Commission Research

New Labour Standards Compliance Strategies: Corporate Codes of Conduct and Social Labeling Programs

Prepared by Patrick Macklem and Michael Trebilcock

Executive Summary

This Report examines new labour standards compliance strategies available to the Federal Labour Standards Review in light of its mandate to make recommendations for legislative changes to Part III of the Canada Labour Code to improve the relevance and effectiveness of federal labour standards.¹ While there may be controversy over their source, nature, scope and applicability, this Report is premised on the assumption that labour standards are necessary to protect workers from exploitation, insecurity and exclusion when they enter, participate in, and exit from labour markets. Compliance with labour standards not only protects workers. It ensures that law-abiding employers are not undercut by others who seek to ignore them. It also makes for efficient use of scarce administrative resources, and promotes public respect for the law and the values it embodies.

Labour standards compliance has become especially significant in light of recent trends in the production and delivery of goods and services both in Canada and abroad. Many industries and sectors are experimenting with flexible forms of production, including teamwork, participatory production, and atypical forms of employment.² Flexible forms of production are emerging simultaneously with a dramatic strengthening of international economic interdependence associated with enhanced technological, commercial and financial integration of national economies. Processes of economic globalization are redefining traditional geographical and political barriers to the production, placement and sale of goods and services. States are gradually dismantling trade barriers and actively seeking new forms of direct foreign investment. Corporations are simultaneously enjoying an unparalleled degree of capital mobility and confronting unparalleled international economic competition. They are seeking to maximize efficiency gains by participating in spatially concentrated clusters organized around principles of flexible production, often referred to as transnational production chains.³ In light of these developments, traditional forms of labour market regulation, whose origins lie in an earlier era of mass production and nationally-bounded economies, risk becoming obsolete instruments of worker protection.

This Report assesses the merits of two alternative labour standards compliance strategies, corporate codes of conduct and social labelling programs, in terms of their potential to supplement and perhaps even replace traditional forms of labour market regulation. A corporate code of conduct is a written set of standards, principles, and norms that a firm voluntarily assumes in its relations with its workers, customers, suppliers, and other persons, enterprises, and institutions in the course of doing business.⁴ A social labeling program operates as a verification system for a firm's social performance by authorizing the use of a physical label to communicate the social conditions surrounding the production of a product or rendering of a service.⁵ Like codes of conduct, social labels are considered to be voluntary responses to market demands. Social labels are aimed at consumers and potential business and institutional partners. They may be affixed to products or their packaging, displayed at the retail site, or assigned to specific enterprises.⁶

Corporate codes of conduct and social labeling programs are flexible and potentially efficient ways of offsetting deficiencies associated with traditional forms of labour market regulation. However, empirical evidence to date demonstrates that reliance on non-state actors to produce, monitor, and enforce labour standards severely compromises their capacity to promote labour standards compliance. Supplementary public regulation is necessary to realize their regulatory potential, and the state has a wide range of measures at its disposal to accomplish this goal. We identify three ways in which the state can bolster the transnational regulatory potential of codes of conduct and social labeling programs by promoting their use by domestic corporations abroad and by foreign corporations seeking domestic market access. We first situate these instruments in the context of a broader debate over the nature and merits of what has become known as "corporate social responsibility."

Endnotes

¹ The Task Force's Terms of Reference can be found at http://www.fls-ntf.gc.ca/en/tr_01.asp.

² See A. Supiot (ed.), Transformation of Work and the Future of Labour Law in Europe (1999) for a sophisticated analysis of these trends. See also Charles Sabel "Moebius-Strip Organizations and Open Labor Markets: Some Consequences of the Reintegration of Conception and Execution in a Volatile Economy" in Pierre Bourdieu and James S. Coleman (eds), Social Theory for a Changing Society (Boulder: Westview Press, 1991) 23-54.

³ For insightful theoretical work on the nature of the transnational corporation, see Andrew Jones, "Truly Global Corporations? Theorizing 'Organizational Globalization' in Advanced Business-services" (2005) 5(2) Journal of Economic Geography 177-200.

⁴ Compare OECD Working Party of the Trade Committee, Codes of Corporate Conduct: An Inventory, available at www.oecd.org/ech/index_2.htm. (codes of conduct are "commitments voluntarily made by companies, associations or other entities, which put forth standards and principles for the conduct of business in the marketplace. This definition includes self-obligations and negotiated instruments"); Kernaghan Webb, Voluntary Codes: Private Governance, the Public Interest, and Innovation (Carleton Research Unit for Innovation, Science, and Environment, Carleton University, 2002) at 11 (voluntary codes of conduct are "commitments not required by legislation or regulation; agreed to by one or more individuals or organizations; intended to influence or control behaviour; and to be applied in a consistent manner or to reach a consistent outcome").

⁵ Janette Diller, "A Social Conscience in the Global Marketplace? Labour Dimensions of Codes of Conduct, Social Labelling and Investor Initiatives" (1999) 138:2 International Labour Review 99 at 103. See also Michael Urminsky (ed), Self-regulation in the workplace: Codes of conduct, social labeling and socially responsible investment (Geneva: International Labour Office, 2002) at 38.

⁶ Diller, ibid, at 104. See also Urminsky, ibid, at 38.