Global Parliamentary Network: Towards better housing opportunities

Opening remarks delivered at the 2019 Global Parliamentary Network meeting held at OECD headquarters in Paris, France on February 14.

I am very pleased to be here again with the OECD parliamentary network, and to benefit from your inputs for a very important project that we are about to launch, that is the housing project.

To start the conversation, let me put housing in the context of the major strategic objectives of the OECD, that is to promote the well-being of people, and to achieve an inclusive growth agenda.

Since we last met in the previous edition of this Network, in the last Ministerial, members adopted the Policy Framework for Inclusive Growth, with concrete policy options to address the increased inequalities of income, wealth and opportunities. Affordable housing in part of this agenda.

However, since then, we have been documenting that the inequality trends are not receding.

With our “Broken elevator” report, we confirmed that social mobility in many OECD countries has stalled, and that it  will take 4.5 generations, or 135 years for a child born in the bottom of the income scale to reach the middle.

In one more month we will present the “middle class report” that confirms that, in many countries, the middle class have been confronting stagnant incomes for a long period of time, while prices of essential consumption items, such as education, health, and housing have increased above inflation. This is why we call it the “squeezed middle class”.

Housing is particularly important, as almost by definition, belonging to the middle class has been equated to owning a house, and the soaring prices that we have experienced in many markets, as well as the mortgage crisis, have questioned this principle.

This context underlines the importance to ensuring affordable, accessible and good quality housing as a key pillar of an agenda of inclusive growth. Life chances are determined by the place you live and the conditions you experience, and access to good quality public services are also determined by your neighborhood.

This is not an easy task, above all if we look at the fact that housing needs are frequently unmet, the cost can reach too high levels, and the quality is also not yet there.

Today a significant number of people across the OECD are homeless, numbers vary from between 1 to 10 in every thousand, and too many households live in low-quality dwellings or face housing costs they cannot afford.

Housing costs represent the largest single expenditure for many individuals and families, around 21% of the disposable household income in OECD countries, going from 15% in Korea, to 35 or 40% in high demand areas such as Oslo or Brussels.

This housing cost burden is particularly high for low-income households, where it can reach 40% of their disposable income in 16 OECD countries in 2016.

Young people are also struggling to get onto the property ladder, and are having to stay longer in potentially precarious rental housing, or living with mum and dad.

Then there is the issue of quality housing. In the OECD, the average home contains 1.8 rooms per person. However, this varies; compare Canada where the average home contains 2.5 rooms per person, with Mexico or Turkey there is only one room per person.

Two out of 10 people in the OECD live in overcrowded housing. What is worse is that in European OECD countries, on average, more than 1 in 5 children live in an overcrowded household, and poor children are at higher risk. This could even impact their learning experiences at school, as overcrowd dwellings may bring higher level of stress that do not contribute to learning.

Low income groups can also accumulate disadvantages related to housing, as they can be pushed out of capital city regions, where many of the best employment opportunities are; or condemned to poor neighborhoods, where crime, social unrest and pollution are particularly problematic.

Initial policy recommendations

The housing project will be looking at the housing sector in its broader sense, and our Chief Economist will share with you the details of this important undertaking.

But we should not forget that, as with many other assets, the distribution and accessability of housing is highly skewed, and any policy agenda should be frame taking into account this starting point. So responding to the needs of those at the bottom of the income distribution will be the best test for an OECD contribution.  We count on you, to help us advance in this domain.

Many thanks.

Remarks for the Roundtable for Policymakers at the OECD Forum on Due Diligence in the Garment and Footwear Sector: The urgency of responsible supply chains in the apparel sector

Good afternoon, and welcome to the Roundtable for Policy makers, part of the OECD Forum on Due Diligence in the Garment and Footwear Sector. I am very pleased to be opening this inaugural Roundtable focused on  the garment and footwear sector and would like to thank the many representatives from governments around the world for joining us.

Let me also welcome and congratulate Christine Kaufmann, the new Chair of the Working Party on Responsible Business Conduct, who will be chairing today’s important discussions. It’s great to see another woman take the lead!

