The power of integrated supply-chain industrial relations

Building effective Grievance Mechanisms in line with international due diligence standards

Integral to identifying, preventing and mitigating adverse human rights impacts in the supply chain, effective grievance mechanisms are a key element of corporate human rights due diligence. 

With the new due diligence law in Germany and the upcoming EU Directive, having mechanisms in place that meet international due diligence standards is becoming more and more important for companies. For ACT, a sustainable supply-chain grievance mechanism is an integrated process that brings all industrial relations stakeholders together. It assists brands in meeting their due diligence responsibilities and supports employers and workers on the ground in achieving sound industrial relations as an enabler of decent work, stability and inclusive growth

This  case study unpacks the relationship between Freedom of Association and effective grievance mechanisms and Purchasing Practices and details key lessons learned from ACT’s first of its kind achievements at industry level in Myanmar between 2019 and 2021.

This case study was first published in the Global Deal’s flagship 2022 report. ACT is a key partner of the Global Deal – a joint initiative of the ILO and OECD to promote Decent Work and Inclusive Growth.


In 2019, garments were Myanmar’s leading export goods, making up almost 40% of total exports. Employing around 500 000 primarily female workers, the garment industry was key to the country’s stability and development. At the same time, disputes over FOA, low wages and poor working conditions were among the main reasons for strikes and disruptions to production in the sector. They quickly escalated into conflicts and were the primary subject of complaints to the state dispute resolution mechanism, which was considered ineffective due to lacking enforcement capacity or allegations of lacking neutrality.

To help prevent and address industrial disputes as a key factor for stable and sustainable production, factories producing for ACT member brands and IndustriALL-affiliated Industrial Workers’ Federation of Myanmar (IWFM) negotiated and agreed upon the Myanmar Freedom of Association Guideline (FOA Guideline) (ACT, 2019[1]).

“Having a FOA Guideline and dispute resolution mechanism can allow for [the] organisation of workers in a trade union, which is a reliable partner for social dialogue at [the] factory level.”

Khaing Zar Aung, President of IWFM (DIEH, 2021[2])

With facilitation and technical support from the ILO, ACT co-ordinated the negotiation of the FOA Guideline, an agreement between employers and trade unions that reflected the interests of both parties while being in line with and drawing on international labour standards. As such, the FAO Guideline clarified key rights and responsibilities for workers and employers in terms of FOA on the basis of both national and international law.

Notably, the FOA Guideline also spelt out that “any reference to Myanmar law reflected in this agreement is understood to mean to the extent that the law is in compliance with international labour standards (ILS). When Myanmar law is not in compliance with ILS, the parties shall be guided by ILS and the interpretation given to them by the ILO Supervisory Mechanism”.

In 2019, Paul Zhubo, Spokesperson of the Employer Working Group, highlighted,

“Throughout the negotiation meetings, we have been able to build trust and understanding between each other. The Guideline is a framework that every factory can use to have a clear and predictable way of engaging with trade unions.”

Paul Zhubo, Spokesperson of the Employer Working Group (ACT, 2019[3])

To ensure a level playing field among all their business partners, ACT member brands adopted measures to ensure compliance with the FOA Guideline and the associated dispute resolution mechanism as a business requirement. Non-compliance by a supplier ultimately resulted in the termination of the business relationship with the ACT member brands. As such, the FOA Guideline became a binding standard, accounting for an estimated 80% of the Myanmar garment export industry at the time.

Building a bottom-up grievance mechanism

In order to address grievances concerning implementing the FOA Guideline, the employer and trade union partners in Myanmar agreed to jointly develop a Framework Dispute Resolution Mechanism (DRM) complementing the role of national institutions (ACT, 2021[4] ). With support from ACT and technical advice provided by the ILO, the parties drove the designing of the mechanism to ensure a legitimate and trusted process embedded in the national context.

Overview of the development process for the Myanmar FOA Guideline and the DRM 

The role of ACT member brands was to guarantee the effective implementation of the Framework DRM and its outcomes by making compliance a binding business requirement for all suppliers and monitoring the implementation of outcomes. At the same time, the ACT global purchasing practices commitments aim to support employers in respecting the right of workers to organise in trade unions, even if that can mean higher production costs resulting from collective bargaining. Within ACT, brand members have committed to defining wages as itemised costs in purchasing prices, and this, with the purpose of taking wages out of bidding competition. This includes the reflection of increases in negotiated wages in the labour components of costing calculations (ACT, 2018[5]).

At the end of 2020, the Framework DRM on the FOA Guideline was piloted, followed by a technical review and an evaluation against the effectiveness criteria of the United Nations Guiding Principles on Business and Human Rights (UNGP) (United Nations, 2011[6]).

