PROM Savada, NAIM Sakona, RADU Mares


Once a company has made a commitment to respect human rights by adopting a code of conduct (chapter 8) and conducted an impact assessment to understand the harms its operations might create (chapter 9), the company should take corrective actions to minimize harms. One of the most significant contributions of the UNGPs is to spell out – although at a general level – the expected conduct depending on how a business is involved in harm: whether it is causing, contributing to, or is linked to harm though its supply and distribution networks. This makes it clear that a company is responsible for what happens in its global value chains and not only its own workplace. The UNGPs also clarify the expected actions: for example, a company should eliminate an abusive supplier from its supply chain only as a last resort, before which it should act to help, persuade or compel its supplier to improve its conduct. As another concrete example, a company is not expected to repair harms that it is merely linked to (meaning the company did not cause or contribute to those harms) but should take other preventative and corrective actions. With that, the UNGPs introduced a significant change in supply chain management, which previously indicated that a company should act only where it had influence, usually on the direct contractors, and should not concern itself with abuses deeper in the supply chain (at the level of sub-suppliers and sub-contractors). As important as these contributions of the UNGPs are, they are still rather general. There is a growing amount of guidance and good practice to define specific corrective actions suitable for a specific human right and industrial setting. Furthermore, it is now common for companies to agree with their suppliers on ‘corrective action plans’ with specific measures and timelines. This introduces the needed element of precision and specificity that the UNGPs could never achieve. Furthermore, the attention is increasingly given to root causes of abuses that require more systemic analysis and responses often in partnership with other stakeholders (chapters 5 and 14).

In Cambodia, local suppliers in garment and footwear industry, for example, are often bound by their buyers’ codes of conduct and purchase agreements. In this way, suppliers have to accept and implement corrective actions agreed with the buyers or a designated third party once issues are identified. This is a condition to maintain their business relationship. Corrective actions are seen as an effort to increase compliance and avoid terminating the contractual relationship, which should be last resort measure. This chapter will further illustrate the process of how corrective actions are developed and imposed on local suppliers/partners, how corrective actions are implemented, and introduce relevant stakeholders who are contributing to the enforcement of those corrective actions.

Main Aspects

  • Involvement in abuses (causation-contribution-linkages to impacts)
  • Leverage (different forms of influence)
  • Ending the relationship (disinvestment, cutting links with suppliers)
  • Responsible disengagement
  • Restructuring of supply chains
  • Control points (“choke points” in supply chains)
  • Purchasing practices (contribution of brands to negative impacts)
  • Correction action plans
  • Chain of responsibilities in supply chains (‘cascading strategy’)
  • Symbolic responses and window-dressing (decoupling)
  • Industry collaboration (and multistakeholder partnerships)
  • Lobbying and public policy advocacy (and support for government)
  • Root causes (and complex factors of risk)
  • Social audit (shortcomings and ‘beyond-audit’ approaches towards suppliers)


UN High Commissioner of Human Rights, An Interpretive Guide[1]

Questions to ask:

  • What lines of responsibility and accountability exist for addressing our findings of potential human rights impact?
  • What systematized approaches might help us integrate findings from our assessments across the relevant business units or functions, so that we can take effective action?
  • Should we have one or more cross-functional groups to liaise on ongoing human rights challenges or cross-functional communication requirements before certain decisions or actions?
  • Can we build scenarios or decision trees for action across the company so that we are prepared to respond to the most likely or severe potential impact? Do staff need training and guidance on these issues?
  • How can we best integrate measures to address potential impact at the contract stage of new projects, partnerships or activities?
  • If we find that human rights impact is linked to our operations, products or services, are we equipped to address the risk of its continuation or recurrence appropriately and swiftly? How will decisions be made? What credible sources can we turn to for advice?
  • How do we assess our leverage in business relationships, especially those in areas of heightened risk to human rights? How can we maximize that leverage from the start of relationships? What opportunities for exercising or increasing our leverage can we see?
  • Do we have any “crucial” business relationships? How should we respond if these relationships lead to adverse human rights impact being linked to our operations, products or services? Are we equipped in terms of internal and external advice for this situation?

Shift, Oil and Gas Sector Guide on Implementing the UN Guiding Principles[2]

Systems for monitoring and auditing suppliers are common in many industries. They can provide useful and necessary “snap-shot” data about suppliers’ performance. However they are also seen to have a number of limitations:

  • They often miss issues due to their brief nature;
  • They may fail to grasp the bigger picture or root cause of repeated human rights impacts;
  • Suppliers who wish to manipulate records often do so successfully;
  • Workers may exercise self-censorship in audit interviews, due to intimidation or fear;
  • These processes have a poor record in generating sustainable improvements across a range of human rights over time.

There has therefore been a move among consumer goods industries towards more “partnership-based” and collaborative approaches to their suppliers. These complement, and may in some instances even replace, audits. They often include:

  • Supporting or analysing the root cause(s) of significant impacts. This can test the conclusions drawn from audits and find any underlying problems;
  • Assessing not only suppliers’ compliance with internationally-recognised human rights in terms of “outcomes” achieved, but also the quality of their forward-looking management systems to identify and address their own human rights risks;
  • Sharing the buying company’s own experience in managing human rights risks, including lessons for effective indicators and tracking systems;
  • Sharing data that helps suppliers see the business case for addressing human rights risks in their own operations.


UN, Guiding Principles on Business and Human Rights[3]

19. In order to prevent and mitigate adverse human rights impacts, business enterprises should integrate the findings from their impact assessments across relevant internal functions and processes, and take appropriate action. (…)

(b) Appropriate action will vary according to:

(i) Whether the business enterprise causes or contributes to an adverse impact, or whether it is involved solely because the impact is directly linked to its operations, products or services by a business relationship;

(ii) The extent of its leverage in addressing the adverse impact.


Where a business enterprise causes or may cause an adverse human rights impact, it should take the necessary steps to cease or prevent the impact.

Where a business enterprise contributes or may contribute to an adverse human rights impact, it should take the necessary steps to cease or prevent its contribution and use its leverage to mitigate any remaining impact to the greatest extent possible. Leverage is considered to exist where the enterprise has the ability to effect change in the wrongful practices of an entity that causes a harm.

Where a business enterprise has not contributed to an adverse human rights impact, but that impact is nevertheless directly linked to its operations, products or services by its business relationship with another entity, the situation is more complex. Among the factors that will enter into the determination of the appropriate action in such situations are the enterprise’s leverage over the entity concerned, how crucial the relationship is to the enterprise, the severity of the abuse, and whether terminating the relationship with the entity itself would have adverse human rights consequences. (…)

If the business enterprise has leverage to prevent or mitigate the adverse impact, it should exercise it. And if it lacks leverage there may be ways for the enterprise to increase it. Leverage may be increased by, for example, offering capacity-building or other incentives to the related entity, or collaborating with other actors.

There are situations in which the enterprise lacks the leverage to prevent or mitigate adverse impacts and is unable to increase its leverage. Here, the enterprise should consider ending the relationship, taking into account credible assessments of potential adverse human rights impacts of doing so.

Where the relationship is “crucial” to the enterprise, ending it raises further challenges. A relationship could be deemed as crucial if it provides a product or service that is essential to the enterprise’s business, and for which no reasonable alternative source exists. Here the severity of the adverse human rights impact must also be considered: the more severe the abuse, the more quickly the enterprise will need to see change before it takes a decision on whether it should end the relationship. In any case, for as long as the abuse continues and the enterprise remains in the relationship, it should be able to demonstrate its own ongoing efforts to mitigate the impact and be prepared to accept any consequences – reputational, financial or legal – of the continuing connection.

UN High Commissioner of Human Rights, An Interpretive Guide[4]

The commentary to Guiding Principle 19 sets out the issues that need to be considered in responding appropriately to this situation. These can be represented, in general terms, in the following decision matrix:

* Decisions on ending the relationship should take into account credible assessments of any potential adverse human rights impact of doing so.

“Leverage” over an entity (business, governmental or non-governmental) in this context may reflect one or more factors, such as:

(a) Whether there is a degree of direct control by the enterprise over the entity;

(b) The terms of contract between the enterprise and the entity;

(c) The proportion of business the enterprise represents for the entity;

(d) The ability of the enterprise to incentivize the entity to improve human rights performance in terms of future business, reputational advantage, capacity-building assistance, etc.;

(e) The benefits of working with the enterprise to the entity’s reputation and the harm to its reputation if that relationship is withdrawn;

(f) The ability of the enterprise to incentivize other enterprises or organizations to improve their own human rights performance, including through business associations and multi-stakeholder initiatives;

(g) The ability of the enterprise to engage local or central government in requiring improved human rights performance by the entity through the implementation of regulations, monitoring, sanctions, etc.

