3The interaction between human rights and business
18.During this inquiry, we have heard first-hand from victims of alleged human rights abuses by large UK companies, including violations of labour rights, such as child labour, freedom of association and the prohibition of forced and compulsory labour. We have also heard commitment by businesses to respect human rights.
19.The original UK National Action Plan set out clearly why businesses should take human rights responsibilities seriously:
- “Companies increasingly understand that there is a business case for respect for human rights and that this brings business benefit in various ways, by:
- “helping to protect and enhance a company’s reputation and brand value;
- “protecting and increasing the customer base, as consumers increasingly seek out companies with higher ethical standards;
- “helping companies attract and retain good staff, contributing to lower rates of staff turnover and higher productivity, and increasing employee motivation;
- “reducing risks to operational continuity resulting from conflict inside the company itself (strikes and other labour disputes), or with the local community or other parties (social licence to operate);
- “reducing the risk of litigation for human rights abuses;
- “appealing to institutional investors, including pension funds, who are increasingly taking ethical , including human rights, factors into account in their investment decisions; and
- “helping companies to become a partner/investor of choice for other businesses or governments that are concerned to avoid human rights risks.”18
Who are the victims of human rights abuses?
20.Victims of human rights abuses by businesses can include: direct employees of the company; people employed further along the supply and value chain by subsidiaries or companies contracted to undertake work;19 and people whose rights are affected by a company’s actions in their vicinity.
21.Within these broad categories, UNICEF UK told us that some groups of people, such as children, were more vulnerable to abuse by companies:
“As children are still growing and developing, they are especially vulnerable to negative business impacts and can be severely and permanently affected by infringements of their rights: there are more than 168 million child labourers worldwide, 85 million of whom are in hazardous work20; child consumers can be more easily convinced to buy and use inappropriate or unsuitable products; and children are much more susceptible than adults to harmful physical effects of toxic chemicals, manual labour and poor diets.”21
22.According to Progressio (CIIR) and Gender and Development Network, women and girls are also particularly vulnerable to certain forms of human rights abuse by businesses:
“Violations of women’s and girls’ human rights caused by entrenched gender-based discrimination occur in every country in the world, cutting across economic, social, environmental, political and cultural spheres, from local to global levels. As such, business activities and operations, as well as the trade, investment and tax policies that facilitate them, create heightened risks to women’s rights and impact upon women in gender-specific ways, whether as workers, community members or human rights defenders.
“Women living in poverty in developing countries are particularly at risk of adverse impacts of business activities. Violations of their rights can be particularly severe in the extractives, large-scale agricultural and export manufacturing industries, including textiles.”22
23.A similar concern has been expressed by the International Labour Organization (ILO), who found that:
“In many sectors, women represent a large share of the workforce in global supply chains. They are disproportionately represented in low-wage jobs in the lower tiers of the supply chain and are too often subject to discrimination, sexual harassment and other forms of workplace violence. In addition, they lack access to social protection measures in general, and maternity protection in particular, and their career opportunities are limited.”23
The same is also true in some sectors in the UK.
Human rights abuses in the garment and textiles sector
24.While we did not focus particularly on any one sector, we received a large amount of evidence on human rights abuses in the garment and textiles industry, which has been under the microscope since the 2013 collapse of the Rana Plaza building, in which over 1,000 workers were killed. Common abuses around the world, according to the International Corporate Accountability Roundtable, include “the violation of freedom of association, health and safety risks, low wages and excessive hours, human trafficking, forced labour, and child labour”.24
25.In the light of concerns about conditions in this sector, we visited Turkey and Leicester to investigate specific claims further.
Turkey
26.In November 2016, we undertook a four-day visit to Istanbul and Ankara, prompted by a BBC Panorama programme which highlighted significant human rights issues in Turkish factories supplying clothes to UK companies.25 It showed refugees being exploited and underage children being employed in factories supplying high street brands such as ASOS, NEXT and Marks and Spencer. The programme did not provide evidence that the children were employed to make clothes for these companies and some of its claims were contested by the companies.
27.While in Istanbul, we met buyers26 from the companies named above and attended the launch of the Ethical Trading Initiative’s Turkey platform. We met local trade union representatives and visited some local factories. In Ankara, we received a briefing from Foreign and Commonwealth Office officials and officials from the Department for International Development, and met the Turkish Parliamentary Human Rights Commission. We also had meetings with several Turkish Government departments and heard from local NGOs.
