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3. No Requirement of Brands to Share Responsibility with Suppliers

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In addition to addressing salient potential and actual impacts and including rights holders in the design of the scheme, an important sign that an initiative is aligned with international human rights standards (see Red Flag 1) is whether its standards adequately incorporate the UNGP requirement that the brand or lead company takes responsibility for impacts occurring throughout its operations. This means not shifting these responsibilities to supply chain participants to manage on their own, a point that many initiatives, including those with certifications, tend to overlook. It entails conducting ongoing due diligence that is participatory, transparent, and timely,[1] correcting past practices of lead companies that have cascading adverse impacts within the value chain and sharing responsibility for remediating harms.
 
Underlying social auditing failures, particularly for manufacturing and raw materials sourcing, is the power imbalance between suppliers and brands and a skewed incentive structure.[2] A brand’s purchasing practices can have an outsized impact on whether a supplier can meet human right standards. When buyers make last-minute changes to orders, change payment terms, demand short turnaround times, set prices below production costs, or take other measures to keep costs low,[3] they set in motion a dynamic that can lead to unpaid wages, poor working conditions, and forced or child labor.[4] Moreover, in such situations buyers often do not share the financial burden of implementing strong human rights measures. This dynamic creates an incentive for suppliers to conceal violations to maintain the relationship with the buyer which means that the problems remain unaddressed.
 
Significantly, the brand’s purchasing practices are typically outside of the scope of certifications.[5] To combat the power and market dynamics that lead suppliers to conceal violations, buyers need to share responsibility with suppliers for minimizing human rights risks. Shared responsibility entails “responsible allocation of risks and responsibilities” between buyers and suppliers and “a joint commitment to cooperate in carrying out human rights and environmental due diligence (HREDD).”[6] Communication between buyers and suppliers about compliance expectations and results is essential. To avoid merely shifting responsibilities, setting buyer-supplier contract terms that lock in responsible purchasing practices, such as ensuring fair pricing and reasonable lead times, may be needed.  Moreover, both parties should be held accountable for failures in meeting safety and labor standards, ensuring that the burden of providing remedy is shared.[7]
 
For more on the role of Responsible Contracting in HREDD, visit Responsible Contracting, another tool in the Investor HREDD Precision Toolset.
[1]  American Bar Association, Responsible Purchasing Code of Conduct: Schedule Q - Version 1.0, accessed March 5, 2024, 
https://www.americanbar.org/content/dam/aba/administrative/human_rights/contractual-clauses-project/scheduleq.pdf.
[2] Ana Perez Adroher, From Policies to Impacts: Analyzing Modern Slavery Risks in Portfolio Companies (FIDH: International Federation for Human Rights, May 10, 2021),  https://www.fidh.org/IMG/pdf/from_policies_to_impacts_analysing_modern_slavery_risks_in_portfolio_companies.pdf.; 
​Genevieve LeBaron et al., Forced Labour Evidence Brief: Social Auditing and Ethical Certification (Re:Structure Lab, July (2022),    https://static1.squarespace.com/static/6055c0601c885456ba8c962a/t/62d746146f5dc5205a17621c/1658275349325/ReStructureLab_SocialAuditingandEthicalCertification_July2022.pdf.; MSI Integrity, Not Fit-for-Purpose: The Grand Experiment of Multi-Stakeholder Initiatives in Corporate Accountability, Human Rights and Global Governance (July 2020), 
https://www.msi-integrity.org/wp-content/uploads/2020/07/MSI_Not_Fit_For_Purpose_FORWEBSITE.FINAL_.pdf.
[3] Responsible Contracting Project and ICCR, Investor Guidance on Responsible Contracting (March 2024), 
https://www.responsiblecontracting.org/_files/ugd/fcee10_9f95dd6727144ac08e2bd4262bb78cf6.pdf.
[4] Daniel Vaughan-Whitehead and Luis Pinedo Caro, Issue Brief No. 10: Purchasing Practices and Working Conditions in Global Supply Chains: Global Survey Results (International Labour Organization, 2017), 11, 
​https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/publication/wcms_556336.pdf.
[5] Perez Adroher, From Policies to Impacts.; LeBaron et al., Social Auditing and Ethical Certification.; MSI Integrity, Not Fit-for-Purpose.
[6] “Core RCP Principles,” Responsible Contracting Project, accessed April 5, 2024,
https://www.responsiblecontracting.org/principles.
[7] Ibid.
Shared responsibility is a relatively new concept that has not yet found its way into many standards, yet its absence has material consequences. The Rana Plaza factory collapse in Bangladesh, which killed over 1,100 garment workers, mostly young women and girls, on April 24, 2013, is an example of the problems that can occur with a model where responsibility for upholding workplace standards is placed solely on the factories.[1] Despite the glaringly visible structural cracks in the Rana Plaza building and the closure of the shops and bank on the ground level, factory managers pressured reluctant workers to work that day. A 2019 investigative report on the tragedy by New York University’s Stern Center for Business and Human Rights found that low profit margins (in the single digits) worsened a tendency among the suppliers to compromise on safety measures.[2] Ultimately, 29 brands were publicly exposed for having open contracts with garment factories within Rana Plaza, including Benetton, Mango, and Primark, among others.[3]
 