OECD, Due Diligence Guidance for Responsible Business Conduct[5]

1. Embed responsible business conduct into policies and management systems

1.3 Incorporate RBC expectations and policies into engagement with suppliers and other business relationships. (…)

Practical Actions

a. Communicate key aspects of the RBC policies to suppliers and other relevant business relationships.

b. Include conditions and expectations on RBC issues in supplier or business relationship contracts or other forms of written agreements.

c. Develop and implement pre-qualification processes on due diligence for suppliers and other business relationships, where feasible, adapting such processes to the specific risk and context in order to focus on RBC issues that have been identified as relevant for the business relationships and their activities or area(s) of operation.

d. Provide adequate resources and training to suppliers and other business relationships for them to understand and apply the relevant RBC policies and implement due diligence.

e. Seek to understand and address barriers arising from the enterprise’s way of doing business that may impede the ability of suppliers and other business relationships to implement RBC polices, such as the enterprise’s purchasing practices and commercial incentives.

3. Cease, prevent and mitigate adverse impacts

3.1 Stop activities that are causing or contributing to adverse impacts on RBC issues, based on the enterprise’s assessment of its involvement with adverse impacts (…). Develop and implement plans that are fit-for-purpose to prevent and mitigate potential (future) adverse impacts. (…)

Practical Actions

b. In the case of complex actions or actions that may be difficult to stop due to operational, contractual or legal issues, create a roadmap for how to stop the activities causing or contributing to adverse impacts, involving in-house legal counsel and impacted or potentially impacted stakeholders and rightsholders.

3.2 Based on the enterprise’s prioritisation (…), develop and implement plans to seek to prevent or mitigate actual or potential adverse impacts on RBC issues which are directly linked to the enterprise’s operations, products or services by business relationships. Appropriate responses to risks associated with business relationships may at times include: continuation of the relationship throughout the course of risk mitigation efforts; temporary suspension of the relationship while pursuing ongoing risk mitigation; or, disengagement with the business relationship either after failed attempts at mitigation, or where the enterprise deems mitigation not feasible, or because of the severity of the adverse impact. A decision to disengage should take into account potential social and economic adverse impacts. These plans should detail the actions the enterprise will take, as well as its expectations of its suppliers, buyers and other business relationships. (…)

Practical Actions

a. Assign responsibility for developing, implementing and monitoring these plans.

b. Support or collaborate with the relevant business relationship(s) in developing fit-for-purpose plans for them to prevent or mitigate adverse impacts identified within reasonable and clearly defined timelines, using qualitative and quantitative indicators for defining and measuring improvement (sometimes referred to as “corrective action plans”). (…)

h. Consider disengagement from the supplier or other business relationship as a last resort after failed attempts at preventing or mitigating severe impacts; when adverse impacts are irremediable; where there is no reasonable prospect of change; or when severe adverse impacts or risks are identified and the entity causing the impact does not take immediate action to prevent or mitigate them. Any plans for disengagement should also take into account how crucial the supplier or business relationship is to the enterprise, the legal implications of remaining in or ending the relationship, how disengagement might change impacts on the ground, as well as credible information about the potential social and economic adverse impacts related to the decision to disengage. (…)

            Enterprises can identify control points (sometimes referred to as “choke points”) by taking into consideration:

  • key points of transformation in the supply chain where traceability or chain of custody information may be aggregated or lost.
  • the number of actors, for example where there are relatively few enterprises that process or handle a majority of inputs that they pass further down into a supply chain.
  • the greatest point of leverage of enterprises towards the end of a supply chain.
  • points where schemes and audit programmes already exist to leverage these systems and avoid duplication.

‘Control point enterprises’ will likely have greater visibility and/or leverage over their own suppliers and business relationships further up the supply chain than enterprises closer towards consumers or end-users. Conducting due diligence on control point enterprises to determine whether they are in turn conducting due diligence in line with this Guidance provides some comfort that risks of adverse impact directly linked to suppliers have been identified, prevented and mitigated. Identification and engagement with control points may be carried out through: including requirements in contracts with supplier and business relationships that control points be identified (on a confidential basis); and by asking suppliers/business relationships to source from the control point enterprises that meet the expectations of this Guidance, by using confidential information-sharing systems on suppliers and/or through industry wide schemes to disclose actors further up the supply chain.

OECD, Common Approaches for Export Credits[6]

The environmental and social impact assessment (ESIA) report typically includes the following items: (…)

7. Management Programme: consists of the set of mitigation and management measures to be taken during implementation of the project to avoid, reduce, mitigate, or remedy for adverse social and environmental impacts, in the order of priority, and their timelines. May include multiple policies, procedures, practices, and management plans and actions. Describes the desired outcomes as measurable events to the extent possible, such as performance indicators, targets or acceptance criteria that can be tracked over defined time periods, and indicates the resources, including budget, and responsibilities required for implementation. Where the buyer/project sponsor identifies measures and actions necessary for the project to comply with applicable laws and regulations and to meet the international standards applied to the project, the management programme will include an Action Plan, which is subject to disclosure to the affected communities and on-going reporting and updating.

International Finance Corporation, Performance Standards[7]

Supply Chain

27. Where there is a high risk of child labor or forced labor in the primary supply chain, the client will identify those risks consistent with paragraphs 21 and 22 above. If child labor or forced labor cases are identified, the client will take appropriate steps to remedy them. The client will monitor its primary supply chain on an ongoing basis in order to identify any significant changes in its supply chain and if new risks or incidents of child and/or forced labor are identified, the client will take appropriate steps to remedy them.

28. Additionally, where there is a high risk of significant safety issues related to supply chain workers, the client will introduce procedures and mitigation measures to ensure that primary suppliers within the supply chain are taking steps to prevent or to correct life-threatening situations.

29. The ability of the client to fully address these risks will depend upon the client’s level of management control or influence over its primary suppliers. Where remedy is not possible, the client will shift the project’s primary supply chain over time to suppliers that can demonstrate that they are complying with this Performance Standard.

OECD, Due Diligence Guidance for Responsible Supply Chains[8]

Components of a CAP [correction action plans] for the enterprise’s own operations

Corrective action plans should have clear timelines for implementation and follow-up. They generally include a combination of policy, training, facility upgrading and strengthening of management systems.

  • Policy: The policy lays out the enterprise’s commitment to uphold international standards and is the foundation for further action, such as training, facility upgrades, etc.
  • Training: While the objectives, audience and content of training should be fit-for-purpose, training is a critical component of most corrective action plans. In most cases training should cover information on the risk, the rights of the worker and the role of the trainee on preventing or mitigating harms.
  • Facility upgrading: Some harm may only be prevented by investing in facility and equipment improvements. Such investments may include: lighting, ventilation, access to fire exits, new machinery, etc.
  • Management systems: Management systems may be strengthened to (i) better track information and flag risks before harm occurs or (ii) establish systematic measures to mitigate risk of harm in the first place. For example, a spinning mill may strengthen its prequalification of private labour recruiters in order to prevent forced labour and child labour. For example, a factory may move towards automated payments to prevent unfair deductions in wages.
  • Rights of workers: In relation to labour impacts, the enterprise should incorporate due diligence on the rights of workers to form and join a trade union and to bargain collectively into the corrective action plan. Trade unions and representative organisations of the workers’ own choosing play an important role in preventing harmful impacts on-site through collective bargaining agreements, ongoing monitoring and helping workers to access grievance mechanisms, or providing a form of grievance mechanisms themselves. For this reason, these rights are considered enabling rights.

Prevent contribution to harm through responsible purchasing practices: Recommendations for retailers, brands and their buying intermediaries

The purchasing practices of retailers, brands and their buying intermediaries have been demonstrated to contribute to harmful impacts – such as excessive and forced overtime and low wages – in some cases. This is most notably the case when orders are changed, cancelled, placed late, rushed (particularly during peak times or holidays) or when lead times are set shorter than feasible. Late or delayed payment for products may also contribute to suppliers delaying payment of wages to their workers. An enterprise’s price negotiations may contribute to cost-cutting and therefore labour, human rights or environmental impacts. The enterprise should strengthen its management systems to prevent contributing to harm through its purchasing practices. Specifically, the enterprise is encouraged to assess whether its purchasing practices are contributing to harm, implement control measures and track red-flags for risk of harm.

            Assess whether purchasing practices are contributing to harm:

  • The enterprise is encouraged to engage with its supplier to understand if and how its purchasing practices may be contributing to harm. Recognising that suppliers may be reluctant to provide such feedback candidly, the enterprise may seek to collect information from its suppliers anonymously (e.g. annual survey) or partner with a third party that aggregates the data and presents findings.
  • The enterprise should track relevant indicators of actions that lead to harm. Examples include: percentage of orders placed late, percentage of orders changed after order is placed; number of days between the last change and shipment. Systems should be established to track such information on an ongoing basis.
  • If the enterprise identifies through its tracking that the above practices (e.g. changes in orders) are common, it should seek to identify why. Team members responsible for the placement of orders should be included in the analysis. (…)

Control measures to prevent contribution to harm

  • The enterprise is encouraged to implement control measures to prevent contributing to harm through its purchasing practices regardless of whether it has identified specific contributions to harm.
  • The enterprise should develop pricing models that account for the cost of wages, benefits and investments in decent work. The above considerations should be reflected in freight on board (FOB) prices together with traditional pricing considerations such as quantities being purchased, cost of materials, skill requirements, etc.
  • Additional control measures may include:
  • Set final order placement dates with the supplier.
  • Communicate the deadlines to everyone in the purchasing teams.
  • Share the purchasing plan with suppliers and communicate updates in a timely manner.
  • Improve forecasting alignment, which involves coordination across geographies, categories and product designs to get the right information and decisions made at the right time.
  • Optimise the sourcing base to handle fluctuations in capacity and to adopt and implement the technologies needed to respond to the demand for emerging styles and products.

