainability, it means different things to different people and the concept of sustainability has a very important social dimension. Standards should be an ambition that eventually can be codified into something that can be applied in the Indian context.”

Perhaps for the first time, sustainability standards have been perceived and deliberated as a journey to achieving sustainability goals, rather than mere compliances. The perception has moved beyond a mere check-box compliance-based approach. The eminent speakers emphasized the importance of sustainability standards in India and highlighted how India is being continuously watched by the World due to its key role in the global supply chain.

Roundtable on Inidan Multinationationals
 and Sustainability, 

Co-hosted by University of Manchester

University of Manchester and CRB co-hosted a dedicated roundtable on Indian Multinationals and Sustainability during the conference and invited presentations by and conversations with Indian Multinationals on their internationalisation strategies and engagement with sustainability standards and collaborative sustainability initiatives in India and globally. The AMBS and Global Development Institute (GDI) at the University of Manchester are jointly leading an ambitious and exciting research project around globalizing firms from emerging economies and their engagement with Voluntary Sustainability Standards (VSS) and Collaborative Sustainability Initiatives (CSI). This research project is part of the UK’s Economic and Social Research Council’s (ESRC) larger research programme, ‘Rising Powers and Integrated Futures’ (see http://www.risingpowers.net). The session convened by Prof Rudolf Sinkovics from the Alliance Manchester Business School (AMBS) and moderated by Prof. Pawan Budhwar from Aston Business School, saw a presentations from senior sustainability managers from companies like Essar, Tata Consultancy Services (TCS), Gas Authority of India Limited (GAIL), Tata Sustainability Group (TSG) and Ambuja Cement.

The Centre for Responsible Business (CRB) provided a historic opportunity: to promote pathways to sustainability in India and globally. Company executives gathered with government officials and civil society leaders along with Indian and international standard setters, policymakers, businesses and civil society organizations, to look at how sustainability standards can be adopted, implemented or adapted to promote better environmental and social practices in India, including in the Micro, Small and Medium Enterprises (MSME) world as part of the global production networks and value chains.

For more information, please visit the conference website here.

Rising Power multinationals and global development

Image by jscreationzs, FreeDigitalPhotos.net

By Mo Yamin and Rudolf Sinkovics

Mo Yamin and Rudolf Sinkovics introduce a special issue of critical perspectives on international business, Vol 11, No.3/4 on the developmental impact of Rising Power firms.

Huawei phones, Nando’s chicken, Tata cars – brands from Rising Power countries are present in more and more countries across the globe. The new multinationals that produce these brands are increasingly competing with established Western multinationals, in the Europe and America as well as in Africa and Asia. But what impact do these Rising Power multinationals have on global development? As they expand their global operations, how do they influence the economy, people and the environment? These questions are at the core of a special issue in Critical Perspectives on International Business.

The developmental promises and challenges of Chinese, Indian, or Brazilian companies’ international operations are controversial. One argument in favour of South-South FDI is that firms from emerging economies might adapt more easily to local realities in a developing country than multinationals from the US or Europe. So, do they better understand the needs of low-income consumers, and can they provide these with goods and services that used to be available only for the rich? Or, on the other hand, should we believe media reports on land grabbing and giant infrastructure projects by Chinese or Indian investors that destroy the environment and harm local communities?

Against this debate, the special issue takes a closer look at the nature and strategies of these Rising Power firms. Four articles in the collection look at how capabilities of these firms differ from those of Western multinationals. First, Peter J. Williamson finds that Rising Power firms have distinctive capabilities of innovation and reconfiguration that can give them an edge over competitors. Peter Konijn and Rob van Tulder examine “Resources-for-infrastructure (R4I) Swaps” as a specific market entry strategy of Chinese firms in African countries.  Taking a different angle, Jaya Prakash Pradhan and Keshab Das highlight regional differences within Rising Power countries and their effects on export performance of local SMEs. Further, Rory Horner shows how the emergence of Rising Power firms in the pharmaceutical sector has led established multinationals to increase pressure around intellectual property rights in India and South Africa.

