Regulating for corporate human rights abuses: The emergence of corporate reporting on the ILO's human rights standards within the global garment manufacturing and retail industry

Abstract

Despite the ubiquitous nature of the discourse on human rights there is currently little research on the emergence of disclosure by multinational corporations on their human rights obligations or the regulatory dynamic that may lie behind this trend. In an attempt to begin to explore the extent to which, if any, the language of human rights has entered the discourse of corporate accountability, this paper investigates the adoption of the International Labour Organisation's (ILO) human rights standards by major multinational garment retail companies that source products from developing countries, as disclosed through their reporting media. The paper has three objectives. Firstly, to empirically explore the extent to which a group of multinational garment retailers invoke the language of human rights when disclosing their corporate responsibilities. The paper reviews corporate reporting media including social responsibility codes of conduct, annual reports and stand-alone social responsibility reports released by 18 major global clothing and retail companies during a period from 1990 to 2007. We find that the number of companies adopting and disclosing on the ILO's workplace human rights standards has significantly increased since 1998 – the year in which the ILO's standards were endorsed and accepted by the global community (ILO, 1998). Secondly, drawing on a combination of Responsive Regulation theory and neo-institutional theory, we tentatively seek to understand the regulatory space that may have influenced these large corporations to adopt the language of human rights obligations. In particular, we study the role that International Governmental Organisation's (IGO) such as ILO may have played in these disclosures. Finally, we provide some critical reflections on the power and potential within the corporate adoption of the language of human rights.

Introduction

In the introduction to Human Rights and Empire, Douzinas (2007, p. 33) observes,

“Human rights are the way people speak about the world and their aspirations, the expression of what is universally good in life. They have become ingrained in the new world order, their claims adopted, absorbed and reflexively insured against challenge. Assent and critique, approbation and censure are part of the same game, both contributing to the endless proliferation and to the colonialism of rights.”

Yet despite the ubiquitous nature of the human rights discourse, there is a surprising lack of critical accounting scholarship on corporate disclosure in relation to human rights obligations; the emerging regulatory environment which may lie behind these disclosures; or what the application of human rights within a business context means for the prospect of greater corporate accountability. This study attempts to begin to address this lacuna by investigating the adoption of the International Labour Organisation's (ILO's) workplace human rights standards by major global retail companies that source products from developing countries, as disclosed in their corporate reporting media. While prior research has focused on the impact of the media (see, Brown and Deegan, 1998, Deegan et al., 2002, Islam and Deegan, 2010) and Non Government Organisations (NGOs) (see, Deegan and Blomquist, 2006, Tilt, 1994) on the operating and reporting behaviour of companies, to date there has been little detailed study in the accounting literature of the global regulatory shifts that have accompanied growing concerns over the complicity of multinational corporations in human rights abuses in developing countries. Specifically, there has been little exploration of the regulatory function of International Governmental Organisations (IGOs) within the global economy and their role in introducing human rights obligations into the discourse of corporate accountability.

The paper builds on Islam and Deegan's (2008) study of the Bangladesh Garments Manufactures and Exporters Association (BGMEA), and in particular their inference that human rights obligations were beginning to work their way into supplier relationships through the ILO's workplace standards. This is an interesting observation as historically the global business community has forcefully resisted bringing the language of human rights into the sphere of corporate responsibility (Kinley and Chambers, 2006). For example, the UN Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights (2003) represents one of the best known attempts to highlight the potentially negative impact of corporate activity on human rights and to extend corporate responsibility for human rights abuses to suppliers and other business partners that fall within their sphere of influence. This attempt to develop an international set of legally binding norms reflected a growing appreciation of the inability of individual States to hold multinational corporations accountable for complicity in human rights abuses that occurred outside national borders. This problem is particularly prevalent within the garment retail sector as multinational companies transfer production locations to developing countries where costs are cheaper, but this is often because labour rights are either weakly enforced or entirely absent (Custers, 1997). A number of high profile companies like Nike, Disney and Coca Cola experienced mounting global criticisms in the 90s over incidents of child and forced labour, accidents from fires, verbal and physical abuse or direct exploitation of workers in their supply factories in developing countries (Bachman, 2000, Collingsworth, 2002, Spar, 1998, Wah, 1998). However, as Kinley and Chambers (2006, p. 449) point out, in the face of this escalating concern,

“Business leaders mounted critiques, not only of the Norms document itself, but also of any expansion of the concept of corporate liability for human rights responsibilities that went beyond the current model of self-regulation through corporate codes of conduct, social responsibility policies and the like.”