Adidas, Workplace Standards[9]

(…) we expect our partners – contractors, subcontractors, suppliers, and others – to operate sustainably and to conduct themselves with the utmost fairness, honesty and responsibility in all aspects of their business.

We use the adidas Workplace Standards as a tool to assist us in selecting and retaining business partners who follow business practices consistent with our policies and values. As a set of guiding principles, the Workplace Standards also help identify potential problems so that we can work with our business partners to address issues of concern as they arise. Business partners will develop and implement action plans for continuous improvement in factory working conditions. Progress against these plans will be monitored by the business partners themselves, our internal monitoring team and external independent monitors. (…)

adidas is committed to respecting human rights and will refrain from any activity, or entering into relations with any entity, which supports, solicits or encourages others to abuse human rights. We expect our business partners to do the same, and where there is any perceived risk of a violation of human rights to duly notify us of this and of the steps being taken to avoid or mitigate such a breach and, where this is not possible, for the business partner to provide for the remediation of the adverse human rights impact where they have caused or contributed to this. (…)

Adidas, Factory Termination Procedure[10]

Many opportunities are given to a supplier to remedy compliance issues before SEA recommends to Sourcing that they should terminate a business relationship. The termination of a supplier solely for poor compliance is therefore infrequent and is usually the result of long-term nonperformance or the breach of specific Zero Tolerance issues. (…)

No matter what the reason for the termination of a supplier relationship, or however it is phrased (i.e. downsizing the supply chain, phasing out, or consolidation), the SEA team should always be notified in advance as it may result in substantial lay-offs or the closure of a factory. Poorly managed closures may trigger worker protests or trade union action.

Poorly handled closures or downsizing may lead to complaints to government agencies, to international bodies such as the ILO or the OECD, or trigger NGO or activist campaigns all of which will lead to adverse publicity and impact on the reputation of the adidas Group and its family of brands. Responsible planning with SEA engagement will minimise this risk.

The purpose of this SOP is to describe the key requirements to be followed when terminating a business relationship and to ensure that the actions are undertaken in a transparent and ethical manner. (…)

3. Procedure

3.2 Letter of Expectations

If the planned termination or downsizing is likely to result in worker lay-offs or factory closure, SEA will normally issue a letter to the supplier, asking them to investigate all possible alternatives to lay-offs or closure, and detailing both our expectations and legal requirements for the ethical treatment of workers. Our expectations include:

  1. Ensure laid-off workers are selected objectively. Criteria for selecting employees to be laid off must not infringe upon accepted international or national labour standards. These include union membership or activity, pregnancy, race, sex, age, or religion. Criteria generally accepted to be fair include length of service, skills and qualifications.
  2. Ensure workers receive full and timely payment of all monies owed to them (wages, unused leaves, social security, severance, retirement, etc.) by the date of termination, in accordance with contract terms and local law.
  3. Notify workers in advance of the factory closure, both orally and in writing. Communication must include the anticipated closure date and relevant factory policies and procedures surrounding the closure, as well as worker rights and responsibilities under the process.
  4. Suppliers shall ensure that the factory maintains all required and relevant documentation necessary to demonstrate and verify compliance with contract terms and local law for worker wages, worker benefits and termination practices.
  5. Where relevant, worker representatives should be consulted on all aspects of the factory closure.
  6. While the factory continues to operate, the supplier must meet the compliance requirements outlined in the adidas Group Workplace Standards.

AngloAmerican, Responsible Sourcing: Standard for Suppliers[11]

Implementation and expectations

In selecting suppliers we will, in conjunction with parallel evaluation criteria, show preference to those suppliers that demonstrate commitment to responsible supply.

Suppliers must ensure the full implementation of these standards within their organisation as well as the cascading into their supply chain, including agents, contractors and suppliers.

Suppliers must maintain effective management systems that are based on sound business and scientific principles, which include establishing appropriate objectives and targets, regularly assessing performance, and practicing continual improvement.

Self-assessment: Suppliers are required to complete a self-assessment questionnaire (SAQ) based on this Standard. The aim of the SAQ is to support the identification of management processes and controls.

Independent 3rd party verification audit: On a sample basis, suppliers will be required to conduct an independent responsible sourcing audit at operational facilities. Follow-up audits may be requested to ensure that recommended corrective action has been undertaken to mitigate risk.

Remediation: Where a review of this Standard, the self-assessment questionnaire or verification audits have indicated non-compliances, we expect suppliers to develop a remediation plan with realistic timeframes to close-out issues, and communicate that plan to Anglo American.

            Anglo American is committed to supporting suppliers enhance their understanding and implementation of this Standard. We reserve the right to disengage from suppliers who deliberately refuse to comply with legal requirements, this Standard, or are unable to provide appropriate evidence of steps undertaken to remediate any non-compliance issues.

Fair Labor Association, Workplace Monitoring Report[12]

This is a report of a workplace assessment conducted by Fair Labor Association assessors following FLA’s Sustainable Compliance methodology (SCI), which evaluates a facility’s performance in upholding fair labor standards through effective management practices throughout the entire employment life cycle.

This report identifies violations and risks of noncompliance with the Fair Labor Association Workplace Code of Conduct in its assessment of the employment functions, and includes a description of the root causes of violations, recommendations for sustainable and immediate improvement, and the corrective action plan for each risk or violation as submitted by the company. (…)

[Definition] Root causes: a systemic failure within an employment function, resulting in a “finding.” Findings are symptoms of underlying problems or “root causes.” Consider, for example, the case of workers not wearing hearing protection equipment in a high noise area. The most expedient conclusion might be that the worker did not use the hearing protection equipment because such equipment was not provided by management. However, upon a more thorough evaluation of available information, the assessor might find that the worker was indeed supplied with hearing protection equipment and with written information about the importance of wearing hearing protection, but was not trained on how to use the equipment and that use of the equipment was not enforced in a consistent manner by management.

[Definition] Company action plan: a detailed set of activities outlined by the sourcing company and/or direct employer to address FLA findings.

Hours of work

Root Causes

1. Factory management is implementing a four-year (2016-2019) working hour reduction plan, reducing weekly working hours from 58 to 49 hours. At the time of the assessment, it is based on 55.5 hours per week for the 2016 plan. Thus, that still means an average of 62 hours of overtime per month.

2. Most workers accept overtime as a way to increase their income.

3. The central government publishes a holiday schedule, which often combines some holidays with working days for an extended holiday, using subsequent Saturdays and Sundays to make up for the lost working days. Factory management prefers to offer an extended holiday for workers ,especially during Chinese New Year, considering that 50.5% of the workers are not local.

4. Factory management does not have a good command of the local law regarding pregnant workers. Furthermore, their understanding of the one-hour-rest requirement it is just the lunch hour (one hour).

Company action plans

1. The company is making efforts together with the factory to reduce working hours gradually within three years, in order to meet local laws and FLA requirements.

2. The factory work together with CSR and HR dept. to create feasible production plan, and ensure regular overtime working hours are not included in the production plan. The factory implements the production plan strictly according to FLA fair labor and responsible production practice code of conduct.

3. The company has established a policy to track the situation of pregnant workers and put into practice. The factory informs the workers during the orientation training that: When the workers are sure that they are pregnant after check, they should submit the Pregnancy test report to the factory HR department for record; The HR staff track according to the report regularly every month. If the pregnancy period is 28 weeks, the HR staff should report to the supervisor and the factory manager to monitor the worker not to work overtime and should rest one hour during work time every day.

4. The company conducts annual internal audit to track the remediation progress.

Verite, Fair Hiring Toolkit[13]

I. A Guide to Corrective Action & Systems Improvement Planning[14]

Forced labor and human trafficking are crimes under international human rights law and in most countries around the world. A case of this abuse discovered in the supply chain – among the worst forms of exploitation in the world of work – will demand immediate corrective action on the part of the brand, its supplier and the recruiter involved. Abuse of this kind will always be treated as a major breach of code compliance.

Corrective action will need to be comprehensive and systematic, involving both short and long term strategies. It should be focused on the needs and well-being of the trafficking victim(s) first and foremost, and involve key stakeholders such as victim service providers, health care professionals, and other public or civil society organizations, wherever necessary. This is a clear case where brands and their suppliers should strongly consider joint multi-stakeholder engagement in the best interests of the workers concerned.

Immediate action

If a case of forced labor or human trafficking is identified in the supply chain (for example as a result of a social audit or another means of assessment), it is essential that the brand respond immediately and unequivocally. This should involve an immediate investigation and site visit by brand representatives, a clear identification of the workers affected, and a full understanding of the nature of the abuse. The brand will need to determine the extent and form of the problem before it can institute the full protective measures that will be required.

