Buying power and human rights in the supply chain: Legal options for socially responsible public procurement of electronic goods

International Journal of Human Rights

Volumn 19, Issue 3, 2015, Pages 341-368

  Martin Ortega, Olga ^a   Outhwaite, Opi ^a   Rook, William ^a  

^a UNIVERSITY OF GREENWICH   (United Kingdom)

Author keywords

Due diligence; Electronics industry; European Union; Human rights; Labour rights; Public procurement; Supply chain; Working conditions

Indexed keywords

EID: 84930899559     PISSN: 13642987     EISSN: 1744053X     Source Type: Journal    
DOI: 10.1080/13642987.2015.1029295     Document Type: Article

References (134)

1. BBC News, ‘Ninth Worker Death at Taiwan iPhone Firm Foxconn’, 21 May 2010, http://www.bbc.co.uk/news/10137101.
2. C. Duhigg and D. Barboza, ‘In China, Human Costs Are Built Into an iPad’, New York Times, 25 January 2012, http://www.nytimes.com/2012/01/26/business/ieconomyapples- ipad-and-the-human-costs-for-workers-in-china.html?pagewanted=all&_r=1&
3. D. Barboza, ‘Worker Deaths Raise Questions at an Apple Contractor in China’, New York Times, 10 December 2013, http://www.nytimes.com/2013/12/11/technology/worker-deathsraise-questions-at-an-apple-contractor-in-china.html
4. BBC’s Panorama, ‘Apple’s Broken Promises’, first broadcast December 2014, http://www.bbc.co.uk/programmes/b04vs348.
5. Interbrand, ‘Best Global Brands 2013’, http://www.interbrand.com/en/bestglobal- brands/2013/Best-Global-Brands-2013.aspx. In this report the top ten companies include Apple Inc., Google, IBM, Microsoft, Samsung and Intel.
6. CNN, ‘Fortune Global 500: The Most Profitable Companies in the Global 500’, 8 July 2013, http://money.cnn.com/gallery/magazines/fortune/2013/07/08/global-500-mostprofitable.fortune/2.html. In this report Apple Inc. are ranked second and Samsung Electronics ranked the 12th most profitable companies in the world.
7. OECD, ‘Mapping Global Value Chains’, Report TAD/TC/WP/RD(2012)9, 3 December 2012, 27-9. The report notes that ‘standardisation, codification and computerisation allow for a large interoperability of parts and components which in turn allows for the fragmentation of the production process across different stages’.
8. T.J. Sturgeon and M. Kawakami, ‘Global Value Chains in the Electronics Industry: Was the Crisis aWindow of Opportunity for Developing Countries?’, The World Bank, Policy Research Working Paper 5417, September 2010, 3.
9. OECD, ‘Mapping Global Value Chains’, 28.
10. Good Electronics, ‘Reset. Corporate Social Responsibility in the Global Electronics Supply Chain’, October 2009, 19.
11. Sturgeon and Kawakami, ‘Global Value Chains in the Electronics Industry’, 4-5.
12. Decision, ‘World Electronic Industries 2008-2013’, April 2009, 14, http://www.decision.eu/doc/brochures/exec_wei_current.pdf.
13. Good Electronics, ‘Reset’, 19.
14. Independent research bodies, non-governmental organisations and collaborative campaigning initiatives in particular have published several reports highlighting these issues.
15. Dan Watch, ‘IT Workers Still Pay the Price for Cheap Computers’, 2013
16. A. Ferus- Comelo and P. Pöyhönen, ‘Phony Equality’ (Make IT Fair, 2011)
17. A. Kakuli and I. Schipper, ‘Out of Focus: Labour Rights in Vietnam’s Digital Camera Factories’ (Make IT Fair, 2011)
18. J. Chan and C. Ho, ‘The Dark Side of Cyberspace’ (World Economy, Ecology and Development (WEED), 2008)
19. China Labor Watch, ‘An Investigation of Eight Samsung Factories in China: Is Samsung Infringing Upon Apple’s Patent to Bully Workers?’, 2012.
20. A Kakuli and A Schipper, ‘Out of Focus’. The ILO has established eight ‘fundamental conventions’, these are Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87)
21. Right to Organise and Collective Bargaining Convention, 1949 (No. 98)
22. Forced Labour Convention, 1930 (No. 29)
23. Abolition of Forced Labour Convention, 1957 (No. 105)
24. Minimum Age Convention, 1973 (No. 138)
25. Worst Forms of Child Labour Convention, 1999 (No. 182)
26. Equal Remuneration Convention, 1951 (No. 100)
27. Discrimination (Employment and Occupation) Convention, 1958 (No. 111).
28. A further four conventions have been designated as priority instruments; these are recognised in the ILO Declaration on Social Justice for a Fair Globalization (2008) as the most significant with respect to governance.
29. The priority conventions are Labour Inspection Convention, 1947 (No. 81)
30. Employment Policy Convention, 1964 (No. 122)
31. Labour Inspection (Agriculture) Convention, 1969 (No. 129)
32. Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 14).
33. Chan and A Ho, ‘The Dark Side of Cyberspace’.
34. Ferus-Comelo and Pöyhönen, ‘Phony Equality’.
35. Chan and Ho, ‘The Dark Side of Cyberspace’; China Labor Watch, ‘An Investigation of Eight Samsung Factories in China’.
36. Kakuli and Schipper, ‘Out of Focus’; China Labor Watch, ‘An Investigation of Eight Samsung Factories in China’.
37. T. Pringle, ‘Reflections on Labor in China: From a Moment to a Movement’, South Atlantic Quarterly 112, no. 1 (2013).
38. Pringle, ‘Reflections on Labor in China’.
39. Ferus-Comelo and Pöyhönen, ‘Phony Equality’.
40. P. Ngai and J. Chan, ‘Global Capital, the State, and Chinese Workers: The Foxconn Experience’, Modern China 38 (2012): 383.
41. Chan and A Ho, ‘The Dark Side of Cyberspace’.
42. Kakuli and Schipper, ‘Out of Focus’.
43. Ferus-Comelo and Pöyhönen, ‘Phony Equality’
44. Kakuli and Schipper, ‘Out of Focus’
45. Chan and Ho, ‘The Dark Side of Cyberspace’.
46. China Labor Watch, ‘An Investigation of Eight Samsung Factories in China’.
47. Chan and Ho, ‘The Dark Side of Cyberspace’
48. China Labor Watch, ‘An Investigation of Eight Samsung Factories in China’.
49. Chan and Ho, ‘The Dark Side of Cyberspace’
50. Kakuli and Schipper, ‘Out of Focus’.
51. A. Chan, ‘Organising Wal-Mart in China: Two Steps Forward, One Step Back for China’s Unions’, New Labor Forum 16, no. 2 (2007): 86-96
52. Chan and Ho, ‘The Dark Side of Cyberspace’
53. Ferus-Comelo and Pöyhönen, ‘Phony Equality’.
54. According to the consultants PWC, worldwide combined shipments of consumer electronics devices were projected to reach 2.5 billion units in 2014, a 7.6% increase from 2013. Report available at http://www.pwc.com/gx/en/technology/scorecard/consumer-electronics.jhtml.
55. See discussion of due diligence below.
56. E. de Hann and I. Schipper, ‘Computer Connections. Supply Chain Policies and Practices of Seven Computer Companies’ (SOMO, 2009).
57. The EICC currently lists 84 members including many major brands and suppliers, see http://www.eicc.info/about_us05.shtml
58. The EICC Code of Conduct is available at http://www.eicc.info/eicc_code.shtml.
59. R. Locke, G. Distelhorst, T. Pal, and H. Samel, ‘Production Goes Global, Standards Stay Local: Private Labor Regulation in the Global Electronics Industry’, Massachusetts Institute of Technology,Working Paper No 2012-1, 2012, 10.
60. GeSI (the Global e-Sustainability Initiative) at http://gesi.org/.
61. Chan and Ho, ‘The Dark Side of Cyberspace’
62. Kakuli and Schipper, ‘Out of Focus’.
63. J. Howe, ‘The Regulatory Impact of Using Public Procurement to Promote Better Labour in Corporate Supply Chain’. Legal Studies Research Paper No 528. Melbourne Law School (2010).
64. As noted on the European Commission, DG Trade website ‘Public Procurement in a Nutshell’, http://ec.europa.eu/trade/policy/accessing-markets/public-procurement/.
65. OECD, ‘Size of Public Procurement Market’, in Government at a Glance (Paris: OECD, 2011), 148.
66. European Commission, DG Trade website ‘Public Procurement in a Nutshell’.
67. Chan and Ho, ‘The Dark Side of Cyberspace’, 2.
68. Howe, The Regulatory Impact, 2010
69. World Economy, Ecology and Development (WEED), ‘Buy It Fair. Guidance for Sustainable Procurement of Computers’, 2009, http://makeitfair.org/en/procure-it-fair/procure-it-fair-buyers-guides-available-in-seven-languages.
70. T.M. Arnaiz, ‘Social Considerations in Spanish Public Procurement Law’, Public Procurement Law Review (2011): 56.
71. C. Leire and O. Mont, ‘The Implementation of Socially Responsible Purchasing’, Corporate Social Responsibility and Environmental Management 17 (2010): 27-39.
72. C. McCrudden, ‘Using Public Procurement to Achieve Social Outcomes’, Natural Resources Forum 28 (2004): 257-67
73. Howe, The Regulatory Impact, 2010.
74. Howe, The Regulatory Impact, (2010), 18.
75. For further information see the consortium’s website at http://www.sweatfree.org/about_us.
76. See The Sweatfree Purchasing Guide, Version 1, USA, May 2011, http://buysweatfree.org/files/guide_to_sweatfree_procurement.pdf.
77. See http://buysweatfree.org/members.
78. Howe, The Regulatory Impact, (2010).
79. Client Earth, ‘Identifying Opportunities for Sustainable Public Procurement, Briefing No. 7: Award Criteria’, Legal Briefing Series, Award Criteria, October 2011, 3.
