The path forward: OECD perspectives on company-union agreements' role in shaping responsible business practices

During the Organisation for Economic Co-operation and Development (OECD) forum on due diligence in the garment and footwear sector, which took place in Paris from February 19 to 23, prominent experts delved into the potential of legally binding agreements voluntarily adopted by companies and global trade unions. Representatives from various sectors, including brands, manufacturers, trade unions, and government, engaged in robust discussions, sharing insights into their experiences while negotiating and implementing such agreements. Additionally, they examined the role of these agreements in light of impending mandatory due diligence legislation, sparking debates that confronted perspectives from the public and private sectors, and those from employers and unions.

Hannah Koep-Andrieu, who heads the Supply Chain Due Diligence division at the OECD Centre for Responsible Business Conduct, led the discussion on "binding company-union agreements and their role in due diligence”. She underscored the significance of mutual communication between companies and workers regarding potential labour rights impacts. Highlighting the pivotal role of binding agreements in facilitating such communication, she observed that while companies have the option to engage with trade unions without formal agreements, many have chosen to enter into agreements addressing specific risk issues and geographical areas. These agreements include international accords focused on safety and initiatives aimed at ensuring living wages. The expert panel evaluated the effectiveness and scalability of these agreements as instruments for conducting due diligence.

Government perspectives on binding agreements: a comparative analysis of the US and Germany

What are the perspectives of governments in both Europe and the US on binding agreements, and how do they contribute to promoting responsible business conduct, especially within the garment and footwear sector? Germany demonstrated a proactive approach by implementing various policy tools aimed at enhancing sustainability and ethical practices in the industry. These include initiatives such as the Partnership for Sustainable Textiles, the Green Button label, and the German Supply Chain Act. Additionally, Germany has actively supported international accords addressing these issues.

“I can tell in the name of my government that we are fighting for binding rules. These are very helpful to concretely see what is working on the ground, making a difference for the workers, how can that be implemented on the surrounding,”

The German government's strategy involves a synergistic blend of multi-stakeholder initiatives aimed at establishing a binding legal framework. This approach aims to create opportunities for brands, trade unions, and NGOs to collaboratively develop and implement effective solutions, thereby guiding brands towards responsible practices. Bärbel Kofler, member of the German Parliament and parliamentary state secretary for the Federal Ministry for Economic Cooperation and Development highlighted the importance of having clear and enforceable rules within a legal framework, as it facilitates the identification and implementation of solutions. “I can tell in the name of my government that we are fighting for binding rules. The agreements binding companies and trade unions are inside this legal framework. It is very helpful to concretely see what is working on the ground, making a difference for the workers, how can that be implemented on the surrounding,” she said.

Within this legal framework, agreements between companies and trade unions play a significant role in providing practical insights and solutions for improving working conditions, as evidenced by initiatives such as those addressing fire safety issues in Bangladesh. Kofler emphasized the bottom-up approach taken, where reports from workers and unions about poor working conditions, particularly concerning female workers' experiences of sexual harassment, have led to the development of effective solutions. The goal now is to scale up these initiatives, she said, recognizing that addressing issues in one part of the supply chain can have broader implications, and efforts are underway to expand agreements and solutions accordingly.

Yet, according to the International Federation for Human Rights (Fidh), the EU Council failed to endorse the Corporate Sustainability Due Diligence Directive, which the Federation said “marks a deplorable setback for corporate accountability and the protection of human rights and the environment worldwide”. The blockage is largely attributable to big Member States, notably Germany and most certainly Italy. As Euractiv announced earlier, the Berlin government had asserted that it would abstained from voting (which equals as a "no") on the EU's proposed corporate due diligence law, the Corporate Sustainability Due Diligence Directive (CSDDD), which would hold companies accountable for human rights violations in their supply chains.

The CSDDD has indeed faced strong criticism from business representatives who argue that it may impose additional administrative burdens, especially at a time when both the EU and national governments aim to streamline regulations. While Germany has initially expressed support for the EU law, it has also voiced concerns, aiming to prevent an excessive burden on companies, particularly those of small and medium sizes. Regarding the role of Italy, Euronews mentioned that after Germany, "Italy appears to have blocked them (the New Rules) in a secret vote by diplomats".

