Leverage, Collaboration and Industry Initiatives
A company cannot always fix a human rights problem in its supply chain by acting alone. Many of the most persistent human rights risks - poverty wages, child labour, forced labour, gender-based violence - are structural in nature, embedded in the economics, politics, and social norms of entire industries and regions. The UN Guiding Principles recognize this reality through their concept of leverage: the ability of a company to influence the practices of another entity that is causing or contributing to an adverse impact. Understanding and using leverage effectively - including through collaboration with peers, civil society, governments, and multi-stakeholder initiatives - is one of the most important practical skills in advanced HRDD.
The Concept of Leverage in the UNGPs
UNGP Principle 19 addresses what companies should do when they find that they are directly linked to an adverse human rights impact through a business relationship - including a supplier relationship - even though they did not cause or contribute to the harm. The principle specifies that a company should "seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by a business relationship, even if it has not contributed to those impacts."
Importantly, the UNGPs recognize that a company's ability to address such impacts will depend on its leverage - the practical influence it can exert on the entity causing the harm. Leverage is not fixed: it can be built, shared, and exercised collectively. The UNGPs identify two implications when a company lacks sufficient leverage:
- The company should consider how to increase its leverage, including through engagement with other actors
- The company should consider whether continuation of the business relationship is appropriate - though this is a last resort, not a first response
Types of Leverage
Leverage takes several forms in supply chain relationships. Understanding which types of leverage a company has - and which it lacks - is essential for designing an effective HRDD response to identified risks:
| Type of Leverage | Description | Example |
|---|---|---|
| Commercial leverage | The size and importance of the commercial relationship to the supplier | A brand that represents 40% of a factory's revenue has significant commercial leverage; one that represents 1% has very little |
| Market leverage | The ability to influence other buyers in the same market to act collectively | Multiple buyers collectively conditioning market access on compliance with a shared standard |
| Technical leverage | The ability to provide knowledge, training, or technical support that helps suppliers improve | A company with expertise in OHS standards providing training to suppliers on hazard management |
| Reputational leverage | The influence that public attention and brand reputation risk can create | Public reporting on supplier conditions creating reputational pressure on both buyer and supplier to improve |
| Regulatory leverage | The influence created by legal requirements that apply to the supply chain | EU CSDDD requirements giving buyers legal authority to demand supply chain information they previously could not require |
Building Leverage Through Purchasing Practices
One underused source of leverage is the purchasing relationship itself. Companies that make consistent, long-term, high-volume purchase commitments with suppliers develop deeper relationships and greater influence than those that constantly switch suppliers for marginal cost savings. Short-termism in purchasing - constant re-sourcing, last-minute order cancellations, aggressive price renegotiation - undermines the commercial leverage that would otherwise enable effective HRDD engagement.
Buyers can increase their leverage by: committing to longer-term purchasing agreements that give suppliers planning certainty; concentrating spend with fewer, higher-quality suppliers rather than fragmenting it across many; paying prices that reflect the true cost of responsible production; and aligning procurement incentives with sustainability performance rather than price alone.
Multi-Stakeholder Initiatives
Multi-stakeholder initiatives (MSIs) bring together companies, civil society organizations, trade unions, and sometimes governments to address supply chain human rights issues collectively. They are particularly valuable for issues that exceed any single company's leverage - sector-wide structural problems that require industry-wide action to change.
The Fair Labor Association (FLA) was established in 1999 following the US apparel industry anti-sweatshop campaigns. It is a membership organization that accredits companies against a comprehensive labour standard, conducts independent monitoring of supplier factories, and investigates complaints from workers and NGOs. Member companies commit to applying the FLA Workplace Code of Conduct throughout their supply chains and to supporting remediation when violations are found. The FLA has been particularly active in the cocoa sector since joining with chocolate companies on child labour reduction programs.
The Ethical Trading Initiative (ETI) is a UK-based alliance of companies, trade unions, and NGOs committed to progressive implementation of the ETI Base Code - a code of conduct based on ILO conventions covering forced labour, child labour, health and safety, freedom of association, living wages, working hours, and non-discrimination. ETI takes a learning-oriented approach: members share experience, participate in projects in specific sectors and regions, and are expected to demonstrate continuous improvement rather than meeting a single fixed standard.