80. European Commission, Green Paper on ‘Public Procurement in the European Union: Exploring theWay Forward’, Green Paper, COM (96) 583 final, 1996 final; and European Commission, ‘Interpretative Communication of the Commission on the Community Law Applicable to Public Procurement and the Possibilities for Integrating Social Considerations into Public Procurement’, COM (2001) 566 final, 2001. See also the European Court of Justice rulings: Gebroeders Beentjes BV v. State of the Netherlands (31/87) [1988] E.C.R. I-4635; Du Pont de Nemours Italiana SpA v. Unità sanitaria locale N° 2 di Carrara (C-21/88) [1990] E.C.R. I-889; [1991] 3 C.M.L.R. 25; and Laboratori Bruneau Srl. Unità sanitaria locale RM/24 di Monterotondo (C-351/88) [1991] E.C.R. I-3641; [1994] 1 C.M.L.R. 707.
81. McCrudden, ‘Using Public Procurement to Achieve Social Outcomes’.
82. Agreement on Public Procurement (GAP), 1994, entered into force on 1 January 1996. The GPA is one of the plurilateral agreements included in Annex 4 to the Marrakesh Agreement Establishing the WTO. This means only those WTO members who are a party to the agreement are bound by its obligations and responsibilities. The EU is a party to the agreement.
83. Article III, GPA and see Articles IV, V and preamble.
84. Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the Coordination of Procedures for the Award of Public Works Contracts, Public Supply; Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 Coordinating the Procurement Procedures of Entities Operating in the Water, Energy, Transport and Postal Services Sectors, Contracts and Public Service Contracts.
85. Directive 2014/24/EU of the European Parliament and of the Council or 26 February 2014 on Public Procurement and Repealing Directive 2004/18/EC.
86. Impact Assessment Accompanying the Proposal for a Directive of the European Parliament and of the Council on Public Procurement, SEC(2011) 1585 final, Brussels, 20 December 2011 at 23.
87. The financial thresholds at which procurement rules apply are slightly lower for central government bodies than for other public sector bodies and slightly higher for supply and service contracts.
88. Art. 4 of Directive 2014/24 establishes the thresholds as €186,000 for public works contracts, €134,000 for public supply and service contracts awarded by central government authorities or €207,000 for supply and service contracts awarded by sub-central authorities.
89. The lack of regulation of contracts under such thresholds is due to the assumption of the European legislator that tenders of little economic value do not have important effects when stimulating the internal market.
90. Arnaiz argues that even if a public procurement contract falls outside of the directives, most public authorities voluntarily act within their provisions.
91. Arnaiz, ‘Social Considerations in Spanish Public Procurement Law’, 62.
92. European Commission, ‘Buying Green: A Handbook on Public Procurement’, (2011), 16, http://ec.europa.eu/internal_market/publicprocurement/docs/gpp/buying_green_handbook_en.pdf.
93. Note that although the European Commission identifies value for money as a key principle, Arrowsmith and Kunzlik argue that it is not per se an objective of the European regime, partly on the basis that this is not an objective that is within the competence of the EU. In this argument value for money is a matter for member states as distinct from an internal policy objective of the EU, and EU rules might then be seen to facilitate the pursuit of value for money by member states but is not a general policy aim for the EU.
94. S. Arrowsmith and P. Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law: General Principles’, in Social and Environmental Policies in EC Procurement Law, ed. S. Arrowsmith and O. Kunzlik (Cambridge: Cambridge University Press, 2009), 30-33
95. S. Arrowsmith, ‘Understanding the Purpose of the EU’s of the EU Regime and Some Proposals for Reform Procurement Directives: The Limited Role’, in The Cost of Different Goals of Public Procurement (Stockholm: Swedish Competition Authority, 2012), 44-118.
96. European Commission, ‘Buying Green’, 16.
97. Impact Assessment Accompanying the Proposal for a Directive of the European Parliament and of the Council on Public Procurement, SEC(2011) 1585 final, Brussels, 20 December 2011 at 23.
98. Client Earth, ‘Identifying Opportunities for Sustainable Public Procurement, Briefing No. 7’, 3.
99. Annex VII (1). Climate change performance has been the only new addition in 2014.
100. In technical specifications contracting authorities can provide such social requirements which directly characterise the product or service in question, such as accessibility for persons with disabilities or design for all users.