Arguably any scheme that certifies a product made under a harmful business model, such as a low-price apparel brand that prioritizes moving quickly from design to production in order to keep up with fashion trends (commonly referred to as a “fast fashion company”), is a red flag. It indicates that the certification allows brands to demand that their suppliers deliver products on short lead times at low cost, a practice that can lead to more Rana Plazas. Certifications that contain explicit expectations of buyers – embedding a principle of shared responsibility – can avoid these risks and build more resilient supply chains. Notably, the practice of fast fashion may soon be a legal risk. In March 2024, the French National Assembly voted unanimously in favor of a bill to crack down on fast fashion by preventing apparel companies from advertising fast fashion and requiring them to pay penalties to cover their environmental impacts.
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→ Demonstrates: Reputational risk, operational risk, legal risk
[1] Amy Kazmin, “How Benetton faced up to the aftermath of Rana Plaza,” Financial Times, April 20, 2015,
​https://www.ft.com/content/f9d84f0e-e509-11e4-8b61-00144feab7de.
[2] Paul M. Barrett, Dorothée Baumann-Pauly, and April Gu, Five Years After Rana Plaza: The Way Forward (NYU Stern Center for Business and Human Rights, April 2018), 9, https://media.business-humanrights.org/media/documents/files/documents/NYU_Rana_Plaza_report.pdf.
[3] “Rana Plaza,” Clean Clothes Campaign, accessed March 5, 2024, https://cleanclothes.org/campaigns/past/rana-plaza.
Most certifications certify the supplier, not the relationship between the buyer and supplier. In this way they provide assurance for the buyer that the supplier is better than others. To apply shared responsibility in a certification context, a scheme could hold a buyer to account for their procurement policies as a precondition for membership. This could entail adopting a standard for evaluating the member company’s sourcing practices since sourcing practices are widely known to be a source of supply chain risk.
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Some initiatives contain measures that acknowledge buyer power and responsibility. These measures vary, as can be seen below:
➔    Fair Wear conducts performance checks on member companies, as part of its “unique shared responsibility approach to improving working conditions.”[1] This includes a criterion that members share responsibility with suppliers, emphasizing that “factory conditions cannot be separated from the purchasing practices of brands.”[2]

➔    Rainforest Alliance’s Sustainable Agriculture Standard (2020) mandates that sustainability efforts of participating producers are priced into the cost as a premium. Calling for a “fundamental transformation of the operating principles of the supply chain,” the scheme has implemented two buyer requirements:
The first is the Sustainability Differential, a mandatory monetary payment paid to producers on top of the market price for the sale of certified crop. The second is Sustainability Investments which are made by market actors to contribute to the investments needed to drive sustainability progress at origin.[3]
The following two initiatives that do not certify are also notable for accounting for buyer power and responsibility in different ways:
➔    International Accord for Health and Safety in the Textile and Garment Industry is a legally binding framework agreement between garment brands and trade unions to ensure the safety and health of workers in the textile and garment industry. It requires brands to contribute to the cost of operating the program and to financially support factories when remediation is necessary.[4]
 
➔    Fair Labor Association’s member companies are evaluated according to their responsible purchasing practices, policies, and implementation. Principle 2 of its Principles of Fair Labor and Responsible Sourcing states:
Responsible Purchasing Practices: Commitment to align planning and purchasing practices with workplace standards.[5]
The Responsible Contracting Project and the Interfaith Center on Corporate Responsibility developed Investor Guidance on Responsible Contracting to help investors integrate shared responsibility principles into their commercial contracts. The tool comprises sample questions that investors can use in conversations with companies, shareholder resolution templates, investor engagement letter templates, and sample responses to push back from companies.
[1] “Brand Performance Checks,” Fair Wear, accessed June 17, 2024, https://www.fairwear.org/join-the-movement/brand-performance-check/.
[2] Fair Wear, Fair Wear Foundation’s Theory of Change (2019), 4, https://api.fairwear.org/wp-content/uploads/2019/10/FairWear_ToC_Narrative_DESIGNED-converted.pdf.
[3] Rainforest Alliance, 2020 Sustainable Agriculture Standard: Farm Requirements (last corrected March 20, 2023), 40, 
https://www.rainforest-alliance.org/resource-item/2020-sustainable-agriculture-standard-farm-requirements/.
[4] “Signatories - Join brands promoting safer workplaces within their supply chains,” International Accord, accessed March 6, 2024, https://internationalaccord.org/signatories/.
[5] “Principles of Fair Labor and Responsible Sourcing and Production for Manufacturing,” Fair Labor Association, accessed July 1, 2024, https://www.fairlabor.org/accountability/standards/manufacturing/mfg-principles/.
Does the scheme have a requirement that the brand or lead company takes responsibility for impacts occurring throughout its operations?
❐  Yes 
❐  No
❐  Partially

Good practices include, but are not limited to: 
•  Conducting ongoing due diligence that is participatory, transparent, and timely
•  Practicing responsible purchasing that enables all suppliers in the value chain to fully respect the rights of workers
•  Sharing responsibility for remediating harms
•  Including in the standard a provision  for evaluating a company’s sourcing strategies
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​Notes:
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