The globalization of the labor movement, including cross-border alliances among unions and their allies, is changing the way multinationals calculate their labor risk. It is no longer sufficient to view and respond to labor protests in isolation based on where they occur in the world. Rather, companies increasingly must monitor developments on a global level and adopt a globally coordinated labor strategy. The need for a global approach is underscored by the recent global minimum wage campaign.
On September 4, 2014, fast food workers in dozens of cities across the U.S. protested outside restaurants as part of the effort to raise the starting minimum wage to $15 per hour. The protests were the seventh in a series of one-day strikes since November 2012. Earlier this year, on May 15, protests were held in more than 200 cities in over 30 countries. Organized primarily by the Service Employees International Union (SEIU) in the U.S., the campaign went global after the SEIU partnered with the International Union of Food, Agricultural, Hotel, Restaurant, Catering, Tobacco and Allied Workers' Associations (IUF), a federation of 396 trade unions in 126 countries. As a result, demonstrations targeting global companies were not limited to a single location or even city. Rather, protests took place at companies' regional headquarters and operations around the world and spread through social media.
Global Protests Point to a Shift in Labor Risk
The global minimum wage movement underscores a fundamental shift taking place in the scope of the labor risk companies face. Recognizing that national unions are no longer effective to counter global companies and their far-flung supply chains, union leaders are developing a network of relationships and coordinating across borders to advance their agendas. Global union federations such as the IUF and IndustriALL represent millions of workers across supply chains. Instead of organizing workers from the bottom up, labor organizations and activists are exerting pressure from the top down, attacking the company’s reputation and advancing policy positions through the use of corporate campaigns. And they are bringing resources to bear - the SEIU has spent more than $10 million underwriting the fast-food movement.
Governments, NGOs and global companies are taking note. In recent annual reports filed with the Securities and Exchange Commission, some companies are identifying campaigns by labor organizations and other activists, including through the use of social media and other mobile communications, as key risks to growth in sales and profits. Campaigns can quickly spread adverse perceptions of an industry, brand, management, and suppliers.
In addition to brand risk, conflicts over wages or other working conditions have the potential to disrupt operations across the extended enterprise. In recent years, countries such as Bangladesh, China and Haiti have all experienced labour unrest, including strikes, street confrontations with police and burned factories.
Against this backdrop, multinationals should develop strategies to avoid becoming the target of corporate campaigns and action plans in the event they do.
Five Tactics to Minimize Risk
- Conduct a risk assessment - Companies should conduct a country-by-country risk assessment, particularly in high risk developing markets. External risk factors to review include: sectarian violence, protests, trade union activity, change in government, NGO activity, and new and proposed legislation. Countries with difficult political climates and a strong union culture are particularly challenging because laws and enforcement priorities can change quickly, heightening the risk of noncompliance. Alongside a country analysis, companies should identify those issues that make them most vulnerable to attack based on the nature of their business and industry.
- Review supply chain standards and compliance - Any enterprise risk assessment should include a review of the labor and human rights practices of key suppliers and other third parties. Many global companies conduct regular workplace assessments of suppliers, varying the frequency based on the length of the relationship and history of non-compliance. These steps can yield valuable insights into the most common labor problems at facilities around the world, as well as issues specific to particular countries. Based on interviews with senior executives responsible for overseeing their companies' global supply chains, Baker & McKenzie'sThe Companies You Keep provides insight into the key risks that businesses face when using third parties to source, manufacture, transport, distribute and sell their products around the world.
- Develop an action plan to fix your biggest issues - Global companies are playing offense and mitigating known risks before they threaten the company's brand. Based on country, industry and supply chain assessments, companies are analyzing potential labor and human rights impacts within their operations, developing action plans to remedy issues, and monitoring progress. In this way, companies are demonstrating that they understand the risks in their industry, take them seriously, and are doing what they can to be part of the solution.
- Align your CSR efforts - The organizational structure around CSR is often fragmented. As a result, key stakeholders such as those in government affairs, investor relations, communications and legal are not always consulted about strategy and specific initiatives. At the same time, disclosure of environmental, human rights and social risks is moving from its home between the glossy pages of voluntary reports into the hard-nosed realm of mandatory legal requirements, as evidenced by recent developments in the European Union and India. Companies now face greater legal exposure and are more vulnerable to brand attacks based on broadly worded aspirational CSR statements. Developing an integrated CSR decision-making structure that includes the labor function is critical to counteract corporate campaign claims.
- Be prepared to tell your story - Given the speed at which corporate campaigns unfold, companies should be ready to launch a counter-campaign to combat false and misleading information, as well as communicate with employees and other stakeholders. Companies should develop a contingency plan in advance and identify those persons responsible for executing and directing the response in collaboration with representatives from the appropriate departments (e.g., communications, government affairs, public relations, legal, compliance, CSR and HR). By preparing and regularly updating key talking points, companies can position themselves to tell their story quickly and effectively. Companies should also consider the availability and effectiveness of legal action in various jurisdictions if actions rise to the level of defamation, extortion, trademark infringement or unfair business practices. Even if litigation tactics are not appropriate in one jurisdiction, they may work in another to limit the reach and impact of a campaign.