Three further articles examine how the concept of global value chains (GVCs) can help to understand Rising Power firms’ developmental impact. Zaheer Khan, Yong Kyu Lew and Rudolf R. Sinkovics show why Pakistani automobile suppliers have benefited relatively little from their integration into GVCs. Joonkoo Lee and Gary Gereffi  point out that new markets in emerging economies and new regional value chains can be an opportunity for developing country firms to upgrade economically. However, they warn of a risk that this economic upgrading may be accompanied by negative social effects. Finally, contributing to the debate about the social impact of Rising Power firms, Noemi Sinkovics, Rudolf R. Sinkovics, Samia Ferdous Hoque and Laszlo Czaban propose a reconceptualization of social value creation, focusing on the “root causes” of constraints to creating social value.

Overall, the special issue contributes both conceptual thinking and empirical insights to the debate around the developmental impact of Rising Power firms. In sum, the articles show that there is no easy answer to the question of whether these new Chinese, Indian or Brazilian multinationals are good or bad for global development. But one thing is sure: We should keep an eye on them.

For more details, please refer to:

Mo Yamin , Rudolf R. Sinkovics , (2015) "Rising power firms – the developmental promises and challenges: an introduction", critical perspectives on international business, Vol. 11 Iss: 3/4. http://dx.doi.org/10.1108/cpoib-04-2015-0016

Read the full special issue of critical perspectives on international business, Vol 11, No. 3/4.

Changing Labour Regulations and Labour Standards in China: interview with Khalid Nadvi

At a workshop on Law and Finance in Rising Powers, held at the Centre for Business Research, University of Cambridge, Khalid Nadvi, Reader in International Development University of Manchester, and the research programme co-ordinator for the ESRCs Rising Powers and Inter-dependent futures programme, presented his work on labour standards in China. This podcast interview gives an overview.

Nadvi said: “Our paper has been looking at how our changing labour regulations are impacting on labour standards in China. The paper that we presented is an introduction to a special issue of the International Labour Review which is on this theme coming out in December 2014.

What we are trying to look at is how does the rise in the labour regulation that we have seen in China in recent years impact on questions around labour standards working around labour conditions and labour rights.

I think things are changing and what we are beginning to see in those changes is that increasingly there is an improvement in real wages. There has been a lot of labour activism and in fact grass roots activism with wild cat strikes and so on, and one of the consequences of that is that there has been a rise in real wages in much of the region along the coastal belt and pearl-river delta and the province of Guangdong. But the nature of the labour regime in China and the working conditions in China is varied and so if you move further inland to inner provinces you might still see very poor conditions and very harsh working environments.

We need to do more analysis of ways in which national, regional and local levels of government engage with this agenda. Looking at labour regulations and the law that has been passed is not going to be enough we need to see how they get implemented and what our evidence is pointing to is that the nature of that implementation varies at the local level. There are reasons why those variations take place.

When you look at the BRICS,  Brazil is the most interesting it is a fascinating story of the ways in which regulation around law, around finance, around labour standards, have really moved ahead. Brazil is interesting and is almost an outlier. China falls somewhere in the middle and Russia is at the other extreme, where we don’t see very strong legal institutions beginning to take effect and so therefore we see all sorts of issues around corruption.”

Listen to the full interview with Khalid Nadvi

More podcasts from the workshop on Law and Finance in Rising Powers,
Centre for Business Research, University of Cambridge, December 9th 2014