Today we’ll be discussing how globalisation in the context of the apparel sector can work for everyone – for workers, consumers and investors.

In many ways, the apparel sector represents the positive outcomes of globalisation in terms of increased specialization, technology transfer, and inclusive growth.

The sector employs up to 75 million people globally and indirectly hundreds of millions more. And importantly, three-quarters of these workers are female, making this sector a gateway into formal and stable employment for many women.

But the sector also embodies some of the darker outcomes of globalisation[1] including downward spiralling price pressures and insufficient resources directed towards decent work and clean production processes in the context of tight margins and short lead times. We all remember the atrocity of the Rana Plaza Factory in 2013, claiming 1,130 lives and also the 2012 factory fire in Pakistan.[2]

We must also be very alive to the problems of forced labour, and child labour, which is truly abhorrent. Of the 152 million children in child labor in 2016: 73 million were in hazardous work,  and 48 percent were below age 12.

I am in great admiration of my friend Mr Kailash Satyarthi, who won a Nobel Prize for his work rescuing thousands children in India from forced labour.

Unsurprisingly, the topic of responsible supply chains is an issue that has risen high on the global agenda as it is a lever to achieve more inclusive growth.

For example, in 2018 G20 Labour Ministers called on countries to take action to “promote sustainable supply chains” consistent with the OECD Guidelines for Multinational Enterprises.

Additionally, more countries, like the United States, UK, France, Australia, the Netherlands and Norway, are including responsible supply chain management in national policy and regulation. We will be hearing more about these policy developments later this afternoon.

Market levers are also very important to consider, and we’ve seen increased scrutiny of supply chains driven by investors and increasingly by consumers.

Consumers are demanding more transparency; in a recent survey, 78% said it is somewhat or very important for a company to be transparent.[3]

Consumers are also increasingly boycotting companies that use cheap labour to produce cheap clothing. Sure, everyone loves a bargain, but what is the true cost behind that saving?

How many people have been paid pittance for how many days so that costs at the consumer end can be kept low?

Recently, Norges Bank Investment Management, one of the world’s largest sovereign wealth funds excluded apparel companies from their investment portfolios. This was responding to perceived human rights risks, and shows an increased oversight by investors on this issue.

So, the message is clear: the apparel sector in garment producing countries will only achieve growth in exports and investment if the garment and footwear industries address the labour, human rights and environmental risks in the supply chain.

And, in terms of market concentration, the onus falls on just a handful of the largest companies. Concentration in the fashion industry is high, with 97 percent of economic profits for the whole industry earned by just 20 companies, most of them in the luxury segment.[4]

Unfortunately, promoting responsible business conduct is becoming increasingly difficult as we see increased fragmentation of production processes.[5]

The OECD can help: we are at the forefront of promoting responsible supply chains that drive competitive and inclusive markets.

Our aim is to create level-playing fields and ensure that companies are not cutting corners and resorting to bad practices to gain market advantage.

Our 2017 Due Diligence Guidance for Responsible Supply Chains is a practical framework that shows companies how to meet global expectations on establishing responsible supply chains. It takes into account both the diversity of the sector as well as the complexity of the challenges that the sector faces in its recommendations. Let me highlight three of them:

First, promoting a collaborative approach between industry at different stages of the supply chain.

SMEs are interacting with an increasing number of partners: brands, retailers, manufacturers, spinners, mills and upstream producers.

By addressing the risks in a multi-stakeholder way, enterprises have the potential to remain competitive, while systematically addressing human rights, labour and environmental risks in their supply chain.

Of course, collaboration does not alter the responsibility of the individual enterprise to identify risks and mitigate harm but it is a useful way of carrying out due diligence.

Secondly, promoting meaningful stakeholder engagement ensuring that all groups affected—employees, communities impacted by operations, and governments— are both heard and given the chance to provide input to decision-making processes such as on-site supplier assessments, development of corrective action plans, impact monitoring, etc.

Thirdly, incentivising responsible purchasing practices to ensure that companies are integrating the true cost of producing responsibly into pricing decisions.

