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Does better labor standard pay? - Linking labor standard compliance and supplier competitiveness - Chikako Oka Royal Holloway University.

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Presentation on theme: "Does better labor standard pay? - Linking labor standard compliance and supplier competitiveness - Chikako Oka Royal Holloway University."— Presentation transcript:

1 Does better labor standard pay? - Linking labor standard compliance and supplier competitiveness - Chikako Oka Royal Holloway University of London

2 Question What do supplier factories gain from better labor standard compliance? Enhanced productivity? Attract and retain buyers?

3 Buyer Survey in Cambodia 14 major buyers (45 % of garment export) in 2008 All buyers check compliance of potential suppliers before placing orders All buyers rank compliance performance of suppliers mainly to identify poor performers Half of buyers explicitly warn suppliers about the consequence of non-compliance, but Cancellation of orders is a rare event

4 Pre-order sorting vs. Post-order monitoring

5 Different Buyer Types Reputation-conscious buyers Join Multi-Stakeholder Initiatives like FLA, ETI, and BFC Quality vs. Quantity/Cost-driven buyers Specialty Retailers emphasize quality Mass Merchandisers emphasize quantity & cost

6 Buyer-Supplier Matching Process

7 Potential Link between compliance and competitiveness

8 Compliance Rate of New Suppliers by Buyer Type

9 Empirical Strategies and findings Buyer # = f (labor compliance, controls) in compliance not significantly related to # Labor compliance = f (buyer type, controls) New suppliers of reputation-conscious buyers have much higher levels of compliance Prob (long relationship) = f (buyer type, labor compliance, controls) Better complying suppliers esp. of specialty retailers tend to be in long-term relationship

10 Key Findings 1. Supplier compliance figures prominently in the buyers decision at the pre-order sorting stage 2. Labor compliance is a necessary, NOT a sufficient condition to attract reputation-conscious buyers 3. Having better compliance and reputation- conscious specialty retailers increases the chance of staying in a long-term relationship Title: Does better labor standard compliance pay? Name of presenter: Chikako Oka

11 Recommendations Buyers: Use leverage at the pre-order stage Buyers: Give carrots to encourage compliance Suppliers: Get a combination of sourcing criteria right, not just compliance Suppliers: Realize that better compliance can bring long-term benefits Policy makers: collaborate with researchers and disseminate information Title: Does better labor standard compliance pay? Name of presenter: Chikako Oka


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