The Fair Labor Association: The Human Effects of COVID-19
The Fair Labor Association (FLA) is a collaborative effort of universities, civil society organisations and socially responsible companies dedicated to protecting workers’ rights worldwide. Affiliates of the FLA include popular footwear and apparel brands Nike and Addidas as well as Fruit of the Loom. Since 1999, the FLA’s collaborative effort has helped improve the lives of millions of workers around the world.
Headquartered in Washington, DC, the FLA is an international organisation with offices in China and Switzerland. Since 1999, through this collaborative approach where companies and organisations come together with a united focus on finding effective solutions to labour issues, the FLA has helped improve the lives of millions of workers around the world.
The FLA places the burden on organisations to voluntarily meet internationally recognised labour standards wherever their products are made. However, they offer their support in ensuring ethical standards are met, and sustainable solutions to abusive labour practices are found by:
- Delivering training to factory workers and management,
- Offering tools and resources to companies
- Conducting due diligence through independent assessments
- Advocating for greater corporate transparency and accountability throughout global supply chains
Between July and October of 2020, the FLA visited performed onsite assessments at 56 factories and found that COVID-19 resulted in significant negative impacts.
82% of the factories visited experienced a reduction in product orders from buyers
95% reported that they had to reduce working hours or workforce due to COVID-19
Out of the workers that remained during the peak of the pandemic (February 2020 to July 2020), 45% saw a decrease in overtime hours across all factories.
According to FLA, workers who must rely on excessive overtime to make ends meet, as many in China and Vietnam do, the decrease in work hours puts workers and their families in a vulnerable position, most especially during the global pandemic.
The FLA’s analyses also showed a gender disparity in factories, with women losing employment at a rate three times greater than men. In 2020, for every male worker who lost a job, three female workers lost theirs.
As the world continues to battle COVID-19 and its many variants, the repercussions to workers could be significant and long-lasting.
The FLA “urges companies to support factories and workers by providing steady and reliable business and strong channels of communication to understand the pandemic’s impact on the apparel and footwear workforce.”
The report COVID-19: IMPACT ON APPAREL AND FOOTWEAR WORKERS is useful to anyone looking to understand the impacts of the pandemic at a factory and human level and includes recommendations are for all companies who are in the apparel and footwear industry.
A Watershed Moment for Sustainability Commitments
Last month saw a landmark ruling where Royal Dutch Shell was instructed to significantly step up its 2030 climate commitments and slash absolute emissions by 45% compared to 2019 levels. This ruling represents a considerable advance on Shell’s stated aim to cut 45% of its emissions intensity compared to 2016 levels by 2035 – a target which provided leeway for increasing emissions as long as the relative carbon emitted per unit of energy produced fell. Now, this imposes a much larger climate obligation on Shell in calling for an urgent absolute reduction.
A ruling that sent ripples through the oil, gas, and energy sector
A watershed moment, this ruling is sure to cause significant alarm amongst fellow oil and gas giants who recognise – for perhaps the first time – that national courts can compel organisations to accelerate their reduction of harmful emissions under the Paris Agreement. Not only does it have "far-reaching" consequences for Shell itself and may even curb the potential growth of the company, but the decision is also likely to set a legal precedent for other energy companies and corporations. According to Thom Wetzer from Oxford University, who heads up the sustainable law programme: “all companies in the energy industry and all heavy emitters will be put on notice and have to accelerate their decarbonisation plans.”
This court mandate applies to not only the Shell group’s own operations but notably also to all the suppliers and customers of the group – strongly implying that Shell is being asked to tackle its Scope 3 emissions. Consequently, it is clear that Shell cannot meet the ruling’s demands alone; to make an impact across all carbon emissions scopes, Shell and other large businesses must immediately look towards forging new, productive partnerships with supplier stakeholders. Failing to do this not only means missed targets and mounting legislative action but also the reputational damage that this will cause to its brand and the company.
Activist investor warns of existential business risk
Reports on the Shell ruling were almost immediately followed by news of a coup attempt in American oil and gas corporation Exxon Mobil. Due to concerns surrounding Exxon’s strategic direction, hedge fund Engine No. 1 ousted sitting board members, stating that the climate crisis poses an "existential threat to the business", which the board has been reluctant to confront.
This small hedge fund accused Exxon of "a failure to take even initial steps towards evolution" and of "obfuscating rather than addressing long-term business risk", partly due to a historical lack of energy industry experience in Exxon’s board. This signalled an imminent shift in the company’s sustainability strategy, which was well received by the market, with Exxon’s shares rising 1.2% the day after the event.
The drive to reduce Scope 3 emissions
And if that wasn’t enough of a shakeup, this was followed by American multinational energy corporation Chevron’s shareholders voting 61% in favour of a proposal to cut Scope 3 emissions at their AGM, signalling frustration with the company’s slack approach towards climate change. Chevron has thus far failed to match its competitors’ net-zero targets with any commitments of its own.
For those less familiar, corporate emissions fall into three categories: Scope 1, 2, and 3. Scope 1 covers emissions from sources that an organisation directly owns or controls. Scope 2 refers to emissions from purchased electricity, steam, heating, and cooling that the reporting company consumes over the course of its operations. And Scope 3 is everything else – all other indirect emissions that occur within an organisation’s value chain, both up and downstream.
Why is this significant? Until now, Scope 3’s heady combination of difficult-to-manage and thus far easy-to-ignore has led large companies to abdicate responsibility for their value chain and sweep its emissions under the carpet. However, the Shell ruling indicates that this approach is no longer viable for big business. With courts stepping in and dictating climate policy to corporations as well as governments, the pressure is mounting on all heavy emitters to tackle their true impact and reduce Scope 3 emissions.
As organisations like Shell, Chevron and Exxon are considered responsible for the actions of their entire ecosystems, sustainability performance becomes contingent on supplier behaviour. The clearest example of this lies in Scope 3 emissions which, for many organisations, considerably exceeds the CO2 they emit directly.
Therefore, the time for green-washing and lip service is now over as pressure mounts from all stakeholder groups for large corporates to take decisive action on sustainability in the supply chain. However, businesses cannot turn promises into concrete progress without actively collaborating with stakeholders across the value chain.
For every five weeks that pass, we lose 1% of the decade
2030, the deadline for achievement of UN SDG-related climate commitments, is fast looming, and with every five weeks that pass, we lose 1% of the decade. The imperative to take immediate action has never been clearer. It’s now down to procurement, wider business leaders, and their associated supplier ecosystems to put sustainability strategy into action by:
● Defining, aligning, and communicating their corporate sustainability goals to focus suppliers, partners and the wider stakeholder groups on how they can make an impact.
● Collaborating systematically through technology using transparent processes that develop trust with suppliers and partners.
● Harnessing the innovation and IP within the supplier ecosystem, turning ideas into projects that can be managed and reported on transparently, and adding clear value trackers to prove impact.
Working closely with stakeholders in the supply chain is an infamously complex process, but it can be made that much simpler using Supplier Collaboration & Innovation (SC&I) technology. This ensures strategic alignment between buyer and supplier and provides comprehensive relationship governance and real-time performance visibility. This allows companies and their suppliers to work on sustainability initiatives more cohesively and develop innovative ideas through collaboration.
Here at Vizibl – through our SC&I platform combined with our knowledge and expertise – we are helping large enterprise organisations in the energy sector better leverage their supplier relationships and move closer to meeting those lofty 2030 sustainability goals.