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Directors Corporate Culture and the Role of Boards Unilever – collaboration with Oxfam on labour standards

Unilever – collaboration with Oxfam on labour standards

Unilever is an Anglo-Dutch global consumer goods company with joint headquarters in London and Rotterdam and sales of €53.3bn in 2015. The company’s stated purpose is to “make sustainable living commonplace”. It employs more than 172,000 people and operates in 190 countries. In 2013 it collaborated with Oxfam on a path-breaking assessment of employment conditions in Vietnam where the company directly employs around 1,500 people. The study covered not only its own factory at Cu Chi, but also at three suppliers where Unilever accounted for more than 20% of turnover and could therefore be expected to influence standards.


Background

The Oxfam Study[1] is a rare example of a collaborative effort between a major multinational company and an NGO. Unilever accepted a request from Oxfam to conduct the research because it wanted to learn more about the implications of the UN Guiding Principles on Business and Human Rights, and how a global business can further improve and refine the labour standards of its employees and workers.

The context was a relationship of trust between the two sides, built up over many years of collaboration and dialogue, notably on sustainable agriculture. The long term relationship is important in a world where NGOs and companies still find it difficult to overcome their mutual suspicion.

Action

The study looked at four key areas: freedom of association, wages, working hours and contract labour. It revealed that Unilever’s headquarters’ working assumption that production workers were paid well above a living wage in its own operations was misplaced. One lesson was therefore that companies need to monitor their own operations as well as those of the supply chain.  Also, contract workers at its own factory had lower wages and conditions than those directly employed. One supplier was found to have reduced its labour force to a minimum level after signing its contract with Unilever and managed fluctuations in demand by having a high ratio of temporary non-unionised workers to permanent jobs.

That said, Oxfam was complimentary about Unilever’s commitment to high standards and willingness to address problems. Liesbeth Unger, one of the report’s authors, praised its efforts in a world where these standards were not being implemented in practice.[2]  Oxfam felt Unilever had the potential to play a leadership role, in keeping with its stated corporate purpose. For the company, the main benefit has been in increasing awareness of issues that are hard to measure, identifying areas of potential improvement and offering some practical suggestions as to how to proceed.

Impact

Among the key recommendations was the need for Unilever to acknowledge that, in countries such as Vietnam the minimum wage is not always an adequate proxy for the needs of workers and their families, and that it should source only from suppliers with good HR management, industrial relations and grievance mechanisms. The record of its suppliers, as revealed in its report, was mixed with some evidence of positive practice.

The report also suggested that Unilever should introduce measurable targets for buyers to place an increasing value of orders with suppliers who are proactive in raising labour standards, and to implement, with industry peers, a training programme for business partners and key suppliers at country level.

The study also suggested a range of indicators that would help stakeholders – and the Unilever management – assess progress. These were:
  • Wage levels for a standard working week relative to the minimum wage, the international poverty line and the best available estimate of a living wage
  • Ratio of permanent to temporary contracts
  • Percentage of workers with an employment contract
  • Percentage of workers covered by a recent collective bargaining agreement
  • Number of significant grievances raised by workers and resolved by management
  • Awareness of workers and supervisors, based on a survey of workers’ rights.
“Unilever has the kind of corporate culture and long-term relationships with suppliers that make it ideally placed to sustain good quality jobs in its supply chain, if it is willing to make the necessary changes to its policies and processes and work collaboratively to address the root causes of labour problems,” the report concluded.

For its part Unilever states that it has been working to implement its commitments and an update on progress will be published in 2016.
 
 
[1] Labour Rights in Unilever’s Supply Chain: From compliance towards good practice, Rachel Wilshaw with Liesbeth Unger, Do Quynh Chi and Pham Thu Thuy, Oxfam, January 2013
[2] Oxfam and Unilever, no longer such strange bedfellows, Oxfam Policy and Practice Blog, February 7, 2013.
 

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