Transnational company agreements and enforcement of labour standards in the global supply chain

Stefania Marassi, The Hague University of Applied Sciences

Multinational enterprises (MNEs) have become global players in the current globalized labour market and their economic activities are no longer territorially limited. However, the regulation of these corporations is still predominantly governed by national law, which consider parent companies, subsidiaries and business partners as different legal entities.

The lack of international regulations governing the direct legal accountability of parent companies for the violation of labour standards by their subsidiaries and/or business partners has had severe social consequences. (H. F. Cantú Rivera, ‘Business & Human Rights: From a “Responsibility to Respect” to Legal Obligations and Enforcement’, 2015). To that end, MNEs and global/European trade unions have started concluding transnational company agreements (TCAs), amongst other CSR initiatives. The emergence of forms of transnational private labour regulation has then been the answer to tackle the discrepancy between economic and legal realities.

By looking at the texts of TCAs one can notice that the signatory parties extend the scope of application of some agreements not only to subsidiaries but also to suppliers and (sub-) contractors. An illustrative example is the recent international framework agreement (IFA) concluded by IndustriALL and H&M, a Swedish MNE in the garment sector, on the respect of fundamental rights (e.g. child labor, freedom of association) in H&M’s global supply chain (2015). The link between TCAs and the regulation of labour rights in MNEs’ global supply chains has been also reaffirmed by the International Labour Organization (ILO) in its recent report “Decent Work in Global Supply Chains” (2016).

The paper contributes to furthering the academic debate on the development of TCAs as well as on the regulation and enforcement of labour rights in MNEs’ global supply chains. To that end, it conducts qualitative empirical research via a textual analysis of the texts of TCAs. The aim is to map out the different provisions on the application of TCAs in the global supply chain, identify the state of play on the topic and update it. Building on this analysis, the paper intends to explore and propose potential strategies and mechanisms to ensure the enforcement of the labour standards laid down in TCAs throughout MNEs’ global supply chains. In doing so, it also examines the potential role the ILO could play in the regulation of TCAs and their implementation in the global supply chain.