Improving labour conditions in the computer industry

Image by Victor Habbick,
FreeDigitalPhotos.net

By Khalid Nadvi and Gale Raj-Reichert

Many leading global brands, like Apple and Hewlett-Packard, source components from and have their products manufactured by a variety of independent suppliers. These suppliers undertake production in many locations across the world in vast global value chains. Ensuring that these suppliers meet international standards on labour, health and safety and environmental impacts is an increasing challenge for the global brands in the computer industry. These pressures are often accentuated by campaigning non-governmental organisations (NGOs), trade unions seeking to ensure better working conditions, and by governments keen to enforce public regulations. There has been substantial progress by the leading brands to engage with their first tier suppliers on such concerns. However, little is known about how labor standards and codes of conduct are addressed by second tier suppliers found at the lower tiers of global value chains, where the governance of labour conditions can be extremely challenging. Are private or public measures more successful in reaching suppliers down the global value chain? This question is addressed in a recent paper by Dr Khalid Nadvi and Dr Gale Raj-Reichert from the Institute for Development Policy and Management at the University of Manchester, “Governing health and safety at lower tiers of the computer industry global value chain” in the journal Regulation & Governance (the article is offered as open access and is free to everyone).

The paper investigates whether, and how, occupational health and safety standards permeate down the computer industry global value chain. It does so by comparing first and second tier suppliers located in Penang, Malaysia and their engagement with a private voluntary industry code - the Electronics Industry Code of Conduct (EICC), and the publicly regulated European Union Directive on the Restriction of Hazardous Substances (EU RoHs).

The EICC, which was developed in 2004, specifies guidelines for firm conduct and policies on labour, occupational health and safety, the environment, ethics, and management systems. The EICC is a voluntary standard and firms that comply with it are required to ensure their suppliers also implement it. The EU RoHS, which came into effect on 1 July 2006, limits the use of hazardous contents, such as lead and brominated flame retardants, in electronics goods of all electronic products sold in the European Union. The penalty for not complying with EU RoHS includes fines and the denial of market access to the EU. Both the EICC and the EU-RoHS directive have direct and potentially positive impacts on the occupational health and safety conditions of workers in factories that produce electronics goods.

The study reported in the paper investigated a group of second tier suppliers in Penang, Malaysia and found that while none of them complied with the EICC code, the majority of them did meet the EU RoHS requirements. The second tier suppliers managed to comply with EU RoHS largely using their own resources with little or no assistance from other firms or the Malaysian government. Through case studies of different second tier suppliers the paper sets out to explain why these suppliers prioritized the EU RoHS over all other governance measures.

The findings show that EU RoHS because of its mandatory legal stipulation made it a de facto market entry requirement for suppliers that were already plugged into global value chains linked to the European market. These findings raise important questions about the role of public regulation and public governance in improving labour conditions in global value chains. While there has been an emphasis over the past three decades on private standards and private measures for governing labour conditions in global industries, experience has shown these measures to have weak outcomes. When one travels further down to smaller suppliers in lower tiers of global value chains in developing countries, private labour standards can be altogether missing. This is often because small suppliers usually have weaker technical, managerial and financial resources. Moreover, many lower tier suppliers in the electronics industry are located in developing countries with weak government agencies and regulatory oversight over labour conditions. This was exactly the case of the second tier suppliers in Penang featured in the paper. For the majority of these suppliers, government agencies did not assist with the compliance of any type of private or public standards on labour conditions.

The paper highlights a critical and important finding which suggests that mandatory standards directly tied to market access may be better able than voluntary private standards to penetrate down the global value chain to reach second tier suppliers. This signals the efficacy and importance of market access regulation over private voluntary initiatives in the most difficult places of global value chains. While market access standards (especially pertaining to labor and the environment) have been difficult to implement at a global or multilateral level (given World Trade Organization restrictions) there are however many examples that prove it is possible at the regional, national/bilateral, and even local levels. For example, China, Japan, South Korea, Turkey and California have all implemented their own versions of a RoHS.

Moreover, market access standards can have harmonizing effects on an industry. Take the printed circuit board industry as an example. After the EU RoHS banned the use of lead, printed circuit board companies found it more expensive to operate two different types of manufacturing processes – one that uses lead for non-EU markets and one that is lead free, complying with EU RoHS, and destined for the EU market. Also, brands such as Apple and Dell now require all of their products globally to comply with EU RoHS.

The findings of the paper support arguments for complementary public-private governance arrangements. Our findings suggest the need for policy actors and researchers to further investigate how to better integrate private regulation with public regulation and public enforcement in order to improve working conditions at lower tiers of the global value chain. 

