The industrial workplace can be a dangerous place, and in some factories, the risks go beyond the pace of the assembly line. This week, China handed down 12 death sentences and nine life sentences to participants in July 2009 violence in the Xinjiang region. This lethal riot, which left approximately 200 people dead, was rooted in long-simmering tensions among Uighur and Han workers in a large toy factory.

Could management have done anything to prevent this tragedy? While the factory cannot be blamed for deep-seated ethnic conflict, CSR Asia's Stephen Frost has argued that many employers do too little to defuse workplace disputes:

"The toy factory riot in question was complicated by a recent influx of Uighur workers and the arrest for rape of Uighur workers, but missing from the factory was a basic component of industrial relations; i.e., a workable and effective grievance mechanism. In fact, this basic element of good workplace relations is missing from most factories in China (especially large ones where it is essential; and the toy factory in question is a very large one indeed and supplies to major brands)."

Protecting the Freedom to Complain

Labor relations is a core concern of investors who consider environmental, social and governance (ESG) practices. The globalization of the industrial supply chain complicates the labor relations picture for corporations who may purchase goods from hundreds of contractors. Beyond the moral justification for better workplace relations, a corporation cannot expect to remain untouched by a riot at one of its suppliers.

According to a report from the Corporate Social Responsibility Initiative at Harvard's Kennedy School of Government, supply-chain incidents are a material threat to global businesses:

"There is risk to corporate reputation through national or international campaigns or boycotts as well as through lawsuits, whether under the Alien Tort Claims Act in the US or other states' domestic legislation, which is increasingly being extended to encompass corporate activities overseas. And a legacy of conflict or abuse can jeopardize a company's ability to win future contracts or realize new investment opportunities. "

As the report explains, a well-managed workplace must have a mechanism to address the grievances of all employees, no matter their position on the org chart. It also notes that "matching practice to principle is a challenge for most companies with complex operations or supply chains."

The authors write:

"The limitation of [existing labor relations] tools lies in their top-down structure. They are designed to account to company management and/or external actors about the groups of people who may be impacted by the company's operations, based on sporadic checks and interviews linked to pre-identified standards for compliance. They do not account to those impacted, but leave them as largely passive objects in the process."

A "robust" program to address worker grievances must, first, assure workers of their right to speak up. Workers will, sensibly, remain "largely passive" if they fear retribution by managers or coworkers. This is why the CSR Initiative, along with labor-focused non-governmental organizations (NGO), advocate a "rights-based" approach to conflict resolution.

Some Metals and Mining Firms Take Action

Most companies and industries have yet to implement rights-based grievance mechanisms. The basic materials sector, perhaps due to its inherent capacity for displacement of land and people, has committed to Sustainable Development Principles that include respect for human rights. International Council on Metals and Mining members Freeport-McMoRan Copper and Gold and ArcelorMittal have both made the development and implementation of grievance mechanisms into key components of their employee and community relations.

Oversight is Key

In workplaces where disputes among workers are compounded by distrust of management, third-party involvement is essential. Stephen Frost described the modest but important steps that CSR Asia has made toward this goal:

"CSR Asia works in China to develop these mechanisms (via factory training…and in partnership with NGOs to provide hotline services for factory workers to contact trusted NGOs that can then relay messages to brands and retailers buying from the factory). … "It's clear that a good grievance system is not going to solve Uighur grievances in Xinjiang, nor prevent all ethnic clashes, but if there is no mechanism at all for workers to air complaints (and have them acted upon), then this sort of thing is going to continue (as it has done for the last 20 years or more)."