Awareness of labor malpractice is increasing. Governments and corporations have introduced new initiatives to address violations of labor rights, ethical investing is on the rise, and consumers are demanding more transparency regarding employee welfare.

Firms that improve labor welfare and broader social outcomes enjoy positive performance benefits, while those that do not face negative consequences. Yet, despite these forces, policy researchers have found that corporate social responsibility efforts have failed to bear fruit. See image carousel below for recent news articles.

A firm determination on the part of various stakeholders to improve labor welfare---coupled with negative consequences for firms that fail to do so---mean firms are in search of actionable insights on how to improve labor welfare within their organisations and across their supply chain. Our analysis provides these actionable insights.

In our analyis of over 9000 observations we find that the operations and supply chain functions of the firm have key levers they can utilize to tackle labor malpractice. We find, among other factors, that

1. Firms that experience higher sales volatility, who are more likely to either strain existing labor resources or employ vulnerable contingent labor, experience a higher number of labor controversies.

2. Firms whose suppliers are involved in labor controversies are themselves involved in a higher number of controversies due to adverse spillover effects from those suppliers.

3. Firms holding more inventory buffer, are better able to absorb shocks, and are less affected by adverse spillover effects.

4. Our model provides adequate predictive accuracy about which firms will be involved labor controversies in the subsequent year. By screening only the top 15% percent of firms we predict to be at high risk of being involved in labor controversies, we can identify over 70% of all firms that would have been mired in controversy in the subsequent year.

Our 4 findings above provide actionable insights for firms. They can,

1. Invest in technologies such as AI to impove their own forecast accuracy.

2. Invest in technologies such as blockchain to improve data flow and transparancy across their supply chains.

3. Hold more buffer inventory in anitcipation of potential supply chain disruptions.

4. Utilize our predictive model to pre-screen suppliers for selection or pre-emptive action.

The above findings are robust across sectors but the specific circumstances of a given firm or sector will warrant specific analysis. For insights curated to your unique circumstances, to make use of predictive models, for collaboration opportunities, and speaking arrangements, please reach out through the contact form.