For more details, please refer to: Nadvi, K. and Raj-Reichert, G. (2015) 'Governing health and safety at lower tiers of the computer industry global value chain',  Regulation & Governance, doi: 10.1111/rego.12079 . The paper can be accessed free.

Two 'Rising Powers' articles among most downloaded articles in 2014

Two journal articles previously presented on this blog have now been included in an online article collection featuring the most downloaded articles published in Routledge Social Sciences journals in 2014. The collection features the top three most downloaded articles that were published and downloaded in 2014 in each Routledge Social Sciences journal. 

Guarín, A. and P. Knorringa (2014), New Middle-Class Consumers in Rising Powers: Responsible Consumption and Private Standards, Oxford Development Studies, Vol. 42, No. 2, pp. 151-171.

In this article, Alejandro Guarín and Peter Knorringa ask how new middle-class consumers in the Rising Powers will influence ethical consumption patterns and private standards on socially and environmentally responsible production. Read the full blog post here.

Nadvi, K. (2014), “Rising Powers” and Labour and Environmental Standards, Oxford Development Studies, Vol. 42, No. 2, pp.137-150.

In his introductory article to a special issue on "Rising Powers" and Labour and Environmental Standards, Khalid Nadvi outlines what makes the Rising Powers special and in what ways they affect global labour and environmental standards. Read the full blog post here.

Both articles will be freely available on the publisher's website until the 30th June 2015.

The full collection of most read articles can be accessed here: http://bit.ly/social-sciences-most-read 

Changing Labour Regulations and Labour Standards in China

By Chris King-Chi Chan and Khalid Nadvi 

Image by Stuart Miles,
FreeDigitalPhotos.net

Chris Chan and Khalid Nadvi introduce a special issue of International Labour Review, Vol. 153, No. 4, that highlights key dynamics and upcoming challenges around labour regulations and labour standards in China.

Cheap clothes, shoes, toys, electronics… - China’s exports of cheap manufactures have contributed substantially to its reemergence as a global economic power over the past three decades. This model of economic growth has largely been based on low wages, keeping production costs low and making exports competitive. However, more recently this picture is changing. Workers are going on strike for higher pay and better working conditions, international NGOs are putting pressure on multinationals to abandon sweatshop production, and the Chinese government is trying to safeguard a ‘harmonious society’ by protecting workers through stricter labour laws. 

How do these dynamics reflect broader debates on public and private regulation? The contributions in this special issue illustrate the limits of voluntary private regulation through Corporate Social Responsibility (CSR) activities, which have been described by researchers interested in labour standards in Global Value Chains and Global Production Networks. Further, in line with the literature on labour in China, the articles in this collection underline the importance of ‘hard’ public regulation by the state, but also show the complexity of effectively implementing such labour laws. 

The individual articles in this issue shed light on different aspects of labour issues in China. First, Lüthje finds an increasing segmentation between high- and low skilled workers in the Chinese automobile industry, who face very different working conditions and wages. Further, Ngok and Zhuang highlight difficulties in implementing new labour laws in China, and make suggestions to increase the efficiency of the labour inspection regime. Hui and Chan document the role of multinationals in lobbying against stricter labour legislation in China through Hong Kong based business associations, which highlights links between global and local pressures around labour regulation. Finally, Wu and Sun critically analyse the practice of collective consultation, in which workers are represented through the All China Federation of Trade Unions. Their findings point to the need for further analysis of trend towards collective bargaining in China. 

Overall, the articles show strong dynamics of changing labour conditions in China, primarily based on increased worker activism and the state’s efforts to respond to these. More research is needed to grasp these changes, in particular as significant differences are emerging across economic sectors and across regions in China. Analysing these requires moving away from the perception of the Chinese state as a homogeneous actor and recognizing different dynamics at local level. Further, in a context of global production arrangements, combining research on labour relations in China with perspectives on labour standards in global production networks appears to be a fruitful approach that should be pursued further. 

