Views on Barriers to Successful Code of Conduct Implementation : A case study of H&M and its suppliers in India

by Ockborn, Felix

Multinational companies sourcing commodities such as apparel from India face the risk of being associated with production conditions that are violating international labour laws. Controls of Indian supply chains by international labour rights’ organisations reveal hazardous working conditions, usage of child labour and workers having little chance to influence their situation. H & M is a multinational viewing India as an important market for garments and accessories. To ensure good conditions for labourers among its suppliers, H & M has worked to implement a Code of Conduct (COC) demanding that certain standards are met in the factories. Through monitoring and giving assistance to suppliers many issues such as child labour and aspects of health and safety have improved, but violations of other provisions in the COC continue to exist. This thesis looks at the issue of COC compliance from both suppliers’ and H & M’s perspectives. It attempts to find what the main compliance issues are among H & M’s first tier suppliers in India, what the barriers are to improving compliance on these issues and how the institutional environment in India affects compliance among suppliers. The aim of the thesis is to contribute to knowledge about barriers to compliance with a COC among Indian suppliers. The knowledge can be used to improve methods for implementing COCs among suppliers. The study applied an inductive case study methodology which consisted of interviews with the managements of 6 suppliers and 4 of H & M’s auditors in India, studies of audit reports and observations from visits to suppliers’ factories. The selection of cases sought both similarities and differences in set-up and geographical location. The analysis was divided into two steps. In the first step, compliance issues and barriers to compliance were analysed from empirical evidence. In the second step a strategic response model based on institutional theory and resource dependence theory was applied to analyse the effect of the institutional environment. The study has found that the six main compliance issues among suppliers to be handling of chemicals, control of overtime hours, workforce turnover, management-worker dialogue, worker-awareness and implementation of proper systems to maintain compliance with the COC. Furthermore, the four main barriers to improve on these issues are found to be the attitudes of the supplier managements, capacity in the supplier organisations, the business model pursued by the suppliers and the power manifestations between positions in the organisations. Lastly, the study has found that the institutional environment in India is full of actors who can have paradoxical effects on compliance among the suppliers. Overall, institutional forces act on suppliers to create and maintain the empirical barriers to compliance. The institutional environment in southern India has more forces supporting compliance than the environment in the north. A model of the contrasting effects of institutional forces was created which can be applied in different institutional environments. It can be used to discuss how the forces of particular institutional environments may cause the implementation of a Code of Conduct in the supply chain to only reach a certain level unless any of the institutional forces are changed.