Launch of the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector

Delivered 08-02-2017

I am very pleased to join you to open this important meeting, and to launch the OECD Due Diligence Guidance in Supply Chains for the Garment and Footware sectors.

I am also glad to be accompanied by all the stakeholders that made the Due Diligence Guidance possible.  This shows that, working together, with all of you (and I understand that we have 200 representatives from many sectors) we can continue to develop a rules based global economy that delivers for people.

The Guidance was important to redress the damage made by the tragedy of the Rana Plaza and many other abuses, and was also something that the G7 in Schloss Elmau encouraged us to pursue.  

But now, ensuring that Supply Chains are free of forced labour, human rights violations, or many other negative aspects has become essential, in a context where there is a strong backlash against global economic integration.

Indeed, globalization is perceived now as the source of all the problems, and protectionism actions are on the rise. So yes, we need to do better, and build the rules based international economy, including with the Guidance, that will recover the trust of people, and help us build responsible globalization.

Adequate due diligence is urgently needed in the garment and footwear sector

The sector, which provides approximately 75 million jobs globally,[i] has contributed to global growth and provides a first port of entry into the formal economy for many women in producing economies.

But let’s face it. The challenges we face in this sector are immense.  Wages largely remain below the level that is needed to sustain workers and their families, locking them into poverty and deprivation.

Many garment and footwear sector workers are exposed to great risks: water pollution, the use of hazardous chemicals, child labour, forced labour, and restrictions on freedom of association. Fire and electrical safety remains a great challenge.

Less than four years after the Rana Plaza collapse, many companies have not taken enough action to protect workers. Only three months ago we read about a tragic fire at a subcontracted factory outside of New Delhi.[ii]

So, to avoid more tragedies, we have to define responsibility at each stage of the supply chain.

This is challenging for an industry that is global in its reach but also fragmented and highly interconnected. The garment and footwear sector is characterised by many separate processes from growing, and spinning to manufacturing. Specialisation and subcontracting are also common practice. This can make room for abusive practices and terrible working conditions.

This is not just morally unacceptable, it’s bad for growth and it’s a harmful obstacle to development, standing in the way to delivering on the Sustainable Development Goals (SDGs) which all countries agreed to in 2015. In particular Goal 12, which is “to ensure sustainable consumption and production patterns”.

The OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector provides just that – a common understanding of how companies can carry out due diligence to identify, prevent and mitigate challenges in their supply chains in-line with the OECD Guidelines for Multinational Enterprises.

Policy coherence, particularly at the international level, reduces the risk of conflicting requirements, gaps in policies and government expectations.

The strength of this Guidance derives from its multi-stakeholder, consensus-based design process. It drew on input from both OECD and non-OECD countries, businesses at different levels of the supply chain, civil society, trade unions, and other experts. This Guidance is not just for you, it is by you.

As such, it recognises both the diversity of the sector as well as the complexity of the challenges faced. It recommends that companies take a collaborative risk-based approach to identify and mitigate harm, while as far as possible maintaining key business relationships.

By addressing risks in this way, companies have the potential to remain competitive, while addressing human rights, labour and environmental risks in their supply chain. The Guidance promotes an approach that is systematic, involving on-going, proactive and reactive processes with a strong focus on progressive improvement.

For example, the Guidance recognises the interconnectedness of business activities. Risks related to wages, forced labour, and health and safety are sometimes increased by short-term and inefficient purchasing practices.

To tackle this, the Guidance is the first international instrument that applies due diligence to a company’s purchasing practices. It also highlights the importance of engaging with workers themselves, who are so often left out of the discussion, but who bear the full brunt of its effects.

We are providing a powerful tool to improve working lives and make growth and globalisation more inclusive in a key sector for the global economy. But the launch is only the beginning: the real change will come with effective implementation.

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Photo credit: OECD

Implementation will be vital to deliver a global industry that works for all

The OECD will support implementation every step of the way. Just as we have with our Due Diligence Guidance on Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas and the OECD-FAO Guidance for Responsible Agricultural Supply Chains. As our Secretary-General likes to say “Agreements make the headlines, but implementation changes lives”.

This afternoon you will have a special session on implementation, and tomorrow you will experience applying the Guidance in a real-world garment and footwear context through a scenario workshop. This is a valuable opportunity to exchange experiences, and anticipate practical challenges at the implementation stage.

You will also look in detail at supporting implementation for specific groups at high risk, including due diligence on sexual harassment and gender-based violence, and due diligence for the responsible employment of migrant workers.

Also tomorrow, you will hear garment and footwear sector perspectives on the OECD National Contact Point mechanism, which has proven highly effective in promoting the broader Guidelines for Multinational Enterprises and supporting implementation and handling grievances.

The OECD will also continue to increase the reach and impact of our responsible business conduct tools by working closely with the G20 and G7.  After Schloss Elmau, the German G20 Presidency has already emphasised its commitment to make sustainable global supply chains a priority, and we will be there to provide the best policy expertise and data analysis to promote and measure progress.

And we will continue through our OECD Global Forum on Responsible Business Conduct and through our close and growing engagement with China, and with India as two of our Key Partners, to promote adherence to and implementation of our standards, guidelines and guidance.

Ladies and Gentlemen,

We have come a long way. But now is the time to make this Guidance a reality, to make it count for people, for people who work in some of the worst conditions imaginable. Agreements made the headlines, implementation changes lives. So I invite you to focus on implementation.  