It will be necessary for the brand to act quickly to remediate the problems that have occurred and to reverse the cycle of abuse. Workers may need to be paid back wages; excessive recruitment fees may need to be reimbursed; and passports may need to be returned. Whatever the nature of the abuse, the brand will need to monitor this process closely to ensure that comprehensive corrective action is taken. To help with this process (and to ensure a full and timely response), it may be necessary to draw up a plan of action – a corrective action/performance improvement plan – that identifies priorities, responsibilities and timelines for each of the actors involved: the brand, supplier and recruiter. (…)

Addressing root causes: from correcting problems to preventing them

To fully address an issue like forced labor, it isn’t enough to take immediate and short-term measures like these, as important as they are. It is also essential to consider the longer-term actions that should be taken to ensure that the problem does not recur.

The brand will need to consider a few things. First, how is it that forced labor and human trafficking are present in the facility in the first place, and do they exist elsewhere in the brand’s supply chain? Second, what needs to be done to ensure that these problems are solved and the brand is no longer at risk?

To answer these questions, it will be necessary to look beyond the supplier in question and the specific case of abuse. The brand will need to take a thorough look at its own systems and protocols, policies and assessment procedures, and other aspects of its social responsibility program to determine the root causes of what went wrong and where. As part of this, it may be advisable to conduct a thorough review and risk assessment across the supply base.

Whatever the nature of the abuse, a review of this kind will lead to stronger policies and procedures, and move the brand away from piecemeal, reactive engagement towards proactive and preventive engagement. Responding in this way and developing new protections for migrant workers to promote fair hiring and recruitment, will promote a cycle of continuous improvement that will benefit both the brand and its supplier. (…)

Long-term engagement: tackling complex causes

Corrective action taken to address a specific incident of forced labor or human trafficking is likely to be immediate and time-bound. The brand will seek to identify the problem and its root cause(s) and address it quickly, working with its supplier and the recruiter in question.

For some “red flags” of forced labor, this is an appropriate strategy. The company can work through the problem directly, address the key issues, develop new policies and procedures, prohibit bad practice and thereby ensure greater protection for migrant workers. In other cases, however, problems are too complex for a “quick fix” approach and will demand a more nuanced and long-term strategy. In these cases, the brand may need to look beyond its own operations and those of its suppliers to address broader, industry-wide or even nation-wide concerns. This will involve tackling the fundamental causes of workplace or recruitment-based problems, and necessitate a multi-stakeholder or partnership approach. The following case from the Gap illustrates longer-term thinking in developing systems solutions.

Developing a Strategy for Corrective Action and Systems Improvement Planning[15]

This tool sets out the steps that brands and their suppliers can take to develop and implement plans to address identified cases of forced labor and human trafficking in the supply chain. (…) The material herein is drawn from Verité’s in-depth training on Problem Solving and Decision-Making for Social Responsibility. (…)

Step 2: Analyze the problem

Companies should analyze the identified problems or gaps for root causes that may underlie them. Many non-conformance issues in the supply chain are manifestations or symptoms of larger problems. In addressing compliance violations, it is important to tackle not only the symptom but the root cause as well. Approaches that do not address root causes may prove inadequate, leaving underlying issues unaddressed and resulting in the recurrence of old problems and the creation of new ones.

There are many tools available to help you with systemic analysis, including:

  • Fishbone Diagram (or Cause and Effect Analysis);
  • Force Field Analysis;
  • KATTAR root cause analysis;
  • 5Ws/2Hs (Who, What, Where, When, Why & How Many, How Often);
  • Fault Tree Analysis; and
  • 5 Whys

Company ABC identified several causes for the passport retention issue. It also found that one of these causes – the fear of workers “running away” from the facility – was driven by the threat of government penalties to the facility in the event that migrant workers overstayed their visas. (The facility was the visa sponsor for the migrant workers.) This concern was also found to be the root of the practice of securing deposits and forced savings.

Step 3: Brainstorm possible changes and improvements to solve the problem

Once it is clear where a problem comes from, brands should act on the most immediate causes, working with their supplier to do so. Many problems have more than one root cause and, in most cases, companies may need to address more than one issue to inspire real change. When brainstorming these improvements, make sure there is a broad cross-section of people involved from different parts of the company and levels of the supply chain, with different perspectives and expertise. (…)

Step 5: Develop a plan for implementing the decisions

Having identified an effective change and improvement option, you should work with your supplier to:

  1. Identify whether policies and procedures need to be developed or revised to support the change;
  2. Identify “change owners” at policy, procedural and task levels;
  3. Discuss a realistic timeframe for implementing the change;
  4. Identify performance indicators to measure effectiveness of the change; and
  5. Revise or design a complementary monitoring mechanism.  (…)

A Guide to Public Policy Advocacy[16]

Public policy engagement by brands against forced labor, human trafficking and the worst forms of exploitation linked to international labor migration is emerging as a key form of engagement in Corporate Social Responsibility (CSR). (…)

The unregulated nature of the recruitment industry in many parts of the world and the lack of legal and regulatory protections available to migrant workers in host countries are among the key issues frequently addressed by brands in dialogue with public policy actors. Other key issues in policy dialogue include:

  • Restrictive policies that sometimes regulate residency permits and work visas, and effectively tie migrant workers to a single employer;
  • Restrictions in some countries that prohibit migrant workers from joining or forming trade unions;
  • Legal jurisdictions that require employers to withhold migrant workers’ travel documents or passports; and
  • Laws – or a lack thereof – regulating the charging of recruitment fees to workers.

Public policy engagement can take different forms: advocacy, awareness raising, even public private partnership. Brands have a number of options available to them to positively influence the social policy environment in which they operate, whether in home or host countries, or at the international level.

  • Brands can advocate at national level for ratification of relevant UN and ILO Conventions that have not been ratified by the countries in which they operate.
  • Brands can lobby sending and receiving countries to adopt better laws and enhanced protection for migrant workers by:
  • Supporting sending country governments in improving the legal and regulatory environment that governs labor recruiters and labor mobility, and ensuring adequate protection for migrants prior to their departure; and
  • Working with receiving country governments to improve laws and strengthen enforcement mechanisms to ensure protection of migrant workers on the job and in their adopted communities. 
  • Brands can encourage the adoption and enforcement of bilateral labor agreements between governments that extend labor and social protection to migrant workers. Such agreements facilitate better migration management by ensuring that it takes place according to agreed-upon principles and procedures.
  • Finally, brands can also consider direct participation in networks and forums for international and regional policy dialogue such as the Global Forum for Migration and Development.

Shift, Advancing Human Rights in Global Supply Chains[17]

There are many reasons why the traditional audit paradigm has struggled to produce sustainable improvements in these and other key areas of social performance, with each of the following playing their respective roles:

  • A lack of disclosure by suppliers of accurate information on their performance during some audit processes, calling into question the value and validity of information gathered;
  • A lack of capacity among suppliers to address issues that have been identified for remediation in a sustainable way;
  • A lack of perceived incentives among suppliers, both external and internal, to address social performance issues, and a corresponding lack of commitment to invest in sustainable improvements;
  • Systemic challenges that are beyond the control of individual suppliers, including social context, regulatory environments, and industry-wide issues;
  • The purchasing practices of global brands and retailers, and a need to recognize and improve upon the role they themselves may play in contributing to impacts on workers.

The first part of the report begins by identifying 10 leading trends and elements that form this new generation of social compliance programs for supply chains:

  1. The shift from pass/fail compliance to comprehensive continuous improvement programs;
  2. Replacing audits with collaborative assessment and root cause analysis;
  3. The role of grievance mechanisms in improving social performance;
  4. The integration of capacity-building approaches for suppliers;
  5. Different forms of partnerships between global brand companies and civil society organizations;
  6. Providing commercial incentives to suppliers for improvements in social performance, such as price, volume, duration, and supplier preference;
  7. Developing metrics to help suppliers identify the business case for better social performance;
  8. Efforts by brands to use their leverage to address systemic issues;
  9. Industry-wide collaboration to tackle systemic issues; and
  10. Aligning internal purchasing practices with social commitments made by global brands and retailers

Short et al., Improvement in Global Supply Chain Working Conditions[18]

Worker rights advocates seeking to improve labor conditions in global supply chains have engaged in private politics that led transnational corporations (TNCs) to adopt codes of conduct and to monitor their suppliers for compliance, but it is not clear whether or when these organizational structures can actually raise labor standards. We [conditions] under which codes and monitoring are more likely to go beyond mere symbolism and to be associated with improvements in supply chain working conditions. At the institutional level, we find that suppliers improve working conditions more when they face greater exposure risk from their domestic civil society, and when their buyers are more sensitive to such exposure. At the program design level, we find that suppliers improve more when the monitoring regime signals a cooperative approach and when auditors are highly trained. (…)

Private political strategies seek to change the behavior of private market actors like corporations by mobilizing activism to target those actors directly. An extensive private politics literature has focused on activists’ targeting strategies, companies’ motivations for submitting to activists’ demands, and the organizational structures corporate targets have adopted in response to private political activism. Studies reveal, for instance, that that private political activism has prompted firms to adopt “impression management tactics”, public “concessions” to conform to activists’ demands, policies sanctioning certain brands targeted by activists, and corporate social responsibility (CSR) officer positions or board committees. However, private politics research has not sought to determine whether these organizational structures are related to positive changes in organizational behavior that align it more closely with activists’ normative goals. (…)

We suspect that this focus is at least partly an artifact of the decoupling literature, which strongly suggests that organizational structures adopted in response to corporate-targeted activism are likely to be symbolic, or decoupled from organizational activities. First, there is a strong consensus in the literature that organizational structures adopted to gain legitimacy with external stakeholders rather than to satisfy the task-related efficiency demands of production will tend to be implemented symbolically and decoupled from practices. Second, symbolic structures are more likely to be decoupled in contexts where efficiency demands are strong and not tempered by countervailing institutional pressures. Finally, resource constraints impede substantive implementation of formal organizational structures. Suppliers to global value chains are subject to all three of these constraints: they face intense efficiency demands to produce high volume at low cost and codes of conduct threaten to raise the cost of labor, a key source of competitive advantage; many are in countries with weak regulatory institutions and lax enforcement of labor standards; and many lack the resources to effectively implement formal structures like codes and monitoring. Thus, the axioms that emerge from the decoupling literature suggest that organizational structures like codes and monitoring are likely to be ceremonial window dressing “implemented, evaluated, and monitored so weakly that they do little to alter daily work routines” in ways that might improve conditions for workers.