Syrian refugee crisis
28.The situation in Turkish factories is affected by the ongoing Syrian refugee crisis. When refugees first started arriving from Syria in 2011, Turkey set up what we were told was a very good system of camps. At the time it was thought that the refugee situation would be temporary. Now, there are approximately 150,000 Syrian refugees in Turkish camps and 2.7 million Syrian refugees in host communities (mostly in the South East of Turkey and Istanbul). In the early days, Turkey was very resistant to accepting international support, but as the crisis worsened, the Turkish Government in 2016 concluded an agreement with the EU, under which the EU would provide €3 billion of financial support for Turkey, €328 million of which would come from the UK.27
29.It costs employers four times more to hire Syrian refugees legally than illegally, and businesses are also required to pay for their work permits. There is also a shortage of jobs, meaning that Turkish citizens and Syrian refugees are applying for the same jobs. FCO and DfID officials told us that this has meant that opposition within Turkey to hosting refugees is growing.
Child labour
30.The Turkish Government was reluctant during our visit to acknowledge that there was an issue with child labour in Turkish factories, but local NGOs were clear that there were children working in factories, and that this has been exacerbated by the influx of Syrian refugees. Their strong message to us was that UK companies should be encouraged to engage more with the Turkish Government: Turkish Ministers and officials might be more willing to engage with companies themselves on ways to reduce child labour and other labour abuses in factories.
31.Buyers from NEXT and Marks and Spencer told us that it could be difficult for them to have visibility further down their supply chains. Child labour, when it was discovered, usually occurred when suppliers had sub-contracted their work to other factories. They confirmed that UK brands either banned sub-contracting, or insisted on auditing sub-contracted factories, as part of their contracts with manufacturers: when illegal sub-contracting was discovered, UK companies would either put a remediation plan in place, or cease working with the supplier in the worst cases.
Still from BBC Panorama investigation showing children working in a factory in Istanbul
Trade union rights
32.Another significant issue raised during our visit to Turkey was hostility towards trade union membership by some Turkish manufacturers. In our meeting with trade union representatives, they mentioned a widely reported case in 2015, where 14 workers were dismissed for unionising in a factory in Izmir, SF Leather, used by Mulberry. They criticised Mulberry for not intervening sooner or terminating their contract with the factory. The case was subsequently settled out of court as part of a confidential settlement.
33.When visiting Chantuque, a factory supplying clothes to UK companies including ASOS, we asked the factory owner about his attitude towards trade union membership. He said that his workers were not unionised, but that he would meet worker representatives. We subsequently had sight of a newspaper article on Chantuque, which alleged that the owner gave pay rises to non-unionised workers and told unionised workers that if they quit their unions they would get a rise; sacked 35 workers (seven of them unionised) as a warning; and told a number of them that they were being sacked for talking about politics at work.28
Leicester
34.On 2 March 2017 we visited Leicester, following several media reports and the publication of research findings by the University of Leicester29 on serious labour rights abuses in the East Midlands garment industry.30
35.While in Leicester, we met different groups and stakeholders that were affected by the current problems in the sector, and in particular the ‘Fast Fashion’ industry. We received a briefing from Professor Peter Nolan and Dr Nikolaus Hammer, of the University of Leicester, on their research findings. We had meetings with representatives from Leicester City Council and the Leicester and Leicestershire Enterprise Partnership (LLEP). We also heard from all the key actors in the supply chain: leading High Street retailers, local manufacturers with a combined experience of over 300 years in the industry, and garment workers.
The UK garment and ‘Fast Fashion’ industry
36.With the emergence of the ‘Fast Fashion’ phenomenon, the UK garment manufacturing industry has undergone significant changes.31 Fast Fashion has changed the sourcing practices of retailers as it requires products to be designed, manufactured and delivered to consumers at speed.32 Retailers have consequently increased sourcing from UK manufacturing units, which are able to offer them faster turnaround times than suppliers in the Far East.
37.Simultaneously, the industry has undergone significant structural changes: where a few years ago it was made up of large manufacturing units; it is now dominated by small firms and fragmented supply chains.33 These structural changes have resulted in the emergence of a new industry, which, according to the Leicester University research, is currently characterised by extremely poor working practices, with many firms violating work and employment regulations. Indeed, that research found that the “majority of garment workers are paid way below the National Minimum Wage, do not have employment contracts, and are subject to intense and arbitrary work practices”.34 Dr Hammer and Professor Nolan made a strong case in their report for updating the existing regulatory framework governing garment manufacturing, so as to reflect the changed dynamics of the sector, and to safeguard against labour rights abuses.35
Human rights abuses and violations of work and employment regulations in the Fast Fashion industry
38.We heard compelling evidence during our visit to Leicester that labour rights abuses are endemic in the Leicester garment industry; they are also very likely to be occurring in other key manufacturing hubs, such as London and Manchester. All these regions have a high concentration of vulnerable groups, particularly migrant communities who have difficulties speaking English, and who may in some cases be held “captive” to the sector despite the poor working conditions.36
39.The most common forms of abuse include payment of wages below the minimum wage, lack of employment contracts and significant disregard of health and safety regulations. According to the Leicester University research, it is common practice for employers to hand out wage slips which understate the number of hours worked by employees in order to save on employers’ tax contributions and to make it appear as though employers are paying the minimum wage. For example, while most workers work between 40–50 hours a week, their wage slips might only show 20 hours of work, paid at the minimum wage.