101. The Memorandum, at p. 10, reads as follows: ‘Contracting authorities may refer to all factors directly linked to the production process in the technical specifications and in the award criteria, as long as they refer to aspects of the production process which are closely related to the specific production or provision of the good or service purchased. This excludes requirements not related to the process of producing the products, works or services covered by the procurement, such as general corporate social responsibility requirements covering the whole operation of the contractor.’ 70. Article 43(1) refers to the possibility of contracting authorities laying down environmental, social or other characteristics and requiring the use of labels related to these criteria. This may only apply, however, where specified conditions are met, including that they are related to the subject-matter.
102. The explanatory memorandum to the proposals for Directive 2014/24 also refers to the possibility of including social considerations in labels but is not clear as to how these might relate to the subject-matter of the contract: ‘Contracting authorities may require that works, supplies or services bear specific labels certifying environmental, social or other characteristics, provided that they accept also equivalent labels. This applies for instance to European or (multi-)national eco-labels or labels certifying that a product is free of child-labour. The certification schemes in question must concern characteristics linked to the subject-matter of the contract and be drawn up on the basis of scientific information, established in an open and transparent procedure and accessible to all interested parties’. It should be noted that this memorandum does not form part of the final proposals - it merely provides background information. Its relevance may be in aiding interpretation by the courts.
103. Recitals 98 and 99.
104. And see the explanatory memorandum accompanying the proposed directive, 10.
105. Recital 33 of the Preamble and Article 26.
106. European Commission, Buying Social. A Guide to Taking into Account of Social Considerations in Public Procurement (2010), http://ec.europa.eu/social/main.jsp?langId=en&catId=89&newsId=978.
107. An example given here is that for the building of a school, accessibility could be part of the subject-matter of the contract, whereas the labour conditions of those employed to build the school could not since these conditions do not relate to the object of the contract. However, those labour conditions could be incorporated into the contract performance conditions. Here they would relate to the execution of the contract.
108. The only reference to working conditions in Directive 2004/18 is Art. 27 which establishes that contracting authorities may state in the contract documents, or be obliged by a member state so to state, the body or bodies from which a candidate or tenderer may obtain the appropriate information on the obligations relating to taxes, to environmental protection, to the employment protection provisions and to the working conditions which are in force in the member state, region or locality in which the works are to be carried out or services are to be provided and which shall be applicable to the works carried out on site or to the services provided during the performance of the contract. This clause seems to refer exclusively to work carried out in EU member states, therefore would not be relevant when considering working conditions in the global supply chain of electronics.
109. For ILO conventions and recommendations see http://ilo.org/global/standards/introduction-tointernational- labour-standards/conventions-and-recommendations/lang-en/index.htm.
110. Recital 105.
111. European Commission, Public Procurement Reform, Fact Sheet No. 8: Social Aspects of the New Rules (undated), http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/reform/fact-sheets/fact-sheet-08-social_en.pdf.
112. This explains, as regard the social criteria, that when considering how the goods they intend to purchase are produced, public buyers may ‘decide to award the contract concerned to the company that intends to employ the greatest number of disadvantaged people, such as the long-term unemployed’. They may also consider the working conditions of the employees involved in production of the goods specifically covered in the procurement contract but cannot be required to apply a general social or environmental responsibility policy, as such a requirement is not specific to the goods or services purchased.