While research in this domain has mostly theorized and documented decoupling, a growing stream focuses on the conditions under which organizational structures adopted symbolically are actually implemented substantively or become coupled with organizational practices. Consistent with the decoupling literature, most studies that do find coupling attribute it to coercive institutional pressures, particularly to forms of state power, such as regulatory inspection and enforcement. Other studies identifying successful coupling of symbolic structures have been of voluntary programs implemented in the context of broader, legally backed state regulatory regimes such as US antidiscrimination law or environmental law. Similarly, studies specifically investigating suppliers’ compliance with labor codes of conduct have found that codes and monitoring tend to be associated with better working conditions when combined with government regulatory efforts. In addition to the coercive power of the state, studies have found that institutional pressures from civil society actors like unions, a free press, NGOs, and brands can induce suppliers to couple their symbolic commitments to codes and their labor practices.

Recent studies have expanded the decoupling literature’s traditional focus on coercive institutions to investigate how the activities of individual organizational actors can create contingencies that promote coupling. (…) In a study of Indonesian apparel and footwear factories, Bartley and Egels-Zandén find that the coupling of labor codes of conduct and supplier labor practices was contingent on local union members’ ability to leverage ties with brands, international NGOs, and global unions to pressure suppliers to live up to their commitments to codes of conduct.

Collectively, the literature on coupling and decoupling contains important insights into the challenges and contingencies of coupling organizational structure and practice, but it also contains gaps that have hindered dialogue with the private politics literature. First, the decoupling literature’s traditional focus on the coupling power of state-based and other coercive institutional pressures has limited its ability to explain variation in substantive outcomes observed among corporate targets of private political activism that adopt organizational structures in environments where coercive institutions are weak or lacking. But these are precisely the types of environments in which private political campaigns operate. Thus, coupling research must address coupling contingencies outside of the traditional channels if it is to tackle the contexts in which private political strategies are most likely to be deployed. (…)

BIICL, The Components of Effective Supply Chain Management[19]

Codes of conduct and contractual clauses

Many interviewees mentioned that using human rights provisions in a contract or an accompanying code of conduct is useful for communicating the human rights standards required or to “start a conversation about human rights”. Such contractual expectations are often coupled with penalty clauses, termination rights and investigatory rights. Interviewees indicated that it is important to include such control mechanisms in the contract, to ensure that the company’s HRDD standards are clearly part of the supplier’s ongoing performance requirements. (…)

Our interviews showed a few examples of where contractual human rights provisions were enforced, such as through termination of a contract or requirement of action plan implementation. In some cases, interviewees indicated that the option for enforcement exists, although they have not yet needed to exercise this option. In some cases, the contract does provide for termination based on human rights violations. In these cases the company usually exercises what leverage it has for the duration of the contract, and refuses to renew the contract or place any new orders going forward.

On the whole our evidence also suggests that contractual provisions have less impact on suppliers when used on their own than if they are complemented by the entire package of HRDD components, including ongoing monitoring of compliance with the code of conduct, human rights policies and action plans embedded in the suppliers’ operations, human rights training, and active and open engagement with the supplier on the realities of improving conditions.

In order to be effective, codes of conduct also need to be complemented by purchasing practices such as prices and lead times. A recent study found that “[w]hile many companies require suppliers to respect their codes of conduct…and monitor suppliers’ labour rights performance, their buying practices often sit at odds with these initiatives.” Codes of conduct place burdens on suppliers but are not always accompanied by resource allocation, financial support and buying practices to enable compliance. The report highlighted that 48% of suppliers receive “no help at all” in implementing the buyer’s code of conduct, and there is very little reward for improvements made in terms of the code of conduct. (…)

Remediation and termination

The approach of the UNGPs is accordingly to exercise and increase existing leverage first, and only if leverage fails to consider terminating the relationship, taking into account the human rights impacts of termination. Companies involved in this study confirmed that this approach is broadly followed. (…)

Before deciding to terminate a relationship, companies often choose to engage with the supplier to put in place action plans for remediating issues and improving policies and conditions. One company which uses this approach indicated that it undertakes return checks to monitor that the supplier adheres to the action plan, and includes this in the follow-up audit. Each action plan has to be completed within a certain period of time, which is usually within six months.

Interviewees indicated that the decision whether to terminate a relationship with a supplier depends on various factors, such as the nature of the violation and the likelihood of improving supplier conditions. Some companies take a risk-averse strict internal position on the decision to terminate, whereas others use a more dynamic ad hoc approach.

For example, some companies have a list of very severe human rights impacts which they will not tolerate in their suppliers, based on the unlikelihood of them being able to improve conditions through leverage. One interviewee indicated that child labour is on their list of “things [that are] absolutely not acceptable to us.” If they detect child labour, they cease working with the supplier “immediately” by simply placing no further orders. It is also highly unlikely that they would work with that supplier again in the future, even if the supplier demonstrates remediation and improvement of practices. It should be noted that this is a company with comprehensive initial screening processes, human rights provisions incorporated into contractual requirements and regular human rights auditing. They indicated that the company’s strict adherence to their human rights standards is intended to signal to suppliers that these requirements are to be taken seriously, and are not simply “guidelines” contained in contractual form. (…)

Other interviewees take a directly contrasting approach to the decision to terminate. They indicated that their companies choose to make ad hoc decisions in each individual case as to how to address the human rights impact. (…) Another interviewee stated that they “try to engage rather than walk away from suppliers”, indicating that “it encourages more transparency if they think we will work through issues with them”. However, they will terminate if they find “similar ongoing problems” after having worked with a supplier to change policies and improve conditions. (…)

Other factors which influence the decision to terminate is the sector, the nature of the activity being undertaken, and the significance of the relevant supplier. For example, an interviewee indicated that once a large and longer-term construction project has started, it is less feasible to simply walk away than it would have been before entering into the relationship. In one instance, they were informed that a construction supplier’s plans failed to respect the cultural heritage of an affected indigenous community. The company took this “extremely seriously”. They instructed the supplier not to build in a particular place, and worked with the supplier to put in place mechanisms for remediation and prevention of similar failures in the future.

On the other hand, if the supplier provides non-essential products with a short order time that could easily be sourced elsewhere, such as stationary or commodities such as bricks, companies frequently decide to simply not place any further orders, and instead switch to a supplier with a better human rights record. A company’s approach regarding termination, as opposed to remediation, often depends on whether the product is “hard to source from other places”.

Interviewees mentioned that even the threat of termination may improve leverage. In one example, a “very important” large supplier, which was producing the company’s private brand, was being audited every six months “without any progress”. The company’s vice president of sourcing visited the supplier and indicated that unless these human rights issues are “fixed”, the company would cancel its orders. Thereafter, the issues were remediated “within months”.

ILO, Decent Work in Global Supply Chains[20]

32. A common feature in global supply chains is that lead firms can coordinate and control the standards of production across different tiers of producers. These private standards can cover a range of technical, quality, product safety, delivery, social and environmental requirements imposed as a condition of supply. The use of such standards is more prevalent in the food sector, where consumer concern over food safety and provenance has led to traceability, sometimes from field to fork. In figure 2.3, for example, all suppliers must meet the standards relevant to their segment established by the final retailers, often large supermarkets. These standards are often stricter than standards pertaining to international trade between countries.

