11. Global Supply Chains

Sustainable Development

Decent work

Economy Social Environment Employment Protection Rights Dialogue
Relevant SDG Targets
8.a, 9.3, 9.b, 16.3, 17.11
Relevant Policy Outcomes
2, 4, 5, 6, 7, 8, 10

On this page: DWA-SDG Relationship | Cross-cutting policy drivers | Partnerships | ILO Capacity | Resources

Global supply chains have become a common way of organizing investment, production and trade in the global economy. In many countries, in particular in developing countries, they have created employment opportunities for economic and social development. There is also evidence, however, that the dynamics of production and employment relations within the global economy and in some supply chains can have negative implications for decent working conditions.

Global supply chains are complex, diverse, fragmented, dynamic and evolving organizational structures. A broad range of terms exist to describe them, including global production networks and global value chains. All of these terms focus on the same basic issues of cross-border production and trade, but with slightly different perspectives. For the purposes of this report, they are used synonymously.

For the purpose of this guide the term “global supply chains” refers to the cross-border organization of the activities required to produce goods or services and bring them to consumers through inputs and various phases of development, production and delivery. This definition includes foreign direct investment (FDI) by multinational enterprises (MNEs) in wholly owned subsidiaries or in joint ventures in which the MNE has direct responsibility for the employment relationship. It also includes the increasingly predominant model of international sourcing where the engagement of lead firms is defined by the terms and conditions of contractual or sometimes tacit arrangements with their suppliers and subcontracted firms for specific goods, inputs and services (44).

The ILO has worked on the subject of socio-economic interconnectedness since its very foundation, as pointed out in the preamble to the ILO Constitution: “Whereas also the failure of any nation to adopt humane conditions of labour is an obstacle in the way of other nations which desire to improve the conditions in their own countries”. Many ILO instruments adopted since 1919 touch upon global supply chains, most prominently the “MNE Declaration”. The subject gained further prominence in 2002, when the ILO established the World Commission for the Social Dimension of Globalization, which in 2004 published its ground-breaking report entitled a “Fair globalization” (35). The report observed that “The emergence of global production systems that drove the increasing flows of FDI has created new opportunities for growth and industrialization in developing countries. Some 65,000 MNEs, with around 850,000 foreign affiliates, are the key actors behind these global production systems. They coordinate global supply chains which link firms across countries, including even local sub-contractors who work outside the formal factory system and outsource to home workers” (para 159) and remarked that “A notable feature of the growth of these global production systems is that it has occurred without the parallel development of multilateral rules to govern its key element, FDI” (para 162). The ILO Governing Body decided in October 2013 to place on the agenda of the 2016 ILC a general discussion on decent work in global supply chains. This decision was motivated by concerns that the dynamics of production and employment relations in some global supply chains, can have negative implications for working conditions, as evidenced by the collapse of the Rana Plaza building in 2013 and factory fires in Pakistan and Bangladesh in 2012. The Conclusions on Decent Work in Global Supply Chains adopted by the 105th ILC provide guidance on how the Office should pursue the objective expressed in the conclusion’s title (45). Paragraph 23 (here shortened) requires the ILO to:
  • Promote the ratification and implementation of the ILO standards relevant to decent work in global supply chains;
  • Strengthen capacity building and provide technical assistance to member States on labour administration and inspection systems;
  • Promote effective national and cross-border social dialogue, thereby respecting the autonomy of the social partners.
  • Assess the impact and scalability of development cooperation programmes, such as Better Work and SCORE, and develop sectoral and other approaches to address decent work challenges in global supply chains.
  • Provide leadership and use the ILO’s convening power and unique added value to drive policy coherence among all multilateral initiatives and processes related to decent work in global supply chains.
  • Strengthen its capacity to give guidance to enterprises on the application of labour standards within their supply chains and make information available on specific country situations, laws and regulations, including on the implementation of labour rights due diligence in coherence with already existing international frameworks.
  • Consider adopting an action plan to promote decent work and protection of fundamental principles and rights at work for workers in EPZs export processing zones (EPZs).
  • Take a proactive role in generating and making accessible reliable data on decent work in global supply chains, in cooperation with all relevant organizations and forums.
  • Carry out further research and analysis to better understand how supply chains work in practice, how they vary by industry, and what their impact is on decent work and fundamental rights.
Global supply chains are an issue of great interest, relevance and concern to ILO Offices everywhere; many of such value chains have their origin in developing countries and their markets in industrialized nations, crossing or involving many other countries in the global chain that stretches from production to consumption.