113. O. Martin-Ortega, ‘Human Rights Due Diligence for Corporations: From Voluntary Standards to Hard Law at Last?’, Netherlands Quarterly of Human Rights 32 (2014): 49-50
114. R. McCorquodale, ‘Corporate Social Responsibility and International Human Rights Law’, Journal of Business Ethics 87 (2009): 392.
115. J. Ruggie, ‘Report of the Special Representative of the Secretary General on the Issue of Human Rights and Transnational Corporations and Other Business Enterprises, Guiding Principles on Business and Human Rights: Implementing the United Nations “Protect, Respect and Remedy” Framework’, 21 March 2011, A/HRC/17/31.
116. The framework is described as resting on three pillars: the state duty to protect against human rights abuses, corporate responsibility to respect human rights, ‘which means that business enterprises should act with due diligence to avoid infringing on the rights of others…’ and the need for access by victims to effective remedies.
117. O. Martin-Ortega and R. Wallace, ‘Business, Human Rights and Children: The Developing International Agenda’, Denning Law Journal 25 (2013): 105-27.
118. The OECD Guidelines on Multinational Enterprises were first passed in 1976 as part of the Declaration on International Investment and Multinational Enterprises. The current revised version was adopted by the OECD Investment Committee on 25 May 2011. See particularly, Section IV on Human Rights.
119. When businesses identify that they have caused or contributed to an adverse human rights impact, the Guiding Principles require them to provide for remediation or at least to cooperate in a legitimate remedy procedure (Guiding Principle 22). The OECD Guidelines on Multinational Enterprises, on the contrary, only contain references to remediation in its commentary, but not in the main text. The OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High Risk Areas, cited below, does not even make a reference to engagement in remedy procedures among its due diligence steps.
120. Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010. 124 STAT. 1376.
121. Martin-Ortega, ‘Human Rights Due Diligence for Corporations’, for a study of the UN Security Council response to conflict minerals demanding corporate due diligence, the Intergovernmental Conference of the Great Lakes Region’s Regional Certification Mechanism and its evolution towards corporate due diligence and national normative responses.
122. OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict- Affected and High-Risk Areas, 2nd ed., 2013.
123. California Transparency and Supply Chain Act (SB 657). The Act was passed in 2010 and entered into force in January 2012.
124. N. Bernaz, ‘Enhancing Corporate Accountability for Human Rights Violations: Is Extraterritoriality the Magic Potion?’, Journal of Business Ethics 117 (2013): 493-511.
125. With regard to Section 1502, Ochoa and Keenan have sustained that this provision will mean that other stakeholders, such as civil society organisations, will have access to valuable information to assist their public campaigns or, potentially, to pursue litigation
126. Christiana Ochoa and Patrick Keenan, ‘Regulating Information Flows, Regulating Conflict: An Analysis of the United States Conflict Minerals Legislation’, Gottingen Journal of International Law 3 (2011): 134.
127. Similar due diligence requirements imposed to address conflict minerals, including through the Dodd-Frank Act, have been met with resistance.
128. M. Epstein and K. Yutha, ‘Conflict Minerals: Managing an Emerging Supply-Chain Problem’, Environmental Quality Management 21, no. 2 (2011): 13-25.
129. Since 2008 the ILO has been developing DecentWork Indicators for a number of countries. For further information on the Decent Work agenda, see http://www.ilo.org/global/about-the-ilo/decent-work-agenda/lang-en/index.htm.
130. For access to the ILO’s country-specific reports on measuring decent work, see http://www.ilo.org/integration/themes/mdw/lang-en/index.htm.
131. For further information on the WRC factory assessment programme, see their website at http://www.workersrights.org/Freports/monitoring.asp.
132. For the FLA’s Workplace Code of Conduct, see http://www.fairlabor.org/our-work/laborstandards.
133. See the FLA’s analogy of their role with medical care, through a check-up, diagnose, remedy, follow-up model, http://www.fairlabor.org/our-work/our-methodology.
134. Electronics Watch, http://electronicswatch.org/en/our-aims_1377.