Working Paper | HBS Working Paper Series | 2013

Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards

by Michael W. Toffel, Jodi L. Short and Melissa Ouellet

Abstract

Corporate codes of conduct are becoming an increasingly important vehicle for promoting and assessing adherence to global labor standards at factories in global supply chains, but little is known about the factors that predict when supplier factories will comply with them. Regulation and governance scholarship suggests that factories' compliance with global labor standards depends on the institutional environments in which they are embedded. However, there are few systematic, comprehensive studies of how different regulatory institutions influence private firms' compliance with global norms. We conduct one of the first large-scale comparative studies using tens of thousands of codes of conduct audits from one of the world's largest social auditors to determine what constellation of international, domestic, civil society, and market institutions promotes compliance with the global labor standards embodied in codes. We find that supplier factories are more likely to comply when they are embedded in states that have highly protective labor regulation and high levels of press freedom; when they serve buyers located in countries where consumers are wealthy and socially conscious; and, among factories in developing countries, those situated in states with more international labor treaty obligations and greater densities of international nongovernment organizations (INGOs). Taken together, these findings suggest the importance of multiple, robust, overlapping, and reinforcing governance regimes to meaningful transnational regulation.

Keywords: Transnational regulation; Labor standards; Consumer politics; Codes of conduct; Compliance; Accounting Audits; Corporate Accountability; Governance Compliance; Governance Controls; Working Conditions; Law Enforcement; Production; Corporate Social Responsibility and Impact; Performance Evaluation; Safety; Quality; Nonprofit Organizations; Non-Governmental Organizations; Supply Chain; Supply Chain Management; Apparel and Accessories Industry; Electronics Industry; Manufacturing Industry; Asia; Europe; China; United States;

Citation:

Toffel, Michael W., Jodi L. Short, and Melissa Ouellet. "Codes in Context: How States, Markets, and Civil Society Shape Adherence to Global Labor Standards." Harvard Business School Working Paper, No. 13-045, November 2012. (Revised October 2013. Revise and resubmit at Regulation & Governance.)