Figure: Simplified value chain in the agri-food industry

Background (Cambodia)

Oka, Accounting for the Gaps in Labour Standard Compliance[21]

This article focuses on the unique nature of the Cambodian model that combines semipublic monitoring and private enforcement. Although the ILO is mandated to monitor and report factory compliance with the Cambodian labour law and international labour standards, the ILO has no enforcement power. The Ministry in charge of labour inspection and remediation suffers from incapacity and corruption, which prevents it from effectively enforcing the labour law. Given the lack of government enforcement, buyers often act as a virtual enforcement authority. For modest fees, ILO BFC [Better Factories Cambodia] releases monitoring reports to buyers with the factories’ agreement, and buyers demand corrective action from suppliers when important violations are found in the ILO monitoring reports.(…)

            Most buyers enforce CoC [Code of Conduct] in their supply chains through pre-order selection and postorder monitoring. Before placing orders, almost all buyers assess the compliance levels of candidate factories either by internal compliance teams or external auditors. If compliance level is deemed unsatisfactory, compliance teams demand corrective action plans. Only when the factory’s compliance reaches an acceptable level, can sourcing teams place orders. In this way, buyers’ compliance departments play the role of a gatekeeper. After orders are placed, factories are regularly monitored, and once important or persistent non-compliance issues are signalled, buyers ask for corrective action plans. If factories do not rectify the problems within a given time frame, buyers may cancel orders. Although most major buyers have CoC that include the national labour law and international core labour standards, the acceptable level of compliance and the degree of actual enforcement are likely to depend on buyers’ vulnerability to negative publicity and thus reputation consciousness.

Instruments (Cambodia)

Law on Environmental Protection and Natural Resource Management[22]

Article 20: For any person who commits a violation of Ministry of Environment’s requirement as specified in Article 14 of this law, the Ministry of Environment shall issue a written order requiring:

  • Correction of the violating activities immediately or within a specified time period; or
  • Cessation of his/her/its activities until the violation has been corrected; or
  • Clean-up the pollution immediately.

Article 21: Any person who does not permit or refuse to allow an inspector to enter [and] conduct and examination or inspection on the premises as stated in the paragraph I Article 15 of this law shall be administratively fined from five hundred thousand Riel (500,000 riel) to one million riel (1,000,000 riel). (…)

Law on Construction[23]

Article 42: If it is necessary to ensure public security, safety, and order, the competent authority can assign a construction controller to check building or demolition works. The construction owner, construction users, persons involved in building works, including a real estate developer, a builder and a construction certifier shall give cooperation to the construction controller.   The competent authority may decide to suspend, modify, halt, or require the demolition of a construction, or take other necessary measures if the building or demolition work has been found not to comply with the building technical regulations and other existing regulations. 

Article 49: Construction safety and quality control shall be conducted by construction controllers or certifiers who hold a license granted by the Minister of Land Management, Urban Planning and Construction. Every expense for construction safety and quality control shall be borne by a construction owner.  For a co-owned building, the owners of all private units shall be jointly responsible for every expense for construction safety and quality control, in proportion to the sizes of private units. 

Royal Government of Cambodia, National Biodiversity Strategy and Action Plan[24]

Theme 4: Sustainable mining

Based on the NSDS [National Sustainable Development Strategy] 2030 vision, mining should be a sector that exploits minerals without destroying nearby human settlements and landscapes, and without causing serious health and environmental impacts. It should be a sector that economizes the scarce mineral resources and promotes the recycling of metals. Strategically, the ecological and socioeconomic impact of mineral resource exploration, extraction and processing on the status and trends of biodiversity components and functions will be assessed; awareness about this impact will be enhanced; preventive and corrective measures, including ecosystem restoration, will be developed and applied, as appropriate; and the contribution of mining resources to biodiversity conservation, poverty reduction, sustainable development and the well-being of all in Cambodia will be increased.(…)

Association of Banks in Cambodia, Sustainable Finance Implementation Guidelines[25]

I. Protecting the Environment, our People and our Cultural Heritage

When making business decisions, we commit to prioritise the environment, protect our people and preserve our cultural heritage by actively assessing, managing, mitigating, offsetting or avoiding potential risks or negative impacts arising from our clients’ business activities, standards or practices. With these principles, our aim is to create a level playing field and raise standards across the sector. (…)

            Banks/MFIs assess and manage environmental (and social) risk and issues through an Environmental and Social Management System (ESMS), customised according to their specific business activities, operations, client base, the types of products and services they provide.

E&S [Environmental &Social] Procedures and Tools

E&S Risk Mitigating: based on the overall E&S risk profile and other relevant factors, the bank/MFI may take several risk-mitigating actions, including:

  • E&S requirements incorporated into loan documentation; this can include the requirement that a client E&S correction action plan is put in place, to mitigate the identified E&S risks;
  • Certain high-risk transactions may involve hiring external E&S expertise and could be subject to higher decision-making authorities (e.g. a Board committee);
  • High-risk projects may require regular on-site visits throughout the life of the loan;
  • Financing may be approved subject to E&S conditions (precedent or subsequent to disbursement);
  • Client risk monitoring performed at shorter intervals.

IFC, Environmental & Social Review Summary: Amru Rice Project[26]

Project Description

The proposed loan is up to US$8-10 million (50/50 split between IFC and the Global Agriculture and Food Security Program – GASFP) to support Amru Rice (Cambodia) Company Ltd. (“Amru or the “Company”) to provide working capital to increase its wet paddy rice sourcing and refinance existing short-term and long-term debt.

            Amru is a rice trading company established in 2011. For the last seven years, Amru increased its vertical integration by extending its activities towards rice milling, processing and packaging, beyond its increase of direct paddy sourcing from cooperatives. (…) To strengthen its farmer loyalty, AMRU established in 2018 the Cambodian Agriculture Cooperative Corporation (CACC) in partnership with farmer cooperatives and private investors to provide drying, warehousing and trading services in Kampong Thom Province.

            Amru main products are high quality Cambodian jasmine, fragrant and organic rice. In 2018, it processed 59,851 tons of rice of which 90% was exported to 70 countries. Total export volume of rice of Amru in 2017 was 45,000 tons. Amru has been increasingly focusing on sales of organic rice which enjoys increasing demand from China, the USA and Europe. The company has been among the top 5 Cambodian rice exporters since 2013 and the largest miller/exporter of organic rice in 2017/2018. (…)

            This is a Category B project based on IFC’s Policy on Environmental and Social Sustainability. The E&S risks and impacts associated with this project are limited, site-specific, and can be readily addressed through generally accepted mitigation measures described in this document and the attached Environmental and Social Action Plan (ESAP). Key E&S issues associated with this investment are:

  1. compliance with applicable Cambodian legal and regulatory requirements, including securing all necessary operational permits;
  2. effectiveness of Amru’s management competency and capacity to implement the integrated EHS/labor/food safety management systems;
  3. emergency preparedness and response plan, especially Life and Fire Safety (L&FS);
  4. resource (energy/water) efficiency and effluent management; point source (stack) air emissions; ambient dust and noise; solid (e.g. bran and rice husk) and hazardous waste management;
  5. supply chain risk assessment and management, including harmful child/forced labor and conversion of natural/critical habitats in paddy rice sourcing areas.(…)

Environmental and Social Mitigation Measures

IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). (…)

PS 1: Assessment and Management of Environmental and Social Risks and Impacts

Based on IFC Global Map of Environmental and Social Risks in Agro-Commodity Production (GMAP), rice production in Cambodia is associated with high risk of harmful child/forced labor, significant occupational safety risks and biodiversity loss due to conversion of natural/critical habitats. To address labor and OHS risks, the Cambodian Rice Federation has adopted in 2015 an Ethical Code of Conduct. Amru Rice has also adopted in 2015 its own Supplier Code of Conduct (known as Corporate Social Responsibility Policy) which commit Amru towards environmental protection, no use of harmful child/forced labor, safe working conditions and human rights, among others.

            To implement such Supplier Code of Conduct, Amru has developed and implemented a series of supply chain management procedures, including the training of its sourcing team to implement its CSR manual. Specifically, starting in 2013, Amru Rice has implemented Internal Control System (ICS) in each of the existing 48 cooperatives, including individual farmer recording book where risks of harmful child / forced labor and occupational health and safety (use of PPEs and storage/management of pesticides) are being identified through a written questionnaire completed by Amru Rice extension officers. Worthwhile to underline that the Organic and SRP certification requirements also include such provisions. In its Contractual Agreement with each CACC, explicit provisions of prohibition of harmful child / forced labor and safe working conditions to farmers are also indicated. Continuous verification of the effective implementation of such provisions is done through Amru Rice sourcing team, individual cooperative management team and lead farmers.

            Independent audit of Amru Rice’s organic and SRP sourcing operations is done annually (e.g. 2016 Ecocert ESR audit, 2018 Fair for Life, etc.) and corrective actions identified are rapidly implemented (e.g. reliable system for registering working hours, existence of an annual training plan). (…)

Marks & Spencer, Human Rights Report[27]

We have rolled out our health programme to 15 factories in Cambodia since 2012. The programme links in-factory clinics to local health service providers and supports factories in creating management committees to address health rights and policies, and providing a training awareness programme for workers. So far, the programme has reached 20,000 workers, increased factory clinic usage by 40% and reduced anaemia by 60%. There is a strong business case to support adoption of the programme, with factories reporting a drop in absenteeism of 5% and an efficiency gain of 7%. (…)

            We are now rolling out a three-year programme (2017-2020) designed to improve on-site health facilities, strengthen HR processes to address health and labour rights, in particular access to sick leave, maternity leave and facilitating workers’ return to work after maternity leave. The programme will identify worker health champions and provide them with leadership training to enable them to support workers in accessing their health rights. It will also link the factory programme to local Community Resource Centres to tackle broader community health provision challenges.