The Responsible Business Alliance (RBA), formerly the Electronic Industry Citizenship Coalition (EICC), is the world's largest industry coalition for corporate social responsibility in global supply chains, with a focus on the electronics sector. The RBA Validated Audit Program (VAP) provides a standardized audit approach used by RBA members across shared supplier facilities. The RBA also runs the Responsible Minerals Initiative (RMI) for conflict minerals sourcing.
Analogy: The Collective Bargaining Parallel
Just as individual workers have limited bargaining power against an employer but gain strength through collective organization, individual companies have limited leverage to change industry-wide practices but gain strength through collective action. A single small buyer demanding that a major cotton supplier improve wages has almost no impact. Fifty buyers coordinating to jointly condition market access on wage improvements creates real leverage. MSIs are the institutional form that collective buyer leverage takes - they are to corporate HRDD what trade unions are to worker rights: the organizational mechanism for aggregating dispersed power into effective influence.
Limitations and Critiques of MSIs
MSIs have faced significant criticism from labor rights organizations and researchers. Common critiques include:
- Industry capture: MSIs governed primarily by companies may reflect industry preferences rather than the interests of affected workers and communities
- Slow progress: MSIs with voluntary standards and no enforcement mechanisms can allow members to claim affiliation without demonstrating genuine improvement
- Certification as greenwashing: MSI membership or certification can be used in public communications in ways that overstate actual progress
- Lack of worker voice: MSIs that do not include genuine representation from affected workers and communities may design solutions that do not reflect those communities' priorities
- Race to the lowest common denominator: The need for industry consensus can result in standards that reflect the level at which all members can comply, rather than genuine best practice
Example: The Bangladesh Accord
The International Accord on Health and Safety in the Textile and Garment Industry (formerly the Bangladesh Accord on Fire and Building Safety) represents a model of multi-stakeholder action with enforceable obligations. Unlike most MSIs, the Accord is a legally binding agreement between brands and global trade unions (IndustriALL and UNI Global Union), with enforcement mechanisms including arbitration and the right to seek remedy in national courts. Brands commit to maintaining purchasing relationships with covered factories, to funding safety inspections and remediation, and to ensuring that safety complaints can be raised without retaliation. By 2023, the Accord had conducted over 2,000 factory inspections and overseen remediation of over 97% of identified hazards. The Bangladesh Accord is frequently cited as evidence that legally binding, worker-influenced MSI models can achieve results that voluntary approaches cannot.
Choosing MSI Engagement Strategically
Not all MSIs are equally credible or effective. When evaluating which MSIs to join or support, companies should assess: whether the governance structure includes genuine representation from affected workers and civil society; whether the standard is based on internationally recognized human rights norms; whether there are independent monitoring and verification mechanisms; whether there are consequences for members who fail to meet commitments; and whether the MSI has demonstrated measurable progress in its areas of focus. Joining an MSI with weak governance simply for reputational purposes does not constitute meaningful HRDD.
Key Takeaways
- 1UNGP Principle 19 introduces the concept of leverage - a company's practical ability to influence the conduct of entities causing human rights harm - and requires companies to seek to increase their leverage when it is insufficient
- 2Leverage takes multiple forms: commercial, market, technical, reputational, and regulatory - each relevant in different supply chain contexts and capable of being built and shared
- 3Multi-stakeholder initiatives (MSIs) such as the Fair Labor Association, Ethical Trading Initiative, and Responsible Business Alliance provide mechanisms for companies to exercise collective leverage on shared supply chain challenges
- 4The Bangladesh Accord demonstrates that legally binding MSI models with genuine worker representation and enforcement mechanisms can achieve significantly greater results than voluntary approaches
- 5MSI membership is not a substitute for company-level HRDD - and joining an MSI with weak governance purely for reputational purposes does not constitute meaningful action on human rights