For more details, please refer to: Chan, C. K. and K.Nadvi (2014), 'Changing labour regulations and labour standards in China: Retrospect and challenges', International Labour Review, Vol. 153, No. 4, 513-534.
DOI: 10.1111/j.1564-913X.2014.00214.x

The individual articles in this special issue can be accessed here: International Labour Review, Vol. 153, No. 4, Special Issue: LABOUR REGULATIONS AND LABOUR STANDARDS IN CHINA

Creating social value in 'bottom of the pyramid' markets: What can multinationals learn from businesses in rural India?

image by africa/FreeDigitalPhotos.net

By Noemi Sinkovics, Rudolf Sinkovics and Mo Yamin

In a recent article published in International Business Review, 23(4), 692-707, Noemi Sinkovics, Rudolf Sinkovics and Mo Yamin explore the role of social value creation in business model formulation at the bottom of the pyramid and the implications for MNEs.

'Bottom of the pyramid' markets in Rising Powers
Within International Business, Rising Power countries such as China, India, Brazil and Indonesia are not only important as home countries of emerging multinational enterprises (MNEs), but their large populations also present huge markets for MNEs from other countries. However, despite growing middle classes in the Rising Power countries, significant parts of their populations still live on low incomes at the bottom of the economic pyramid. In fact, the majority of people belonging to the 'bottom of the pyramid' (BOP) worldwide can be found in emerging economies. Thus, understanding how BOP markets work can be an important advantage for MNEs to be successful in Rising Power markets.

Creating social value at the bottom of the pyramid
Discussions on MNE strategies in BOP markets often centre around the notion of creating social value, in addition to making profits for the business. Social value creation can be defined as contributing to sustenance, self-esteem and freedom of servitude (Todaro & Smith 2011)1, which ranges from basic necessities such as food and shelter to issues such as dignity and personal freedom to make choices in life.

To better understand the phenomenon of social value creation, this paper looks at how social value is created by entrepreneurs within the bottom of the pyramid, and what MNEs entering BOP markets can learn from these businesses.

Five examples of social value creation: businesses in rural India
For this purpose, we interviewed the owners of five businesses in rural India, who are not only targeting BOP markets but also themselves come from a low-income background. Two of these explicitly created their business to create social value, in order to overcome specific difficulties experienced in the local community: A company selling traditional paintings was founded to stop dependence of local artists on middlemen, who were selling their artwork at high margins. In a more modern sector, an IT entrepreneur founded a rural business process outsourcing firm in response to high unemployment among skilled workers in the area. Three other companies did not explicitly see community benefit as their mission, but nevertheless created social value through their operations in a variety of ways. Two companies producing bangles and incense sticks both have a positive impact on the community by providing education and employment opportunities to people from disadvantaged social groups, such as physically handicapped or slum-dwellers. Similarly another company that grows and processes amla (Indian gooseberry) and grew out of a women's self-help group has not only improved incomes for its members and employees. It has also acted as an example for other entrepreneurs to start similar businesses lifting them out of poverty.

On the whole, these case studies illustrate that social value can be created independently of whether this is a stated objective of the business or not. Further, for those businesses that do explicitly aim to create social value, this tends to be in response to a very specific 'trigger constraint', i.e. a local constraint that entrepreneurs experience and try to overcome.

On top of this, all five businesses show that in order to make a difference for communities, a business model at the bottom of the pyramid needs to be closely linked to specific needs and constraints experienced by members of this community. All business models studied addressed such needs as part of their core business, no matter whether they consciously aimed to create social value or not.

What can MNEs learn from this?
For MNEs, this means that in order to be successful in BOP markets connecting to local communities is key, but also that they will likely find it difficult to do this. In practice, it may be hard for MNEs to establish close links in social networks at the bottom of the pyramid to find out about the needs experienced locally. This puts them at a disadvantage over local companies. Further, long term engagement is important to understand the local situation - again, this is unlikely to happen for many MNEs. MNEs originating from Rising Power countries may nevertheless have an advantage in understanding of BOP markets over Western MNEs, based on cultural or spatial proximity.

