The National Labor Relations Board ruling on Tuesday that McDonald’s could be held responsible for labor conditions in its franchisees’ operations has business groups and lawyers crying foul. McDonald’s says it will appeal, contesting the determination that it exercises “significant control” over the practices of its franchisees.
But McDonald’s is already going through great lengths to ensure good working conditions in the other direction in its value chain. It should do the same for franchisees.
Its sustainable supply chain program employs staff around the world to strengthen sustainability and working conditions in the operations of McDonald’s suppliers — also independent entities over which McDonald’s ostensibly has little control. (Disclosure: I have served as a judge for its Best of Sustainable Supply awards.)
Brands in other industries have realized that even though they may have minimal leverage on paper over parties with which they do business, they must proactively engage them on labor conditions. Rightly or not, their brand is likely to take a hit if major problems at a supplier come to light. And if a business partner is committing labor transgressions, there are likely quality, safety, or other problems lurking somewhere, too.
McDonald’s should apply to franchisees a model similar to the one it uses for its suppliers: The company engages in long-term relationships with suppliers to make it clear that they’ll work together on tough issues, not just issue fines; brings suppliers together periodically to learn from each other; and rewards innovation. A combination of internal staff and independent auditors ensures compliance and supports these efforts.
Then, McDonald’s might follow the lead of other industries and develop a collaborative initiative with peer companies and some of its harshest critics.
In the 1990s, oil companies (e.g., Shell in Nigeria and BP in Colombia) got into trouble for the abusive actions of security personnel supposedly protecting their facilities. As a result, those companies and others got together with NGOs such as Human Rights Watch and Amnesty International and the U.S. and U.K. governments to form the Voluntary Principles on Security and Human Rights, a code that spells out how companies can work with security providers in a way that respects the rights of local communities.
Other so-called “multi-stakeholder initiatives” have similarly cropped up to address the difficult problems that arise when companies don’t fully control the impacts of their businesses. The Global Network Initiative was created by Google, Yahoo!, and Microsoft and socially responsible investors, academics, and human rights groups to protect free expression and privacy on the internet. Government demands for surveillance or censorship was a major reason they did so.
The Fair Labor Association was created in the 1990s to bring together companies, civil society organizations, and colleges and universities to protect factory workers’ rights in complex global supply chains. Following the 2013 Rana Plaza factory collapse, the Alliance for Bangladesh Worker Safety and the Bangladesh Accord on Fire and Building Safety were established to focus on that country.
These initiatives have enabled companies to work with peer companies that face similar challenges, and collaborate with groups that have relevant expertise. Perhaps it’s time for a multi-stakeholder initiative on fair working conditions in franchise operations: not just for fast food chains like McDonald’s, but for hotels and retail outlets as well.
The challenges of ensuring labor compliance among franchisees are not insignificant. But McDonald’s neither needs to reinvent the wheel nor go it alone. There are models for how to tackle such difficult challenges — in other industries and within McDonald’s itself.