40.Following our visit to Leicester, we received written evidence from the niece of a woman who had been working in these conditions:
“What the employers do is that they make her sign a paper that she will work either 16 or 20 hours a week at minimum wage. Then they will give her a draft copy of wage slip which will again show that she works for example 20 hours and is paid £7.20 an hour … She worked on average 60 hours a week but only got paid £3 sometimes £3.50 an hour. In that time she also suffered severe back pain because of the number of hours she worked. She was always paid cash.”37
41.Other worker grievances include poor physical conditions in the factories, such as working in the cold without heating; poor cleaning and hygiene practices; and lack of adequate maintenance of buildings and manufacturing units.
Workers making clothes for River Island in a Leicester factory. This factory is considered to be an example of good practice.
Workers and former workers in Leicester factories at the Pakistani Youth and Community Association
The Leicester Imperial Typewriter Building, where it is estimated that over 50 workplaces are housed. The building is in disrepair and key fire escapes are not fit for purpose.
Supply chain dynamics and the need to ‘level the playing field’
42.While violations of employment law and regulations need to be tackled, supply chain dynamics and the uneven distribution of costs and benefits between retailers and manufacturers also need to be addressed. The working conditions that manufacturers offer their workforce in many cases reflect the deal they receive from leading retailers. Currently, they face many pressures, including delivering high volume production in short time scales and at very low or even no profit margins.38
43.Local manufacturers with years of experience in the sector told us that negotiating reasonable deals with retailers was one of the biggest challenges they faced. Their perception was that buyers had little knowledge about “real production costs”, and were unwilling to pay for the fast turnaround they received through local sourcing—they told us that buyers unfairly compared UK manufacturing costs to overseas costs.39 Imbalanced commercial agreements, together with other conditions imposed on them by retailers, seriously undermined their ability “to improve working conditions.”40 In fact, according to the Leicester University research, the pressures faced by manufacturers were such that “it might be fairly tempting for some to exploit the existing opportunities in the labour and product market; in other words, to push a vulnerable workforce harder, to subcontract to less compliant enterprises, and to calculate with a (relatively low) risk of the consequences following detection”.41
44.The “skewed playing field”42 has also created a divide between compliant and non-compliant businesses, adding further to the pressures faced by suppliers. Competition from unethical manufacturers, who are able to offer lower prices to buyers, undercuts and takes away business from ethical suppliers. This is a major grievance among suppliers, some of whom said in an off-the-record session that buyers “have an ethical responsibility” and should be able to identify the difference between ethical and non-ethical prices. The suppliers argued, in contrast, that leading retailers encouraged unlawful practices by doing business with unethical manufacturers in the knowledge that the prices quoted must require them to cut corners.
Human rights abuses in other sectors
45.While we did not look in detail at the alleged human rights abuses occurring in other industries, we did take evidence from a victim in Nigeria whose life and livelihood were significantly affected by an oil spill.43 Other alleged human rights abuses in the extractives industry in Africa and South America have been well documented.44 Recent investigations have also focused on the Democratic Republic of Congo, where children are forced to mine minerals such as cobalt, which are essential to smartphones.45
46.In the agricultural industry, both in the UK and overseas, workers are vulnerable to trafficking and being made to work in inhumane conditions for less than the minimum wage.46 Child labour is also prevalent in the global tobacco industry.47
18 Foreign and Commonwealth Office, Good Business: Implementing the UN Guiding Principles on Business and Human Rights, Cm 8695, September 2013, para 1: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/236901/BHR_Action_Plan_-_final_online_version_1_.pdf [accessed 12 March 2017]
19 This would also include companies who are producing goods for others and, for example, finance companies.
20 http://www.ilo.org/global/topics/child-labour/lang--en/index.htm [accessed 9 March 2017]
23 ILO, Provisional Record, 105th Session, Geneva, (May–June 2016), para 4: http://www.ilo.org/wcmsp5/groups/public/---ed_norm/---relconf/documents/meetingdocument/wcms_489115.pdf [accessed 12 March 2017]
25 BBC Panorama, Undercover: The Refugees Who Make Our Clothes (October 2016): http://www.bbc.co.uk/programmes/b0813kpq [accessed 7 March 2017]
26 These are the company employees who place orders with suppliers and agree the terms of the contract under which the clothes will be manufactured.