DWA-SDG Relationship

The 2030 Agenda does not refer to global supply chains directly, but points out in its paragraph 63 that “national development efforts need to be supported by an enabling international economic environment, including coherent and mutually supporting world trade, monetary and financial systems, and strengthened and enhanced global economic governance.” It is possible to enhance the contribution of global supply chains to fair and inclusive growth if there is stronger coherence between economic objectives and decent work.

Several SDG targets touch upon aspects of global trade, including 8.a (Aid for Trade support to developing countries), 9.3 (integration of SMEs into global value chains), 16.3 (rule of law at the international level) and 17.11 (boosting exports by developing countries); in addition, many of the SDG targets listed under other sections of this publications are relevant for global supply chains: working conditions, labour standards, labour migration, health and safety at work, to name a few.

As pointed out above, ensuring respect for labour rights, acceptable working conditions and sound industrial relations along global supply chains has been a major concern of the ILO since its inception. The subject of Decent Work in global supply chains is not captured in a specific Policy Outcomes, but cuts across several others, most notably PO 2 (labour standards), PO 4 (enterprises), PO 6 (informal economy), PO 7 (compliance), PO 8 (unacceptable forms of work) and PO 10 (workers & employers). Of particular importance to global supply chains is the issue of social dialogue relating to cross-border production systems.

Cross-cutting policy drivers

The application of labour standards in global supply chains are both a concern and a primary means of action in the Office’s work to ensure that decent work principles are observed along such chains. It is important to build capacity for sound labour relations and to ensure the effective recognition of the right to collective bargaining so that employers, workers and their organizations can play a role in ensuring compliance and decent work. Similarly, new forms of cross-border social dialogue can be an important means to involve governments, workers and employers from different countries, including multinationals, in the strengthening governance in global supply chains.

Gender equality issues are of great relevance to global supply chains; for example, women form the majority of workers in certain segments of the apparel, horticulture, mobile phone and tourism global supply chains. However, they tend to be more concentrated in low-wage or low-status forms of employment than men, and in fewer sectors (44).

Finally, global supply chains must and can play a significant role in ensuring sustainable patterns of production and consumption (SDG 12), often driven by the demands of responsible consumers and multinationals.

Partnerships

The aforementioned ILC conclusions (45) request the Office to establish, maintain and strengthen partnerships with “international organizations and forums such as UN organizations, the OECD, G7 and G20 and international trade and financial institutions, and consider international frameworks such as the UN Guiding Principles, as well as other reference instruments such as the OECD Guidelines for Multinational Enterprises. An important partner for ILO’s work on global supply chains is the UN Global Compact, which incorporates several ILO core conventions.

ILO Capacity

The Office does not have a unit dealing specifically with global supply chains, but many technical departments, such as ENTERPRISES, WORKQUALITY, NORMES and GOVERNANCE contribute to this work. The ILO Sectoral Policies Department (SECTOR) analyses global supply chains from a sectoral perspective , with a specific focus on social dialogue; SECTOR led the preparation of the ILC General Discussion on global supply chains.
The MULTI unit of the Enterprises Department contributes to decent work in global supply chains through the promotion of the MNE Declaration. The same Department offers a work stream on value chain development, which promotes the inclusion of SMEs into global supply chains (as advocated by SDG target 9.3). ILO’s Partnership Department PARDEV is responsible for the conclusion of public-private partnerships, many of which aim at improving working conditions in certain global supply chains. Several ILO Development Cooperation projects pursue the same goal, including the Better Work and SCORE Programmes, as well as a number of projects implemented in the area of working conditions.

Resources

A compilation of studies and reports on decent work in global supply chains were published under the web page of the ILC Committee on global supply chains. Additional resources can be found under the topic of value chain development, and on the ILO programme on multinational enterprises.


35. WCSDG. A fair globalization - Creating opportunities for all. Geneva : ILO, 2004.

44. ILO. Decent work in global supply chains - Report IV to the 105th ILC. Geneva : ILO, 2016.

45. ILC. Resolution concerning decent work in global supply chains. Geneva : ILO, 2016.