Report prepared after Oxfam's study visit to Unilever finds many positives but work still to be done.
Unilever’s overall commitment to labor rights in its Vietnam supply chain has improved over the last three years but significant challenges remain, according to the Oxfam report released on July 4.
Unilever allowed Oxfam access to its staff, operations, data and key suppliers at its factory in Cu Chi district, Ho Chi Minh City, which manufactures personal, home care, and food products.
This follows a previous study in 2013 that highlighted the gap between the company’s policies and the reality on the ground for workers with precarious employment, low wages and excessive working hours, which Oxfam says are endemic in global supply chains like these.
Evidence of Unilever’s improved commitment to labor rights includes regular dialogue with trade unions at a global level, better sourcing policies, increased trust between workers and management, and a commitment to more direct employment in its manufacturing operations, bringing greater job security and employment benefits, according to Oxfam’s report.
However, the review also showed there is a lot more to be done to achieve sustained positive change for workers making its products in Vietnam and other parts of its supply chain, something the company acknowledges.
The study found that wages for a typical semi-skilled worker at Unilever’s factory had increased 48 per cent between July 2011 and July 2015, helped by government increases to the minimum wage, but lower skilled workers with dependents said they still struggle to make ends meet.
Oxfam also found that more people were directly employed in the company’s factory. However, the percentage of women was down from 19 per cent in 2011 to 13 per cent in 2015 while women made up two-thirds (67 per cent) of those employed by a third party supplier with lower wages and benefits.
In the supply chain, the report highlights that suppliers are much more aware of Unilever’s expectations on labor standards but lacked guidance on how they can deliver on these and meet commercial requirements at the same time, with four out of five suppliers believing better standards would cost them more.
The report recommends that Unilever step up its efforts to ensure gender equality in its manufacturing operations and do more to influence the wider system affecting labor rights, from worker representation and business practices to engaging with governments.
“It’s unusual for a multinational company to open up its business to Oxfam in this way and shows great transparency and openness,” according to Ms. Rachel Wilshaw, Oxfam’s Ethical Trade Manager.
It is clear that the process has already brought positive change within the company and, most importantly, for the people making its products, and has the potential to deliver much more.
“Yet huge challenges remain for multinational companies to ensure workers enjoy good jobs on a living wage, with opportunities for women to progress,” Ms. Wilshaw said.
Unilever has recognized the need for companies to do business differently. All too often companies feel pressure to put containing costs above better labor standards. Ways need to be found for workers, farmers and communities to get a fairer share of the value that business generates, and women’s empowerment should be embedded in that strategy.
“Oxfam would like to see Unilever use its power to influence other companies and governments to tackle the root causes of poor labor standards,” she added. “But it is also time for these companies to step up and follow Unilever’s lead.”
Vietnam may be on the threshold of major reforms in both economic and labor terms over the next five years as a result of signing the free trade agreement (FTA) with the European Union and the TPP, the Oxfam report noted. These reforms include the ratification of conventions on workers’ right to join or form a union and a requirement to prove that products are produced in compliance with international labor and environmental standards.
There is no agreed definition or formula for determining a living wage among the parties to the National Wage Council, which comprises the Ministry of Labor, Invalids and Social Affairs (MoLISA), the Vietnam General Confederation of Labor (VGCL), and employer organizations. All use different methodologies to estimate the minimum living needs of workers in the country’s four geographical wage regions.
In 2015 VGCL claimed a monthly living wage would be VND4.7 million ($210) for Region 1, which includes Hanoi and Ho Chi Minh City, while MoLISA estimated it at VND4.13 million ($185). The minimum wage was increased in 2015 from VND3.1 million ($139) to VND3.5 million ($157) for Region 1, an increase of 12.4 per cent compared with the 2015 inflation rate of 0.63 per cent (the lowest rate in 15 years).
The global economic slowdown, coupled with geopolitical instability and natural, climate-related disasters, has created a more complex and volatile business operating environment, according to Unilever. Despite this, its business has continued to grow, guided by the Unilever Sustainable Living Plan.
In Southeast Asia, and Vietnam specifically, Unilever has led the process of setting up an ASEAN Food and Beverage alliance, aimed at harmonizing standards and building industry best practice in the food industry in the region. Unilever’s Vietnam business continues to grow from strength to strength.
In 2015 Unilever celebrated the 20th anniversary of doing business in Vietnam, reaching a new milestone with more than 35 million Vietnamese people using one or more Unilever products every day. The business has expanded its partnerships with local small and medium-sized enterprises (SMEs), working with almost 2,000 in its value chain as well as reaching more than 300,000 small retail outlets nationwide.