            We identified that boosting wages in Cambodia would require improvements across multiple issues, as well as the commitment and collaboration of all stakeholders. Importantly, there are also opportunities for M&S to work within its own supply base to help factories boost wages and support workers in making their money go further. We also found that although wages are a fundamental issue for workers, job security is also a key priority in an industry driven by the use of short-term contracts. We identified the opportunity for M&S to engage suppliers on this highly political topic and promote better outcomes for workers.

Marks & Spencer, Modern Slavery Statement[28]

Audit Case Study examples

(…) In Cambodia, we found that contract machine maintenance workers are generally only used on an annual basis. Normal practice was that the workers were contracted to a third party labour provider and the supplier paid a lump sum to the third party but with no verification of the workers contracts/pay/working hours. We have now implemented a process that the supplier has to verify the contracts of the workers and there are now contracts between the labour providers and the suppliers including providing evidence of payslips and working hours. In addition the labour provider must sign a contract that they will respect the human rights of all of their contract workers.

Adidas, Summary of Human Rights Complaints Handled[29]

Complainant*Factory nameComplaintOutcomeStatus
C.CAWDU – a Cambodian trade unionCheng Yueh Enterprise Co., Ltd., Cambodia (a former sub-contractor of one of the adidas’ T1 footwear suppliers-. Meng Da)adidas exchanged several emails with C.CAWDU regarding the termination and severance payments for 17 union officials and members following the 2017 closure of the Cheng Yueh subcontractor. (…)adidas immediately launched an investigation and reached out to the lawyer who had been appointed by Cheng Yueh to handle the factory closure. We also sought advice from the Ministry of Labor. (…)Ongoing
Central-Cambodia – a Labour Rights NGO based in Pnom Penh CambodiaBowker Garment Factory (Cambodia) Company LimitedOn August 22, 2018 Central Cambodia (‘Central’) wrote to adidas alleging that Bowker had unlawfully dismissed 3 workers, taken inappropriate disciplinary action against 3 workers and discriminated against union leaders (….)adidas shared with Central the result of our investigation and the remedial action taken by the factory: • Terminations: (…) • Disciplinary Action: (..)Closed
Central-CambodiaBowker Garment Factory (Cambodia) Company LimitedOn December 3, 2018, Central-Cambodia (‘Central’) raised the following complaints with adidas: (…)adidas reviewed the allegations         and conducted a follow-up investigation and verification. We shared with Central the result of our investigation and the remedial action taken by the factory: (…)Closed
Central-Cambodia; Worker Rights Consortium (WRC) – US based labor advocacy groupChen Cambodia (PCC) – a former supplier to adidasIn September 2018 adidas was approached by Central-Cambodia (‘Central’), and later by the Worker Rights Consortium (WRC) about PCC.Despite having no active relationship with PCC, adidas wrote to Pou Chen urging them to act on the AC ruling. Pou Chen responded stating that they have paid the correct amount of severance and that they had consulted the Ministry of Labor, who had confirmed that the factory’s calculations were in accordance with the labor law. (…)Ongoing

Australian NCP, Final Statement: ANZ Group and Phnom Penh Sugar Co.[30]

2. The Specific Instance alleged non-observance by ANZ of certain parts of the General Policies Chapter and Human Rights Chapter of the OECD Guidelines for Multinational Enterprises (OECD Guidelines) in relation to ANZ’s involvement with the developer of a sugar plantation and refinery project in Cambodia. The project is alleged to have forcibly displaced the families and dispossessed them of their land and productive resources. ANZ Royal is a joint venture of ANZ Group and the Royal Group of Companies (based in Cambodia), with ANZ Group holding a 55 per cent interest in ANZ Royal. ANZ is linked to the project as it provided partial financing in 2011 to the developer of the project, Phnom Penh Sugar (PPS) for the refinery construction.

            In its letter to the AusNCP of 2 August 2017, ANZ stated that it undertook a review of its human rights standards in 2016. This is in line with an outcome sought by the notifiers that ANZ develop a corporate-level human rights compliant policy on involuntary land acquisition and resettlement, including relevant due diligence procedures. As part of the review it made some upgrades in the following key areas.

  • Confirming our ‘zero tolerance’ for improper land acquisition (incorporated in a public ‘ANZ land acquisition position statement’)
  • Committing to considering remediation processes if we identify we have caused or contributed to adverse impacts, or are linked to adverse human rights impacts via our products and services.
  • Confirming our expectation that our customers resolve issues identified where they are associated with adverse human rights impacts (consistent with our ‘sensitive sector’ policies that were also upgraded in 2015).
  • Supporting our business partners to align to these standards, eg clarifying our expectation that our business partners provide a fair and safe working environment, including following our approach to ‘no tolerance’ for child labour.

Australian NCP, Follow Up Statement: ANZ Group and Phnom Penh Sugar Co.[31]

ANZ acknowledges its due diligence on the project funded by its loan was inadequate and recognizes the hardships faced by the affected communities. (…) Following dialogue with Inclusive Development International and Equitable Cambodia in 2014, ANZ encouraged its customer to address the adverse human rights impacts caused by the land concession granted for the project. (…)

The agreement includes:

  • A contribution by ANZ of the gross profit it earned from the loan to help alleviate the hardships faced by the affected communities and support their efforts toward rehabilitation.
  • A commitment by ANZ to review and strengthen its human rights policies, including its customer social and environmental screening processes, and specific grievance mechanism accessible to affected communities.

FLA, Independent External Assessment Report for Evergreen Enterprises[32]

Understanding this Assessment Report

This report identifies violations and risks of noncompliance with the Fair Labor Association Workplace Code of Conduct in its assessment of the employment functions, and includes a description of the root causes of violations, recommendations for sustainable and immediate improvement, and the corrective action plan for each risk or violation as submitted by the company.(…)

Finding No.5

1. At least seven personnel files were found with no copy of National ID card on file. At least one worker who was working in the painting section was found using someone else’s birth certificate, National ID card and Family book. After various verification channels, the worker provided his own ID and other age proof documents on the second day of assessment that proved that he was not an underage worker. (…)

Company Action Plans

Action Plan no 1.


1. Factory will ensure that workers’ proof of age document is properly checked and maintained during the recruitment process.

2. Factory will recheck all workers personal documents and not recruit juvenile workers to employ in the factory.

3. Factory will ensure labor contracts include all information as required by law and provide new contract to workers.

4. Factory will ensure that workers are put on proper probationary period as accordance to the law.

5. Factory will arrange all workers to conduct their health check properly.

6. Factory will arrange all workers to conduct their employment book properly.

7. The factory will establish and maintain the Approved Company internal regulation and rules.

FLA, Independent External Assessment Report for Pou Chen[33]

Finding No.2

(…)1. The factory provides ongoing training to employees across different employment functions. However, at least 50% of interviewed workers were not fully aware of most of these policies, except for Wage calculation and Working hours. [ER.1, ER.28]

2. Around 50% of workers interviewed were not aware of the grievance channels and how grievances are handled. The majority of workers interviewed were not aware of freedom of association policy and not aware of who the shop stewards or union leaders are. [ER.1, ER.28]

3. No special training on harassment and abuse policy is provided to expatriate leaders. [ER.1, ER.2, ER.17] (…)

Company Action Plans

Action Plan no 1.


1. Review all training materials to ensure all information are updated.

2. Publish all the policy on announcement board in the production area.

3. Make an announcement regarding to updated policy at monthly meeting with workers.

4. Provide friendly workplace training to overseas supervisors quarterly.

5. All supervisors shall sign on no harassment and abuse policy to commit that they will not violet the policy.

AFWA et al., Gender Based Violence in the H&M Garment Supply Chain[34]

According to the H&M CSR Code of Conduct for suppliers, Section 8.4 on Corrective Action, H&M’s role in remediating violations of its Sustainability Commitment is extremely limited. If H&M confirms a case of non-compliance with minimum requirements by a supplier, H&M will send a letter of concern and require a corrective action plan from the supplier. At best, H&M will provide capacity building support to the supplier factory to guide implementation of the corrective action plan. H&M does not work directly with suppliers to remediate violations. (…)

            In order to meet even international due diligence standards, H&M must take an active role in addressing violations of decent work in their supply chains. (…)

CARE, Productivity Cost of Sexual Harassment to the Cambodian Garment Industry[35]

1.2. Given the identified gaps in workplace-level protections, CARE recommends garment factories, with the support of the industry body GMAC:

  • Develop and/or adopt and implement workplace-level policies (in line with international best practice) which put processes in place to prevent, respond to and monitor sexual harassment.
  • Train all management and staff on sexual harassment, gender equality, and bystander intervention to ensure that the workplace-level policy is properly understood and implemented.
  • Provide necessary awareness to workers on the workplace policy, and their rights and responsibility to report incidents in the factory to the designated management staff.
  • Task appropriate employees with responsibility and expertise in addressing sexual harassment and creating cultural change so that sexual harassment is no longer tolerated. This may involve establishing a sexual harassment committee or explicitly and publicly tasking an existing committee or individuals with this mandate.
  • Create linkages, dialogue and reporting mechanisms (where appropriate) between other workplace and community stakeholders, such as unions, commune authorities, landlords, and police to address and prevent sexual harassment that occurs both inside and outside the workplace.