“We learned via this initiative, that by having workers at the policy table, we could get more economic growth, a stronger middle class, and voices that support and promote democracy,”

On the US government side, Kelly Fay Rodriguez, special representative for International Labor Affairs at the US Department of State, discussed the US's efforts to promote workers' rights globally and combat unfair labour practices. The US government views company-union agreements as crucial tools in this endeavour. The landmark Dindigul Agreement to eliminate gender-based discrimination exemplifies how unions and brands can collaborate to enhance working conditions, foster company resilience, and address societal disparities. The US government actively supports and seeks to expand such agreements, as demonstrated by recent initiatives such as the Presidential Memorandum on high labour standards.

“We learned via this initiative, that by having workers at the policy table, we could get more economic growth, a stronger middle class, and voices that support and promote democracy,” asserted Rodriguez. The US prioritises company-union agreements over other measures like codes of conduct and auditing, recognizing their effectiveness in preventing workplace tragedies and empowering workers along the value chain. She elaborated: “We are going to keep implementing existing workers legislation and put into action the President’s initiatives. Why do we do it? First, we know that other efforts don’t work. Or at least certainly not as effectively as these collective agreements. Codes of conducts, auditing, etc, can be useful tools, but they are not enough. They run the risk of conflict of interest. We all have in mind terrible examples of tragedies, a building on fire, or female workers being harassed along the value chain. These could have been easily avoided should the voices of the workers be heard. And no one wants to hear about those cases in the newspaper headlines on your supply chain.”

The role and views of Unions in negotiating binding agreements

Turning to the perspective of the unions, industrial global unions have engaged in negotiations for several binding agreements with companies in the sector, including acts on living wage, the international accord, and bilateral global framework agreements. Additionally, they support their affiliate unions in collective bargaining processes. For unions, these binding agreements hold significant importance within the broader context of industrial obligations.

“Without legal regulation, workers would still be slaves,”

In fact, Atle Høie, the general secretary of IndustriALL Global Union, emphasised the critical role of legal enforceability in industrial regulations. Høie commented: “If we don’t have legal enforceability, then there are no industrial regulations. Without binding agreements, workers and employers are on different planets. Without them, employers hold all economic powers, and they use it. In other words, without legal regulation, workers would still be slaves. Years ago, the ILO setup conventions related to the right to organise and bargain collectively. These are groundbreaking inventions. And of course, implementing these conventions are the most essential things. They are amongst the most ratified conventions in the world, so legally, most countries do respect the right to bargain, the right to organise. But the world shows us that there is a big difference between ratification and implementation. Many of the countries who have ratified still allow massive violation of these conventions on their own territory. And there are only two things that can force implementation: strong unions, and of course, cooperative governments in the rest of the world.”

Høie also highlighted the transformative impact of binding agreements, citing the example of the Bangladesh Accord, which significantly improved working conditions in the textile industry following the Rana Plaza collapse. “Just to mention a few figures over this period of 11 years since the Rana Plaza event: IndustryALL members conducted thousands of thousands of inspections in Bangladesh right after the incident. In total, they have put on record almost 200 000 issues that needed to be rectified in the factories that produce the brands."

Høie continued: "Today, 11 years later, 92 to 93 percent of all these issues have been rectified. This would have never been possible without a binding agreement. Last year, we managed to negotiate an extension of the accord, which will include more countries. We opened it to Pakistan, and will open it to more countries in the next six years. And we also managed to extend the scope of the accord, to encompass more fundamental right supports, which includes the right to organise, and bargain collectively. If within these next six years, we have five more countries, that is five more countries which won’t have to face the issues that Bangladesh faced 11 years ago."

“I think it comes both ways. The employers’ interests must also be protected,”

In Cambodia's textile and footwear industry, which comprises approximately 750 companies and employs around 800,000 individuals, understanding the motivations behind signing agreements is crucial. Ken Loo, secretary general of the Textile, Apparel, Footwear & Travel Goods Association in Cambodia, highlights the importance of these agreements for both employers and brands. Contrary to the assumption that only employers violate contracts, Loo emphasises the need for fairness and protection of employers' interests. “I think it goes both ways. The employers’ interests must also be protected,” he said.