Effective access to remedy in global supply chains

The Framework DRM was based on the eight effectiveness criteria of the UNGP (United Nations, 2021[7])

  1. To enable stakeholder trust, grievance mechanisms need to be legitimate and accountable for the fair conduct of grievance processes. The Myanmar Framework DRM has such legitimacy since it was developed not only with the involvement of affected stakeholders but by them through negotiation between representatives of employers and trade unions. Moreover, and in line with UN guidance, the risk of conflicts of interest is minimised by delegating dispute resolution to independent experts designated by the representatives of affected stakeholders in appropriate cases.
  2. Grievance mechanisms also need to be accessible. In the case of Myanmar, the Framework DRM was published on all factory notice boards, and awareness raising in all supplier factories was planned after the pilot. While trade unions were the point of access, the mechanism was open to non-members.
  3. The Myanmar DRM ensured predictability by establishing clear steps with time frames at each stage of the process. Upon joint agreement, the time frames could be applied in a flexible way.
  4. An equitable grievance process implies that aggrieved parties have reasonable access to sources of information, advice and expertise necessary to engage in a fair, informed and respectful way. To support this, the Myanmar Framework DRM provided employers and trade unions with technical advisors and expertise as necessary.
  5. Confidence was also built by being transparent and informing local parties about the Framework DRM at each stage of the process.
  6. Importantly, according to the UNGP, grievance mechanisms need to be rights-compatible in the sense of ensuring that outcomes and remedies accord with internationally recognised human rights. In this regard, the Myanmar Framework DRM included escalation steps in case of non-implementation of remedial outcomes, including, ultimately, termination of the business relationship with the respective brands.
  7. The Myanmar Framework DRM also provided a source of continuous learning. The negotiation process on the DRM itself was a strong source of learning and relationship building between employers and trade unions. Together with a tailor-made training programme for employer and worker representatives, which was prepared for large-scale rollout, this aimed to help prevent future grievances and conflicts.
  8. Finally, the Myanmar Framework DRM was dialogue-based. Designed as an industry level mechanism with implementation at the factory level as the first step, the Framework DRM negotiation process itself was based on closely involving the stakeholders through dialogue. After the piloting phase, it was planned to develop a long-term integrated mechanism in 2021 based on the learnings from the pilot. In addition, the employers and trade unions had agreed in their joint Letter of Agreement (ACT, 2019[1]) to develop the collective bargaining mechanism and negotiation process as the next step. With the military coup in Myanmar in February 2021, this became impossible. As a result, ACT suspended all planned operations and focused on mitigation measures, including the operation of a Fast-Track DRM (ACT, 2021[8]). In December 2021, ACT members took the difficult decision to cease ACT’s operations in Myanmar. However, the Myanmar process provides important lessons for companies and organisations aiming to support the development of sustainable and efficient supply-chain grievance mechanisms, particularly on FOA as a fundamental enabling right.

Key Lessons

Key lessons For ACT, a sustainable supply-chain grievance mechanism is an integrated process that brings all industrial relations stakeholders together. It assists brands in meeting their due diligence responsibilities and supports employers and workers on the ground in achieving sound industrial relations as an enabler of decent work, stability and inclusive growth. Specifically, the following lessons can be drawn from the ACT experience in building effective grievance mechanisms:

  • Higher levels of trust: An integrated mechanism developed by the industrial relations stakeholders themselves can enable higher levels of trust and deliver in areas where there have been significant shortcomings of business-only approaches in the past. Many supply-chain grievance mechanisms rely, at most, on consultation at the local level. In contrast, a locally embedded, industry-level grievance mechanism establishes legitimacy and trust. It also enables access to remedy in close contact with impacted stakeholders.
  • Prevention of harm: By strengthening relationships and establishing social dialogue structures, a locally embedded and globally supported grievance mechanism, as part of a comprehensive and broader industrial relations process, can help settle – and prevent – labour disputes.
  • Reliable information: Unlike much traditional auditing, a locally integrated grievance mechanism, if well designed, can provide reliable information for brands on what is going on in their supply chains.
  • Maximising efficiency through collaboration: While industry-level co-ordination is, in theory, also possible only between brands and/or multi-stakeholder initiatives providing grievance mechanisms, the ownership (not just involvement) of local employer and trade union representatives ensures collaboration between all relevant stakeholders. In addition, coordinated brand support enables the establishment of joint learning networks where brands can collaborate to maximise effect.

ACT continues to support the establishment of specific industry-level DRMs, particularly on freedom of association, collective bargaining and wage-related rights in key production countries, as well as enhancing the further development of an international DRM model that incorporates learnings and accomplishments to date. This will help ensure respect of the right to FOA, thus providing workers with representation to negotiate collectively with employers. As such, it is an important enabler of living wages in and of itself.