This is really important to save lives. But it is also essential to build a more inclusive and human world. Let’s continue joining forces to ensure that they make the impact that you are all looking for.

Thank you.

[i] https://cleanclothes.org/resources/publications/factsheets/general-factsheet-garment-industry-february-2015.pdf/view

[ii] On 11 November 2016, 13 workers will killed in a garment factory fire on the outskirts of New Delhi. http://www.aljazeera.com/news/2016/11/fire-kills-factory-workers-india-sahibabad-161111072912321.html

 

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Telling the whole truth in a post-truth environment

In 2016, surprisingly for many, Oxford Dictionaries chose as their Word of the Year “post-truth”, an adjective defined as: “relating to or denoting circumstances in which objective facts are less influential in shaping public opinion than appeals to emotion and personal belief”. This runs contrary to the main tenet of the OECD, the “house of best practices” whose works and analysis depend on high quality statistics and solid empirical evidence. So how did we get here, and what does it means for our democracies?

As the OECD’s G20 Sherpa, I witnessed the evolution of what was originally a financial crisis into an economic crisis, and more recently, after eight years of low growth and very slow recovery, into a political crisis defined by the lack of trust of people in the institutions that we built over so many decades. It is also clear that the values of openness, mutual assistance, and international integration on which the OECD was founded are being questioned.

One reason for this is that while we have told “the truth and nothing but the truth”, we have not told “the whole truth”. Like people gradually enclosing themselves in media silos and social networks that only give them news and views they are comfortable with, we have been happy to rely on economic models that work with comfortingly quantitative facts on GDP, income per capita, trade flows, resource allocation, productivity, and the like. These standard economic models did not anticipate the level of discontent that was created by the skewed outcomes that they were delivering, and that have prevailed for so many years.

Our “truths” did not capture very relevant dimensions that inform people’s decisions (including recent political decisions), and particularly those that are intangible or non- measurable concepts. This is why such important issues as justice, trust or social cohesion were just ignored in the models. Indeed, neoliberal economics taught us that people are rational, and that they will always take the best decisions according to the information they have to maximize utility. And that accumulation of rational decisions will deliver the best outcome on the aggregates. In this model there is no room for emotions or for concepts like fairness or resentment.

Populism, the backlash against globalisation, call it what you will, recognises these emotions. We should do so too, especially since we actually have the data and facts that gave rise to these feelings in the first place. I am referring to the increased inequalities of income and outcomes that almost all the OECD economies experienced even before the crisis and that the crisis made worse.

If we go beyond averages and GDP per capita and look at the distributional impact of our economic decisions for instance, the picture is devastating. Up to 40 percent of people in the lowest tenth of the income distribution in OECD countries (and 60% in my own country, Mexico) have not seen their situation improve in the last decades. On top of that, lower income groups accumulate disadvantages, as their initial condition does not allow them to access quality education and health care or fulfilling jobs, while their children are facing a sombre future with less chance of improving their lot. At the OECD we have confirmed this. Our data show that if you are born into a family whose parents did not reach higher education, you have four times less chance of reaching middle school. You may encounter more health problems, and have less fulfilling jobs and lower wages. You are trapped in a vicious circle of deprivation.

Even the loosely-defined middle classes in OECD countries are fearful for their future and that of their children. They too feel betrayed and are angry that despite working hard, saving and doing everything else that was supposed to guarantee a good life, they see the fruits of success being captured by a tiny elite while they are left behind. No wonder they are attracted to solutions that resonate with their emotions and seem to give them some hope.

What should an organisation like the OECD, committed to evidence-based policy advice, do in this context? First, we must speak out when there is a deliberate misrepresentation of the facts and realities. Even if the people delivering these lies are not aware of it, it does not discharge them from the responsibility to check the evidence. Presenting a view that is based on lies by omission or on purpose should be recognised as such and not go unchallenged in the “post-truth” environment.

Second, instead of defending our selection of facts, recognise that they were also biased, and that in many instances they represented preconceived notions of how the economy functions that have been proven wrong. To rebuild trust in the facts we produce to explain social and economic phenomena, we must ensure that they really represent the whole reality and provide workable solutions. We may need to start, as the Chief Statistician of the OECD has said, “to measure what we treasure and not treasure what we measure”.

Most of all we need to understand that economic challenges are not just economic. That is why the OECD’s New Approaches to Economic Challenges (NAEC) initiative promotes a multi-dimensional view of people’s well- being, with tangible and intangible elements (including emotions and perceptions) all worthy of consideration. The NAEC agenda is ambitious, calling for a new growth narrative that recognises the complexity of human behaviour and institutions, and calls on sociology, psychology, biology, history, and other disciplines to help write this narrative and build better models to inform economic decisions.

We thought there was only one truth, and we promoted it without considering that it may have had faults. We defined reality in certain ways and ignored critics to the models. We strongly, and mistakenly, believed markets were the whole answer.

I think that as economists and policymakers, we should remember that in The Wealth of Nations, Adam Smith was drawing conclusions from not just the methodology, but also the ethics and psychology he explored in The Theory of Moral Sentiments. We may need to enrich our models to ensure that the outcomes respond to people expectations, and help us to recover the most important ingredient in our societies, which is trust.