Binding agreements are essential to ensure fairness and accountability from all parties involved. While employers and trade unions are direct signatories, other stakeholders, such as buyers, also play a significant role in upholding the agreements. They hold considerable power in the industry hierarchy and can influence both employers and trade unions. For instance, in cases of violations, both trade unions and factories may turn to buyers for resolution. Initially, there may be scepticism and lack of trust between parties, but over time, as relationships develop, faith in the agreements strengthens. Loo thus underscores the importance of third-party involvement, especially in the early stages of an agreement, although the necessity of third-party involvement may diminish and even become unnecessary as trust and cooperation between stakeholders grow.

Brands' practical approach to binding agreements and due diligence in the fashion industry

How does PVH, an American fashion company that owns brands such as Calvin Klein and Tommy Hilfiger, approach joining such agreements and what role do they play in practical due diligence activities? Mick Bride, senior vice president of Corporate Responsibility, Global Affairs and Responsible Supply Chain at PVH, explained: “Our approach is straightforward: we aim to match our words with actions. We are inclined towards signing agreements only if we genuinely intend to adhere to them. We view these agreements as vital, not merely as a facade of being a socially responsible company. When discussing upcoming legislation in the fashion sector, we conducted thorough research and found that there are around 82 to 84 specific laws on the horizon. One of our Legal Affairs representatives at PVH made a notable observation: 'Fashion is becoming a regulated industry.' If we accept this premise, then essentially, companies have three options: ignore the issue, conduct top-down due diligence, or engage in dialogue with stakeholders to collaboratively develop a model that integrates due diligence throughout the supply chain and company operations. From our perspective, the latter option is the most effective.”

“'Fashion is becoming a regulated industry.' If we accept this premise, then essentially, companies have three options: ignore the issue, conduct top-down due diligence, or engage in dialogue with stakeholders to collaboratively develop a model that integrates due diligence...”

How scalable are multi-company agreements?

Another important question would be how scalable are these multi-company agreements? IndustriALL’s Atle Høie answered: "Scalability in terms of expanding to more countries is crucial. The more countries we include, the better. For brands, having more signatories enhances enforceability. It is in their interest to have broad participation. For instance, with agreements like the Bangladesh Accord, the more signatories we have, the greater the impact in cleaning up practices. These agreements remain necessary until trade unions are obsolete, regardless of improvements in the international community."

From the government's perspective, German parliament member Bärbel Kofler noted that "while having 200 companies sign agreements is commendable, it is only 200 companies and not all. It is therefore essential to ensure a level playing field for all. It is unfair for compliant companies to bear additional costs; those ahead should not be disadvantaged compared to non-compliant ones. Consumers should be informed so they can make informed purchasing decisions. As governments, we are elected to establish rules and laws. It is about setting minimum standards we all agree on, such as respecting freedom of association and adhering to ILO core values. Countries that ratify international agreements should incorporate them into their regulatory systems."

Exploring strategies for brands to achieve living wages

In his opening speech, Antonio Gomes, OECD’s deputy director of the Directorate for Financial and Enterprise Affairs, mentioned risk based due-diligence, and the fact that the OECD identifies inadequate wages as a prevalent risk in the global garment and footwear industry, often falling short of workers' basic needs. In this regard, Høie's remarks shed light on future endeavours, particularly in the garment and textile industry, with an emphasis on enhancing the legal enforceability and arbitration mechanisms of agreements. He emphasised the recent efforts to negotiate additional agreements, highlighting the importance of strengthening legal mechanisms to support collective bargaining on wages in various countries.

The essence of these agreements lies in brands assuming financial responsibility for any wage increases resulting from national collective agreements, thereby reclaiming some of the responsibility they had previously delegated. “Recently, we have an agreement with a few brands on legally binding mechanisms to collectively bargain wages in countries where that will become a result. The whole point of this agreement is that the brand will take the last financial responsibility for any increases that come through a national collective agreement. And this is important, as this is how brands take back some of their responsibility that they deliberately gave away when they created their own structure. Having economic powers taking back the responsibilities they tried to get rid of is what it is about.” A negotiation that could significantly mark the development in the industry's landscape.