Partly as a consequence of this aggressive lobbying, the Norms have effectively been sidelined (Kinley and Chambers, 2006). Yet it may be that the enduring threat of a more legally binding set of principles goes some way towards explaining the somewhat paradoxical hint that human rights obligations are beginning to enter the disclosure narratives of large multinational garment retailers through the ILO's workplace standards. IGOs appear to play an important role in the emerging disclosure in relation to corporate accountability for human rights by developing global standards; forging alliances with NGOs and collectively using media to pressurise companies and their suppliers.

While we retain a relatively sceptical position on whether or not these corporate commitments to workplace rights correlate with substantive improvement in the lot of children and workers in emerging economies (see for example the ILRF, 2007) and also whether the broader human rights discourse represents an effective mechanism for securing greater economic justice (Douzinas, 2007), we nevertheless contend that this shift in the language of corporate responsibility and the institutional pressures that may be partially behind it, represent powerful and important new ways of constructing workers (as bundles of rights) and corporations as duty bearers (Barrientos, 2000, Christopherson and Lillie, 2005, Islam and Deegan, 2008, Islam and Deegan, 2010, Mc Clintock, 1999, Ruggie, 2008) in ways which both colonise and emancipate. We contend that the critical accounting community has yet to fully explore the extent to which this shift in discourse operates or how it could be employed for, “dissent, resistance and rebellion against the oppression of power and the injustice of law.”

The paper therefore has three objectives. Firstly, it empirically explores the extent to which a group of multinational garment retailers invoke the language of human rights when disclosing their corporate responsibilities. We specifically focus on major multinational garments and retail companies’ disclosures in relation to the adoption of the ILOs’ workplace human rights standards. We undertake a content analysis of the annual reports, stand-alone social responsibility reports and social responsibility codes of conduct of a sample of large multinational garment companies. Secondly, we tentatively seek to understand the regulatory space that may have influenced these large corporations to adopt the language of human rights obligations. In particular, we draw on a combination of Ayres and Braithwaite's Responsive Regulation theory and neo-institutional theory in order to study the role that International Governmental Organisation's (IGO) such as the ILO may have played in these disclosures. Constructing corporate obligations through the language of human rights is of course ideological and their recognition requires regulatory mechanisms to construct both corporations and individuals in a particular way. We draw on responsive regulation theory as one way of framing the global regulatory space within which the ILO is involved in shaping the discourse on human rights as it is beginning to be applied to and by corporations (Ayres and Braithwaite, 1992, Braithwaite, 2002a, Braithwaite, 2002b, Braithwaite, 2006). Responsive regulation theory therefore implies a responsiveness in the regulatory environment to perceived gaps in governance and accountability. We draw on neo-institutional theory on the other hand to model the responsiveness of corporations to the field within which they are being institutionalized and as such, assume they will respond with a mixture of isomorphic behaviour (DiMaggio and Powell, 1983) and strategic manipulation (Oliver, 1991). By combining both these theories, we seek to understand how institutional human rights standards such as the ILO's 1998, workplace standards, contribute towards the construction and practice of corporate accountability. Finally, the paper begins to provide some critical reflections on the power and potential within the corporate adoption of the language of human rights.

The paper therefore makes two important contributions to the literature. Firstly, it provides an insight into corporate disclosure on human rights responsibilities, an area where there is almost no academic literature at present¹ and secondly the paper contributes towards a more general understanding of the evolving regulatory dynamic that is emerging in response to the globalisation of capital and liberalisation of trade.

The remainder of the paper is structured as follows. Section 2 provides some background on the global retail industry and the ILO; Section 3 delineates the theoretical perspectives underpinning the paper; the research methods are outlined in Section 4; the results are presented in Section 5 and the paper closes with some critical reflections on whether the discourse of human rights and it's institutions have the power to effective substantive change in relation to corporate accountability.