27 http://europa.eu/rapid/press-release_MEMO-16–963_en.htm [accessed 16 March 2017]
28 This description was provided by Alfred LeProvost from the British Embassy. The original report (in Turkish) can be found here: https://www.evrensel.net/haber/90442/santukta-sendikalasma-mucadelesi-suruyor
29 University of Leicester, New Industry on a skewed Playing Field: Supply Chain Relations and Working Conditions in UK garment Manufacturing, Centre for Sustainable Work and Employment Futures (2015): http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/ [accessed 12 March 2017]
30 The Channel 4 Despatches programme, ‘Britain’s cheap clothes,’ was aired on 30 January 2017, and was widely publicised, see e.g. British factory workers paid £3 an hour making clothes for high street giants, The Daily Telegraph, 23 January 2017: http://www.telegraph.co.uk/business/2017/01/23/british-factory-workers-paid-3-hour-making-clothes-high-street/ [accessed 8 March 2017]. Labour rights abuses in the UK garment sector have been featuring in media reports since 2010 (when the first series of the Dispatches programme exposed poor working conditions in factories in the Leicester area). Following these media reports, the Ethical Trading Initiative (ETI) commissioned the Centre for Sustainable Work and Employment Futures, of the University of Leicester, to carry out research into working conditions in the UK garment industry. The research sought to understand supply chain dynamics within the UK garment sector, and conducted a case study on working conditions in the garment manufacturing hub of Leicester.
31 “The term “Fast Fashion” refers to a phenomenon in the fashion industry whereby production processes are expedited in order to get new trends to the market as quickly and cheaply as possible. As a result of this trend, the tradition of introducing new fashion lines on a seasonal basis is being challenged. Today, it is not uncommon for fast-fashion retailers to introduce new products multiple times in a single week.” (http://www.investopedia.com/terms/f/fast-fashion.asp [accessed 16 March 2017])
32 University of Leicester, New Industry on a skewed Playing Field: Supply Chain Relations and Working Conditions in UK garment Manufacturing, Centre for Sustainable Work and Employment Futures (2015) p 22: http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/ [accessed 9 March 2017]
33 University of Leicester, New Industry on a skewed Playing Field: Supply Chain Relations and Working Conditions in UK garment Manufacturing, Centre for Sustainable Work and Employment Futures (2015) p 8: http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/ [accessed 9 March 2017]
34 Ibid.
35 Ibid.
36 Ibid. p 15
38 University of Leicester, New Industry on a skewed Playing Field: Supply Chain Relations and Working Conditions in UK garment Manufacturing, Centre for Sustainable Work and Employment Futures (2015) p 24: http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/ [accessed 9 March 2017]
39 A supplier commenting on the difficulties in negotiating prices with buyers when they compared his prices to overseas suppliers said he had to remind them, “I am not China and I am not Bangladesh.”
40 University of Leicester, New Industry on a skewed Playing Field: Supply Chain Relations and Working Conditions in UK garment Manufacturing, Centre for Sustainable Work and Employment Futures (2015) p 24: http://www2.le.ac.uk/offices/press/for-journalists/media-resources/Leicester%20Report%20-%20Final%20-to%20publish.pdf/ [accessed 9 March 2017]
41 Ibid.
42 Ibid. p 17
44 Amnesty International, Amnesty International Report 2016/17: The state of the world’s human rights: https://www.amnesty.org.uk/files/2017–02/POL1048002017ENGLISH.PDF?xMHdSpNaJBUNbiuvtMCJvJrnGuLiZnFU [accessed 9 March 2017]; The Guardian, British gold mining firm agrees settlement over deaths of Tanzanian villagers (February 2015): https://www.theguardian.com/environment/2015/feb/10/british-gold-mining-settlement-deaths-tanzanian-villagers [accessed 9 March 2017]
45 Sky News, Meet Dorsen, 8, who mines cobalt to make your smartphone work (February 2017): http://news.sky.com/story/meet-dorsen-8-who-mines-cobalt-to-make-your-smartphone-work-10784344 [accessed 9 March 2017]; The Guardian, Your new iPhone’s features include oppression, inequality – and vast profit (September 2016): https://www.theguardian.com/commentisfree/2016/sep/19/your-new-iphone-features-oppression-inequality-vast-profit [accessed 12 March 2017]
46 The Guardian, Gangmasters agree to pay more than £1m to settle modern slavery claim (December 2016): https://www.theguardian.com/uk-news/2016/dec/20/gangmasters-agree-1m-payout-to-settle-modern-slavery-claim [accessed 9 March 2017]
47 The Guardian, Child labour: the tobacco industry’s smoking gun (September 2011): https://www.theguardian.com/global-development/2011/sep/14/malawi-child-labour-tobacco-industry [accessed 9 March 2017]; The Independent, Imperial Tobacco and British American Tobacco linked to child labour in Indonesia (May 2016): http://www.independent.co.uk/news/business/news/imperial-tobacco-and-british-american-tobacco-linked-to-child-labour-in-indonesia-ngo-says-a7047736.html [accessed 9 March 2017]
4 April 2017