Cooperation and Punishment in Private Regulation of Labor Standards
Governance of labor standards in global value chains still relies heavily on so-called private regulation, by which global buyers impose standards on their suppliers, monitor compliance through audits, and attempt to remediate violations. Although researchers, activists, and businesses have long pointed to the limits of this approach and advocated for alternatives, such as enforceable brand agreements, no alternative form of labor governance has been significantly scaled. Therefore, it remains essential to identify ways in which buyers might use private regulation to make it more likely that their first-tier suppliers comply with global labor standards, including related to severe labor exploitation.
This brief summarizes a research effort to understand the qualities of private regulation that prompt suppliers to improve compliance. The authors examine how suppliers responded to failed compliance audits under two models of private regulatory governance: one that emphasized collaboration in the absence of penalties and another that added the threat of penalties if suppliers did not show progress.