The question of how MNEs can know about and respond to the needs of BOP customers is important to find ways of creating social value by responding to local constraints, as practised by businesses originating from the BOP.


For more details, please refer to: Sinkovics,N., Sinkovics,R.R. & M.Yamin (2014) The role of social value creation in business model formulation at the bottom of the pyramid – Implications for MNEs?, International Business Review, 23(4), 692-707.
http://dx.doi.org/10.1016/j.ibusrev.2013.12.004


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1 Todaro, M.P., & Smith, S.C.(2011). Economic development (11th ed.). Harlow: Pearson Education Limited.

Small firms and Corporate Social Responsibility: comparing the social contract in Brazil, China and India

By Peter Knorringa and Khalid Nadvi 

image by David Castillo Dominici/

FreeDigitalPhotos.net

In a recent article published in the Journal of Business Ethics, Peter Knorringa and Khalid Nadvi compare the local institutional context for socially and environmentally sustainable behaviour in small firm clusters in Brazil, China and India. The paper points to a number of open questions around small firms and CSR in the Rising Powers.

Multinational companies have been adopting elaborate Corporate Social Responsibility (CSR) programmes at global level, but often face difficulties in implementing social and environmental standards throughout the supply chain - especially with many small suppliers located in emerging economies. To better understand how and when small firms are likely to improve their social and environmental performance, we propose to pay closer attention to the underlying social contract in these countries, including the formal and informal institutional context for CSR.

Important elements of such a social contract include both the national policy framework of labour and environmental regulation, as well as informal norms on ethical behaviour and traditions of compliance with formal rules that may exist in local industrial clusters. Hence, small firms that are located in industrial clusters in emerging economies and are supplying to multinationals not only face demands for compliance with global CSR standards from their international buyers, but they are also strongly influenced by the local context they operate in.

Nevertheless, we currently know very little about how these local and global forces interact. Do national labour laws and private social standards from MNCs complement each other in pushing for better working conditions in small firms? Are there informal ethical norms in local communities that small entrepreneurs belong to, which facilitate compliance with global CSR standards? Or, on the other hand, will small firms be less likely to comply with global social standards if they operate in a context where national labour laws are weakly enforced?

Comparing the social contracts in Brazil, China and India reveals differences in the local context for CSR, and in the ways in which these interact with global CSR standards:

In India, informal labour is common in small firms, which means that workers are not covered by formal labour laws. In addition, complex layers of subcontracting make it more difficult for international buyers to influence compliance with global CSR standards in suppliers. As a result, small firms in India face little pressure to improve social and environmental performance from the outside, and any willingness of entrepreneurs to engage in more social and environmentally sustainable production for ethical reasons is made more difficult by cut-throat competition in very price-sensitive markets.

In Brazil, on the contrary, there is relatively less informal employment. Labour laws in the formal sector are generally enforced, for example through a system of labour inspectors monitoring and facilitating compliance. Further, there is growing cooperation between the public and private sector around sustainability issues at national level which sets the scene for mutually reinforcing engagement including on global sustainability standards.

China is an intermediate case, where national labour and environmental laws have become stricter over the past decades, but the details of regulations and the effectiveness of enforcement differ across regions. Hence, the local institutional framework may be better positioned to accommodate global CSR demands than in India, but seems less conducive to effective enforcement of social and environmental standards than in Brazil.

Future research on CSR in emerging economy industrial clusters should explore in more detail the interactions between CSR pressures from global buyers and the localised social contract in which small firms operate. This requires paying attention to how public policies and informal norms at national and local level facilitate or hinder compliance with global social and environmental standards. In addition, it will be important to observe how the emergence of increasingly affluent middle classes in emerging economies such as China, India or Brazil influences the demand for social and environmentally sustainable goods in domestic markets. Potentially, such domestic sustainability standards in emerging economies may also begin to shape the formulation of global standards, as these countries increasingly engage in global governance fora.

For more details, please refer to:
Knorrigna, P. and Nadvi, K. (2014) 'Rising Power Clusters and the Challenges of Local and Global Standards', Journal of Business Ethics, September 2014.