For example, irresponsible purchasing practices can have a significant impact on supplier level wages. Inaccurate technical specifications from buyers were associated with 22% lower wages at the supplier level whereas buyers that offer prices covering at least productions costs were associated with nearly 10% higher wages at the supplier level.[6]

Lastly, as with everything, there is a gender angle here.

As I mentioned that 75% of employees in the industry are women, it is essential to integrate a gender-lens into due diligence.[7]

We know that women are more likely to be paid lower wages, be engaged in informal or irregular employment, and face workplace harassment. So women have to be involved in decision-making processes, assess and appreciate the disproportionate risks to women in this sector, and analyze the accessibility of grievance mechanisms to women.

Practically, at the OECD we are committed to boosting the capacity of companies to carry out these due diligence considerations by facilitating shared learnings to support a level playing field and conducting research to fill knowledge gaps. For example:

  • We are collaborating with the China National Textile and Apparel Council, the Confederation of Indian Industry and are exploring partnership with the Cambodian government and the Garment Manufacturers Association in Cambodia on establishing sector-wide approaches to due diligence that are rooted in the national context.
  • We are collaborating with the EU and the ILO on promoting responsible supply chains in Asia in close partnership with China, Vietnam, and Japan.

But most importantly, we believe in the role of governments to enable and monitor responsible supply chains, and this is what brings us here today. We at the OECD are committed to collaborating with governments globally to support policy which builds responsible supply chains.

For example:

  • We are analysing the policy options for governments in eradicating forced labour, modern slavery, human trafficking and child labour in global supply chains and providing recommendations in collaboration with Alliance 8.7 to the G20.
  • We convene governments to share learnings on how they can embed due diligence into their purchasing and procurement decisions;
  • And we provide recommendations to governments on how they can attract responsible investment through our Investment Policy Reviews.

The OECD is also working with the G7 on sustainable supply chains and combatting modern slavery, and we continue to provide access to remedies through our National Contact Points for the OECD Guidelines for Multinational Enterprises.

There is also broader recognition that we need better performance by all on international standards. The OECD is the house of many of those standards.

Today we will have the opportunity to consider many of these themes including:  capacity building of industry and government on responsible business conduct standards, providing access to remedy, legislating and engaging with multi-stakeholders and the link between trade and responsible investment.

We have over 20 governments represented in this room here today and therefore are presented with the extraordinary opportunity to listen and learn from one another and to chart paths forward for greater collaboration. Today’s dialogue is only half a day, but we hope that it is just the beginning.

As you are considering these issues, I invite you to reflect on how the OECD can support policy makers. We stand ready to work alongside you in moving these important issues  forward. As an immediate next step, we would like to invite you to the Global Forum on Responsible Business Conduct to take place in Thailand in collaboration with the UN in June.

But count on the OECD, as we really are a market leader in responsible business conduct, and this is an important part of us all achieving inclusive growth and a globalization that doesn’t involve a race to the bottom.

[1] [1]https://cleanclothes.org/resources/publications/factsheets/general-factsheet-garment-industry-february-2015.pdf/view and https://www.ilo.org/wcmsp5/groups/public/@ed_dialogue/@sector/documents/publication/wcms_300463.pdf

https://www.wto.org/english/res_e/statis_e/wts2018_e/wts2018_e.pdf

[2] http://oecdinsights.org/2017/01/31/fashion-industry-oecd-due-diligence-instrument/

[3] In a survey of 10,000 consumers around the world  (Fashion Transparency Index)

[4] The State of Fashion 2019: A year of Awakening, (Mckinsey) 2019. The top 20 companies include Nike, H&M, Hermes, Adidas, Gap, Burberry, Michael Kors amongst others.

[5] Outlook 2019: Apparel industry challenges and opportunities, Just Style. https://www.just-style.com/analysis/outlook-2019-apparel-industry-challenges-and-opportunities_id132645.aspx

[6] http://mneguidelines.oecd.org/OECD-Garment-Forum-2019-session-note-Monitoring-Purchasing-Practices.pdf

[7] Ibid. (1)