Discussion Paper Series No 5: Does Better Labour Standard Compliance Pay

This post is also available in: French

Description: Faced with growing demands for responsibility in global supply chains, multinational companies are increasingly regulating labour and other conditions of their suppliers through codes of conduct and monitoring. While research in this area has been expanding rapidly, the link between labour standard compliance and competitiveness of supplier firms remains unexplored. This paper seeks to fill the gap by examining whether the supplier’s level of labour compliance affects its likelihood of attracting and retaining buyers. Based on original survey and panel data from Cambodia’s garment sector, the paper shows that better labour standard compliance is a necessary condition for producing for reputation-conscious buyers but not a sufficient condition for attracting them. Other criteria such as price, quality, and delivery time are driving buyers’ sourcing decisions. Nevertheless, producing for a certain buyer type and respecting certain labour standards increases the supplier’s likelihood of retaining buyers, which is critical to the supplier’s competitiveness.

Download (PDF, 921KB)