Salmivaara, New Governance of Labour Rights[36]

If important or persistent non-compliance is detected, buyers demand corrective action plans. As the sustainability manager of a large European brand described, the approach is one of ‘continuous collaboration and dialogue’, aimed at ‘resolving challenges together’ (interview C2). Cancelling orders or terminating the relationship is the last option. This is in accordance with worker representatives’ wish, as they are ultimately afraid of workers losing their jobs.


  1. Why is the corrective action plan important from the perspective of global brands? What about from the perspective of local suppliers? Can these perspectives be in conflict?
  2. Why is terminating business relationship used as the last resort in case a local supplier fails to eliminate or remediate its violation of human rights?
  3. If you were a financier and gave a loan to an agribusiness, what would you propose as a corrective action plan in the case of violation of land use right of local farmers?
  4. In your opinion, what are the factors that brands should pay more attention to when imposing a corrective action plan on their suppliers?

Further Readings

[1] UN Office of the High Commissioner of Human Rights, The Corporate Responsibility to Respect Human Rights – An Interpretive Guide (2011) http://www.ohchr.org/Documents/Issues/Business/RtRInterpretativeGuide.pdf.

[2] Shift and the Institute for Human Rights and Business, Oil and Gas Sector Guide on Implementing the UN Guiding Principles on Business and Human Rights (2012) www.ihrb.org/pdf/eu-sector-guidance/EC-Guides/O&G/EC-Guide_O&G.pdf.

[3] Human Rights Council, UN Guiding Principles on Business and Human Rights, Seventeenth Session (2011) http://www.ohchr.org/Documents/Publications/GuidingPrinciplesBusinessHR_EN.pdf.

[4] UN Office of the High Commissioner of Human rights, The Corporate Responsibility to Respect Human Rights – An Interpretive Guide (2011) http://www.ohchr.org/Documents/Issues/Business/RtRInterpretativeGuide.pdf.

[5] OECD, Due Diligence Guidance for Responsible Business Conduct (2018)http://mneguidelines.oecd.org/OECD-Due-Diligence-Guidance-for-Responsible-Business-Conduct.pdf.

[6] OECD, Recommendation of the Council on Common Approaches for Officially Supported Export Credits and Environmental and Social Due Diligence (the “Common Approaches”) (2016) www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=TAD/ECG%282016%293&doclanguage=en.

[7] International Finance Corporation, Performance Standard 2 – Labor and working conditions (2012) https://www.ifc.org/wps/wcm/connect/115482804a0255db96fbffd1a5d13d27/PS_English_2012_Full-Document.pdf?MOD=AJPERES

[8] OECD, Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector (2017) www.oecd-ilibrary.org/docserver/9789264290587-en.pdf?expires=1532695820&id=id&accname=ocid177253&checksum=818B31E05AC72D66A0A7A131BE6CDE73.

[9] Adidas, Workplace Standards (2016) https://www.adidas-group.com/media/filer_public/23/b4/23b41dce-85ba-45a7-b399-28f5835d326f/adidas_workplace_standards_2017_en.pdf.

[10] Adidas, Factory Termination Standard Operating Procedure (2007) www.adidas-group.com/media/filer_public/2013/07/31/termination_sop_en.pdf.

[11] AngloAmerican, Responsible Sourcing – Standard for Suppliers (2016) www.angloamerican.com/~/media/Files/A/Anglo-American-PLC-V2/documents/responsible-sourcing-standard-for-suppliers-november-2016.pdf.

[12] Fair Labor Association, Workplace Monitoring Reports – Chenfeng Group (2016) http://portal.fairlabor.org/fla/go.asp?u=/pub/zTr5&tm=5&Rid=1813&Fdn=13&Fna=AA0000002007%5F2016%2Epdf.

[13] Verite, Fair Hiring Toolkit, 2018 (2011) http://helpwanted.verite.org/helpwanted/toolkit.

[14] Verite, ‘A Guide to Corrective Action & Systems Improvement Planning’, Fair Hiring Toolkit, http://helpwanted.verite.org/node/708.

[15] Verite, ‘Developing a Strategy for Corrective Action and Systems Improvement Planning’, Fair Hiring Toolkit, http://helpwanted.verite.org/node/709.

[16] Verite, ‘A Guide to Public Policy Advocacy’, Fair Hiring Toolkit, http://helpwanted.verite.org/node/714.

[17] Shift, From Audit to Innovation: Advancing Human Rights in Global Supply Chains (2013) www.shiftproject.org/media/resources/docs/Shift_audittoinnovationsupplychains_2013.pdf.

[18] J. Short et al., Beyond Symbolic Responses to Private Politics: Codes of Conduct and Improvement in Global Supply Chain Working Conditions, Harvard Business School Working Paper (2018) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2806966# (references omitted).

[19] British Institute of International and Comparative Law (BIICL), The components of effective supply chain management (2018) http://human-rights-due-diligence.nortonrosefulbright.online (footnotes omitted).

[20] International Labor Organization (ILO), Decent work in global supply chains (2016) www.ilo.org/public/libdoc//ilo/2016/116B09_43_engl.pdf.

[21] Chikako Oka, ‘Accounting for the Gaps in Labour Standard Compliance: The Role of Reputation-Conscious Buyers in the Cambodian Garment Industry’, European Journal of Development Research (2010) https://link.springer.com/content/pdf/10.1057/ejdr.2009.38.pdf.

[22] Cambodia, Law on Environmental Protection and Natural Resource Management (1996)

[23] Cambodia, Law on Construction (2017) https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&ved=2ahUKEwjcm-rWyp_rAhUZOisKHXWcA8AQFjAAegQIBRAB&url=http%3A%2F%2Fwww.mlmupc.gov.kh%2Fdownload-file.php%3Fp%3Ditems%2F%26file%3D612020153529Law%2520on%2520Construction.pdf&usg=AOvVaw12lRUYFg7xY04TztCkyBSA.

[24] Royal Government of Cambodia, National Biodiversity Strategy and Action Plan, Royal Government of Cambodia (2016) https://www.cbd.int/doc/world/kh/kh-nbsap-v2-en.pdf.

[25] The Association of Banks in Cambodia, Cambodian Sustainable Finance Principles Implementation Guidelines (2019) https://www.ifc.org/wps/wcm/connect/8ce9ddc0-2422-4e69-aa8b-e4f3c8cc3eec/Cambodia+SF+Principles+-+Implementation+Guidelines.pdf?MOD=AJPERES&CVID=mGdMKuz.

[26] International Finance Corporation, Environmental & Social Review Summary: Amru Rice Project (2019) https://disclosures.ifc.org/#/projectDetail/ESRS/41831.

[27] Marks & Spencer, Our Approach to Human Rights (2017) https://corporate.marksandspencer.com/documents/plan-a-our-approach/mns-human-rights-report-june2017.pdf.

[28] Marks & Spencer, Modern Slavery Statement 2017/18 (2018) https://corporate.marksandspencer.com/documents/plan-a-our-approach/mns-modern-slavery-statement-june2018.pdf.

[29] Adidas, Summary of Human Rights complaints handled by adidas in 2018 (2018), https://www.adidas-group.com/media/filer_public/65/ad/65adad7e-63b8-4400-afaf-e099b8ae6cf7/summary_of_human_rights_complaints_handled_by_adidas_in_2018_web_en.pdf.

[30] Australian National Contact Point for the OECD Guidelines for Multinational Enterprises, Final Statement: This Specific Instance was Submitted by Equitable Cambodia and Inclusive Development International on Behalf of 681 Cambodian Families. (27 June 2018), https://ausncp.gov.au/sites/default/files/inline-files/11_AusNCP_Final_Statement.pdf.

[31] Australian National Contact Point for the OECD Guidelines for Multinational Enterprises, Follow Up Statement: Regarding Complaint Submitted by Equitable Cambodia and Inclusive Development International on Behalf of Cambodian Families (27 February 2020) https://ausncp.gov.au/sites/default/files/2020-02/Complaint_11_statement.pdf.

[32] Fair Labor Association, Independent External Assessment Report for Evergreen Enterprises Inc., Cambodia (2019) https://www.fairlabor.org/transparency/workplace-monitoring-reports.

[33] Fair Labor Association, Independent External Assessment Report for Pou Chen, Cambodia (2019) https://www.fairlabor.org/transparency/workplace-monitoring-reports.

[34] AFWA, CENTRAL, GLJ, LIPS & SLD, Gender Based Violence in the H&M Garment Supply Chain, Workers Voices from the Global Supply Chain: A Report to the ILO 2018 (2018) https://www.globallaborjustice.org/wp-content/uploads/2018/05/GBV-HM-May-2018.pdf.

[35] CARE International, “I Know I Cannot Quit”: The Prevalence and Productivity Cost of Sexual Harassment to the Cambodian Garment Industry (March 2017), https://www.care.org.au/wp-content/uploads/2017/04/SHCS_Research_Summary_March_2017.pdf.

[36] Anna Salmivaara, New Governance of Labour Rights: The Perspective of Cambodian Garment Workers’ Struggles, Globalizations (2018) https://www.tandfonline.com/doi/full/10.1080/14747731.2017.1394069.


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